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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HARTE-HANKS, INC.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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[ ] Fee paid previously with preliminary materials.
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HARTE-HANKS, INC.
200 CONCORD PLAZA DRIVE, SUITE 800
SAN ANTONIO, TEXAS 78216
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 2, 2000
As a stockholder of Harte-Hanks, Inc., you are hereby given notice of and
invited to attend in person or by proxy the Annual Meeting of Stockholders of
the Company to be held at 200 Concord Plaza Drive, First Floor, San Antonio,
Texas, on Tuesday, May 2, 2000, at 10:00 a.m. local time, for the following
purposes:
1. To elect three Class I directors, each for a three-year term;
2. To approve an amendment to the Company's stock option plan that
increases by three million the number of shares of common stock, par value
$1.00, that may be issued under the plan; and
3. To transact such other business as may properly come before the meeting
and any adjournment thereof.
The Board of Directors has fixed the close of business on March 10, 2000 as
the record date for the determination of stockholders entitled to notice of and
to vote at such meeting and any adjournment thereof.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING, TO ASSURE YOUR SHARES ARE REPRESENTED AT THE
MEETING, PLEASE DATE, EXECUTE AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE
ENCLOSED STAMPED ENVELOPE FOR WHICH NO ADDITIONAL POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
By Order of the Board of Directors,
DONALD R. CREWS
Senior Vice President, Legal and
Secretary
San Antonio, Texas
March 27, 2000
YOUR VOTE IS IMPORTANT.
PLEASE EXECUTE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED.
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HARTE-HANKS, INC.
200 CONCORD PLAZA DRIVE, SUITE 800
SAN ANTONIO, TEXAS 78216
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PROXY STATEMENT
---------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 2, 2000
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This Proxy Statement is furnished to stockholders of Harte-Hanks, Inc.
("Harte-Hanks" or the "Company") for use at the 2000 Annual Meeting of
Stockholders to be held at the date, time and place and for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders, or at any
adjournment thereof. The enclosed proxy is solicited on behalf of the Board of
Directors of the Company. A stockholder executing the accompanying proxy has the
right to revoke it at any time prior to the voting thereof by notifying the
secretary of the Company in writing, executing a subsequent proxy, or attending
the meeting and voting in person. Unless a contrary choice is so indicated, all
duly executed proxies received by the Company will be voted in accordance with
the instructions set forth on the proxy card. The record date for stockholders
entitled to vote at the Annual Meeting is the close of business on March 10,
2000. The approximate date on which this Proxy Statement and the enclosed proxy
are first being sent or given to stockholders is March 27, 2000.
VOTING PROCEDURES
The accompanying proxy card is designed to permit each stockholder of
record at the close of business on the record date, March 10, 2000 (the "Record
Date"), to vote in the election of Class I directors and on the proposal to
increase the number of shares available for issuance under the Company's stock
option plan. The proxy card provides space for a stockholder (i) to vote in
favor of or to withhold voting for the nominees for the Class I Directors, (ii)
to vote for or against the proposal to increase by three million the number of
shares of common stock, par value $1.00 ("Common Stock") available for issuance
under the Company's stock option plan, (iii) to vote for or against any other
proposal to be considered at the Annual Meeting or (iv) to abstain from voting
on any proposal other than election of Class I directors if the stockholder
chooses to do so. The election of Class I directors will be decided by a
plurality of the votes cast. All other matters, including the proposed amendment
to the Company's stock option plan, will be determined by a majority of the
votes cast.
The holders of a majority of all of the shares of stock entitled to vote at
the Annual Meeting, present in person or by proxy, will constitute a quorum for
the transaction of business at the Annual Meeting. If a quorum should not be
present, the Annual Meeting may be adjourned from time to time until a quorum is
obtained. Shares as to which authority to vote has been withheld with respect to
the election of any nominee for director will not be counted as a vote for such
nominee. Abstentions and broker nonvotes are counted for purposes of determining
the presence or absence of a quorum for the transaction of business. Abstentions
are counted in tabulations of the votes cast on proposals presented to
stockholders to determine the total number of votes cast. Abstentions are not
counted as votes for or against any such proposals. Broker nonvotes are not
counted as votes cast for purposes of determining whether a proposal has been
approved.
Stockholders are urged to sign the enclosed proxy and return it promptly.
When a signed card is returned with choices specified with respect to voting
matters, the shares represented are voted by the proxies designated on the proxy
card in accordance with the stockholder's instructions. The proxies for the
stockholders are Larry Franklin and Houston H. Harte.
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If a signed proxy card is returned and the stockholder has made no
specifications with respect to voting matters, the shares will be voted FOR the
election of the three nominees for Class I director, FOR the proposal to
increase by three million the number of shares available for issuance under the
Company's stock option plan, and at the discretion of the proxies on any other
matter that may properly come before the Annual Meeting or any adjournment.
The total outstanding capital stock of the Company as of March 10, 2000
consisted of 68,245,117 shares of Common Stock. Each share of Common Stock is
entitled to one vote.
MATTERS TO BE BROUGHT BEFORE THE MEETING
PROPOSAL ONE -- ELECTION OF CLASS I DIRECTORS
The current number of members of the Board of Directors is seven. The Board
of Directors is divided into three classes, each of which serves for a
three-year term. One class of directors is elected each year. The term of the
Company's Class I directors will expire at the Annual Meeting. The Class I
directors elected in 2000 will serve for a term of three years, which expires at
the Annual Meeting of Stockholders in 2003 or when their successors are elected
and qualified. The election of directors will be decided by a plurality vote of
the votes cast.
The nominees for Class I directors are David L. Copeland, Dr. Peter T.
Flawn and Christopher M. Harte. Each nominee is a member of the present Board of
Directors. The Board believes that each nominee will be available and able to
serve as a director. If a nominee is unable to serve, the shares represented by
all valid proxies will be voted for the election of such substitute as the Board
may recommend, the Board may reduce the number of directors to eliminate the
vacancy consistent with the requirement to maintain nearly equal classes, or the
Board may fill the vacancy at a later date after selecting an appropriate
nominee. Information with respect to the nominees is set forth in the section of
this Proxy Statement entitled "Management -- Directors and Executive Officers."
THE BOARD OF DIRECTORS URGES STOCKHOLDERS TO VOTE "FOR"
EACH OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE.
PROPOSAL TWO -- AMENDMENT OF HARTE-HANKS 1991 STOCK OPTION PLAN
Harte-Hanks has for many years utilized stock incentives as part of its
overall compensation program. The Board of Directors of Harte-Hanks believes
that stock options and stock-based incentives play an important role in
attracting and retaining the services of outstanding personnel and in
encouraging such persons to have a greater personal financial investment in
Harte-Hanks.
Since 1984, Harte-Hanks has had a stock option plan. The Company's
stockholders approved the 1991 Stock Option Plan (the "1991 Plan") in 1991 and
it has been amended periodically. The Company's stockholders most recently
approved amendments to the 1991 Plan in 1998. The 1991 Plan permits the
granting, either alone or in combination, of "non-qualified" stock options that
do not qualify for beneficial treatment under the Internal Revenue Code (the
"Code") and incentive stock options under Section 422 of the Code ("ISOs").
Stock options permit the purchase of shares of Harte-Hanks by persons who are
responsible for or contribute to the management, growth, success and
profitability of Harte-Hanks and who are designated by the Compensation
Committee of the Board of Directors that administers the 1991 Plan. James L.
Johnson and Dr. Peter T. Flawn are the current members of the Compensation
Committee.
As of February 10, 2000, options to acquire 7,269,442 shares of Common
Stock were outstanding, of which 7,075,750 were granted pursuant to the 1991
Plan and the remainder pursuant to predecessor plans. Also as of that date,
options granted under the 1991 Plan covering 828,000 shares had been exercised,
leaving only 86,250 shares (of the 8 million currently authorized) available for
future option grants. Consequently, the Board of Directors believes that the
1991 Plan should be amended to increase by 3 million the number of
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shares of Common Stock authorized for issuance thereunder and is submitting the
proposed amendment to stockholders.
The Option Grants Table on Page 9 of this Proxy Statement reflects the
number of options awarded in 1999 to executive officers named in the Summary
Compensation Table. For 1999, employees of the Company as a group received
1,575,350 options. The following is a summary of the 1991 Plan's principal
provisions:
Purpose of the 1991 Plan. The purpose of the 1991 Plan is to advance the
interests of the Company by attracting and retaining the best available
personnel for positions of substantial responsibility and to provide additional
incentives to key employees of Harte-Hanks or any present or future subsidiary
to promote the success of the business of these corporations.
Shares Subject to the 1991 Plan. The shares subject to option and the other
provisions of the 1991 Plan shall be shares of the Company's Common Stock, which
may be either authorized but unissued shares or treasury shares.
Administration of the 1991 Plan. The Compensation Committee has broad
authority to administer and interpret the 1991 Plan.
Eligibility. All employees, consultants and advisors to the Company or any
current or future parent or subsidiary (including outside directors), are
eligible to receive options under the 1991 Plan, except that no employee is
eligible to receive an ISO, if, on the date of the grant, such employee owns in
excess of 10% of the outstanding voting stock of the Company. No participant in
the 1991 Plan is eligible to receive options to purchase more than 1,000,000
shares of Common Stock per calendar year.
Effect of Change in Shares of the Company Subject to the 1991 Plan. If
there is a change in the stock of the Company through the declaration of stock
dividends, stock splits, or combinations or exchanges of shares, or otherwise,
the number of shares available for option, the shares subject to an option and
the option prices shall be appropriately adjusted.
Manner of Exercise. Payment methods for exercise of options granted under
the 1991 Plan may include, as determined by the Board or Compensation Committee,
(a) by check, (b) in shares of Common Stock owned by the participant, or (c)
partly by check and partly in shares of Common Stock. Incentive Stock Options
granted prior to January 1, 1998, may be exercised only by check. If
participant-owned Common Stock is used to pay the purchase price, the
participant must have held the Common Stock used for at least six months prior
to the date of exercise. The Board or Compensation Committee may authorize use
of an attestation procedure, pursuant to which the Company will subtract the
number of shares held by the optionee and having a value equal to the exercise
price from the number of shares to be issued pursuant to the exercise. Upon
exercise of a non-qualified option, the Board or Compensation Committee may
permit the participant to deliver Common Stock as payment for the withholding
taxes or, at the participant's request, the Board or Compensation Committee may
withhold a number of shares from the certificate satisfactory to pay the
withholding taxes.
Amendment and Termination of the 1991 Plan. The Board may alter, suspend or
discontinue the 1991 Plan at any time. All ISOs must be granted within ten years
of the date on which the Board approved the latest increase in the number of
shares available for issue under the Plan, or the date such an increase was
approved by the stockholders, whichever is earlier. No action of the Board may
impair any then outstanding option without the consent of the holder of the
option. No amendment may be made without the approval of the stockholders of the
Company by the affirmative votes of the holders of a majority of shares of
Common Stock casting votes at a duly held stockholders meeting, which amendment
would (i) increase the number of shares available under the 1991 Plan; (ii)
change the employees or class of employees eligible to participate in the 1991
Plan; or (iii) change the material terms of the 1991 Plan as construed under
sec. 162(m) of the Code.
Change in Control. The Board has the discretion at the time of a grant or
at any time prior to or upon the occurrence of a change of control (as defined
in the 1991 Plan) or potential change of control, to provide in whole or in part
for the accelerated exercisability of each option outstanding at the time of
such change of control.
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Transferability. All or a portion of the non-qualified options to be
granted, at the Board or Compensation Committee's discretion, may be on terms
that permit transfer without consideration to an immediate family member (as
defined in the 1991 Plan), trusts for the benefit of immediate family members,
or a partnership or other entity in which immediate family members are the only
partners; provided that the stock option agreement pursuant to which the
non-qualified options are granted must be approved by the Compensation Committee
and that subsequent transfers of transferred options are prohibited, except by
will or the laws of descent and distribution. ISOs are non-transferable except
by will or the laws of descent and distribution, and during the plan
participant's lifetime are only exercisable by the participant.
Exercise of Incentive Stock Options. The Board, or the Compensation
Committee, will set the option terms and exercisability schedule of ISOs.
However, no ISOs will be exercisable at any time after the expiration of ten
years from the date of grant. The total fair market value (determined as of the
date of grant) of stock with respect to which ISOs are first exercisable by a
participant in any one calendar year cannot exceed $100,000. ISOs exceeding the
$100,000 limit in any year are treated as non-qualified stock options. The ISOs
granted earliest shall be applied first to the $100,000 limit.
Federal Income Tax Consequences.
Nonqualified Options. No income will be recognized by an optionee for
federal income tax purposes upon the grant of a non-qualified option. Upon
exercise of a non-qualified option, the optionee will recognize income equal to
the excess of fair market value of the shares received over the exercise price.
Income recognized upon the exercise of non-qualified options will be considered
compensation subject to withholding at the time such income is recognized, and
therefore, the Company or an affiliate must make the necessary arrangements with
the optionee to ensure that the amount of the tax required to be withheld is
available for payment. Non-qualified options are designed to ensure that the
Company will be entitled to a deduction equal to the amount of ordinary income
recognized by the optionee at the time of such recognition by the optionee.
The basis of shares transferred to an optionee pursuant to exercise of a
non-qualified option is the price paid for such shares plus an amount equal to
any income recognized by the optionee as a result of the exercise of such
option. If an optionee thereafter sells shares acquired upon exercise of a
non-qualified option, any amount realized over the basis of such shares will
constitute capital gain to such optionee for federal income tax purposes.
Incentive Options. No income will be recognized by an optionee for federal
income tax purposes upon the grant or exercise of an ISO. However, the excess of
the fair market value of shares received upon the exercise of an ISO over the
option price for such shares is an item of adjustment for the optionee for
purposes of the alternative minimum tax. The basis of shares transferred to an
optionee pursuant to the exercise of an ISO is the price paid for such shares.
If the optionee holds such shares for at least one year after transfer of the
shares to the optionee and two years after the grant of the option, the optionee
will recognize capital gain or loss upon sale of the shares received upon such
exercise equal to the difference between the amount realized on such sale and
the exercise price. Generally, if the shares are not held for that period, the
optionee will recognize ordinary income upon disposition in an amount equal to
the excess of the fair market value of the shares on the date of exercise over
the option price of such shares. Any additional gain realized by the optionee
upon such disposition will be a capital gain.
The Company is not entitled to a deduction upon the exercise of an ISO by
an optionee. If the optionee disposes of the shares of stock received pursuant
to such exercise prior to the expiration of one year following transfer of the
shares to the optionee or two years after grant of the option, however, the
Company may deduct an amount equal to the ordinary income recognized by the
optionee upon disposition of the shares at the time such income is recognized by
the optionee.
Stock for Stock Exercise. If an optionee uses already owned shares of
Common Stock to pay the exercise price for shares under an option, generally,
the number of shares received pursuant to the option which is equal to the
number of shares delivered in payment of the exercise price will be considered
received in a nontaxable exchange. The optionee will have a carryover basis with
respect to those shares of Common Stock received that are equal in number to the
shares of Common Stock surrendered as payment. The optionee's basis in the
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additional shares of Common Stock received will be equal to any amount included
in the optionee's gross income (i.e., from the exercise of a non-qualified
option), plus any cash paid for such shares. The optionee will have a carryover
holding period with respect to those shares of Common Stock received that are
equal in number to the shares of Common Stock surrendered as payment. The
holding period of any additional shares of Common Stock received will begin on
the date that the option is exercised.
The resulting tax consequences will vary if such already owned shares of
Common Stock are "statutory option stock," (as defined in Section 424(c)(3)(B)
of the Code) and such statutory option stock has not been held by the optionee
for the applicable holding period referred to in Section 424(c)(3)(A) of the
Code. If the stock used to pay the exercise price of an ISO is statutory option
stock with respect to which the applicable holding period has not been
satisfied, the transfer of such stock will be a disqualifying disposition
described in Section 421(b) of the Code, which will result in the recognition of
ordinary income by the optionee in an amount equal to the excess of the fair
market value of the statutory option stock at the time the option covering such
stock was exercised over the option price of such stock.
Performance-Based Compensation. Certain stock options granted to highly
compensated executive officers are intended to comply with the "qualified
performance based compensation" rules under Code Section 162(m)(4)(C), so that
the Company can generally obtain a full deduction for federal income tax
purposes for the income recognized on exercise of such options. Any option
granted to such officers with an exercise price equal to or in excess of the
fair market value of a share of Common Stock as of the date of grant is to be
granted and administered in accordance with the "qualified performance based
compensation" rules. The Compensation Committee (which is comprised solely of
outside directors) administers such grants.
THE SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES UPON THE PARTICIPANTS IN
THE 1991 PLAN CONTAINED IN THIS PROXY STATEMENT DOES NOT PURPORT TO BE COMPLETE.
THE BOARD OF DIRECTORS URGES STOCKHOLDERS TO VOTE "FOR"
THE PROPOSED AMENDMENT TO THE 1991 PLAN.
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of February 15, 2000, the beneficial
ownership of each current director, each nominee for director, each executive
officer included in the Summary Compensation Table, the directors and executive
officers as a group, and each stockholder known to management to own
beneficially more than 5% of the Company's Common Stock. Except as noted below,
each named person has sole voting power and dispositive power with respect to
the shares shown.
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) OF COMMON STOCK CLASS
- ---------------------------------------- ---------------- ----------
Houston H. Harte(2)......................................... 11,982,967 17.6%
David L. Copeland(3)........................................ 8,368,048 12.3
Andrew B. Shelton Revocable Trust........................... 6,857,696 10.0
Capital Research and Management Company(4).................. 4,359,300 6.4
Larry Franklin(5)........................................... 4,112,289 6.0
David L. Sinak(6)........................................... 3,750,006 5.5
Christopher M. Harte(7)..................................... 1,410,146 2.1
Donald R. Crews(8).......................................... 767,800 1.1
Richard M. Hochhauser(9).................................... 715,570 1.0
Peter E. Gorman(10)......................................... 265,000 *
Jacques D. Kerrest(11)...................................... 29,274 *
Dr. Peter T. Flawn.......................................... 10,468 *
James L. Johnson............................................ 3,701 *
All Executive Officers and Directors as a Group (10
persons)(12).............................................. 26,085,263 37.3
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* Less than 1%.
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(1) The address of Capital Research and Management Company is 333 South Hope
Street, Los Angeles, California 90071. The address of David L. Sinak is c/o
Hughes & Luce, L.L.P., 1717 Main Street, Suite 2800, Dallas, Texas 75201.
The address of each other beneficial owner is c/o Harte-Hanks, Inc., 200
Concord Plaza Drive, Suite 800, San Antonio, Texas 78216.
(2) Includes 2,250,000 shares in the aggregate owned by three trusts for which
Mr. Harte serves as co-trustee with David L. Sinak and 750,000 shares owned
by a trust for which Mr. Harte serves as a co-trustee with David L. Sinak
and Christopher M. Harte and as to which Mr. Harte holds shared voting and
dispositive power.
(3) Includes 17,200 shares held as custodian for his children; 1,339,750 shares
that are owned by 24 trusts for which Mr. Copeland serves as trustee or
co-trustee; 6,857,696 shares owned by the Andrew B. Shelton Revocable Trust
for which Mr. Copeland is the sole trustee; and 110,000 shares owned by the
Shelton Family Foundation of which he is a director.
(4) Capital Research and Management Company has sole dispositive power but no
voting power as to these shares. Information with respect to Capital
Research and Management Company is based on a Schedule 13G filing, dated
February 10, 2000.
(5) Includes 746,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days; 720,000 shares owned by three trusts
for which Mr. Franklin serves as co-trustee and holds shared voting and
dispositive power; 100,000 shares held in trust for his children; and
110,000 shares owned by the Shelton Family Foundation of which he is a
director.
(6) Represents shares owned by eight trusts for which Mr. Sinak serves as
co-trustee and holds shared voting and dispositive power.
(7) Includes 2,200 shares held as custodian for his step-children and child,
750,000 shares owned by a trust for which Mr. Harte serves as co-trustee
with David L. Sinak and Houston H. Harte and in which all three trustees
have shared voting and dispositive power, 83,334 shares owned by a trust
for which Mr. Harte serves as a co-trustee with David L. Sinak and as to
which Mr. Harte holds both shared voting and dispositive power and 558,839
shares held by Spicewood Family Partners, Ltd. of which Mr. Harte is the
sole general partner with exclusive voting and dispositive power over all
the partnership's shares.
(8) Includes 298,800 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(9) Includes 465,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(10) Includes 205,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(11) Includes 15,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days and 228 shares held in trust for his
children.
(12) Includes 1,729,800 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information about the current
directors and executive officers of the Company. Each of the executive officers
has held his position with the Company, or a similar position with the Company,
for at least the past five years, except as noted below.
NAME AGE POSITION WITH COMPANY
- ---- --- ---------------------
David L. Copeland...................... 44 Director (Class I)
Dr. Peter T. Flawn..................... 74 Director (Class I)
Larry Franklin......................... 57 Director (Class II); Chairman and Chief Executive
Officer
Christopher M. Harte................... 52 Director (Class I)
Houston H. Harte....................... 73 Vice Chairman, Board of Directors (Class III)
Richard M. Hochhauser.................. 55 Director (Class III); President and Chief Operating
Officer
James L. Johnson....................... 72 Director (Class II)
Donald R. Crews........................ 56 Senior Vice President, Legal; Secretary
Peter E. Gorman........................ 51 Senior Vice President; President, Harte-Hanks
Shoppers
Jacques D. Kerrest(1).................. 52 Senior Vice President, Finance and Chief Financial
Officer
- ---------------
(1) Prior to joining the Company in July 1997, Mr. Kerrest served as chief
financial officer of Chancellor Broadcasting Company beginning in November
1995. Prior to that position, beginning in July 1993 he served as chief
financial officer of Positive Communications, Inc.
Class I directors are to be elected at the Annual Meeting. The term of
Class II directors expires at the 2001 Annual Meeting of Stockholders, and the
term of Class III directors expires at the 2002 Annual Meeting of Stockholders.
David L. Copeland has served as a director of the Company since 1996. He
has been employed by SIPCO, Inc., the management and investment company for the
Andrew B. Shelton family, since 1980 and currently serves as its president. He
also serves as a director of First Financial Bankshares, Inc.
Dr. Peter T. Flawn, a director of the Company since 1985, is President
Emeritus of the University of Texas at Austin. Dr. Flawn is Chairman of the
Audit Committee of the Board of Directors.
Larry Franklin has served as a director of the Company since 1974 and as
Chief Executive Officer of the Company since 1991. Mr. Franklin has held
numerous positions since joining the Company in 1971, including Chief Financial
Officer, and also serves as a director of John Wiley & Sons, Inc.
Christopher M. Harte has served as a director of the Company since 1993. He
is a private investor and served as president of the Portland Press Herald and
Maine Sunday Telegram for approximately two years beginning June 1992. Prior to
becoming president of the Portland newspapers, Mr. Harte spent nine years with
Knight-Ridder Newspapers, during which time he served as president and publisher
of two newspapers and in other positions. He also serves as a director of
Geokinetics, Inc. Mr. Harte is the nephew of Houston H. Harte.
Houston H. Harte has served as a director of the Company since 1952 and
served as Chairman of the Board of Directors from 1972 until May 1999.
Richard M. Hochhauser has served as Chief Operating Officer of the Company
since January 1998 and as a director since 1996. He also has served as President
of Harte-Hanks Direct Marketing since 1987 and has held numerous other positions
since joining the Company in 1975.
James L. Johnson, a director of the Company since 1994, is Chairman
Emeritus of GTE Corporation. Mr. Johnson serves as a director of CellStar
Corporation, Finova Group, Inc., Mutual of New York, Valero Energy Corporation
and Walter Industries, Inc.
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MEETING ATTENDANCE AND COMMITTEES OF THE BOARD
The Board of Directors held eleven meetings during 1999. Each member of the
Board participated in at least 75% of all Board and committee meetings held
during the period that he served as a director and/or committee member. The
Board of Directors has established the Audit Committee and the Compensation
Committee. The functions of these committees and their current members are
described below.
Audit Committee. The Audit Committee currently consists of Dr. Peter T.
Flawn (Chairman) and James L. Johnson. The Audit Committee, which met three
times during 1999, is responsible for monitoring the Company's internal audit
function and its internal accounting controls, recommending to the Board of
Directors the selection of independent auditors, considering the range of audit
and non-audit fees and monitoring and reviewing the activities of the
independent auditors.
Compensation Committee. The Compensation Committee currently consists of
James L. Johnson (Chairman) and Dr. Peter T. Flawn, both of whom are
Non-Employee Directors in accordance with Rule 16b-3 of the Securities Exchange
Act of 1934 and outside directors in accordance with Section 162(m) of the Code.
The Compensation Committee, which met seven times during 1999, recommends salary
amounts for the Company's chief executive officer and other executive officers
and makes the final determination regarding bonus arrangements and awards of
stock options to such persons.
The Board of Directors does not have a standing nominating committee or any
other committee performing a similar function. The function customarily
attributable to a nominating committee is performed by the Board of Directors as
a whole.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the last three years to the Chief Executive Officer and each
of the Company's other most highly compensated executive officers (based on
total annual salary and bonus for 1999).
ANNUAL COMPENSATION
------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) GRANTED COMPENSATION(2)
- --------------------------- ---- -------- -------- ------- ---------------
Larry Franklin.......................... 1999 $835,000 $200,000 55,000 $19,400
Chairman and 1998 800,000 680,000 110,000 14,920
Chief Executive Officer 1997 750,000 750,000 110,000 14,800
Richard M. Hochhauser................... 1999 465,000 148,800 55,000 6,400
President and Chief 1998 440,000 360,800 90,000 1,920
Operating Officer 1997 400,000 400,000 90,000 1,800
Jacques D. Kerrest...................... 1999 314,000 76,930 29,000 6,400
Senior Vice President, Finance and 1998 300,000 180,000 68,000 --
Chief Financial Officer 1997 116,334 96,250 110,000 --
Donald R. Crews......................... 1999 305,000 74,725 18,000 6,400
Senior Vice President, Legal and 1998 294,000 176,400 36,000 1,920
Secretary 1997 280,000 196,000 19,000 1,800
Peter E. Gorman......................... 1999 300,000 162,000 17,000 6,400
Senior Vice President; President, 1998 290,000 82,940 36,000 1,920
Harte-Hanks Shoppers 1997 275,000 177,375 25,000 1,800
- ---------------
(1) Bonus amounts are inclusive of payments received under the existing
incentive compensation plan. Larry Franklin has elected to defer $545,417,
$480,000 and $450,000 of the total compensation payable to him in 1999, 1998
and 1997, respectively, in accordance with the Company's deferred
compensation plan.
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(2) Consisted of matching contributions made by the Company on behalf of the
respective individual under the Company's 401(k) plan and $13,000 in
premiums paid annually by the Company on a split-dollar policy insuring the
life of Larry Franklin.
OPTION GRANTS DURING 1999
The following table sets forth certain information concerning options to
purchase Common Stock granted in 1999 to the individuals named in the Summary
Compensation Table.
% OF TOTAL
OPTIONS
GRANTED TO MARKET POTENTIAL STOCK APPRECIATION
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION --------------------------------
NAME GRANTED IN 1999 PRICE AT GRANT DATE 0% 63%(1) 159%(1)
- ---- ------- ---------- -------- -------- ------------- -------- -------- ----------
Larry Franklin.................... 50,000(2) 3.2% $24.50 $24.50 January, 2009 $ -- $770,396 $1,952,335
5,000(3) 0.3% 2.00 24.50 January, 2009 112,500 189,540 307,733
Richard M. Hochhauser............. 50,000(2) 3.2% 24.50 24.50 January, 2009 -- 770,396 1,952,335
5,000(3) 0.3% 2.00 24.50 January, 2009 112,500 189,540 307,733
Jacques D. Kerrest................ 25,000(2) 1.6% 24.50 24.50 January, 2009 -- 385,198 976,167
4,000(3) 0.3% 2.00 24.50 January, 2009 90,000 151,632 246,187
Donald R. Crews................... 15,000(2) 1.0% 24.50 24.50 January, 2009 -- 231,119 585,700
3,000(3) 0.2% 2.00 24.50 January, 2009 67,500 113,724 184,640
Peter E. Gorman................... 15,000(2) 1.0% 24.50 24.50 January, 2009 -- 231,119 585,700
2,000(3) 0.1% 2.00 24.50 January, 2009 45,000 75,816 123,093
- ---------------
(1) Assumed annual compounded rates of stock price appreciation of 5% (63%) and
10% (159%) over the term of the grant applied to market price at date of
grant.
(2) Options become exercisable in installments over five years and expire on the
tenth anniversary of the date of grant.
(3) Performance options have been granted at exercise prices of $2.00 per share.
The performance options are exercisable only after the third, and prior to
the tenth, anniversary of the date of grant. The timing at which the options
become exercisable depends upon the extent to which the Company achieves
certain goals that are established at the time the options are granted.
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning option
exercises during 1999 and unexercised options held at December 31, 1999 by the
individuals named in the Summary Compensation Table.
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
Larry Franklin............... -- $ -- 565,000 525,000 $10,670,627 $5,160,626
Richard M. Hochhauser........ 30,000 767,500 439,000 440,000 8,459,251 4,031,875
Jacques D. Kerrest........... -- -- -- 207,000 -- 1,394,375
Donald R. Crews.............. 24,000 614,000 289,500 111,000 5,579,126 959,000
Peter E. Gorman.............. -- -- 179,500 173,000 3,481,626 1,657,750
- ---------------
(1) The value is the amount by which the market value of the underlying stock at
December 31, 1999 ($21.75) exceeds the aggregate exercise prices of the
options.
RETIREMENT BENEFIT PLAN
In addition to a defined benefit pension plan which is qualified under
Section 401 of the Code, the Company has established for certain individuals an
unfunded, non-qualified pension restoration plan. The annual pension benefit
under the plans, taken together, is largely determined by the number of years of
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employment multiplied by a percentage of the participant's final average
earnings (earnings during the highest five consecutive years). The defined
benefit plan was frozen as of December 31, 1998, and no further benefits will
accrue under that plan. In addition, the Code places certain limitations on the
amount of pension benefits that may be paid under qualified plans. Any benefits
payable to participants in the pension restoration plan in excess of those
payable from the defined benefit plan will be paid under the pension restoration
plan.
The table below may be used to calculate the approximate annual benefits
payable at retirement at age 65 under the Company's defined benefit pension plan
and pension restoration plan to individuals in specified remuneration and
years-of-service classifications. The benefits are not subject to any reduction
for social security benefits or other offset amounts.
YEARS OF CREDITED SERVICE
----------------------------------------------------
HIGHEST 5 YEAR AVERAGE REMUNERATION 15 20 25 30 35
- ----------------------------------- -------- -------- -------- -------- --------
$150,000................................ $ 34,090 $ 45,453 $ 56,817 $ 68,180 $ 79,543
250,000................................ 58,453 77,937 97,421 116,906 136,390
350,000................................ 83,203 110,937 138,671 166,406 194,140
450,000................................ 107,953 143,937 179,921 215,906 251,890
550,000................................ 132,703 176,937 221,171 265,406 309,640
650,000................................ 157,453 209,937 262,421 314,906 367,390
750,000................................ 182,203 242,937 303,671 364,406 425,140
850,000................................ 206,953 275,937 344,921 413,906 482,890
950,000................................ 231,703 308,937 386,171 463,406 540,640
The compensation included in the Summary Compensation Table under salary
and bonuses qualifies as remuneration for purposes of the Company's defined
benefit pension plan and pension restoration plan, except that there are limits
on the amounts of bonuses taken into consideration under the pension restoration
plan. For purposes of the plans, the officers named in the Summary Compensation
Table have the following years of service: Mr. Franklin: 28 years; Mr.
Hochhauser: 24 years; Mr. Crews: 17 years; Mr. Gorman: 19 years and Mr. Kerrest:
3 years.
COMPENSATION OF DIRECTORS
Directors who are not employees or otherwise affiliates of the Company
receive annual director's fees of $47,000 and are reimbursed for certain out of
pocket expenses. Directors who are employees or are otherwise affiliates of the
Company do not receive director's fees. Under the Harte-Hanks, Inc. 1998
Director Stock Plan non-employee directors may elect to receive all or a portion
of the cash compensation otherwise payable for such director's services in
common stock of the Company based upon fair market value. During 1999, David L.
Copeland, Dr. Peter T. Flawn, Christopher M. Harte and James L. Johnson each
received director's fees in cash or in stock of $47,000.
SEVERANCE AGREEMENTS
The Company has entered into a severance agreement with Larry Franklin. If
Mr. Franklin is terminated from his position as Chairman and Chief Executive
Officer of the Company other than for "cause" (as defined in the severance
agreement) or if Mr. Franklin terminates his employment after specified adverse
actions are taken by the Company, he will be entitled to severance compensation
in a lump sum cash amount equal to 200% of the sum of (A) the annual base salary
in effect just prior to termination, plus (B) the average of the bonus or
incentive compensation for the two fiscal years preceding the termination. In
addition to the cash compensation, upon Mr. Franklin's termination, the Company
will continue to provide certain benefits for a two year period and all options
previously granted to Mr. Franklin will immediately vest and become fully
exercisable. The Company has entered into a severance agreement with Richard M.
Hochhauser which is substantially the same as the severance agreement with Mr.
Franklin.
The Company has also entered into severance agreements with Donald R.
Crews, Peter E. Gorman and Jacques D. Kerrest. If after a "change in control"
(as defined) of the Company, any of the above executives is
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terminated other than for "cause," or elects to terminate his employment under
specified circumstances, the executive will be entitled to severance
compensation in a lump sum cash amount equal to 200% of the sum of (A) the
annual base salary in effect immediately prior to the change in control, plus
(B) the average of the bonus or incentive compensation for the two fiscal years
preceding the change in control. In addition, a terminated executive will
receive a cash payment sufficient to cover health insurance premiums for a
period of 18 months. Upon a change in control, all options previously granted to
the executive will immediately vest and become fully exercisable. Under limited
circumstances the above-described executives may be entitled to the foregoing
benefits upon termination of employment before a "change in control" occurs.
In no event will the Company be required to make to any of the foregoing
executives any payment under such agreements that would result, in the opinion
of tax counsel, in an "excess parachute payment" within the meaning of Section
280G of the Code and the imposition of an excise tax under Section 4999 of the
Code.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
recommending to the full Board of Directors salary amounts for the Company's
Chief Executive Officer and other executive officers and making the final
determination regarding bonus arrangements and awards of stock options to such
persons.
Compensation to executives is designed to attract and retain superior
talent, to motivate the performance of executives in support of the achievement
of the Company's strategic financial and operating performance objectives, and
to reward performance that meets this standard. The Company is engaged in highly
competitive businesses and must attract and retain qualified executives in order
to be successful. In 1999, executive compensation comprised the following
elements:
Base Salary. The base salary for the Chief Executive Officer and the
other executive officers of the Company was determined after review of
publicly available information concerning the base salaries of executives
with similar responsibilities in companies engaged in businesses similar to
the Company's core businesses (which may include, but are not necessarily
the same as, those included in the Peer Group Index Graph contained in this
Proxy Statement) and the responsibilities of each executive officer,
particularly in view of the fact that the decentralized management
philosophy of the Company relies heavily on the direct action of the
Company's executives in pursuit of Company goals.
Annual Incentive Compensation. Year-end cash bonuses are designed to
motivate the Chief Executive Officer and the other executive officers to
achieve specific annual financial and other goals based on the strategic
financial and operating performance objectives of the Company overall, as
well as each core business. In conjunction with the Compensation
Committee's review of the strategic and operating plans of the Company and
each core business at the beginning of 1999, the Compensation Committee
established incremental target performance levels for each executive
officer based on the operating profit and earnings per share growth goals
of the Company and the related financial goals of the core businesses.
Bonus amounts were paid to the executive based on the target performance
level reached.
Stock Option Plan. The 1991 Plan forms the basis of the Company's
long-term incentive plan for executives. The Compensation Committee
believes that a significant portion of executive compensation should be
dependent on value created for the stockholders. Stock options are
generally granted annually. In 1999, certain options were granted at fair
market value on the date of grant and become exercisable in installments
over five years from such date if the option holder is still employed.
Other options were granted below fair market value but only become
exercisable nine years after their date of grant unless at the end of three
years the Company has reached specific financial performance levels
established at the time of grant. In selecting recipients for option grants
and in determining the size of such grants, the Compensation Committee
considered various factors including the overall performance of the Company
and the recipient.
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Executives also receive benefits typically offered to executives by
companies engaged in businesses similar to the Company's core businesses and
various benefits generally available to employees of the Company (such as health
insurance).
It is the Company's policy to qualify compensation paid to executive
officers for deductibility under applicable provisions of the Code, including
Section 162(m). However, the Company may determine from time to time to pay
compensation to its executive officers that may not be deductible.
In making its decisions, the Compensation Committee takes into account,
primarily on a subjective basis, factors relevant to the specific compensation
component being considered, including compensation paid by other companies of
comparable size in businesses similar to the Company's core businesses, the
generation of income and cash flow by the Company as a whole and the individual
core businesses, the attainment of annual individual and business objectives and
an assessment of business performance against companies of comparable size in
businesses similar to the Company's core businesses, the executive officer's
level of responsibility and the contributions the Company expects the executive
to make in support of the Company's strategies.
1999 Compensation of Chief Executive Officer. The base salary of Mr.
Franklin for 1999 was $835,000, an increase of 4.4% over his base salary in
1998. Mr. Franklin's bonus potential was targeted at 50% of base salary, with a
potential range of 0%-100% of base salary. Mr. Franklin's 1999 cash bonus, which
was based on the degree of attainment of financial goals established at the
beginning of 1999, reflects the fact that in 1999 the Company's revenues,
operating income and earnings per share from the Company's current businesses
increased substantially. In 1999, Mr. Franklin received two option grants under
the Company's 1991 Plan, and in making those grants the Committee took into
consideration the factors described above under the caption "Stock Option Plan."
COMPENSATION COMMITTEE
James L. Johnson, Chairman Dr. Peter T. Flawn
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COMPARISON OF SHAREHOLDER RETURN
The following graph compares the cumulative total return of the Company's
Common Stock during the period December 31, 1994 to December 31, 1999 with the
S&P 500 Index, a peer group tracked in the proxy statement relating to the
Annual Meeting of the Company held on May 4, 1999 and a new peer group selected
by the Company for inclusion into this Proxy Statement for the reasons explained
below.
The S&P 500 Index includes 500 United States companies in the industrial,
transportation, utilities and financial sectors and is weighted by market
capitalization. Both peer groups are also weighted by market capitalization. In
the proxy statement relating to the Annual Meeting of the Company held on May 4,
1999, the Company compared total return of its Common Stock against a peer group
including Acxiom Corporation, Catalina Marketing Corporation, R.R. Donnelly &
Sons Company, Dow Jones & Company, Inc., Gannett Co., Inc., Knight-Ridder, Inc.,
M/A/R/C Inc., The New York Times Company, The Times Mirror Company and the
Tribune Company (the "Old Peer Group"). Because the Company divested itself of
its newspaper and broadcast operations in late 1997, the Company has selected a
new peer group (the "New Peer Group) comprised of companies more closely
mirroring the Company's current lines of business. This New Peer Group is
comprised of Acxiom Corporation, Catalina Marketing Corporation, Fair Isaac and
Company, Incorporated, infoUSA, INC., Convergys Corporation, Young & Rubicam
Inc., Snyder Communications, Inc., Sykes Enterprises, Incorporated and Teletech
Holdings, Inc. Convergys Corporation and Young & Rubicam Inc have been factored
only for the years ended December 31, 1998 and 1999 and Snyder Communications,
Inc., Sykes Enterprises, Incorporated and Teletech Holdings, Inc. have been
factored for the years ended December 31, 1997, 1998 and 1999, because such
periods reflect the time these companies have been public.
The graph depicts the results of investing $100 in the Company's Common
Stock, the S&P 500 Index, the Old Peer Group and the New Peer Group at closing
prices on December 31, 1994. It assumes that all dividends were reinvested.
TOTAL SHAREHOLDER RETURNS
[PERFORMANCE GRAPH]
HARTE-HANKS, INC. S&P 500 OLD PEER GROUP NEW PEER GROUP
----------------- ------- -------------- --------------
12/31/94 100.00 100.00 100.00 100.00
12/31/95 152.53 137.58 131.01 133.83
12/31/96 214.92 169.17 154.66 213.12
12/31/97 287.33 229.60 228.62 173.40
12/31/98 443.82 290.08 241.85 206.79
12/31/99 339.90 351.12 306.66 296.46
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INDEPENDENT AUDITORS
KPMG LLP, independent certified public accountants, has been selected by
the Board of Directors as the Company's independent auditor for the year 2000.
Representatives of KPMG LLP, who were also the Company's independent auditors
for the year 1999, are expected to be present at the Annual Meeting. They will
have the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the meeting other than the matters set forth herein. Should any other
matter requiring a vote of stockholders properly arise, the proxies in the
enclosed form confer upon the person or persons entitled to vote the shares
represented by such proxies discretionary authority to vote the same in
accordance with their best judgment in the interest of the Company.
A proper proposal submitted by a stockholder in accordance with applicable
rules and regulations for presentation at the Company's next annual meeting that
is received at the Company's principal executive office by November 28, 2000
will be included in the Company's proxy statement and form of proxy for that
meeting.
The enclosed proxy is solicited on behalf of the Board of Directors of the
Company. The cost of soliciting proxies in the accompanying form will be paid by
the Company. Officers of the Company may solicit proxies by mail, telephone or
telegraph. Upon request, the Company will reimburse brokers, dealers, banks and
trustees, or their nominees for reasonable expenses incurred by them in
forwarding proxy material to beneficial owners of shares of the Common Stock.
FINANCIAL STATEMENTS
A copy of the Company's 1999 Annual Report containing audited financial
statements accompanies this Proxy Statement. The Annual Report does not
constitute a part of the proxy solicitation material.
By Order of the Board of Directors
DONALD R. CREWS
Senior Vice President, Legal and
Secretary
March 27, 2000
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HARTE-HANKS, INC.
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
FOR AGAINST ABSTAIN
1. Election of Directors. 2. To amend the Company's 1991 Stock
Option Plan to increase by three [ ] [ ] [ ]
NOMINEES: David L. Copeland, Dr. Peter T. Flawn and million the number of shares available
Christopher M. Harte for issuance under the plan.
FOR WITHHELD
[ ] [ ] 3. On any other business that may properly come before the
meeting, hereby revoking any proxy or proxies heretofore
[ ] given by the undersigned.
-----------------------------------
For all nominees except as noted above MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE SIGN, DATE AND MAIL TODAY.
(Joint owners must EACH sign. Please sign EXACTLY as your
name appears on this card. When signing as attorney,
trustee, executor, administrator, guardian or corporate
officer, please give your FULL title.)
Signature: Date: Signature: Date:
---------------------------- ------------------ --------------------------------- ----------------
18
HRT108 DETACH HERE
PROXY
HARTE-HANKS, INC.
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
AT 10:00 A.M., TUESDAY, MAY 2, 2000
200 CONCORD PLAZA DRIVE, FIRST FLOOR
SAN ANTONIO, TEXAS 78216
The undersigned stockholder of Harte-Hanks, Inc. (the "Company") hereby
revokes any proxy or proxies previously granted and appoints Larry Franklin and
Houston H. Harte or either of them as proxies, each with full powers of
substitution and resubstitution, to vote the shares of the undersigned at the
above-stated Annual Meeting and at any adjournment(s) thereof.
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE REVERSE SIDE. IF A
CHOICE IS NOT INDICATED WITH RESPECT TO ITEMS (1) AND (2), THIS PROXY WILL BE
VOTED "FOR" SUCH ITEMS. THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO
ANY MATTER REFERRED TO IN ITEM (3). THIS PROXY IS REVOCABLE AT ANY TIME BEFORE
IT IS EXERCISED.
[SEE REVERSE SIDE] [SEE REVERSE SIDE]
CONTINUED AND TO BE SIGNED ON REVERSE SIDE