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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HARTE-HANKS, INC.
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(Name of Registrant as Specified in Its Charter)
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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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number 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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(4) Proposed maximum aggregate value of transaction:
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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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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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HARTE-HANKS, INC.
200 CONCORD PLAZA DRIVE, SUITE 800
SAN ANTONIO, TEXAS 78216
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 2001
As a stockholder of Harte-Hanks, Inc., you are hereby given notice of and
invited to attend in person or by proxy the Annual Meeting of Stockholders of
the Company to be held at 200 Concord Plaza Drive, First Floor, San Antonio,
Texas 78216, on Tuesday, May 8, 2001, at 10:00 a.m. local time, for the
following purposes:
1. To elect two Class II directors, each for a three-year term; and
2. 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 12, 2001 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, 2001
YOUR VOTE IS IMPORTANT.
PLEASE EXECUTE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED.
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HARTE-HANKS, INC.
200 CONCORD PLAZA DRIVE, SUITE 800
SAN ANTONIO, TEXAS 78216
---------------------
PROXY STATEMENT
---------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 2001
---------------------
This Proxy Statement is furnished to stockholders of Harte-Hanks, Inc.
("Harte-Hanks" or the "Company") for use at the 2001 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 12,
2001. The approximate date on which this Proxy Statement and the enclosed proxy
are first being sent or given to stockholders is March 27, 2001.
VOTING PROCEDURES
The accompanying proxy card is designed to permit each stockholder of
record at the close of business on the record date, March 12, 2001 (the "Record
Date"), to vote in the election of Class II directors. 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 other
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. Any other matters will be determined by a majority
of the votes cast, except as otherwise required by law.
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, 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 12, 2001
consisted of 64,781,483 shares of Common Stock. Each share of Common Stock is
entitled to one vote.
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
fax. Upon request, the Company will reimburse brokers, dealers, banks and
trustees, or their nominees for reasonable expenses incurred by them in
forwarding proxy materials to beneficial owners of shares of the Common Stock.
MATTERS TO BE BROUGHT BEFORE THE MEETING
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 2001 will serve for a term of three years, which expires at
the Annual Meeting of Stockholders in 2004 or when their successors are elected
and qualified. The election of directors will be decided by a plurality of the
votes cast.
The nominees for Class II directors are Larry Franklin and James L.
Johnson. Each nominee is a member of the present Board of Directors. The Board
believes that each nominee will be available and able to serve as a director. If
a nominee is unable to serve, the shares represented by all valid proxies will
be voted for the election of such substitute as the Board may recommend, the
Board may reduce the number of directors to eliminate the vacancy consistent
with the requirement to maintain nearly equal classes, or the Board may fill the
vacancy at a later date after selecting an appropriate nominee. Information with
respect to the nominees is set forth in the section of this Proxy Statement
entitled "Management -- Directors and Executive Officers."
THE BOARD OF DIRECTORS URGES STOCKHOLDERS TO VOTE "FOR"
EACH OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE.
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SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of February 1, 2001, the beneficial
ownership of each current director, each nominee for director, each executive
officer included in the Summary Compensation Table, the directors and executive
officers as a group, and each stockholder known to management to own
beneficially more than 5% of the Company's Common Stock. Except as noted below,
each named person has sole voting power and dispositive power with respect to
the shares shown.
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OF COMMON STOCK CLASS
--------------------------------------- ---------------- ----------
Larry Franklin(2)........................................... 10,218,771 15.6%
Houston H. Harte............................................ 8,882,567 13.8%
David L. Copeland(3)........................................ 7,841,994 12.1%
David L. Sinak(4)........................................... 4,699,906 7.3%
Capital Research and Management Company(5).................. 4,387,300 6.8%
Shelton Family Foundation(6)................................ 4,100,000 6.4%
Christopher M. Harte(7)..................................... 1,412,061 2.2%
Richard M. Hochhauser(8).................................... 842,017 1.3%
Donald R. Crews(9).......................................... 507,653 *
Peter E. Gorman(10)......................................... 241,050 *
Jacques D. Kerrest(11)...................................... 62,924 *
Dr. Peter T. Flawn.......................................... 10,468 *
James L. Johnson............................................ 4,188 *
All Executive Officers and Directors as a Group (13
persons)(12).............................................. 22,893,810 34.2%
---------------
* Less than 1%.
(1) The address of Capital Research and Management Company is 333 South Hope
Street, Los Angeles, California 90071. The address of David L. Sinak is c/o
Hughes & Luce, L.L.P., 1717 Main Street, Suite 2800, Dallas, Texas 75201.
The address of the Shelton Family Foundation is 273 Walnut Street, Abilene,
Texas 79601. The address of each other beneficial owner is c/o Harte-Hanks,
Inc., 200 Concord Plaza Drive, Suite 800, San Antonio, Texas 78216.
(2) Includes 891,500 shares that may be acquired upon the exercise of options
exercisable within the next 60 days; 2,755,572 shares owned by seven trusts
for which Mr. Franklin serves as co-trustee and holds shared voting and
dispositive power and to which he disclaims beneficial ownership; 100,000
shares held in trust for his children; and 4,100,000 shares owned by the
Shelton Family Foundation of which he is one of six directors and to which
he disclaims beneficial ownership.
(3) Includes 17,700 shares held as custodian for his children; 3,000 shares
held as custodian for unrelated minors; 3,677,934 shares that are owned by
29 trusts for which Mr. Copeland serves as trustee or co-trustee and to
which he disclaims beneficial ownership; and 4,100,000 shares owned by the
Shelton Family Foundation of which he is one of six directors and to which
he disclaims beneficial ownership.
(4) Represents shares owned by 14 trusts for which Mr. Sinak serves as
co-trustee and holds shared voting and dispositive power and to which he
disclaims beneficial ownership.
(5) Capital Research and Management Company has sole dispositive power but no
voting power as to these shares. Information with respect to Capital
Research and Management Company is based on a Schedule 13G filing, dated
December 29, 2000.
(6) Information relating to this stockholder is based on the stockholder's
Schedule 13D filing, dated December 18, 2000.
(7) Includes 2,200 shares held as custodian for his step-children and child,
833,334 shares owned by two trusts for which Mr. Harte serves as co-trustee
with David L. Sinak and in which the trustees have shared voting and
dispositive power and to which he disclaims beneficial ownership and
558,839 shares
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held by Spicewood Family Partners, Ltd. of which Mr. Harte is the sole
general partner with exclusive voting and dispositive power over all the
partnership's shares.
(8) Includes 592,500 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(9) Includes 266,850 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(10) Includes 241,050 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
(11) Includes 48,650 shares that may be acquired upon the exercise of options
exercisable within the next 60 days and 228 shares held in trust for his
children.
(12) Includes 2,415,400 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information about the current
directors and executive officers of the Company. Each of the executive officers
has held his position with the Company, or a similar position with the Company,
for at least the past five years, except as noted below.
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
David L. Copeland...................... 45 Director (Class I)
Dr. Peter T. Flawn..................... 75 Director (Class I)
Larry Franklin......................... 58 Director (Class II); Chairman and Chief Executive
Officer
Christopher M. Harte................... 53 Director (Class I)
Houston H. Harte....................... 74 Vice Chairman, Board of Directors (Class III)
Richard M. Hochhauser.................. 56 Director (Class III); President and Chief Operating
Officer
James L. Johnson....................... 73 Director (Class II)
Craig Combest.......................... 56 Senior Vice President; President, National Sales
Organization
Donald R. Crews........................ 57 Senior Vice President, Legal; Secretary
Charles Dall'Acqua..................... 46 Senior Vice President; President, Harte-Hanks
Marketing Services
Peter E. Gorman........................ 52 Senior Vice President; President, Harte-Hanks
Shoppers
Jacques D. Kerrest(1).................. 53 Senior Vice President, Finance and Chief Financial
Officer
Gary J. Skidmore....................... 46 Senior Vice President; President, Harte-Hanks CRM
---------------
(1) Prior to joining the Company in July 1997, Mr. Kerrest served as chief
financial officer of Chancellor Broadcasting Company beginning in November
1995.
Class II directors are to be elected at the Annual Meeting. Messrs.
Franklin and Johnson are nominees for re-election as Class II directors. The
term of Class III directors expires at the 2002 Annual Meeting of Stockholders,
and the term of Class I directors expires at the 2003 Annual Meeting of
Stockholders.
David L. Copeland has served as a director of the Company since 1996. He
has been employed by SIPCO, Inc., the management and investment company for the
Andrew B. Shelton family, since 1980 and currently serves as its president. He
also serves as a director of First Financial Bankshares, Inc.
Dr. Peter T. Flawn, a director of the Company since 1985, is President
Emeritus of the University of Texas at Austin. Dr. Flawn is Chairman of the
Audit Committee of the Board of Directors.
Larry Franklin has served as a director of the Company since 1974 and as
Chief Executive Officer of the Company since 1991. Mr. Franklin has held
numerous positions since joining the Company in 1971, including Chief Financial
Officer, and also serves as a director of John Wiley & Sons, Inc.
Christopher M. Harte has served as a director of the Company since 1993. He
is a private investor and served as president of the Portland Press Herald and
Maine Sunday Telegram for approximately two years beginning June 1992. Prior to
becoming president of the Portland newspapers, Mr. Harte spent nine years with
Knight-Ridder Newspapers, during which time he served as president and publisher
of two newspapers and in other positions. He also serves as a director of
Geokinetics, Inc. Mr. Harte is the nephew of Houston H. Harte.
Houston H. Harte has served as a director of the Company since 1952 and
served as Chairman of the Board of Directors from 1972 until May 1999.
Richard M. Hochhauser has served as Chief Operating Officer of the Company
since January 1998 and as a director since 1996. He also has served as President
of Harte-Hanks Direct Marketing since 1987 and has held numerous other positions
since joining the Company in 1975.
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James L. Johnson, a director of the Company since 1994, is Chairman
Emeritus of GTE Corporation. Mr. Johnson serves as a director of CellStar
Corporation, Finova Group, Inc., Mutual of New York and Walter Industries, Inc.
MEETING ATTENDANCE AND COMMITTEES OF THE BOARD
The Board of Directors held eleven meetings during 2000. Each member of the
Board participated in at least 75% of all Board and committee meetings held
during the period that he served as a director and/or committee member. The
Board of Directors has established the Audit Committee and the Compensation
Committee. The functions of these committees and their current members are
described below.
Audit Committee. The Audit Committee currently consists of Dr. Peter T.
Flawn (Chairman), David L. Copeland and James L. Johnson. The Audit Committee,
which met three times during 2000, 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. All members of the Audit Committee satisfy the
independence requirements of the New York Stock Exchange; that is, the Board has
determined that no member on the Audit Committee has a relationship with the
Company that may interfere with the Audit Committee's independence from the
Company and its management.
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
Internal Revenue Code of 1986, as amended (the "Code"). The Compensation
Committee, which met nine times during 2000, 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 2000).
ANNUAL COMPENSATION
------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) GRANTED COMPENSATION(2)
--------------------------- ---- -------- -------- ------- ---------------
Larry Franklin.......................... 2000 $835,000 $561,120 50,000 $19,800
Chairman and 1999 835,000 200,000 55,000 19,400
Chief Executive Officer 1998 800,000 750,000 110,000 14,920
Richard M. Hochhauser................... 2000 550,000 369,600 75,000 6,800
President and Chief 1999 465,000 148,800 55,000 6,400
Operating Officer 1998 440,000 360,800 90,000 1,920
Jacques D. Kerrest...................... 2000 327,000 163,173 25,000 6,800
Senior Vice President, Finance and 1999 314,000 76,930 29,000 6,400
Chief Financial Officer 1998 300,000 180,000 68,000 --
Peter E. Gorman......................... 2000 320,000 182,400 20,000 6,800
Senior Vice President; President, 1999 300,000 162,000 17,000 6,400
Harte-Hanks Shoppers 1998 290,000 82,940 36,000 1,920
Donald R. Crews......................... 2000 318,000 158,682 15,000 6,800
Senior Vice President, Legal and 1999 305,000 74,725 18,000 6,400
Secretary 1998 294,000 176,400 36,000 1,920
---------------
(1) Bonus amounts are inclusive of payments received under the existing
incentive compensation plan. Larry Franklin has elected to defer $416,436,
$545,417 and $480,000 of the total compensation payable to him in 2000,
1999, and 1998, 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 2000
The following table sets forth certain information concerning options to
purchase Common Stock granted in 2000 to the individuals named in the Summary
Compensation Table.
% OF TOTAL
OPTIONS POTENTIAL STOCK
GRANTED TO MARKET APPRECIATION
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION ----------------------------
NAME GRANTED IN 2000 PRICE AT GRANT DATE 0% 63%(1) 159%(1)
---- ------- ---------- -------- -------- ------------- ---- -------- ----------
Larry Franklin....................... 50,000(2) 4.3% $20.063 $20.063 January, 2010 $ -- $630,860 $1,598,723
Richard M. Hochhauser................ 75,000(2) 6.4% 20.063 20.063 January, 2010 -- 946,290 2,398,084
Jacques D. Kerrest................... 25,000(2) 2.1% 20.063 20.063 January, 2010 -- 315,430 799,362
Peter E. Gorman...................... 20,000(2) 1.7% 20.063 20.063 January, 2010 -- 252,344 639,489
Donald R. Crews...................... 15,000(2) 1.3% 20.063 20.063 January, 2010 -- 189,258 479,617
---------------
(1) Assumed annual compounded rates of stock price appreciation of 5% (63%) and
10% (159%) over the term of the grant applied to market price at date of
grant.
(2) Options become exercisable in installments over five years and expire on the
tenth anniversary of the date of grant.
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AGGREGATED OPTION EXERCISES IN 2000 AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning option
exercises during 2000 and unexercised options held at December 31, 2000 by the
individuals named in the Summary Compensation Table.
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 2000 DECEMBER 31, 2000(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Larry Franklin............... -- $ -- 746,000 394,000 $14,640,024 $3,390,204
Richard M. Hochhauser........ 30,000 552,500 540,000 384,000 10,606,976 3,153,772
Jacques D. Kerrest........... -- -- 21,000 211,000 223,365 1,614,778
Peter E. Gorman.............. -- -- 205,000 167,500 4,200,638 1,666,037
Donald R. Crews.............. 18,000 331,500 298,800 98,700 6,169,710 804,278
---------------
(1) The value is the amount by which the market value of the underlying stock at
December 31, 2000 ($23.69) 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 defined
benefit plan was frozen as of December 31, 1998, and no further benefits will
accrue under that plan. In addition, the Code places certain limitations on the
amount of pension benefits that may be paid under qualified plans. Any benefits
payable to participants in the pension restoration plan in excess of those
payable from the defined benefit plan will be paid under the pension restoration
plan.
The table below may be used to calculate the approximate annual benefits
payable at retirement at age 65 under the Company's defined benefit pension plan
and pension restoration plan to individuals in specified remuneration and
years-of-service classifications. The benefits are not subject to any reduction
for social security benefits or other offset amounts.
YEARS OF CREDITED SERVICE
----------------------------------------------------
HIGHEST 5 YEAR AVERAGE REMUNERATION 15 20 25 30 35
----------------------------------- -------- -------- -------- -------- --------
$150,000................................ $ 34,090 $ 45,453 $ 56,817 $ 68,180 $ 79,543
250,000................................ 58,247 77,662 97,078 116,494 135,909
350,000................................ 82,997 110,662 138,328 165,994 193,659
450,000................................ 107,747 143,662 179,578 215,494 251,409
550,000................................ 132,497 176,662 220,828 264,994 309,159
650,000................................ 157,247 209,662 262,078 314,494 366,909
750,000................................ 181,997 242,662 303,328 363,994 424,659
850,000................................ 206,747 275,662 344,578 413,494 482,409
950,000................................ 231,497 308,662 385,828 462,994 540,159
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: 29 years; Mr.
Hochhauser: 25 years; Mr. Gorman: 20 years and Mr. Kerrest: 4 years; Mr. Crews:
18 years.
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COMPENSATION OF DIRECTORS
Directors who are not employees or otherwise affiliates of the Company
receive annual director's fees of $47,000 and are reimbursed for certain out of
pocket expenses. Directors who are employees or are otherwise affiliates of the
Company do not receive director's fees. Under the Harte-Hanks, Inc. 1998
Director Stock Plan non-employee directors may elect to receive all or a portion
of the cash compensation otherwise payable for such director's services in
common stock of the Company based upon fair market value. During 2000, David L.
Copeland, Dr. Peter T. Flawn, Christopher M. Harte and James L. Johnson each
received director's fees in cash or in stock of $47,000.
SEVERANCE AGREEMENTS
The Company has entered into a severance agreement with Larry Franklin. If
(i) Mr. Franklin is terminated from his position as Chairman and Chief Executive
Officer of the Company other than for "cause" (as defined in the severance
agreement), (ii) Mr. Franklin terminates his employment after specified adverse
actions are taken by the Company, or (iii) there is a "change in control" (as
defined in the severance agreement) of the Company, then in any of such events
Mr. Franklin 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 such event, plus (B) the average of the bonus or incentive compensation
for the two fiscal years preceding such event. In addition to the cash
compensation, the Company will continue to provide certain benefits for a two
year period and all options previously granted to Mr. Franklin will immediately
vest and become fully exercisable. The Company has entered into a severance
agreement with Richard M. Hochhauser which is substantially the same as the
severance agreement with Mr. Franklin.
The Company has also entered into severance agreements with each of its
other executive officers. If after a "change in control" (as defined in the
severance agreements) of the Company, any of such 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
certain of such executives may be entitled to the foregoing benefits upon
termination of employment before a "change in control" occurs.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
recommending to the full Board of Directors salary amounts for the Company's
Chief Executive Officer and other executive officers and making the final
determination regarding bonus arrangements and awards of stock options to such
persons.
Compensation to executives is designed to attract and retain superior
talent, to motivate the performance of executives in support of the achievement
of the Company's strategic financial and operating performance objectives, and
to reward performance that meets this standard. The Company is engaged in highly
competitive businesses and must attract and retain qualified executives in order
to be successful. In 2000, executive compensation comprised the following
elements:
Base Salary. The base salary for the Chief Executive Officer and the
other executive officers of the Company was determined after review of
publicly available information concerning the base salaries of executives
with similar responsibilities in companies engaged in businesses similar to
the Company's core businesses (which may include, but are not necessarily
the same as, those included in the Peer Group Index Graph contained in this
Proxy Statement) and the responsibilities of each executive officer,
particularly in view of the fact that the decentralized management
philosophy of the Company relies heavily on the direct action of the
Company's executives in pursuit of Company goals.
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Annual Incentive Compensation. Year-end cash bonuses are designed to
motivate the Chief Executive Officer and the other executive officers to
achieve specific annual financial and other goals based on the strategic
financial and operating performance objectives of the Company overall, as
well as each core business. In conjunction with the Compensation
Committee's review of the strategic and operating plans of the Company and
each core business at the beginning of 2000, the Compensation Committee
established incremental target performance levels for each executive
officer based on the operating profit and earnings per share growth goals
of the Company and the related financial goals of the core businesses.
Bonus amounts were paid to the executive based on the target performance
level reached.
Stock Option Plan. The 1991 Plan forms the basis of the Company's
long-term incentive plan for executives. The Compensation Committee
believes that a significant portion of executive compensation should be
dependent on value created for the stockholders. Stock options are
generally granted annually. In 2000, options were granted at fair market
value on the date of grant and become exercisable in installments over five
years from such date if the option holder is still employed. In selecting
recipients for option grants and in determining the size of such grants,
the Compensation Committee considered various factors including the overall
performance of the Company and the recipient.
Executives also receive benefits typically offered to executives by
companies engaged in businesses similar to the Company's core businesses and
various benefits generally available to employees of the Company (such as health
insurance).
It is the Company's policy to qualify compensation paid to executive
officers for deductibility under applicable provisions of the Code, including
Section 162(m). However, the Company may determine from time to time to pay
compensation to its executive officers that may not be deductible.
In making its decisions, the Compensation Committee takes into account,
primarily on a subjective basis, factors relevant to the specific compensation
component being considered, including compensation paid by other companies of
comparable size in businesses similar to the Company's core businesses, the
generation of income and cash flow by the Company as a whole and the individual
core businesses, the attainment of annual individual and business objectives and
an assessment of business performance against companies of comparable size in
businesses similar to the Company's core businesses, the executive officer's
level of responsibility and the contributions the Company expects the executive
to make in support of the Company's strategies.
2000 Compensation of Chief Executive Officer. The base salary of Mr.
Franklin for 2000 was $835,000, the same amount as his base salary in 1999. 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 2000 cash bonus, which was based
on the degree of attainment of financial goals established at the beginning of
2000, reflects the fact that in 2000 the Company's revenues, operating income
and earnings per share from the Company's current businesses increased
substantially. In 2000, Mr. Franklin received one option grant under the
Company's 1991 Plan, and in making that grant 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
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ending December 31, 2000, none of the Company's
executive officers served on the board of any entities whose directors or
officers serve on the Company's Compensation Committee. No current or past
executive officers of the Company serve on the Committee.
10
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REPORT OF AUDIT COMMITTEE
On May 2, 2000, the Board of Directors adopted the Charter of the Audit
Committee of the Board of Directors, a copy of which is attached to this Proxy
Statement as Appendix A. Management is responsible for the Company's internal
controls and financial reporting process. The Company's independent auditors are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with generally accepted auditing standards
and for issuing a report thereon. The Audit Committee is responsible for
monitoring and overseeing these processes. This report discusses certain actions
the Audit Committee took during 2000 in connection with those responsibilities.
In this context, the Audit Committee reviewed the audited consolidated
financial statements and met and held discussions with management and KMPG LLP,
the Company's independent auditors. The Audit Committee also received and
reviewed numerous reports from the Company's internal auditors. Management
represented to the Audit Committee that the Company's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles. The Audit Committee also discussed with the independent auditors
matters required to be discussed by Statement on Auditing Standards No. 61,
which includes among other items, matters related to the conduct of the audit of
the Company's financial statements.
The independent auditors also provided the Audit Committee with written
disclosures and the letter required by Independence Standards Board Standard No.
1, which relates to the auditor's independence from the Company and its related
entities, and the Audit Committee discussed with the independent auditors their
independence.
Based on discussions with management and the independent auditors, as well
as the Audit Committee's review of the representations of management and the
report of the independent auditors to the Audit Committee, the Audit Committee
recommended to the Board of Directors that the Company's audited consolidated
financial statements be included in the Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, filed with the Securities and Exchange
Commission.
The Audit Committee has recommended to the Board, and the Board has
selected, KPMG LLP as the Company's independent certified public accountants to
make the annual audit and to report on, as may be required, the consolidated
financial statements which may be filed by the Company with the Securities and
Exchange Commission during the ensuing year.
AUDIT COMMITTEE
Dr. Peter T. Flawn, Chairman David L. Copeland James L. Johnson
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COMPARISON OF STOCKHOLDER RETURNS
The following graph compares the cumulative total return of the Company's
Common Stock during the period December 31, 1995 to December 31, 2000 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 is also weighted by market capitalization and is
comprised of companies in the Company's lines of business. The peer group is
comprised of Acxiom Corporation, Catalina Marketing Corporation, Fair Isaac and
Company, Incorporated, infoUSA, INC., Convergys Corporation, Young & Rubicam
Inc. (merged with WPP Group PLC in October 2000), Snyder Communications, Inc.
(merged with Havas Advertising in September 2000), Sykes Enterprises,
Incorporated and Teletech Holdings, Inc. Convergys Corporation and Young &
Rubicam Inc have been factored only for 1998, 1999 and 2000 and Snyder
Communications, Inc., Sykes Enterprises, Incorporated and Teletech Holdings,
Inc. have been factored only for 1997, 1998, 1999 and 2000, because such periods
reflect the time these companies have been public.
The graph depicts the results of investing $100 in the Company's Common
Stock, the S&P 500 Index and the peer group at closing prices on December 31,
1995. It assumes that all dividends were reinvested.
TOTAL STOCKHOLDER RETURNS
[PERFORMANCE GRAPH]
--------------------------------------------------------------------------------------
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
--------------------------------------------------------------------------------------
Harte-Hanks, Inc. 100 140.91 188.38 290.98 222.84 243.73
S&P 500 100 122.96 163.98 210.85 255.21 231.98
Peer Group 100 159.25 129.57 154.52 221.53 226.98
12
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INDEPENDENT AUDITORS
KPMG LLP, independent certified public accountants, has been selected by
the Board of Directors as the Company's independent auditor for the year 2001.
Representatives of KPMG LLP, who were also the Company's independent auditors
for the year 2000, 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.
AUDIT FEES
The aggregate fees billed by KPMG LLP for professional services rendered in
connection with the audit of the Company's annual financial statements and the
reviews of the financial statements included in the Company's 10-Q's for the
2000 fiscal year were $180,000. In addition, KPMG LLP billed an aggregate of
$25,200 for professional services rendered in connection with the annual audits
of the Company's benefit plans.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
No fees were billed by KPMG LLP to the Company during the 2000 fiscal year
in connection with the Company's financial information systems.
ALL OTHER FEES
Except for the audit fees described above, no other fees were billed by
KPMG LLP to the Company for any other services during fiscal year 2000.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the meeting other than the matters set forth herein. Should any other
matter requiring a vote of stockholders properly arise, the proxies in the
enclosed form confer upon the person or persons entitled to vote the shares
represented by such proxies discretionary authority to vote the same in
accordance with their best judgment in the interest of the Company.
There are two different deadlines for the submission of stockholder
proposals. Stockholder proposals which are being submitted for inclusion in the
Company's proxy statement and form of proxy for the next annual meeting must be
received by the Company at its principal executive offices on or before January
7, 2001. Such proposals when submitted must be in full compliance with
applicable laws, including Rule 14a-8 of the Securities Exchange Act of 1934, as
amended.
Under the Company's bylaws, stockholder proposals which are being submitted
other than for inclusion in the Company's proxy statement and form of proxy for
the Company's next annual meeting must be received by the Company at its
principal executive offices no earlier than February 6, 2002 and no later than
March 8, 2001. Such proposals when submitted must be in full compliance with
applicable law and the Company's bylaws.
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16
FINANCIAL STATEMENTS
A copy of the Company's 2000 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, 2001
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APPENDIX A
HARTE-HANKS, INC.
AUDIT COMMITTEE CHARTER
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
- Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.
- Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
- Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to the
independent auditors as well as anyone in the organization. The Audit Committee
has the ability to retain, at the Company's expense, special legal, accounting,
or other consultants or experts it deems necessary in the performance of its
duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the New York Stock
Exchange. The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent nonexecutive
directors, free from any relationship that would interfere with the exercise of
his or her independent judgment. All members of the Committee shall have a basic
understanding of finance and accounting and be able to read and understand
fundamental financial statements, and at least one member of the Committee shall
have accounting or related financial management expertise.
Audit Committee members shall be appointed by the Board. If an Audit
Committee Chair is not designated or present, the members of the Committee may
designate a Chair by majority vote of the Committee membership.
The Committee shall meet at least three times annually, or more frequently
as circumstances dictate. The Audit Committee shall prepare and/or approve an
agenda in advance of each meeting. The Committee should meet privately in
executive session at least annually with management, the director of the
internal auditing department, the independent auditors, and as a committee to
discuss any matters that the Committee or each of these groups believe should be
discussed.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
Review Procedures
(1) Review and reassess the adequacy of this Charter at least annually.
Submit the Charter to the Board of Directors for approval and have the document
published at least every three years in accordance with Securities and Exchange
Commission (SEC) regulations.
(2) Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with management and
independent auditors of significant issues regarding accounting principles,
practices, and judgments.
(3) In consultation with management, the independent auditors, and the
internal auditors, consider the integrity of the Company's financial reporting
processes and controls. Discuss significant financial risk exposures and the
steps management has taken to monitor, control, and report such exposures.
Review
A-1
18
significant findings prepared by the independent auditors and the internal
auditing department together with management's responses.
Independent Auditors
(4) The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review the
independence and performance of the auditors and annually recommend to the Board
of Directors the appointment of the independent auditors or approve any
discharge of auditors when circumstances warrant.
(5) Approve the fees and other significant compensation to be paid to the
independent auditors.
(6) On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the Company
that could impair the auditors' independence.
(7) Review the independent auditors' audit plan -- discuss scope, staffing,
locations, reliance upon management and internal audit, and general audit
approach.
(8) Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required to be
communicated to audit committees in accordance with AICPA SAS 61.
(9) Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
Internal Audit Department and Legal Compliance
(10) Review the budget, plan, changes in plan, activities, organizational
structure, and qualifications of the internal audit department, as needed.
(11) Review the appointment, performance, and replacement of the senior
internal audit executive.
(12) Review significant reports prepared by the internal audit department
together with management's response and follow-up to these reports.
(13) On at least an annual basis, review with the Company's counsel any
legal matters that could have a significant impact on the organization's
financial statements, the Company's compliance with applicable laws and
regulations, and inquiries received from regulators or governmental agencies.
Other Audit Committee Responsibilities, and Clarification of Role
(14) Annually prepare a report to shareholders as required by the SEC. The
report should be included in the Company's annual proxy statement.
(15) Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the Board deems
necessary or appropriate.
(16) Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
(17) While the Audit Committee has the responsibilities, duties and powers
set forth in this Charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Company's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditors. Nor is it the duty of the Audit Committee to conduct investigations,
to resolve disagreements, if any, between management and the independent
auditors or to assure compliance with laws and regulations.
A-2
19
HARTE-HANKS, INC.
c/o EquiServe
P.O. Box 9398
Boston, MA 02205-9398
DETACH HERE
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
1. Election of Directors. 2. On any other business that may properly come before the
meeting, hereby revoking any proxy or proxies heretofore
NOMINEES: (01) Larry Franklin and given by the undersigned.
(02) James L. Johnson
FOR WITHHELD
[ ] [ ]
[ ]
--------------------------------------
For the nominees except as noted above MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE SIGN, DATE AND MAIL TODAY.
(Joint owners must EACH sign. Please sign EXACTLY as your
name appears on this card. When signing as attorney,
trustee, executor, administrator, guardian or corporate
officer, please give your FULL title.)
Signature: Date: Signature: Date:
---------------------------- ------------------ --------------------------------- ----------------
20
DETACH HERE
PROXY
HARTE-HANKS, INC.
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
AT 10:00 A.M., TUESDAY, MAY 8, 2001
200 CONCORD PLAZA DRIVE, FIRST FLOOR
SAN ANTONIO, TEXAS 78216
The undersigned stockholder of Harte-Hanks, Inc. (the "Company") hereby
revokes any proxy or proxies previously granted and appoints Larry Franklin and
Houston H. Harte or either of them as proxies, each with full powers of
substitution and resubstitution, to vote the shares of the undersigned at the
above-stated Annual Meeting and at any adjournment(s) thereof.
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 ITEM (1), THIS PROXY WILL BE VOTED "FOR"
SUCH ITEM. THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY MATTER
REFERRED TO IN ITEM (2). THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS
EXERCISED.
[SEE REVERSE SIDE] [SEE REVERSE SIDE]
CONTINUED AND TO BE SIGNED ON REVERSE SIDE