<PAGE> 1
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
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Harte-Hanks Communications, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] 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:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] 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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
HARTE-HANKS COMMUNICATIONS, INC.
200 CONCORD PLAZA DRIVE, SUITE 800
SAN ANTONIO, TEXAS 78216
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 1997
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 6, 1997, 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 Harte-Hanks Communications, Inc.
1994 Employee Stock Purchase Plan to increase the aggregate number of
shares of Harte-Hanks Common Stock that may be issued under such Plan from
450,000 to 1,000,000; 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 17, 1997 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 28, 1997
YOUR VOTE IS IMPORTANT.
PLEASE EXECUTE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED.
<PAGE> 3
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 6, 1997
---------------------
This Proxy Statement is furnished to stockholders of Harte-Hanks
Communications, Inc. for use at the 1997 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 17,
1997. The approximate date on which this Proxy Statement and the enclosed proxy
are first being sent or given to stockholders is March 28, 1997.
VOTING PROCEDURES
The accompanying proxy card is designed to permit each stockholder of
record at the close of business on the record date, March 17, 1997, to vote in
the election of Class I 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 I 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 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 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 three nominees for Class I director, FOR the approval of the
amendment to the 1994 Employee Stock Purchase Plan and at the discretion of the
proxies on any other matter that may properly come before the Annual Meeting or
any adjournment.
<PAGE> 4
The total outstanding capital stock of the Company as of March 17, 1997
consisted of 37,217,807 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 eight. 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 1997 will serve for a term of three years which expires at
the Annual Meeting of Stockholders in 2000 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 I directors are David L. Copeland, Dr. Peter T.
Flawn and Christopher M. Harte. 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 RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
EACH OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE.
PROPOSAL TWO -- AMENDMENT OF THE HARTE-HANKS 1994 EMPLOYEE STOCK PURCHASE PLAN
The Company has for many years utilized stock incentives as part of its
overall compensation program. The Board of Directors believes 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 the Company.
Since 1994, the Company has had an Employee Stock Purchase Plan (the "1994
Plan"). Stockholders approved the 1994 Plan at the 1994 Annual Meeting. The 1994
Plan permits eligible employees to purchase shares of Harte-Hanks Common Stock
at 85% of the fair market value on the date of purchase. The purchases are made
quarterly in accordance with the Plan through payroll deductions as specified by
the employees. Payroll deductions may not exceed 10% of the employee's base
compensation.
Part-time employees, employees who own five percent or more of the
outstanding stock of the Company, and officers of the Company who are "highly
compensated employees" as defined in Section 414(q) of the Internal Revenue Code
of 1986, as amended (the "Code"), are not eligible to participate. The 1994 Plan
is not subject to any provisions of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
The Board of Directors proposes to amend the 1994 Plan to increase the
number of shares of Harte-Hanks Common Stock reserved under the 1994 Plan from
450,000 (increased from 300,000 shares as a result of the 3 for 2 stock dividend
paid December 15, 1995) to 1,000,000, which requires stockholder approval. As of
March 17, 1997, 361,514 shares of Harte-Hanks Common Stock had been purchased
under the 1994 Plan, and 88,486 shares remained available for future purchase.
Harte-Hanks had 37,217,807 shares outstanding at March 17, 1997. The Board of
Directors believes this amendment is necessary to assure that an adequate number
of shares of Harte-Hanks Common Stock will be available for future purchases in
order to provide appropriate incentives to employees of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
INCREASE IN THE NUMBER OF SHARES AVAILABLE UNDER THE 1994 PLAN.
2
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of February 18, 1997, 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.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF BENEFICIAL OWNER(1) OF COMMON STOCK OF CLASS
---------------------- ---------------- --------
<S> <C> <C>
Houston H. Harte(2)......................................... 6,385,301 17.2%
David L. Copeland(3)........................................ 4,820,798 13.0%
Andrew B. Shelton Revocable Trust........................... 4,378,848 11.8%
Edward H. Harte............................................. 3,050,248 8.2%
Train, Smith Counsel(4)..................................... 2,556,761 6.9%
Ariel Capital Management, Inc.(5)........................... 2,117,205 5.7%
Larry Franklin(6)........................................... 1,924,932 5.1%
David L. Sinak(7)........................................... 1,875,003 5.0%
Christopher M. Harte(8)..................................... 424,691 1.1%
Donald R. Crews(9).......................................... 368,250 *
Richard M. Hochhauser(10)................................... 319,500 *
Stephen W. Sullivan(11)..................................... 175,000 *
Peter E. Gorman(12)......................................... 72,750 *
Dr. Peter T. Flawn.......................................... 7,500 *
James L. Johnson............................................ 1,500 *
All Executive Officers and Directors as a Group (12
persons)(13).............................................. 16,995,770 44.7%
</TABLE>
- ---------------
* Less than 1%.
(1) The address of Ariel Capital Management, Inc. is 307 North Michigan Avenue,
Chicago, Illinois 60601. The address of Train, Smith Counsel is 667 Madison
Avenue, New York, New York 10021. 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 1,125,000 shares in the aggregate owned by three trusts for which
Mr. Harte serves as co-trustee with David L. Sinak and 375,000 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 18,200 shares held as custodian for his children; 402,750 shares
that are owned by 10 trusts for which Mr. Copeland serves as co-trustee and
4,378,848 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 2,084,686
shares and shared dispositive power with respect to 2,556,761 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 11, 1997.
(5) Includes 1,995,430 shares as to which Ariel Capital Management, Inc. holds
sole voting power and no shares as to which it holds shared voting power.
Information with respect to Ariel Capital Management, Inc. is based on a
Schedule 13G filing dated February 10, 1997.
(6) Includes 217,500 shares that may be acquired upon the exercise of options
exercisable within the next 60 days, 360,000 shares owned by four trusts
for which Mr. Franklin serves as co-trustee and holds shared voting and
dispositive power, and 60,000 shares held in trust for his children.
3
<PAGE> 6
(7) Represents shares owned by 13 trusts for which Mr. Sinak serves as
co-trustee and holds shared voting and dispositive power.
(8) Includes 1,500 shares held in trust for his child, 375,000 shares owned by
a trust for which Mr. Harte serves as co-trustee with David L. Sinak and
Houston H. Harte and 41,667 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 131,250 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(10) Includes 172,500 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(11) Includes 115,500 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(12) Includes 72,750 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(13) Includes 828,000 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.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
David L. Copeland.................... 41 Director (Class I)
Dr. Peter T. Flawn................... 71 Director (Class I)
Larry Franklin....................... 54 Director (Class II); President and Chief Executive
Officer
Christopher M. Harte................. 49 Director (Class I)
Edward H. Harte...................... 74 Director (Class II)
Houston H. Harte..................... 70 Chairman, Board of Directors (Class III)
Richard M. Hochhauser................ 52 Director (Class III); Executive Vice President;
President, Harte-Hanks Direct Marketing
James L. Johnson..................... 69 Director (Class II)
Michael J. Conly..................... 45 Senior Vice President; President, Harte-Hanks
Television
Donald R. Crews...................... 53 Senior Vice President, Legal; Secretary
Peter E. Gorman...................... 48 Senior Vice President; President, Harte-Hanks Shoppers
Stephen W. Sullivan.................. 50 Senior Vice President; President, Harte-Hanks
Newspapers
</TABLE>
Class I directors are to be elected at the Annual Meeting. The term of
Class II directors expires at the 1998 Annual Meeting of Stockholders and the
term of Class III directors expires at the 1999 Annual Meeting of Stockholders.
David L. Copeland has served as a director of the Company since April 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.
4
<PAGE> 7
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., Global Marine, Inc., Input/Output, Inc., National Instruments
Corporation 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 President, Harte-Hanks Newspapers, 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. Mr. Harte is the son of Edward H.
Harte and the grandson of the late Houston Harte, co-founder of the Company.
Edward H. Harte has served as a director of the Company since 1952. Prior
to his retirement in 1987, he served as Publisher of the Corpus Christi
Caller-Times since 1962. Mr. Harte is the son of the late Houston Harte.
Houston H. Harte has served as a director of the Company since 1952 and as
Chairman of the Board of Directors since 1972. Mr. Harte is also the son of the
late Houston Harte.
Richard M. Hochhauser has served as a director of the Company since April
1996 and as Executive Vice President of the Company since January 1996. He 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 January 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 seven meetings during 1996. 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 other
than Edward H. Harte who did not attend two meetings for health reasons. 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 1996, 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, as amended. The Compensation Committee, which met five times during
1996, 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.
5
<PAGE> 8
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 four other most highly compensated executive officers (based on
total annual salary and bonus for 1996).
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) GRANTED COMPENSATION(2)
--------------------------- ----- -------- -------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Larry Franklin......................... 1996 $700,000 $700,000 55,000 $14,800
President and Chief Executive Officer 1995 650,000 650,000 90,000 14,800
1994 650,000 455,000 67,500 14,300
Richard M. Hochhauser.................. 1996 380,000 197,600 55,000 1,800
Executive Vice President; President, 1995 323,000 226,100 60,000 1,800
Harte-Hanks Direct Marketing 1994 297,000 207,900 6,000 1,800
Donald R. Crews........................ 1996 270,000 189,000 10,000 1,800
Senior Vice President, Legal and 1995 270,000 189,000 12,000 1,800
Secretary 1994 270,000 189,000 3,750 1,800
Peter E. Gorman........................ 1996 246,000 172,200 42,000 1,800
Senior Vice President; President, 1995 225,000 135,000 10,500 1,800
Harte-Hanks Shoppers 1994 216,000 113,184 3,750 1,800
Stephen W. Sullivan.................... 1996 260,000 156,000 9,000 1,800
Senior Vice President; President, 1995 250,000 125,000 14,250 1,800
Harte-Hanks Newspapers 1994 242,000 153,065 4,500 1,800
</TABLE>
- ---------------
(1) Bonus amounts are inclusive of payments received under the existing
incentive compensation plan. Larry Franklin has elected to defer $400,000
and $325,000 of the total bonuses payable to him in 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.
OPTION GRANTS DURING 1996
The following table sets forth certain information concerning options to
purchase Common Stock granted in 1996 to the five individuals named in the
Summary Compensation Table.
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS
GRANTED TO MARKET POTENTIAL STOCK APPRECIATION
OPTIONS EMPLOYEES EXERCISE PRICE AT EXPIRATION --------------------------------
NAME GRANTED IN 1996 PRICE GRANT DATE 0% 63%(1) 159%(1)
---- ------- ---------- -------- -------- ------------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Larry Franklin............ 50,000(2) 7.1% $22.500 $22.500 January, 2006 $ -- $707,506 $1,792,960
5,000(3) 0.7% 2.000 22.500 January, 2006 102,500 173,251 281,796
Richard M. Hochhauser..... 30,000(2) 4.3% 20.500 20.500 January, 2006 -- 386,770 980,152
5,000(3) 0.7% 2.000 20.500 January, 2006 92,500 156,962 255,859
20,000(2) 2.8% 25.625 25.625 July, 2006 -- 322,309 816,793
Donald R. Crews........... 10,000(2) 1.4% 25.625 25.625 July, 2006 -- 161,154 408,397
Peter E. Gorman........... 10,000(2) 1.4% 20.500 20.500 January, 2006 -- 128,923 326,717
2,000(3) 0.3% 2.000 20.500 January, 2006 37,000 62,785 102,343
20,000(2) 2.8% 20.625 20.625 April, 2006 -- 259,419 657,419
10,000(2) 1.4% 25.625 25.625 July, 2006 -- 161,154 408,397
Stephen W. Sullivan....... 7,000(2) 1.0% 20.500 20.500 January, 2006 -- 90,246 228,702
2,000(3) 0.3% 2.000 20.500 January, 2006 37,000 62,785 102,343
</TABLE>
6
<PAGE> 9
- ---------------
(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 $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 1996 AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning option
exercises during 1996 and unexercised options held at December 31, 1996 by the
five individuals named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1996 DECEMBER 31, 1996(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry Franklin........ -- -- 127,500 310,000 $2,938,125 $5,315,625
Richard M.
Hochhauser.......... -- -- 147,000 208,000 3,396,750 3,212,375
Donald R. Crews....... -- -- 127,500 81,250 2,962,625 1,508,437
Peter E. Gorman....... -- -- 54,000 116,250 1,274,500 1,847,437
Stephen W. Sullivan... -- -- 99,000 93,750 2,346,250 1,873,812
</TABLE>
- ---------------
(1) The value is the amount by which the market value of the underlying stock at
December 31, 1996 ($27.75) 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
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 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.
<TABLE>
<CAPTION>
HIGHEST 5 YEAR YEARS OF CREDITED SERVICE
AVERAGE ----------------------------------------------------
REMUNERATION 15 20 25 30 35
- -------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$150,000.................................... $ 34,268 $ 45,690 $ 57,113 $ 68,536 $ 79,958
250,000.................................... 59,018 78,690 98,363 118,036 137,708
350,000.................................... 83,768 111,690 139,613 167,536 195,458
450,000.................................... 108,518 144,690 180,863 217,036 253,208
550,000.................................... 133,268 177,690 222,113 266,536 310,958
650,000.................................... 158,018 210,690 263,363 316,036 368,708
750,000.................................... 182,768 243,690 304,613 365,536 426,458
850,000.................................... 207,518 276,690 345,863 415,036 484,208
950,000.................................... 232,268 309,690 387,113 464,536 541,958
</TABLE>
7
<PAGE> 10
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: 25 years; Mr.
Hochhauser: 21 years; Mr. Crews: 14 years; Mr. Gorman: 16 years and Mr.
Sullivan: 24 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. During 1996, Dr. Peter T. Flawn,
Christopher M. Harte and James L. Johnson each received director's fees of
$47,000, and David L. Copeland received director's fees of $31,333 for serving
part of the year.
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) 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 Michael J.
Conly, Donald R. Crews, Peter E. Gorman, Richard M. Hochhauser and Stephen W.
Sullivan. If any of the above executives is terminated, other than for "cause,"
after a "change in control" (as defined) of the Company, 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.
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 1996, 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
8
<PAGE> 11
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 1996, 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 1996, 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 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.
1996 COMPENSATION OF CHIEF EXECUTIVE OFFICER. The base salary of Mr.
Franklin for 1996 was $700,000, representing a 7.7% increase over his $650,000
base salary in each of the prior five years. 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 1996 cash bonus, which was based on the degree of
attainment of financial goals established at the beginning of 1996, reflects the
fact that in 1996 the Company's revenues, operating income and earnings per
share increased substantially. In 1996 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 "Stock
Option Plan."
Compensation Committee
<TABLE>
<S> <C>
James L. Johnson, Chairman Dr. Peter T. Flawn
</TABLE>
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
9
<PAGE> 12
Company's initial public equity offering, to December 31, 1996 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, DiMark, Inc. (which was acquired by the Company on April 30, 1996),
R.R. Donnelley & Sons Company, Dow Jones & Company, Inc., Gannett Co., Inc.,
Knight-Ridder, Inc., M/A/R/C Group, The New York Times Company, The Times Mirror
Company and Tribune Company.
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.
<TABLE>
<CAPTION>
Harte-Hanks
Measurement Period Communica-
(Fiscal Year Covered) tions, Inc. Peer Group S&P 500
<S> <C> <C> <C>
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
</TABLE>
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 1997. Representatives of KPMG Peat Marwick LLP, who were also the Company's
independent auditors for the year 1996, 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.
10
<PAGE> 13
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, 1997
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 1996 Annual Report containing audited financial
statements and management's discussion and analysis of financial condition and
results of operations 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 28, 1997
11
<PAGE> 14
P HARTE-HANKS COMMUNICATIONS, INC.
R BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING
O OF STOCKHOLDERS AT 10:00 A.M., TUESDAY, MAY 6, 1997
X 200 CONCORD PLAZA DRIVE, FIRST FLOOR
Y SAN ANTONIO, TEXAS 78216
The undersigned stockholder of Harte-Hanks Communications, Inc. (the
"Company") hereby appoints Larry Franklin and Houston H. Harte or either of
them, as proxies, each with full powers of substitution, to vote the shares of
the undersigned at the above-stated Annual Meeting and at any adjournment(s)
thereof.
/ X / PLEASE MARK VOTES AS IN THIS EXAMPLE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED
IN ACCORDANCE WITH THE SPECIFICATIONS MADE BELOW. 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.
1. ELECTION OF CLASS I DIRECTORS
NOMINEES: David L. Copeland, Dr. Peter T. Flawn and
Christopher M. Harte
FOR WITHHELD
/ / / /
/ / ___________________________________
INSTRUCTION: To withhold authority to vote for any individual
nominee(s), write that nominee's name on the space provided above)
2. To approve an amendment to the Harte-Hanks Communications, Inc. 1994
Employee Stock Purchase Plan to increase the aggregate number of shares
of Harte-Hanks Common Stock that may be issued under such Plan.
FOR AGAINST ABSTAIN
/ / / / / /
3. On any other business that may properly come before the meeting, hereby
revoking any proxy or proxies heretofore given by the undersigned.
<PAGE> 15
Receipt herewith of the Company's Annual Report and Notice of Meeting and Proxy
Statement, dated March 28, 1997, is hereby acknowledged.
MARK HERE
FOR ADDRESS
CHANGE AND / /
NOTE AT LEFT
(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.)
PLEASE SIGN, DATE AND MAIL TODAY.
Signature: _________________________ Date ___________________
Signature: _________________________ Date ___________________
