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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 sec. 240.14a-11(c) or sec. 240.14a-12
Harte-Hanks Communications, Inc.
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(Name of Registrant as Specified in its Charter)
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(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)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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HARTE-HANKS COMMUNICATIONS, INC.
200 CONCORD PLAZA DRIVE, SUITE 800
SAN ANTONIO, TEXAS 78216
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 5, 1998
As a stockholder of Harte-Hanks Communications, 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 5, 1998, at 10:00 a.m. local time, for the
following purposes:
1. To elect two Class II directors, each for a three-year term;
2. To approve an amendment to the Harte-Hanks Communications, Inc.
Certificate of Incorporation (the "Harte-Hanks Charter") to change the name
of the Company to "Harte-Hanks, Inc.";
3. To approve an amendment to the Harte-Hanks Charter to increase the
number of authorized shares of common stock, par value $1.00 ("Common
Stock"), from 125,000,000 to 250,000,000;
4. To approve the adoption of the Harte-Hanks Communications, Inc.
1998 Director Stock Plan;
5. To approve amendments to the Harte-Hanks Communications, Inc. 1991
Stock Option Plan (the "1991 Plan"); and
6. 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 16, 1998 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, 1998
YOUR VOTE IS IMPORTANT.
PLEASE EXECUTE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED.
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HARTE-HANKS COMMUNICATIONS, INC.
200 CONCORD PLAZA DRIVE, SUITE 800
SAN ANTONIO, TEXAS 78216
---------------------
PROXY STATEMENT
---------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 5, 1998
---------------------
This Proxy Statement is furnished to stockholders of Harte-Hanks
Communications, Inc. ("Harte-Hanks" or the "Company") for use at the 1998 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 16, 1998. The approximate date on which this Proxy Statement and the
enclosed proxy are first being sent or given to stockholders is March 27, 1998.
VOTING PROCEDURES
The accompanying proxy card is designed to permit each stockholder of
record at the close of business on the record date, March 16, 1998 (the "Record
Date"), to vote in the election of Class II directors and on the proposals
described in this Proxy Statement. The proxy card provides space for a
stockholder (i) to vote in favor of or to withhold voting for the nominees for
the Class II Directors, (ii) to vote for or against any proposal to be
considered at the Annual Meeting or (iii) to abstain from voting on any proposal
other than election of Class II directors if the stockholder chooses to do so.
The election of Class II directors will be decided by a plurality of the votes
cast. The proposed amendments to the Harte-Hanks Charter and the 1991 Plan will
be determined by a majority of the shares entitled to vote at the Annual
Meeting. All other matters 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.
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 two nominees for Class II director, FOR the other proposals
described on the proxy card and at the discretion of the proxies on any other
matter that may properly come before the Annual Meeting or any adjournment.
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The total outstanding capital stock of the Company as of March 16, 1998
consisted of 73,589,784 shares of Common Stock, which number reflects a
two-for-one stock split paid in the form of a stock dividend on March 16, 1998.
Each share of Common Stock is entitled to one vote. All share numbers referenced
in this Proxy Statement are adjusted to reflect the stock split.
MATTERS TO BE BROUGHT BEFORE THE MEETING
PROPOSAL ONE -- ELECTION OF CLASS II 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 II directors will expire at the Annual Meeting. The Class II
directors elected in 1998 will serve for a term of three years which expires at
the Annual Meeting of Stockholders in 2001 or when their successors are elected
and qualified. The election of directors will be decided by a plurality vote of
the votes cast in writing.
The nominees for the Class II directors are Larry Franklin and James L.
Johnson. All nominees are members of the present Board of Directors. The Board
believes that all nominees will be available and able to serve as directors. If
any 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 THE HARTE-HANKS CHARTER TO CHANGE THE NAME OF THE
COMPANY TO HARTE-HANKS, INC.
On October 15, 1997, the Company completed the sale of its newspaper and
television businesses to The E.W. Scripps Company. The sale was part of the
Company's strategy to focus on its direct marketing and shopper businesses. In
light of the sale, the Board of Directors believes that the name Harte-Hanks,
Inc. is more appropriate for the Company at this time. The New York Stock
Exchange trading symbol will remain "HHS."
To accomplish the proposed name change, Article I of the Harte-Hanks
Charter will be amended to read in its entirety:
"The name of the Corporation is "Harte-Hanks, Inc."
If the amendment is adopted, it will become effective upon the filing of a
Certificate of Amendment with the Secretary of State of the State of Delaware.
THE BOARD OF DIRECTORS URGES STOCKHOLDERS TO VOTE
FOR THE PROPOSED NAME CHANGE.
PROPOSAL THREE -- AMENDMENT OF THE HARTE-HANKS CHARTER TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK.
At the Annual Meeting, stockholders will be asked to consider and vote upon
a proposal to amend the Harte-Hanks Charter to increase the number of shares of
Harte-Hanks Common Stock authorized for issuance from 125,000,000 to
250,000,000. This amendment was adopted by the Board of Directors on January 28,
1998, subject to stockholder approval.
Harte-Hanks' authorized capital stock currently consists of a total of
125,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock.
There are no preemptive rights associated with any of the
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Harte-Hanks capital stock. As of the Record Date there were 73,589,784 shares of
Common Stock outstanding and approximately 9,664,126 shares were reserved for
future issuance pursuant to stock option plans and other arrangements. No shares
of Preferred Stock have been issued.
On January 28, 1998, the Board of Directors approved a two-for-one stock
split to be paid in the form of a stock dividend on March 16, 1998 to
stockholders of record on March 2, 1998. The Board of Directors believes that it
is in the best interests of the Company to have additional shares of Common
Stock issuable at its discretion for possible future acquisitions, stock splits,
stock dividends, employee benefit plans and other corporate purposes.
The additional Common Stock authorized by the adoption of the amendment
would have rights identical to the currently outstanding Common Stock. Adoption
of the proposed amendment and issuance of Common Stock would not affect the
rights of the holders of currently outstanding Harte-Hanks Common Stock, except
for the effects incidental to increasing the number of shares outstanding,
including possible dilution of the equity interests of existing stockholders or
reduction of proportionate voting power of existing stockholders. If the
amendment is adopted, it will become effective upon the filing of a Certificate
of Amendment to the Harte-Hanks Charter with the Secretary of State of the State
of Delaware.
The additional shares of Common Stock may be issued, subject to certain
exceptions, by the Board of Directors at such times, in such amounts, and upon
such terms as the Board of Directors may determine without further approval of
the stockholders. Stockholders have no preemptive rights to subscribe for
additional shares when issued. To accomplish the proposed increase, the first
sentence of the Fourth Article of the Harte-Hanks Charter must be amended as
follows:
"Fourth: The aggregate number of shares of capital stock that the
Corporation shall have the authority to issue is two hundred fifty-one
million (251,000,000), of which two hundred fifty million (250,000,000)
shares shall be common stock of the Corporation, par value $1.00 per share,
and one million (1,000,000) shares shall be Preferred Stock, par value $1.00
per share."
THE BOARD OF DIRECTORS URGES STOCKHOLDERS TO VOTE
FOR THE PROPOSED INCREASE IN THE AUTHORIZED COMMON STOCK.
PROPOSAL FOUR -- ADOPTION OF THE HARTE-HANKS COMMUNICATIONS, INC. 1998 DIRECTOR
STOCK PLAN
Harte-Hanks believes that directors as well as officers of the Company
should have a meaningful investment in the company they manage. In order to
increase Harte-Hanks stock ownership by its non-employee directors and to
attract and retain highly qualified individuals to serve as directors of the
Company, the Board of Directors adopted the 1998 Director Stock Plan (the "1998
Plan") on March 9, 1998, subject to stockholder approval.
For many years non-employee directors have been paid a cash fee to
compensate them for the services they provide to the Company. Pursuant to the
1998 Plan, each non-employee director may elect to receive all or a portion of
the cash compensation otherwise payable for such director's services in Common
Stock. There are currently four non-employee directors serving on the Board of
Directors. The following table summarizes the benefits that such non-employee
directors would have received during 1997 if all had elected to take the total
amount of the director fees paid in stock.
NEW PLAN BENEFITS
1998 DIRECTOR STOCK PLAN
AGGREGATE DOLLAR VALUE OF AGGREGATE NUMBER OF SHARES
GROUP DIRECTOR FEES FOREGONE AWARDED IN LIEU OF FEES
----- ------------------------- --------------------------
Non-Executive Director Group (4
persons)......................... $188,000 11,660
Subject to stockholder approval, the 1998 Plan will be effective May 5,
1998. Only non-employee directors (those not employed by the Company or any
subsidiary of the Company) will be eligible to
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participate in the Plan. Beginning July 1, 1998, each non-employee director
would have the option to elect to take stock in lieu of such director's cash
compensation for directors fees in increments of 25%, 50%, 75% or 100%. Upon
such election, the number of whole shares of stock to be distributed to the
director shall be equal to the cash compensation foregone during a calendar
quarter divided by the closing price for the Common Stock as reported by the New
York Stock Exchange (or any exchange on which the stock is then traded) on the
last day of the calendar quarter. The maximum number of shares of Common Stock
that may be issued pursuant to the 1998 Plan is 200,000 shares, subject to
adjustment for changes in capitalization. All shares of Common Stock to be used
for purposes of this Plan will be treasury shares.
Shares of Common Stock issued pursuant to the 1998 Plan are subject to a
six-month holding period, except in the case of death or disability of the
non-employee director. No rights under the Plan shall be assignable or
transferable by a director, other than by will or the laws of descent and
distribution. The 1998 Plan may be amended by action of the Board of Directors;
provided that stockholder approval is required to increase the number of shares
of Common Stock that may be distributed under the Plan.
THE BOARD OF DIRECTORS URGES STOCKHOLDERS TO VOTE
FOR THE PROPOSED 1998 DIRECTOR STOCK PLAN
PROPOSAL FIVE -- 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 employees to have a greater personal financial investment in
Harte-Hanks.
Since 1984, Harte-Hanks has had a stock option plan. The Harte-Hanks
stockholders approved the 1991 Stock Option Plan (the "1991 Plan") in 1991. 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 Code and incentive stock options under Section 422A 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 that administers the 1991 Plan. James L. Johnson and Dr. Peter T.
Flawn are the current members of the Compensation Committee.
On January 28, 1998, the Board of Directors adopted amendments to the 1991
Plan to (a) permit the exercise price for stock options to be paid, directly or
constructively, in shares of Common Stock owned by the optionee; (b) provide
that upon exercise of a non-qualified option, the Board or the Compensation
Committee may permit the participant to request withholding of a number of
shares from the certificate issued upon exercise of the option sufficient to pay
the withholding taxes; (c) limit to 1,000,000 the total number of shares of
Common Stock for which options may be granted to any one participant in a single
year; (d) provide that non-qualified options may be granted to consultants or
advisors that provide services to the Company or its subsidiaries, and outside
directors of the Company; and (e) provide that, at the discretion of the Board
or Compensation Committee, non-qualified options may be granted that permit
transfer without consideration to certain family members of the optionee. These
amendments are submitted to the stockholders for approval in compliance with the
1991 Plan.
The Option Grants Table reflects the number of options awarded in 1997 to
executive officers named in the Summary Compensation Table. As of February 18,
1998, options to acquire approximately 5,792,550 shares of Harte-Hanks Common
Stock had been granted and remain outstanding pursuant to the 1991 Plan. Options
may be granted on up to 8 million shares of Common Stock. The following is a
summary of its principal provisions (including proposed amendments).
Purpose of the Plan. The purpose of the 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 employee of Harte-Hanks Communications, Inc. or any present or future parent
or subsidiary to promote the success of the business of these corporations.
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Shares Subject to the Plan. The shares subject to option and the other
provisions of this Plan shall be shares of the Company's Common Stock not to
exceed 8 million shares. Such shares may be either authorized but unissued
shares or treasury shares.
Administration of the Plan. The Compensation Committee has broad authority
to administer and interpret the 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 incentive stock option, 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 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 Common
Stock used must have been held by the participant 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 Plan. The Board may alter, suspend or
discontinue the Plan at any time. All Incentive Stock Options must be granted
within ten years of the effective date of the 1991 Plan, or the date the 1991
Plan 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 then issued and outstanding, which amendment would (i) increase
the number of shares available under the Plan; (ii) change the employees or
class of employees eligible to participate in the Plan; or (iii) change the
material terms of the 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.
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. Incentive stock options 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 Incentive Stock Option will be exercisable at any time
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after the expiration of ten (10) 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 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 Tax Consequences.
Nonqualified Options. No income will be recognized by an optionee for
federal income tax purposes upon the grant of a nonqualified option. Upon
exercise of a non-qualified option, the optionee will recognize income equal to
the excess of the fair market value of the shares received over the exercise
price. Income recognized upon the exercise of nonqualified 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. Nonqualified 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
nonqualified 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
nonqualified option, any amount realized over the basis of such shares will
constitute capital gain to such optionee for federal income tax purposes.
If an optionee uses already owned shares of Common Stock to pay the
exercise price for shares under a nonqualified option, 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, and the fair market value of the remaining shares received by the
optionee upon such exercise will be taxable to the optionee as ordinary income.
The optionee's basis in the number of shares received in exchange for the shares
delivered in payment of the exercise price will be equal to the basis of the
shares delivered in payment. The basis of the remaining shares received upon
such exercise will be equal to the fair market value of such shares.
Incentive Options. No income will be recognized by an optionee for federal
income tax purposes upon the grant or exercise of an incentive option. 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 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 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.
If an optionee uses already owned shares of Common Stock to pay the
exercise price for shares under an ISO, the resulting tax consequences will
depend upon whether such already owned shares of Common Stock are "statutory
option stock," and, if so, whether such statutory option stock has been held by
the optionee for the applicable holding period referred to in Section
424(c)(3)(A) of the Code. In general, "statutory option stock" (as defined in
Section 424(c)(3)(B) of the Code) is any stock acquired through the exercise of
an ISO or an option granted pursuant to an employee stock purchase plan, but not
through the exercise of a nonqualified stock option. If such stock is statutory
option stock with respect to which the applicable holding
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period has been satisfied, no income will be recognized by the optionee upon the
transfer of such stock in payment of the exercise price of an ISO. If such stock
is not statutory option stock, no income will be recognized by the optionee upon
the transfer of such stock unless such stock is not substantially vested within
the meaning of the regulations under Section 83 of the Code (in which event it
appears that the optionee will recognize ordinary income upon the transfer equal
to the amount by which the fair market value of the transferred shares exceeds
their basis). 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. Under the present
provisions of the Code, it is not clear whether all shares received upon the
exercise of an ISO with already owned shares will be statutory option stock or
how the optionee's basis will be allocated among such shares.
Performance-Based Compensation. Certain stock options granted to the
executives listed in the Summary Compensation Table (or individuals who may be
required to be included in the Summary Compensation Table at the time of
exercise of the options) 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 BOARD OF DIRECTORS URGES STOCKHOLDERS TO VOTE
FOR THE PROPOSED AMENDMENTS TO THE PLAN.
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SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of February 18, 1998 (adjusted to
reflect the two-for-one stock split in the form of a dividend paid on March 16,
1998) 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 investment
power with respect to the shares shown.
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER(1) OF COMMON STOCK CLASS
---------------------- ---------------- ----------
Houston H. Harte(2)........................................ 12,769,802 17.4
David L. Copeland(3)....................................... 8,420,596 11.4
Andrew B. Shelton Revocable Trust.......................... 6,857,656 9.3
Edward H. Harte............................................ 5,559,736 7.6
Train, Smith Counsel(4).................................... 4,893,184 6.6
The Capital Group Companies, Inc.(5)....................... 4,385,600 6.0
Larry Franklin(6).......................................... 3,797,614 5.1
David L. Sinak(7).......................................... 3,750,006 5.1
Christopher M. Harte(8).................................... 849,382 1.2
Donald R. Crews(9)......................................... 764,500 1.0
Richard M. Hochhauser(10).................................. 699,000 *
Peter E. Gorman(11)........................................ 196,500 *
Dr. Peter T. Flawn......................................... 15,000 *
Jacques D. Kerrest(12)..................................... 13,228 *
James L. Johnson........................................... 3,000 *
All Executive Officers and Directors as a Group (10
persons)(13)............................................. 26,058,622 34.8
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* Less than 1%.
(1) The address of Train, Smith Counsel is 667 Madison Avenue, New York, New
York 10021. The address of The Capital Group Companies, Inc., 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
Communications, 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 36,400 shares held as custodian for his children; 1,484,500 shares
that are owned by 12 trusts for which Mr. Copeland serves as trustee or
co-trustee and 6,857,696 shares owned by the Andrew B. Shelton Revocable
Trust for which Mr. Copeland is the sole trustee.
(4) Train, Smith Counsel has shared voting power with respect to 3,983,804
shares and shared dispositive power with respect to 4,893,184 shares and
has sole voting power or sole dispositive power with respect to no shares.
Information with respect to Train, Smith Counsel is based on a Schedule 13G
filing dated February 12, 1998.
(5) A subsidiary of The Capital Group Companies, Inc. has sole dispositive
power but no voting power as to these shares. Information with respect to
The Capital Group Companies, Inc. is based on a February 10, 1998 Schedule
13D filing.
(6) Includes 480,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days, 720,000 shares owned by four trusts
for which Mr. Franklin serves as co-trustee and holds shared voting and
dispositive power, and 120,000 shares held in trust for his children.
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(7) Represents shares owned by 13 trusts for which Mr. Sinak serves as
co-trustee and holds shared voting and dispositive power.
(8) Includes 3,000 shares held in trust for his children, 750,000 shares owned
by a trust for which Mr. Harte serves as co-trustee with David L. Sinak and
Houston H. Harte and 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
shared voting and dispositive power.
(9) Includes 247,500 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(10) Includes 369,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(11) Includes 190,500 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(12) Includes 228 shares held in trust for his children.
(13) Includes 1,287,000 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
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.............. 42 Director (Class I)
Dr. Peter T. Flawn............. 72 Director (Class I)
Larry Franklin................. 55 Director (Class II); President and Chief Executive
Officer
Christopher M. Harte........... 50 Director (Class I)
Houston H. Harte............... 71 Chairman, Board of Directors (Class III)
Richard M. Hochhauser.......... 53 Director (Class III); Executive Vice President and
Chief Operating Officer; President, Harte-Hanks
Direct Marketing
James L. Johnson............... 70 Director (Class II)
Donald R. Crews................ 54 Senior Vice President, Legal; Secretary
Peter E. Gorman................ 49 Senior Vice President; President, Harte-Hanks
Shoppers
Jacques D. Kerrest(1).......... 50 Senior Vice President, Finance and Chief Financial
Officer
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(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 Command, Inc. From January 1990 to July 1993
he was managing partner of Plenum Associates, Inc.
Class II directors are to be elected at the Annual Meeting. The term of
Class III directors expires at the 1999 Annual Meeting of Stockholders and the
term of Class I directors expires at the 2000 Annual Meeting of Stockholders.
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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.
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 and also serves as a director of El
Paso Energy, Inc. and Tenneco, Inc.
Larry Franklin has served as a director of the Company since 1974 and as
President and 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 as
Chairman of the Board of Directors since 1972.
Richard M. Hochhauser has served as Chief Operating Officer of the Company
since January 1998 and has served as a director and Executive Vice President of
the Company 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., GTE Corporation, Mutual of New York, Valero
Energy Corporation and Walter Industries, Inc.
MEETING ATTENDANCE AND COMMITTEES OF THE BOARD
The Board of Directors held ten meetings during 1997. 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 an audit committee and a 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 1997, 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 five times during 1997, 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.
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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 1997).
ANNUAL COMPENSATION
NAME AND PRINCIPAL ------------------- OPTIONS ALL OTHER
POSITION YEAR SALARY BONUS(1) GRANTED COMPENSATION(2)
------------------ ---- -------- -------- ------- ---------------
Larry Franklin 1997 $750,000 $750,000 110,000 $14,800
President and Chief Executive Officer 1996 700,000 700,000 110,000 14,800
1995 650,000 650,000 180,000 14,800
Richard M. Hochhauser 1997 400,000 400,000 90,000 1,800
Executive Vice President and Chief 1996 380,000 197,600 110,000 1,800
Operating Officer 1995 323,000 226,100 120,000 1,800
Donald R. Crews 1997 280,000 196,000 19,000 1,800
Senior Vice President, Legal and 1996 270,000 189,000 20,000 1,800
Secretary 1995 270,000 189,000 24,000 1,800
Peter E. Gorman 1997 275,000 177,375 25,000 1,800
Senior Vice President; President, 1996 246,000 172,200 84,000 1,800
Harte-Hanks Shoppers 1995 225,000 135,000 21,000 1,800
Jacques D. Kerrest(3) 1997 116,334 96,250 110,000 --
Senior Vice President, Finance and 1996 -- -- -- --
Chief Financial Officer 1995 -- -- -- --
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(1) Bonus amounts are inclusive of payments received under the existing
incentive compensation plan. Larry Franklin has elected to defer $450,000,
$400,000 and $325,000 of the total bonuses payable to him in 1997, 1996 and
1995, respectively, in accordance with the Company's deferred compensation
plan.
(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.
(3) Jacque D. Kerrest was hired as Senior Vice President, Finance and Chief
Financial Officer of the Company in July 1997 at an annualized base salary
of $275,000.
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OPTION GRANTS DURING 1997
The following table sets forth certain information concerning options to
purchase Common Stock granted in 1997 (adjusted to reflect the two-for-one stock
split in the form of a dividend paid on March 16, 1998) to the individuals named
in the Summary Compensation Table.
% OF
TOTAL
OPTIONS
GRANTED TO MARKET POTENTIAL STOCK APPRECIATION
OPTIONS EMPLOYEES EXERCISE PRICE AT EXPIRATION --------------------------------
NAME GRANTED IN 1997 PRICE GRANT DATE 0% 63%(1) 159%(1)
---- ---------- ---------- -------- -------- ------------- -------- -------- ----------
Larry Franklin............ 100,000(2) 7.7% $12.875 $12.875 January, 2007 $ -- $809,702 $2,051,943
10,000(3) 0.8% 1.000 12.875 January, 2007 118,750 199,720 323,944
Richard M. Hochhauser..... 80,000(2) 6.1% 12.875 12.875 January, 2007 -- 647,761 1,641,555
10,000(3) 0.8% 1.000 12.875 January, 2007 118,750 199,720 323,944
Donald R. Crews........... 16,000(2) 1.2% 12.875 12.875 January, 2007 -- 129,552 328,311
3,000(3) 0.2% 1.000 12.875 January, 2007 35,625 59,916 97,183
Peter E. Gorman........... 20,000(2) 1.5% 12.875 12.875 January, 2007 -- 161,940 410,389
5,000(3) 0.4% 1.000 12.875 January, 2007 59,375 99,860 161,972
Jacques D. Kerrest........ 100,000(2) 7.7% 14.656 14.656 July, 2007 -- 921,724 2,335,829
10,000(3) 0.8% 1.000 14.656 July, 2007 136,583 228,735 370,145
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(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 are exercisable only after the fifth, and prior to the tenth,
anniversary of the date of grant.
(3) Performance options have been granted at exercise prices of $1.00 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 1997 AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning option
exercises during 1997 and unexercised options held at December 31, 1997
(adjusted to reflect the two-for-one stock split in the form of a dividend paid
on March 16, 1998) by the individuals named in the Summary Compensation Table.
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1997 DECEMBER 31, 1997(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
Larry Franklin.......... -- $ -- 435,000 550,000 $7,027,500 $6,010,625
Richard M. Hochhauser... 4,600 64,783 340,400 455,000 5,494,317 4,951,875
Donald R. Crews......... 24,000 273,500 262,500 150,000 4,238,250 1,902,250
Peter E. Gorman......... -- -- 145,500 220,000 2,365,250 2,531,500
Jacques D. Kerrest...... -- -- -- 110,000 -- 559,375
- ---------------
(1) The value is the amount by which the market value of the underlying stock
at December 31, 1997 ($18.50) 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
employment multiplied by a percentage of the participant's final average
earnings (earnings during the highest five consecutive years). The Code places
certain limitations on the amount of pension benefits that may be
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paid under qualified plans. Any benefits in excess of those limitations payable
to participants in the pension restoration plan will be paid under that 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.
HIGHEST 5 YEAR YEARS OF CREDITED SERVICE
AVERAGE ----------------------------------------------------
REMUNERATION 15 20 25 30 35
- -------------- -------- -------- -------- -------- --------
$150,000...... $ 34,090 $ 45,453 $ 56,817 $ 68,180 $ 79,543
250,000....... 58,840 78,453 98,067 117,680 137,293
350,000....... 83,590 111,453 139,317 167,180 195,043
450,000....... 108,340 144,453 180,567 216,680 252,793
550,000....... 133,090 177,453 221,817 266,180 310,543
650,000....... 157,840 210,453 263,067 315,680 368,293
750,000....... 182,590 243,453 304,317 365,180 426,043
850,000....... 207,340 276,453 345,567 414,680 483,793
950,000....... 232,090 309,453 387,817 464,180 541,543
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: 26 years; Mr.
Hochhauser: 22 years; Mr. Crews: 15 years; Mr. Gorman: 17 years and Mr. Kerrest:
1 year.
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. During 1997, David L. Copeland, Dr.
Peter T. Flawn, Christopher M. Harte and James L. Johnson each received
director's fees of $47,000.
SEVERANCE AGREEMENTS
In July 1993, the Company entered into a severance agreement with Larry
Franklin. If Mr. Franklin is terminated from his position as President and Chief
Executive Officer of the Company other than for "cause" (as defined) 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 also entered into severance agreements with Donald R.
Crews, Peter E. Gorman, Richard M. Hochhauser and Jacques D. Kerrest. If after a
"change in control" (as defined) of the Company, any of the above executives is
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
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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 Committee 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 1997, executive compensation was comprised of 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) 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 Committee's review of
the strategic and operating plans of the Company and each core business at
the beginning of 1997, the 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, if the executive
was responsible for a core business, the goals of the core business. Bonus
amounts were paid to the executive based on the target performance level
reached.
Stock Option Plan. The 1991 Stock Option Plan forms the basis of the
Company's long-term incentive plan for executives. The 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 1997, certain options were granted at fair market value on the
date of grant and become exercisable 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 Committee considered various factors such as the overall performance of
the Company and the recipient.
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 Internal Revenue
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
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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.
1997 Compensation of Chief Executive Officer. The base salary of Mr.
Franklin for 1997 was $750,000, an increase of 7.1% over his base salary in
1996. 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 1997 cash bonus, which
was based on the degree of attainment of financial goals established at the
beginning of 1997, reflects the fact that in 1997 the Company's revenues,
operating income and earnings per share from the Company's current businesses
increased substantially. In 1997 Mr. Franklin received two option grants under
the Company's 1991 Stock Option 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
COMPARISON OF SHAREHOLDER RETURN
The following graph compares the cumulative total return of the Company's
Common Stock during the period commencing November 4, 1993, the date public
trading of the Common Stock began following the Company's initial public equity
offering, to December 31, 1997 with the S&P 500 Index and a peer group selected
by the Company.
The S&P 500 Index includes 500 United States companies in the industrial,
transportation, utilities and financial sectors and is weighted by market
capitalization. The peer group selected by the Company, which also is weighted
by market capitalization, includes Acxiom Corporation, Catalina Marketing
Corporation, R.R. Donnelley & 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 Tribune Company.
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The graph depicts the results of investing $100 in the Company's Common
Stock, the S&P 500 Index and the peer group selected by the Company at closing
prices on November 4, 1993. It assumes that all dividends were reinvested
[GRAPH]
Harte-Hanks
Measurement Period Communications,
(Fiscal Year Covered) Inc. Peer Group S&P 500
11/4/93 100.00 100.00 100.00
12/31/93 117.29 108.01 102.16
12/31/94 117.29 101.20 103.51
12/31/95 178.90 132.58 142.41
12/31/96 252.08 156.51 175.10
12/31/97 337.01 231.36 233.52
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, independent certified public accountants, has been
selected by the Board of Directors as the Company's independent auditor for the
year 1998. Representatives of KPMG Peat Marwick LLP, who were also the Company's
independent auditors for the year 1997, 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 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 January 27, 1999 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.
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FINANCIAL STATEMENTS
A copy of the Company's 1997 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, 1998
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1235-PS-98
21
HARTE-HANKS COMMUNICATIONS, INC.
1998 DIRECTOR STOCK PLAN
1. Purposes. The purposes of the 1998 Director Stock Plan (the
Plan) are to (a) attract and retain highly qualified individuals to serve as
directors of Harte-Hanks Communications, Inc. (the Company) and (b) to increase
the Non-Employee Directors (as defined below) stock ownership in the Company.
2. Effective Date. The Plan shall be effective as of May 5, 1998,
subject to the approval of the stockholders of the Company.
3. Participation. Only Non-Employee Directors shall be eligible
to participate in the Plan. A Non-Employee Director is a person who is serving
as a director of the Company and who is not an employee of the Company or any
subsidiary of the Company.
4. Election to Receive Stock In Lieu Of Eligible Cash Fees.
Subject to the terms and conditions of the Plan, each Non-Employee Director may
elect to forego all or a portion of the cash compensation otherwise payable for
services to be rendered by such Non-Employee Director during the calendar year
and to receive in lieu thereof whole shares of Company common stock (rounded
upward or downward to the nearest whole share), as determined in accordance
with Section 6 hereof. Elections shall be made in increments of 25%, 50%, 75%
or 100% of such compensation. An election under this Section 4 to have cash
compensation paid in shares of common stock shall be valid only if it is in
writing, signed by the Non-Employee Director, and filed with the Corporate
Secretary of the Company. Common stock to be received by a Non-Employee
Director pursuant to such director's election shall be distributed to the
director as soon as practicable after the end of each calendar quarter.
5. Cash Compensation. For purposes of the Plan, cash compensation
shall mean the Non-Employee Directors annual director's fees, but shall not
include a Non-Employee Directors expense reimbursement.
6. Equivalent Amount of Stock. The number of whole shares of
common stock to be distributed to a Non-Employee Director in accordance with
such Non-Employee Directors election made under Section 4 above shall be equal
to:
(a) the amount of the cash compensation which the
Non-Employee Director has forgone during that calendar quarter in exchange for
shares of common stock, divided by
(b) the closing price for the common stock as reported by
the New York Stock Exchange (or any exchange on which the common stock may be
then listed) on the last day of each calendar quarter, or, if no shares of
common stock were traded on such date, on the next preceding date on which the
common stock was traded.
22
7. Shares Subject To The Plan. All shares of common stock to be
used for purposes of the Plan shall be treasury shares, that is, shares
previously issued and outstanding which have been reacquired by the Company and
have not been canceled. The shares of common stock issued to a Non-Employee
Director pursuant to the provisions of the Plan may not be sold for at least
six months after having been acquired, except in the case of death or
disability of the Non-Employee Director. The total number of shares of common
stock issuable pursuant to the Plan is 200,000.
8. Nonassignability. No rights under the Plan shall be assignable
or transferable by a Non-Employee Director other than by will or the laws of
descent and distribution.
9. Construction; Amendment; Termination. The Plan shall be
construed in accordance with the laws of the State of Delaware and may be
amended or terminated at any time by action of the Board, provided, that the
stockholders of the Company must approve any increase in the number of shares
of common stock issuable under the Plan and provided further that the Plan may
not be amended more than once every six months other than to comport with
changes in the Internal Revenue Code of 1986, as amended, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
23
AMENDED AND RESTATED
HARTE-HANKS COMMUNICATIONS, INC.
1991 STOCK OPTION PLAN
1. Purpose of the Plan. This plan shall be known as the Harte-Hanks
Communications, Inc. 1991 Stock Option Plan (the "Plan"). The purpose of the
Plan is to attract and retain the best available personnel for positions of
substantial responsibility and to provide additional incentives to key employees
of Harte-Hanks Communications, Inc. or any present or future Parent or
Subsidiary of Harte-Hanks Communications, Inc. to promote the success of the
business of these corporations. It is intended that options that qualify as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, as well as nonqualified options may be granted
pursuant to the Plan, and the Plan shall be construed accordingly.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Corporation" shall mean Harte-Hanks Communications, Inc.
(b) "Board" shall mean the Board of Directors of the Corporation and,
subject to such limitations as are prescribed by the Board of
Directors of the Corporation, the committee, if any, appointed to
administer the Plan pursuant to paragraph 4(a) hereof.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" shall mean common stock, par value $1.00 per
share, of the Corporation.
(e) "Employee" shall mean, with respect to Incentive Stock Options,
any person employed by the Corporation or any present or future
Parent or Subsidiary of the Corporation who would qualify as an
"employee" under Treas. Reg. ss. 1.421-7(h)(1) or successor
regulation. With respect to non-qualified options, "Employee"
shall also include consultants and advisors who provide services
to the Corporation or any of its Subsidiaries or its Parent,
including outside directors of the Corporation.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "Fair Market Value" shall mean the closing sale price (or average
of the quoted closing bid and asked prices if there is no closing
sale price reported) of the Common Stock on the date specified as
reported by the New York Stock Exchange or by the principal
national stock exchange on which the Common Stock is then listed.
If there is no reported price
24
information for the Common Stock, the Fair Market Value will be
determined by the Board, in its sole discretion. In making such
determination, the Board may, but shall not be obligated to,
commission and rely upon an independent appraisal of the Common
Stock.
(h) "Incentive Stock Option" or "ISO" shall mean an Option that
constitutes an incentive stock option within the meaning of
Section 422 of the Code. These options shall be designated as
Incentive Stock Options.
(i) "Option" shall mean a stock option granted pursuant to this Plan.
(j) "Parent" shall mean any future corporation which would be a
"parent corporation" of the Corporation as defined in Section
425(e) and (g) of the Code.
(k) "Participant" shall mean an Employee who receives an Option.
(l) "Plan" shall mean the Harte-Hanks Communications, Inc. 1991 Stock
Option Plan.
(m) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(n) "Subsidiary" shall mean any present or future corporation which
would be a "subsidiary corporation" of the Corporation as defined
in Section 425(f) and (g) of the Code.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of paragraph 7 hereof, the aggregate number of shares of Common Stock
issuable upon the exercise of Options pursuant to the Plan shall not exceed
8,000,000 shares. Such shares may be either authorized but unissued shares or
treasury shares.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased shares which were subject thereto
shall, unless the Plan shall have been terminated, be available for the grant of
other Options under the Plan.
4. Administration of the Plan.
(a) The Plan shall be administered by the Board; provided however,
that the Board at any time can appoint a committee, consisting
solely of non-employee directors, to administer the Plan.
(b) Powers of the Board. The Board (or a committee appointed pursuant
to Section 4(a) above) is authorized (but only to the extent not
contrary to the express provisions of the Plan) to select from
the persons who are eligible to receive Options under the Plan
the particular persons who will receive
2
25
Options, to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the form
and content of Options to be issued under the Plan and to make
other determinations and exercise such other power and authority
as may be necessary or advisable for the administration of the
Plan. A majority of the Board members eligible to act shall
constitute a quorum for purposes of acting with respect to the
Plan and the action of a majority of the members present who are
eligible to act at any meeting at which a quorum is present shall
be deemed the action of the Board.
The President or any Vice President of the Corporation is hereby
authorized to execute instruments evidencing duly granted Options
on behalf of the Corporation and to cause them to be delivered to
the Participants.
(c) Effect of Board Decisions. All decisions, determinations and
interpretations of the Board with respect to the Plan and Options
granted thereunder shall be final and conclusive on all persons
affected thereby.
(d) Approval of Grants. Each grant of Option must be approved in one
of the following ways:
(i) Board/Committee Approval. The entire Board of the
Corporation or a committee thereof may vote in advance to
approve such grant.
(ii) Stockholder Approval/Ratification. In compliance with
Section 14 of the Exchange Act, a majority of the
stockholders of the Corporation duly entitled to vote on
such matters at meetings held in accordance with the
Delaware Corporation Law, may either in advance of the grant
or no later than the next annual meeting of stockholders,
affirmatively vote to approve such grant.
5. Eligibility.
(a) All Employees are eligible to receive Options under the Plan,
except that no Employee shall be eligible to receive an Incentive
Stock Option if, on the date of grant, such Employee owns
(including ownership through the attribution provisions of
Section 424 of the Code) in excess of 10% of the outstanding
voting stock of the Company (or of its parent or subsidiary as
defined in Section 424 of the Code).
(b) No Participant shall be eligible to be granted Options with
respect to more than 1,000,000 shares of Common Stock per
calendar year under the Plan.
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26
6. Term of Plan. The Plan shall continue in effect until terminated
pursuant to Paragraph 12.
7. Effect of Change in Stock Subject to the Plan. In the event that each of
the outstanding shares of Common Stock (other than shares held by dissenting
stockholders) shall be changed into or exchanged for a different number or kind
of shares of stock of the Corporation or of another corporation (whether by
reason of merger, consolidation, recapitalization, reclassification, stock
dividend, split-up, combination of shares, or otherwise), then there shall be
substituted for each share of Common Stock then under Option or available for
Option the number and kind of shares of stock into which each outstanding share
of Common Stock (other than shares held by dissenting stockholders) shall be so
changed or for which each such share shall be so exchanged, together with an
appropriate adjustment of the option price.
In the event there shall be any other change in the number of, or kind of,
issued shares of Common Stock, or of any stock or other securities into which
such Common Stock shall have been changed, or for which it shall have been
exchanged, the Board shall make such adjustment, if any, in the number, or kind,
or option price of shares then subject to an Option or available for Option as
is equitably required. Any such adjustment shall be effective and binding for
all purposes of the Plan.
8. Time of Granting Options. The date of grant of an Option under the Plan
shall for all purposes, be the date on which the Board awards the Option or, if
otherwise, the date specified by the Board as the date the award is to be
effective. Notice of the grant shall be given to each Employee to whom an Option
is so granted within a reasonable time after the date of such grant.
9. Manner of Exercise. Payment methods for the exercise of Options granted
under this Plan may include any of the following, as determined by the Board or
a committee at the date of the grant or prior to any exercise, provided that
such method is not prohibited by the applicable Option agreement (or the law
applicable thereto as the same may be amended from time to time):
(a) by check;
(b) in shares of Common Stock owned by the Participant;
(c) partly by check and partly in shares of Common Stock.
Notwithstanding the foregoing, 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 Common Stock used must have been
held by the Participant for at least six months prior to the date of exercise.
Payments made in Common Stock shall be made by tendering to the Company shares
owned by the Participant having an aggregate Fair Market Value per share that is
not greater than the exercise price for the shares with respect to which the
Option is being exercised and by paying any remaining amount of the exercise
price by check. The Board or the committee may, in its discretion, authorize a
constructive exchange of existing shares, as follows: the Participant may
exercise the option by delivering a notarized statement that the Participant has
4
27
owned for at least six months the number of shares of Common Stock to be used
for the exercise of the Option (and delivering cash, to the extent the value of
such shares is less than the exercise price), and thereupon, a new certificate
shall be issued to the Participant for the number of shares being acquired
pursuant to the exercise of the Option, less the number of shares being
constructively tendered as set forth in the Participant's notarized statement.
The Board or committee, in its discretion, may also authorize: (a) Participants
to deliver Common Stock as payment for the withholding taxes due upon exercise
of a non-qualified option; or (b) at the request of the Participant, withholding
of a number of shares from the certificate satisfactory to pay the withholding
taxes due on exercise of a non-qualified option.
10. Effective Date. The Plan became effective on February 28, 1991, the
date it was adopted by the Board of Directors of the Corporation.
11. Modification of Options. At any time and from time to time the Board
may execute an instrument providing for the modification of any outstanding
Option, provided no such modification, extension or renewal shall confer on the
holder of said Option any right or benefit which could not be conferred on such
holder by the grant of a new Option at such time, or impair the Option without
the consent of the holder of the Option.
12. Amendment and Termination of the Plan. The Board may alter, suspend or
discontinue the Plan at any time. However, all Incentive Stock Options must be
granted within ten years of the effective date of the Plan, or the date the Plan
is approved by the shareholders, 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
Corporation by the affirmative votes of the holders of a majority of shares of
Common Stock casting votes at a duly held stockholder's meeting which amendment
would (i) increase the number of shares available under the Plan; (ii) change
the employees or class of employees eligible to participate in the Plan; or
(iii) change the material terms of the Plan as construed under ss. 162(m) of the
Code.
13. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to any Option granted under the Plan unless the issuance and delivery of
such shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act, the Exchange Act, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the shares may then be listed.
The Corporation shall not be liable for refusing to sell or issue any
shares if the Corporation cannot obtain from the appropriate regulatory
body(ies) authority deemed by the Corporation's counsel to be necessary lawfully
to issue or sell such shares.
As a condition to the exercise of an Option, the Corporation may
require the person exercising the Option to make such representations and
warranties as may be necessary to assure
5
28
the availability of an exemption from the registration requirements of federal
or state securities law.
14. Restrictions on Shares. The Board may impose such restrictions on the
ownership and transfer of shares issued pursuant to this Plan as it deems
desirable; any such restrictions shall be set forth in any Option agreement
entered into hereunder.
15. Reservation of Shares. The Corporation during the term of this Plan
will reserve and keep available a number of shares sufficient to satisfy the
requirements of the Plan.
16. Change of Control.
(a) In order to maintain the Participants' rights in the event of a
Change of Control or Potential Change of Control of the
Corporation, as hereinafter defined, the Board, in its sole
discretion, may, in addition to and notwithstanding anything to
the contrary contained in the Plan, either at the time an Option
is granted hereunder or at any time prior to or upon the
occurrence of a Change of Control or Potential Change of Control,
provide, in whole or in part, for the accelerated exercisability
of and/or the waiver of any conditions to the full and immediate
exercisability of, each Option outstanding at the time of such
Change of Control or Potential Change of Control event. The Board
may, in its discretion, include such further provisions and
limitations in any agreement entered into with respect to an
Option as it may deem equitable and in the best interests of the
Corporation.
(b) For the purposes of this paragraph 16, a "Change of Control"
shall be deemed to have occurred if: (i) any person (as defined
in Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act") and as used in
Sections 13(d) and 14(d) thereof), excluding the Corporation, its
Subsidiaries and any employee benefit plan sponsored or
maintained by the Corporation or its Subsidiaries (including any
trustee of such plan acting as trustee), but including a "group"
as defined in Section 13(d)(3) of the Exchange Act (a "Person"),
becomes beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of at least fifty percent (50%) of the total number
of shares which are entitled to vote for the election of
directors of the Corporation (the "Voting Shares"); or (ii) the
stockholders of the Corporation shall approve any merger or other
business combination of the Corporation, sale of substantially
all the Corporation's assets or a combination of the foregoing
transactions (a "Transaction") other than a Transaction involving
only the Corporation and one or more of its Subsidiaries, or a
Transaction immediately following which the stockholders of the
Corporation immediately prior to the Transaction continue to have
a majority of the voting power in the resulting entity. Two or
more persons owning in the aggregate fifty
6
29
percent (50%) or more of the Voting Shares shall not be deemed to
be a "group" for the purposes of paragraph 16(b)(i) hereof solely
because such persons are officers or directors of the
Corporation.
(c) For the purposes of this paragraph 16, a Potential Change of
Control shall be deemed to have occurred if: (i) a Person
commences a tender offer for at least fifty percent (50%) of the
Voting Shares; (ii) approval of any Transaction (excluding any
Transaction that is excluded for purposes of paragraph 16(b)(ii)
above) is requested of stockholders; (iii) proxies for the
election of directors of the Corporation are solicited by anyone
other than the Corporation; or (iv) any other event occurs which
is deemed to be a Potential Change of Control by the Board.
(d) Notwithstanding the foregoing, no Change of Control or Potential
Change of Control shall be deemed to have occurred for purposes
of the Plan with respect to an Employee by reason of any actions
or events in which such Employee participates in a capacity other
than in his or her capacity as an Employee (or as a director of
the Company, where applicable).
(e) Notwithstanding the foregoing, in no event shall the acceleration
of any option hereunder upon a Change of Control occur to the
extent an "excess parachute payment" (as defined in Code Sec.
280G) would result. In the event that the Board or a committee
appointed thereby determines that such an excess parachute
payment would result if the full acceleration provision of this
section 16(e) occurred (when added to any other payments or
benefits contingent on a change of control under any other
agreements, arrangements or plans) then the number of shares as
to which exercisability is accelerated shall be reduced so that
total parachute payments do not exceed 299% of the optionee's
"base amount," as defined in Code Sec. 280G(b)(3).
17. Transferability. All or a portion of the nonqualified options to be
granted to a Participant may, in the discretion of the Board or committee, as
the case may be, be on terms that permit transfer without consideration by such
Participant to (i) the spouse, children or grandchildren of the Participant
("Immediate Family Members"), (ii) a trust or trusts, or to a guardian under the
Uniform Gift to Minors Act, for the exclusive benefit of such Immediate Family
Members, or (iii) a partnership or other entity in which such Immediate Family
Members are the only partners, provided that (x) the stock option agreement
pursuant to which such nonqualified options are granted must be approved by the
committee, and must expressly provide for transferability in a manner consistent
with this Section, and (y) subsequent transfers of transferred Options shall be
prohibited except by will or the laws of descent and distribution. Following
transfer, any such Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for
purposes of each agreement and Section 9 hereof the term "Participant" shall be
deemed to refer to the transferee (however, the events of termination of
employment, if any, set forth in the agreement and the obligation to
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30
pay withholding taxes shall continue to apply to the transferor). Incentive
Stock Options shall be nontransferable except by will or the laws of descent and
distribution, and may only be exercisable during the Participant's lifetime, by
the Participant.
18. Stock Option Price. The option price per share of Common Stock
deliverable upon the exercise of an Incentive Stock Option shall not be less
than 100% of the Fair Market Value of a share of Common Stock on the date the
Incentive Stock Option is granted. As to nonqualified options awarded to
executive officers whose compensation may otherwise exceed the deduction limit
of Section 162(m) of the Code, if the option price per share is not less than
the Fair Market Value of the Common Stock at the date of the grant, such options
shall be deemed to be "qualified performance based compensation" under Code
Section 162(m)(4)(C), and shall be administered in a manner consistent with that
section.
19. Exercise of Incentive Stock Options. No Incentive Stock Option shall be
exercisable at any time after the expiration of ten (10) years from the date of
grant. Otherwise, the Board, or a committee appointed by the Board, will set the
option terms and exercisability schedule. The total fair market value
(determined as of the date of grant) of stock with respect to which ISO's
(whether granted under this Plan or under any other agreement or plan of the
Company or any of its subsidiaries) are first exercisable by a Participant in
any one calendar year shall not exceed $100,000. In the event that the
Participant's total ISO's exceed the $100,000 limit in any year (whether due to
acceleration of exercisability under Section 16 above, miscalculation, error or
otherwise) the amount of ISO's that exceed such limit shall be treated as
non-qualified stock options. The ISO's granted earliest (whether under this Plan
or any other agreement or plan) shall be applied first to the $100,000 limit. In
the event that only a portion of the options granted at the same time can be
applied to the $100,000 limit, the Company shall issue separate share
certificate(s) for such number of shares as does not exceed the $100,000 limit,
and shall designate such shares as ISO stock in its share transfer records.
8
31
DETACH HERE
PROXY
HARTE-HANKS COMMUNICATIONS, INC.
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
AT 10:00 A.M., TUESDAY, MAY 5, 1998
200 CONCORD PLAZA DRIVE, FIRST FLOOR
SAN ANTONIO, TEXAS 78216
The undersigned stockholder of Harte-Hanks Communications, 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.
THIS 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) THROUGH (5), THIS PROXY WILL
BE VOTED "FOR" SUCH ITEMS. THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT
TO ANY MATTER REFERRED TO IN ITEM (6). THIS PROXY IS REVOCABLE AT ANY TIME
BEFORE IT IS EXERCISED.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
32
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
1. ELECTION OF DIRECTORS.
Nominees: Larry Franklin and James L. Johnson
FOR WITHHELD
[ ] [ ]
[ ] MARK HERE
--------------------------------------- FOR ADDRESS [ ]
FOR BOTH NOMINEES EXCEPT AS NOTED ABOVE CHANGE AND
NOTE BELOW
2. To approve an amendment to the Harte-Hanks Charter to change the Company's
name to [ ] Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve an amendment to the Harte-Hanks Charter to increase authorized
shares of Common Stock from 125,000,000 to 250,000,000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To approve adoption of the Harte-Hanks Communications, Inc. 1998 Director
Stock Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To approve amendments to the Harte-Hanks Communications, Inc. 1991 Stock
Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. On any other business that may properly come before the meeting hereby
revoking any proxy or proxies heretofore given by the undersigned.
PLEASE SIGN, DATE AND MAIL TODAY.
(Joint owners must EACH sign. Please sign EXACTLY as your name(s) appear(s) on
this card. When signing as attorney, trustee, executor, administrator, guardian
or corporate officer, please give your FULL title.)
Signature: Date: Signature: Date:
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