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<SEC-DOCUMENT>0000950134-01-500027.txt : 20010402
<SEC-HEADER>0000950134-01-500027.hdr.sgml : 20010402
ACCESSION NUMBER:		0000950134-01-500027
CONFORMED SUBMISSION TYPE:	10-K405
PUBLIC DOCUMENT COUNT:		10
CONFORMED PERIOD OF REPORT:	20001231
FILED AS OF DATE:		20010330

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			HARTE HANKS INC
		CENTRAL INDEX KEY:			0000045919
		STANDARD INDUSTRIAL CLASSIFICATION:	MISCELLANEOUS PUBLISHING [2741]
		IRS NUMBER:				741677284
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K405
		SEC ACT:		
		SEC FILE NUMBER:	001-07120
		FILM NUMBER:		1587069

	BUSINESS ADDRESS:	
		STREET 1:		200 CONCORD PLAZA DR STE 800
		CITY:			SAN ANTONIO
		STATE:			TX
		ZIP:			78216
		BUSINESS PHONE:		2108299000

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	HARTE HANKS COMMUNICATIONS INC
		DATE OF NAME CHANGE:	19920703

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	HARTE HANKS NEWSPAPERS INC
		DATE OF NAME CHANGE:	19771010
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>d85151e10-k405.txt
<DESCRIPTION>FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 2000
<TEXT>

<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 --------------

                                    FORM 10-K

(MARK ONE)
[X]            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

[ ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
              THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

               FOR THE TRANSITION PERIOD FROM         TO
                                              -------    --------

                          COMMISSION FILE NUMBER 1-7120

                                 --------------

                     HARTE-HANKS, INC. (formerly HARTE-HANKS
                              COMMUNICATIONS, INC.)
             (Exact name of registrant as specified in its charter)

                 DELAWARE                                    74-1677284
      (State or other jurisdiction of                     (I.R.S. Employer
      incorporation or organization)                   Identification Number)

            200 CONCORD PLAZA DRIVE                             78216
            SAN ANTONIO, TEXAS                               (ZIP CODE)
 (Address of principal executive officers)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE -- 210-829-9000

                                 --------------

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                                           NAME OF EACH
TITLE OF EACH CLASS                               EXCHANGE ON WHICH REGISTERED
- -------------------                               ----------------------------
   Common Stock                                     New York Stock Exchange


           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      None

                                 --------------

                                (Title of class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes   X   No.
                                              ----      ----

         Indicate by check mark if disclosure of delinquent filings pursuant to
Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. X
                                             ---

         Aggregate market value of the Company's voting stock held by
non-affiliates on February 1, 2001, based on the $23.19 per share closing price
for the Company's Common Stock on the New York Stock Exchange on such date:
approximately $1,022,000,000.

SHARES OUTSTANDING AT FEBRUARY 1, 2001:

         Common Stock - 64,565,472 shares

DOCUMENTS INCORPORATED BY REFERENCE:

         The Company's Annual Report to Stockholders for the year ended December
31, 2000 (incorporated in Part II to the extent provided in Items 5, 6, 7 and 8
hereof).

         Definitive Proxy Statement for the Company's May 8, 2001 Annual Meeting
of Stockholders to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934 (incorporated in Part III to the extent provided in Items
10, 11 and 12 hereof).

================================================================================
<PAGE>   2

                                       2


                                Harte-Hanks, Inc.
                                Table of Contents
                                Form 10-K Report
                                December 31, 2000
<TABLE>
<CAPTION>
Part I                                                                                           Page
- ------                                                                                           ----

<S>                        <C>                                                                   <C>
      Item 1.              Business                                                                3
      Item 2.              Properties                                                              3
      Item 3.              Legal Proceedings                                                       9

      Item 4.              Submission of Matters to a Vote of Security Holders                    10


Part II
- -------

      Item 5.              Market for Registrant's Common Equity and Related
                           Stockholder Matters                                                    10

      Item 6.              Selected Financial Data                                                10

      Item 7.              Management's Discussion and Analysis of Financial
                           Condition and Results of Operations                                    10

      Item 7A.             Quantitative and Qualitative Disclosures About Market Risk             10

      Item 8.              Financial Statements and Supplementary Data                            10

      Item 9.              Changes in and Disagreements with Accountants on
                           Accounting and Financial Disclosure                                    10

Part III
- --------

      Item 10.             Directors and Executive Officers of the Registrant                     10

      Item 11.             Executive Compensation                                                 11

      Item 12.             Security Ownership of Certain Beneficial Owners and
                           Management                                                             12

      Item 13.             Certain Relationships and Related Transactions                         12


Part IV
- --------

      Item 14.             Exhibits, Financial Statement Schedules and Reports on
                           Form 8-K.                                                              12

Signatures                                                                                        16
</TABLE>


<PAGE>   3

                                       3


ITEM 1.     BUSINESS AND ITEM 2.     PROPERTIES

INTRODUCTION

         Harte-Hanks is a highly focused international direct and interactive
services company that provides a full scope of solutions to a wide range of
industries in the customer relationship management (CRM) arena. The Company also
publishes highly targeted advertising shopper publications which reach nearly
ten million households a week.

         The Company's direct and interactive marketing business operates both
nationally and internationally, while its shopper business operates in selected
local and regional markets in California and Florida. The Company believes that
marketing is undergoing a transition from traditional mass media marketing to
targeted marketing and CRM. The transition is being driven by the increasing
sophistication and efficiency of computer technology and a growing need among
marketers to customize the products and services they offer to customers. Direct
and interactive marketing, which represents 69% of the Company's revenue, is
leading the movement toward highly targeted marketing and CRM. The Company's
shopper business applies similar targeting principles. Harte-Hanks' strategy is
based on five key elements: being a market leader in each of its businesses;
increasing revenues through growing its base businesses, introducing new
products, entering new markets and making acquisitions; using technology to
create competitive advantages; employing people who can partner effectively with
its clients; and creating shareholder value. Company revenues totaled $960.8
million in 2000.

         Harte-Hanks is the successor to a newspaper business begun in Texas in
the early 1920's by Houston Harte and Bernard Hanks. In 1972, the Company went
public and was listed on the New York Stock Exchange. The Company went private
in a leveraged buyout initiated by management in 1984. In 1993, the Company
again went public and listed its common stock on the NYSE. In October 1997, the
Company sold all of its remaining traditional media operations (consisting of
newspapers, television and radio companies) in order to focus all of its efforts
on its direct and interactive services and shoppers operations.

         See Note N of "Notes to Consolidated Financial Statements" for certain
financial information about the Company's two business segments - direct and
interactive marketing and shoppers.

DIRECT MARKETING

GENERAL

         Harte-Hanks operates a worldwide direct and interactive services
company offering a broad range of specialized, coordinated and integrated
services. The Company utilizes advanced technologies to enable its clients to
identify, reach, influence and nurture their customers. The Company believes
that developments in computer technology and trends toward more sophisticated
marketing analysis and measurement will continue to result in increased usage of
direct and interactive marketing services. Harte-Hanks' direct and interactive
marketing clients include many of America's largest retailers, high-tech firms,
banks, mutual funds companies, pharmaceutical companies, healthcare
organizations and insurance companies, along with a growing number of clients in
such emerging markets as telecommunications, automotive, utilities and
hospitality. The Company's client base is both domestic and international. In
2000, Harte-Hanks Direct Marketing had revenues of $662.0 million, which
accounted for 69% of the Company's total revenues.

         Harte-Hanks Direct Marketing offers a complete range of specialized,
coordinated and integrated direct and interactive marketing services from a
single source. These services are organized into two broad sectors - CRM and
marketing services.


<PAGE>   4

                                       4


         In 2000, Harte-Hanks made two acquisitions in its direct and
interactive marketing business segment. Both of these acquisitions expanded the
Company's services and client base in its CRM sector. Harte-Hanks expanded its
services to the high-tech, communications and financial services industries
through the acquisition of Hi-Tech Marketing Limited, a London based leading
provider of CRM services in Europe. Harte-Hanks further expanded its
capabilities through the acquisition of Detroit based Information Resources
Group, a leading provider of business-to-business intelligence solutions to the
high-tech, communications and other industries.

CUSTOMER RELATIONSHIP MANAGEMENT

         Harte-Hanks Customer Relationship Management (CRM) uses technology as
an enabler to capture, to analyze and to disseminate customer and prospect data
across all points of customer contact. The Company helps clients manage the
inquiries they receive from their marketing efforts, whether from Web sites,
e-mail, toll-free numbers, trade shows, fax programs or other sources. These
inquiries, or leads, are qualified, tracked and distributed both to appropriate
sales channels and to client management for analysis and decision-making. Using
proprietary software and open software solutions, the Company also builds
contact databases for its clients using the information gained from these CRM
activities. These databases help clients measure the return on their marketing
communications and make more informed decisions about future marketing efforts.

         The Company also builds customized marketing databases for specific
clients and provides them with easy-to-use tools to perform analysis and to
target their best customers and prospects. Using proprietary name and address
matching software, the Company standardizes large numbers of customer records
from multiple sources, integrates them into a single database for each client
and, if needed, appends demographic and lifestyle information.

         In most cases, these databases are delivered for use on clients'
personal computers, networks or workstations, where the Company's P/CIS(R)
software applications and other software solutions help clients predict the
likely results of marketing promotions and track recipients' buying behavior.
Relational databases are built for clients from a range of facilities, each
specializing in specific market segments. These databases are moved to the
client's site or maintained at Harte-Hanks with on-line access to client
locations. In addition to building a client's database and installing the
software, Harte-Hanks CRM performs regular database updates and offers its
software module Trillium(TM) for clients who want to integrate data quality
capabilities into their data warehouse.

         In addition, the Company operates as a service bureau, preparing list
selections, maximizing deliverability and reducing clients' mailing costs
through sophisticated postal coding, hygiene and address updates through a
non-exclusive National Change of Address license with the U.S. Postal Service.

         As a further extension of the client's marketing arm, Harte-Hanks
provides marketing research and analytics services. Specific capabilities
include tracking and reporting, media analysis, modeling, database profiling,
primary data collection, marketing applications, consulting and program
development.

         CRM services are marketed to specific industries or markets with
services and software products tailored to each industry or market. Having
established the basic technological foundation, the Company is able to provide
CRM services to new industries and markets by modifying its existing technology
and information applications. The Company currently provides CRM services to all
of its primary markets in addition to a range of emerging markets.

         The Company expanded its CRM services by the June 2000 acquisition of
UK-based Hi-Tech Marketing Limited, a leading pan-European provider of response
management services to the high-tech, communications and financial services
industries. The combination greatly enhances the Company's current European
response management operations that are located in Belgium.

<PAGE>   5

                                       5


         The Company enhanced its database offering with the November 2000
acquisition of Information Resource Group (IRG), a leading provider of database
products and solutions to the high-tech and communications industries. IRG's
database content and related services complement the database products and
solutions offered by Harte-Hanks Market Intelligence. This combination allows
the Company to provide its clients additional technology-related information
about more than 270,000 business sites in markets worldwide to enhance their
sales, marketing and research initiatives. The Company also expects the
combination of these two database products to provide the advantage of
operational synergies.

         The Company strengthened its suite of CRM offerings by forming a number
of strategic alliances during the year. Harte-Hanks formed alliances with
HotData and InfoUSA to deliver Harte-Hanks Market Intelligence CI TechModels to
all customer touch points across the enterprise. HotData will integrate CI
TechModels into popular CRM systems, major enterprise databases and Web sites.
InfoUSA will append CI TechModels to all of its business locations profiles for
sale to customers. Harte-Hanks entered into a strategic relationship and
reseller agreement with CoolSavings, a provider of e-marketing services used by
online and off-line advertisers to build one-to-one customer relationships.
Through this alliance, Harte-Hanks provides its clients a bundled set of
services, including an integrated view of the consumer, targeted promotions via
the Internet, e-mail and direct mail, and tracking and analysis of promotion
effectiveness. CoolSavings provides 12 million active online consumers and more
than 150 companies that want to market offline. Harte-Hanks will tap into the
database to help jump-start its customers' online efforts and to market its
services to CoolSavings clients.

         The Company provides CRM services at its facilities in Austin, Texas;
Billerica, Massachusetts; Dallas, Texas, Glen Burnie, Maryland; La Jolla,
California; Lake Katrine, New York; Lake Mary, Florida; Los Angeles, California;
New York, New York; River Edge, New Jersey; Sterling Heights, Michigan;
Sunnyvale, California; and West Bridgewater, Massachusetts. These centers
possess some industry specialization and are linked together to support certain
clients that experience volume spikes or seek high-growth needs.

         The Company also provides CRM services internationally through offices
in Dublin, Ireland; Hasselt, Belgium; London, England; Madrid, Spain; Melbourne,
Australia; Sao Paulo, Brazil; Sevres, France; Slough, England; Thatcham,
England; and Toronto, Canada.

MARKETING SERVICES

         Harte-Hanks provides a variety of services to help clients develop and
execute targeted marketing communication programs. These include such upfront
services as creative and graphics, along with back-end services such as
printing, personalization of communication pieces using laser and inkjet
printing, target mail and fulfillment, and transportation logistics.

         The Company's mail tracking capability and long-standing relationships
with the U.S. Postal Service help ensure that customer mailings reach their
destinations on time. And, by controlling the final stage of the print
distribution process through its logistics operations, the Company facilitates
the delivery of its clients' materials while holding costs to a minimum.

         Increasingly clients seek execution programs as part of Harte-Hanks
end-to-end solutions. Harte-Hanks also offers direct marketing agency services
to create the plan to manage direct and interactive marketing communication
efforts. These services combine information-based strategy and brand-building
creative efforts across both traditional direct and interactive media.

         Depending upon the needs of clients, Harte-Hanks marketing services
capabilities are provided in a specialized, coordinated and integrated approach
through 17 facilities nationwide.


<PAGE>   6

                                       6


SALES AND MARKETING

         The national direct and interactive marketing sales forces of
Harte-Hanks are headquartered in Cincinnati, Ohio, with additional offices
maintained throughout the United States and in Dublin, Ireland, Hasselt,
Belgium; London, England; Madrid, Spain, Melbourne, Australia, Sao Paulo,
Brazil, Sevres, France, Slough, England; Thatcham, England and Toronto, Canada.
In addition, the Company has affiliates in Singapore. The sales forces, with
industry-specific knowledge and experience, emphasize the cross-selling a full
range of direct and interactive marketing services and are supported by
employees in each sector. The overall sales focus is to position Harte-Hanks as
a marketing partner and a single-source solution for a client's targeted
marketing needs.

         The Company generally charges transaction-related fees each time it
provides direct and interactive marketing services. For certain CRM
applications, it charges a one-time, negotiated fee to build a database, plus an
additional fee each time the database is updated. There are often consulting and
account management fees associated with CRM services and planning fees for many
of the data-based solutions.

FACILITIES

         Direct and interactive marketing services are provided at the following
facilities:

<TABLE>
<CAPTION>
              CRM                                      MARKETING SERVICES (CONTINUED)
<S>                                                    <C>
              Austin, Texas                            Kansas City, Kansas
              Billerica, Massachusetts                 Langhorne, Pennsylvania
              Dallas, Texas                            Memphis, Tennessee
              Glen Burnie, Maryland                    New York, New York
              La Jolla, California                     Sacramento, California
              Lake Katrine, New York                   Westville, New Jersey
              Lake Mary, Florida                       Wilkes-Barre, Pennsylvania
              Los Angeles, California
              New York, New York                       NATIONAL SALES HEADQUARTERS
              River Edge, New Jersey                   Cincinnati, Ohio
              Sterling Heights, Michigan               Kansas City, Kansas
              Sunnyvale, California                    La Jolla, California
              West Bridgewater, Massachusetts
                                                       INTERNATIONAL OFFICES
              MARKETING SERVICES                       Dublin, Ireland
              Baltimore, Maryland                      Hasselt, Belgium
              Bellmawr, New Jersey                     London, England
              Bloomfield, Connecticut                  Madrid, Spain
              Cherry Hill, New Jersey                  Melbourne, Australia
              Cincinnati, Ohio                         Sao Paulo, Brazil
              Clearwater, Florida                      Sevres, France
              Dallas/Grand Prairie, Texas              Slough, England
              Deerfield Beach, Florida                 Thatcham, England
              Fullerton, California                    Toronto, Canada
              Jacksonville, Florida
</TABLE>


<PAGE>   7

                                       7


COMPETITION

         Harte-Hanks' direct and interactive marketing business faces
competition from other direct marketing companies in each sector, as well as
from print and electronic media and other forms of advertising. Harte-Hanks
believes that its state-of-the-art CRM capabilities, combined with its national
production capability, industry focus and ability to offer a full range of
integrated services, enable the Company to compete effectively.

SHOPPERS

GENERAL

         Harte-Hanks is the largest publisher of advertising shoppers in North
America based on weekly circulation and revenues, and the only national targeted
media company that focuses on shoppers as a core business. Shoppers are weekly
advertising publications delivered free by third-class mail to all households in
a particular geographic area. Shoppers offer advertisers a targeted,
cost-effective local advertising system, with virtually 100% penetration in
their area of distribution. Shoppers are particularly effective in large markets
with high media fragmentation in which major metropolitan newspapers generally
have low penetration.

         As of December 31, 2000, Shoppers delivered nearly 10 million shopper
packages in four major markets each week covering the greater Los Angeles market
(Los Angeles County, Orange County, Riverside County, San Bernardino County,
Ventura County, and Kern County), the greater San Diego market, Northern
California (San Jose, Sacramento and Stockton) and South Florida. (Shopper
publications overlap in approximately 220,000 households in South Orange
County.) The Company's California publications account for 88% of Shopper's
weekly circulation.

         Harte-Hanks publishes 809 individual shopper editions each week
distributed to zones of approximately 12,200 households each. This allows
single-location, local advertisers to saturate a single geographic zone, while
enabling multiple-location advertisers to saturate multiple zones. This unique
delivery system gives large and small advertisers alike a cost-effective way to
reach their target markets. The Company believes that its zoning capabilities
and production technologies have enabled it to saturate and target areas in a
number of ways including, geographic, demographic, lifestyles, behavioral and
language. This allows its advertisers to effectively target their customers. The
Company's strategy is to increase its share of local advertising in its existing
circulation areas, and, over time, to increase circulation through internal
expansion into contiguous areas and make selective acquisitions. In 2000,
Harte-Hanks Shoppers had revenues of $298.7 million, accounting for
approximately 31% of the Company's total revenues.

         During the period 1996 through 2000, over 1 million households were
added to the Company's shopper circulation through internal expansion. The
Company believes that expansions provide increased revenues and operating income
as the publications in these new areas mature. In addition to internal
expansion, Harte-Hanks Shoppers added approximately 2 million households to its
California circulation with the acquisition of the ABC Shoppers Group from an
indirect subsidiary of The Walt Disney Company in October 1997. The Company now
reaches over 8.7 million households in California, or nearly 73% of the state's
total.


<PAGE>   8

                                        8


PUBLICATIONS

The following table sets forth certain information with respect to shopper
publications:

<TABLE>
<CAPTION>
                                                                                 December 31, 2000
                                                                       ----------------------------------
                                                                                              Number of
Market                              Publication Name                   Circulation              Zones
- ------                              ----------------                   -----------            ----------
<S>                                 <C>                                <C>                    <C>
Greater Los Angeles                 PennySaver/South                   5,143,000                 434
                                    Coast Shopper

Greater San Diego                   PennySaver/Bargain                 1,437,000                 117
                                    Bulletin

Northern California                 PennySaver/Magic Ads               2,150,500                 160

South Florida                       The Flyer                          1,171,100                  98
                                                                       ---------                 ---

Total:                                                                 9,901,600                 809
</TABLE>

         Shopper publications contain classified and display advertising and are
primarily delivered to consumers' homes by third-class saturation mail. The
typical shopper publication contains over 42 pages and is 7 by 9-1/2 inches in
size. Each edition, or zone, is targeted around a natural neighborhood marketing
pattern. Shoppers also serve as a distribution vehicle for multiple ads from
national and regional advertisers; "print and deliver" single-sheet inserts
designed and printed by the Company; coupon books; preprinted inserts from major
retail chains; and a four-color proprietary product, MARQUEE. Harte-Hanks
shopper publications also offer audiotext voice mail in a pay-per-call format.
In addition, Shoppers offer advertising over its internet sites -
www.pennysaverusa.com for its California publications and theflyer.com for its
South Florida publication.

         The Company has acquired, developed and applied innovative technology
and customized equipment in the publication of its shoppers, contributing to
efficiency and growth. A proprietary pagination system has made it possible for
the hundreds of weekly zoned editions to be designed, built and output to
plate-ready negatives in a paperless, digital environment. Automating the
production process saves on labor, newsprint and overweight postage. This
software also allows for better ad tracking, immediate checks on individual zone
and ad status, and more on-time press starts with less manpower.

SALES AND MARKETING

         The Company maintains local sales offices throughout its geographic
markets and employs more than 647 commissioned sales representatives who develop
both targeted and saturation advertising programs for customers. The sales
organization provides service to both national and local advertisers through its
telemarketing departments and field sales representatives. Shopper customers
vary from individuals with a single item for sale to local neighborhood
advertisers to large multi-location advertisers. The core customers continue to
be local service businesses and small retailers. The Company is increasingly
focusing its marketing efforts on larger national accounts by emphasizing its
ability to deliver saturation advertising in defined zones in combination with
advertising in the shopper publication.

         Additional focus is placed on particular industries/categories through
the use of sales specialists. These sales specialists are primarily used to
target automotive, real estate, and employment advertisers.

         The Company utilizes a proprietary sales and marketing system (SAMS) to
enter customer orders directly from the field, instantly checking space
availability, ad costs and other pertinent information. A


<PAGE>   9

                                        9


paperless order entry system on a Unix platform, SAMS has built-in
error-reducing safeguards, minimizing costly sales adjustments. In addition,
SAMS facilitates placement of advertising in multiple-zoned editions. The
Company has expanded SAMS so that, in addition to allowing advertising
information to be entered for immediate publication, it will build a relational
customer database, enabling sales personnel to access customer history by
designated variables, thereby identifying similar potential customers and
assisting follow-up with existing customers.

FACILITIES

         Harte-Hanks shoppers are produced at owned or leased facilities in the
markets they serve. The Company has five production facilities - three in
Southern California, one in Northern California and one in its Florida market -
and 33 sales offices. At the end of 1998 and during 1999, the Company
consolidated two Northern California production facilities into one in the
Sacramento area. The consolidation has facilitated future expansions in the
Northern California marketplace and provided cost savings in the form of
operating synergies.

COMPETITION

         Harte-Hanks shoppers compete primarily with metropolitan daily
newspapers, shared mail packages and other local advertising media. Shoppers
also compete in varying degrees for advertisers and readers with magazines,
radio, broadcast and cable television, directories, internet sites, other
shoppers and other communications media that operate in their markets. The
Company believes that its production systems and technology, which enable it to
publish separate editions in narrowly targeted zones, allow it to compete
effectively, particularly in large markets with high media fragmentation.


EMPLOYEES

         As of December 31, 2000, Harte-Hanks employed 7,557 full-time employees
and 1,292 part-time employees, as follows: direct marketing - 5,681 full-time
and 916 part-time employees; shoppers - 1,855 full-time and 375 part-time
employees; and corporate office - 21 full-time employees and 1 part-time
employee. None of the work force is represented by labor unions. The Company
considers its relations with its employees to be good.

FACILITIES

         Harte-Hanks' executive offices are located in San Antonio, Texas and
occupy approximately 17,000 square feet in leased premises. The Company's
business is conducted in facilities worldwide containing aggregate space of
approximately 3.4 million square feet. Approximately 3.2 million square feet are
held under leases, which expire at dates through 2014. The balance of the
properties, used in the Company's Southern California shopper operations,
Westville, New Jersey marketing services operations and Hasselt, Belgium CRM
operations, are owned by the Company.

ITEM 3.           LEGAL PROCEEDINGS

         The Company from time to time becomes involved in various claims and
lawsuits incidental to its businesses. In the opinion of management, after
consultation with counsel, any ultimate liability arising out of currently
pending claims and lawsuits will not have a material effect on the financial
condition or operations of the Company.


<PAGE>   10

                                       10


ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.

ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS

         Incorporated herein by reference from the Company's Annual Report to
Stockholders for the year ended December 31, 2000 at page 32.

ITEM 6.           SELECTED FINANCIAL DATA

         Incorporated herein by reference from the Company's Annual Report to
Stockholders for the year ended December 31, 2000 at page 31.

ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS

         Incorporated herein by reference from the Company's Annual Report to
Stockholders for the year ended December 31, 2000 at pages 12 through 17.

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                  MARKET RISK

         The Company's earnings are affected by changes in short-term interest
rates as a result of its revolving credit agreements, which bear interest at
floating rates. The Company does not believe that it has significant exposure to
market risks associated with changing interest rates as of December 31, 2000.
The Company does not use derivative financial instruments in its operations.

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The following information is set forth in the Company's Annual Report
to Stockholders for the year ended December 31, 2000, which is incorporated
herein by reference: All Consolidated Financial Statements (pages 18 through
21); all Notes to Consolidated Financial Statements (pages 22 through 30); and
the Independent Auditors' Report (page 32). With the exception of the
information herein expressly incorporated by reference, the Company's Annual
Report to Stockholders for the year ended December 31, 2000 is not deemed filed
as part of this Annual Report on Form 10-K.

ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE

         None.

ITEM 10.          MANAGEMENT

         Incorporated herein by reference from the information in the Company's
definitive proxy statement dated March 27, 2001 for the May 8, 2001 Annual
Meeting of Stockholders under the caption "Management -- Directors and Executive
Officers" on pages 5 and 6.


<PAGE>   11

                                       11


ITEM 11.        EXECUTIVE COMPENSATION

         Incorporated herein by reference from the information in the Company's
definitive proxy statement dated March 27, 2001 for the May 8, 2001 Annual
Meeting of the Stockholders under the caption, "Executive Compensation and Other
Information" on pages 7 through 10.


<PAGE>   12


                                       12


ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

         Incorporated herein by reference from the information in the Company's
definitive proxy statement dated March 27, 2001 for the May 8, 2001. Annual
Meeting of Stockholders under the caption "Security Ownership of Management and
Principal Stockholders" on pages 3 and 4.

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         None.

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
                  8-K

(a)(1)            The following consolidated financial statements are
                  incorporated by reference from the Company's Annual Report to
                  Stockholders for the year ended December 31, 2000 attached
                  hereto:

                  Consolidated Balance Sheets, December 31, 2000 and 1999

                  Consolidated Statements of Operations, Years ended
                  December 31, 2000, 1999 and 1998

                  Consolidated Statements of Cash Flows, Years ended
                  December 31, 2000, 1999 and 1998

                  Consolidated Statements of Stockholders' Equity, Years ended
                  December 31, 2000, 1999 and 1998

                  Notes to Consolidated Financial Statements

                  Independent Auditors' Report

(a)(2)            The following accountants' report and financial schedule for
                  years ended December 31, 2000, 1999 and 1998 are submitted
                  herewith:

                  Independent Auditors' Report 10-K Schedule

                  Schedule II -- Valuation and Qualifying Accounts

                  All other schedules are omitted as the required information is
                  inapplicable


<PAGE>   13

                                       13


(a)(3) EXHIBITS

<TABLE>
<CAPTION>
Exhibit
  No.                       Description of Exhibit
- -------                     ----------------------
<S>             <C>

3(a)            Amended and Restated Certificate of Incorporation (filed as
                Exhibit 3(a) to the Company's Form 10-K for the year ended
                December 31, 1993 and incorporated by reference herein).

3(b)            Amended and Restated Bylaws (filed as Exhibit 3(b) to the
                Company's Registration Statement No. 33-69202 and incorporated
                by reference herein).

3(c)            Amendment dated April 30, 1996 to Amended and Restated
                Certificate of Incorporation (filed as Exhibit 3(c) to the
                Company's Form 10-Q for the nine months ended September 30, 1996
                and incorporated by reference herein).

3(d)            Amendment dated May 5, 1998 to Amended and Restated Certificate
                of Incorporation (filed as Exhibit 3(d) to the Company's Form
                10-Q for the six months ended June 30, 1998 and incorporated by
                reference herein).

3(e)            Amended and Restated Certificate of Incorporation as amended
                through May 5, 1998 (filed as Exhibit 3(e) to the Company's Form
                10-Q for the six months ended June 30, 1998 and incorporated by
                reference herein).

4(a)            364-Day Credit Agreement dated as of November 4, 1999 between
                Harte-Hanks, Inc. and the Lenders named therein [$100 million]
                (filed as Exhibit 4(a) to the Company's form 10-Q for the nine
                months ended September 30, 1999 and incorporated by reference
                herein).

4(b)            Three-Year Credit Agreement dated as of November 4, 1999 between
                Harte-Hanks, Inc. and the Lenders named therein [$100 million]
                (filed as Exhibit 4(b) to the Company's form 10-Q for the nine
                months ended September 30, 1999 and incorporated by reference
                herein).

4(c)            Amendment No. 2 dated October 30, 2000 to 364-Day Credit
                Agreement [$100 million]. (filed as Exhibit 4(c) to the
                Company's Form 10-Q for the nine months ended September 30, 2000
                and incorporated by reference herein).

4(d)            Other long term debt instruments are not being filed pursuant to
                Section (b) (4) (ii) of Item 601 of Regulation S-K. Copies of
                such instruments will be furnished to the Commission upon
                request.
</TABLE>

<PAGE>   14

                                       14


<TABLE>
<CAPTION>
  No.                       Description of Exhibit
- -------                     ----------------------
<S>             <C>

10(a)           1984 Stock Option Plan (filed as Exhibit 10(d) to the Company's
                Form 10-K for the year ended December 31, 1984 and incorporated
                herein by reference).

10(b)           Registration Rights Agreement dated as of September 11, 1984
                among HHC Holding Inc. and its stockholders (filed as Exhibit
                10(b) to the Company's Form 10-K for the year ended December 31,
                1993 and incorporated by reference herein).

*10(c)          Severance Agreement between Harte-Hanks, Inc. and Larry
                Franklin, dated as of December 15, 2000.

*10(d)          Form of Severance Agreement between Harte-Hanks, Inc. and
                Richard M. Hochhauser dated as of December 15, 2000.

*10(e)          Form 1 of Severance Agreement between Harte-Hanks, Inc. and
                certain Executive Officers of the Company dated as of
                December 15, 2000.

*10(f)          Form 2 of Severance Agreement between Harte-Hanks, Inc. and
                certain Executive Officers of the Company dated as of
                December 15, 2000.

10(g)           Harte-Hanks, Inc. Amended and Restated Restoration Pension Plan
                dated as of January 1, 2000. (filed as Exhibit 10(f) to the
                Company's Form 10-K for the year ended December 31, 1999 and
                incorporated by reference herein).

10(h)           Harte-Hanks Communications, Inc. 1996 Incentive Compensation
                Plan (filed as Exhibit 10(p) to the Company's Form 10-Q for the
                nine months ended September 30, 1996 and incorporated by
                reference herein).

10(i)           Harte-Hanks, Inc. Amended and Restated 1991 Stock Option Plan
                (filed as Exhibit 10(g) to the Company's Form 10-Q for the six
                months ended June 30, 1998 and incorporated by reference
                herein).

10(j)           Harte-Hanks, Inc. 1998 Director Stock Plan (filed as Exhibit
                10(h) to the Company's Form 10-Q for the six months ended June
                30, 1998 and incorporated by reference herein).

10(k)           Harte-Hanks, Inc. Deferred Compensation Plan (filed as Exhibit
                10(I) to the Company's Form 10-K for the year ended December 31,
                1998 and incorporated by reference herein).

*10(l)          Amendment One to Harte-Hanks, Inc. Amended and Restated
                Restoration Pension Plan dated December 18, 2000.
</TABLE>

<PAGE>   15

                                       15


<TABLE>
<CAPTION>
Exhibit
  No.                       Description of Exhibit
- -------                     ----------------------
<S>             <C>

*11             Statement Regarding Computation of Net Income (Loss) Per Common
                Share.

*13             Annual Report to Stockholders (only those portions incorporated
                by reference into the Form 10-K are filed herewith).

*21             Subsidiaries of the Company

*23             Consent of KPMG LLP
</TABLE>

- ---------------------
*Filed herewith


ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
            (continued)

14(c)           Exhibits -- The response to this portion of item 14 is submitted
                as a separate section of this report on pages 18 to 68.

14(d)           Financial Statement Schedule -- The response to this portion of
                Item 14 is submitted as a separate section of this report on
                page 18.


         The agreements set forth above describe the contents of certain
exhibits thereunto which are not included. However, such exhibits will be
furnished to the Commission upon request.


<PAGE>   16

                                       16


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Harte-Hanks, Inc. has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.


                                       HARTE-HANKS, INC.

                                       By:      /s/ Larry Franklin
                                            -----------------------------------
                                            Larry Franklin
                                            Chairman & Chief Executive Officer


                                       By:     /s/ Jacques D. Kerrest
                                            -----------------------------------
                                            Jacques D. Kerrest
                                            Senior Vice President, Finance and
                                            Chief Financial Officer




Date:    March 29, 2001

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities indicated.

<TABLE>
<S>                                                                <C>
          /s/  Houston H. Harte                                          /s/  Christopher M. Harte
- -----------------------------------------------                    -----------------------------------
Houston H. Harte, Vice Chairman                                    Christopher M. Harte, Director


          /s/  Larry Franklin                                            /s/  James L. Johnson
- -----------------------------------------------                    -------------------------------
Larry Franklin, Chairman                                           James L. Johnson, Director


          /s/  Richard M. Hochhauser                                     /s/  David L. Copeland
- -----------------------------------------------                    --------------------------------

Richard M. Hochhauser, Director                                    David L. Copeland, Director


          /s/  Dr. Peter T. Flawn
- ----------------------------------------------
Dr. Peter T. Flawn, Director
</TABLE>


<PAGE>   17

                                       17


                   INDEPENDENT AUDITORS' REPORT 10-K SCHEDULE


The Board of Directors and Stockholders
Harte-Hanks, Inc.:

Under date of January 29, 2001, we reported on the consolidated balance sheets
of Harte-Hanks, Inc. and subsidiaries as of December 31, 2000 and 1999 and the
related consolidated statements of operations, cash flows and stockholders'
equity for each of the years in the three-year period ended December 31, 2000,
as contained in the 2000 annual report to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year 2000. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedule as referred to in Item
14(a)(2). This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.



                                               /s/ KPMG LLP


San Antonio, Texas
January 29, 2001


<PAGE>   18

                                       18


                       Harte-Hanks, Inc. and Subsidiaries

                          Financial Statement Schedule


                                   Schedule II
                        Valuation and Qualifying Accounts

                                 (in thousands)


<TABLE>
<CAPTION>
                                                                       Additions
                                                   Balance at          Charged to                             Balance
                                                   Beginning           Costs and                              at End
                      Description                   of Year             Expenses          Deductions          of Year
                      -----------                  ----------          ----------         ----------          -------
<S>                                                <C>                 <C>                <C>                 <C>
Allowance for doubtful accounts:

     Year ended December 31, 2000...                $ 3,751              $ 4,602            $ 3,709           $4,644
                                                    =======              =======            =======           ======

     Year ended December 31, 1999...                $ 3,246              $ 1,825            $ 1,320           $3,751
                                                    =======              =======            =======           ======

     Year ended December 31, 1998...                $ 2,835              $ 2,193            $ 1,782           $3,246
                                                    =======              =======            =======           ======
</TABLE>


<PAGE>   19


                               INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
  No.                       Description of Exhibit
- -------                     ----------------------
<S>             <C>

3(a)            Amended and Restated Certificate of Incorporation (filed as
                Exhibit 3(a) to the Company's Form 10-K for the year ended
                December 31, 1993 and incorporated by reference herein).

3(b)            Amended and Restated Bylaws (filed as Exhibit 3(b) to the
                Company's Registration Statement No. 33-69202 and incorporated
                by reference herein).

3(c)            Amendment dated April 30, 1996 to Amended and Restated
                Certificate of Incorporation (filed as Exhibit 3(c) to the
                Company's Form 10-Q for the nine months ended September 30, 1996
                and incorporated by reference herein).

3(d)            Amendment dated May 5, 1998 to Amended and Restated Certificate
                of Incorporation (filed as Exhibit 3(d) to the Company's Form
                10-Q for the six months ended June 30, 1998 and incorporated by
                reference herein).

3(e)            Amended and Restated Certificate of Incorporation as amended
                through May 5, 1998 (filed as Exhibit 3(e) to the Company's Form
                10-Q for the six months ended June 30, 1998 and incorporated by
                reference herein).

4(a)            364-Day Credit Agreement dated as of November 4, 1999 between
                Harte-Hanks, Inc. and the Lenders named therein [$100 million]
                (filed as Exhibit 4(a) to the Company's form 10-Q for the nine
                months ended September 30, 1999 and incorporated by reference
                herein).

4(b)            Three-Year Credit Agreement dated as of November 4, 1999 between
                Harte-Hanks, Inc. and the Lenders named therein [$100 million]
                (filed as Exhibit 4(b) to the Company's form 10-Q for the nine
                months ended September 30, 1999 and incorporated by reference
                herein).

4(c)            Amendment No. 2 dated October 30, 2000 to 364-Day Credit
                Agreement [$100 million]. (filed as Exhibit 4(c) to the
                Company's Form 10-Q for the nine months ended September 30, 2000
                and incorporated by reference herein).

4(d)            Other long term debt instruments are not being filed pursuant to
                Section (b) (4) (ii) of Item 601 of Regulation S-K. Copies of
                such instruments will be furnished to the Commission upon
                request.
</TABLE>

<PAGE>   20

<TABLE>
<CAPTION>
Exhibit
  No.                       Description of Exhibit
- -------                     ----------------------
<S>             <C>

10(a)           1984 Stock Option Plan (filed as Exhibit 10(d) to the Company's
                Form 10-K for the year ended December 31, 1984 and incorporated
                herein by reference).

10(b)           Registration Rights Agreement dated as of September 11, 1984
                among HHC Holding Inc. and its stockholders (filed as Exhibit
                10(b) to the Company's Form 10-K for the year ended December 31,
                1993 and incorporated by reference herein).

*10(c)          Severance Agreement between Harte-Hanks, Inc. and Larry
                Franklin, dated as of December 15, 2000.

*10(d)          Form of Severance Agreement between Harte-Hanks, Inc. and
                Richard M. Hochhauser dated as of December 15, 2000.

*10(e)          Form 1 of Severance Agreement between Harte-Hanks, Inc. and
                certain Executive Officers of the Company dated as of
                December 15, 2000.

*10(f)          Form 2 of Severance Agreement between Harte-Hanks, Inc. and
                certain Executive Officers of the Company dated as of
                December 15, 2000.

10(g)           Harte-Hanks, Inc. Amended and Restated Restoration Pension Plan
                dated as of January 1, 2000. (filed as Exhibit 10(f) to the
                Company's Form 10-K for the year ended December 31, 1999 and
                incorporated by reference herein).

10(h)           Harte-Hanks Communications, Inc. 1996 Incentive Compensation
                Plan (filed as Exhibit 10(p) to the Company's Form 10-Q for the
                nine months ended September 30, 1996 and incorporated by
                reference herein).

10(i)           Harte-Hanks, Inc. Amended and Restated 1991 Stock Option Plan
                (filed as Exhibit 10(g) to the Company's Form 10-Q for the six
                months ended June 30, 1998 and incorporated by reference
                herein).

10(j)           Harte-Hanks, Inc. 1998 Director Stock Plan (filed as Exhibit
                10(h) to the Company's Form 10-Q for the six months ended June
                30, 1998 and incorporated by reference herein).

10(k)           Harte-Hanks, Inc. Deferred Compensation Plan (filed as Exhibit
                10(I) to the Company's Form 10-K for the year ended December 31,
                1998 and incorporated by reference herein).

*10(l)          Amendment One to Harte-Hanks, Inc. Amended and Restated
                Restoration Pension Plan dated December 18, 2000.
</TABLE>

<PAGE>   21

<TABLE>
<CAPTION>
Exhibit
  No.                       Description of Exhibit
- -------                     ----------------------
<S>             <C>

*11             Statement Regarding Computation of Net Income (Loss) Per Common
                Share.

*13             Annual Report to Stockholders (only those portions incorporated
                by reference into the Form 10-K are filed herewith).

*21             Subsidiaries of the Company

*23             Consent of KPMG LLP
</TABLE>

- ---------------------
*Filed herewith

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(C)
<SEQUENCE>2
<FILENAME>d85151ex10-c.txt
<DESCRIPTION>SEVERANCE AGREEMENT - LARRY FRANKLIN
<TEXT>

<PAGE>   1
                                        1                          EXHIBIT 10(c)


                              AMENDED AND RESTATED
                               SEVERANCE AGREEMENT


         AGREEMENT made as of December 15, 2000, between Harte-Hanks, Inc., a
Delaware corporation (the "Company"), and Larry Franklin (the "Executive").

         WHEREAS, the Executive is currently serving as the Company's Chairman
and Chief Executive Officer and a member of the Board of Directors (the
"Board");

         WHEREAS, the Executive possesses an intimate knowledge of the business
and affairs of the Company, its policies, methods, personnel and plans for the
future and has acquired contacts of considerable value to the Company; and

         WHEREAS, the Board recognizes that the Executive's contribution to the
growth and success of the Company has been substantial and wishes to offer an
inducement to the Executive to remain in the employ of the Company; and

         WHEREAS, the Company desires to amend and restate Executive's existing
Severance Agreement dated as of July 23, 1993 ("Prior Agreement"), to read as
hereinafter provided, in order to recognize Executive's increased
responsibilities with the Company and to reflect currently competitive
compensation practices for individuals of Executive's experience and
responsibility;

         NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, this Agreement amends
and restates the Prior Agreement, and sets forth benefits which the Company will
pay to Executive in the event of termination of Executive's employment during
the Term of this Agreement:

         1. Term. The term of this Agreement shall be effective upon its
execution and continue until the earliest of (i) July 16, 2007, provided, that
if the Executive's employment with the Company is terminated (other than for
reasons set forth in Section 3(a)(1)(i), (ii) or (iii)) or a Change in Control
occurs, then this Agreement will continue past such date until the expiration of
the second anniversary of the Termination Date or Change in Control,
respectively, (ii) the Executive's death or (iii) the Executive's earlier
voluntary retirement (except as provided in Section 3(a)(2)) (the "Term").

         2.       Definitions.

                  (a) Cause. For "Cause" means that the Executive shall have
         committed:

                           (i) an intentional material act of fraud or
                  embezzlement in connection with his duties or in the course of
                  his employment with the Company;

                           (ii) intentional wrongful material damage to property
                  of the Company; or

                           (iii) intentional wrongful disclosure of material
                  secret processes or material confidential information of the
                  Company.

                  For the purposes of this Agreement, no act, or failure to act,
                  on the part of the Executive will be deemed "intentional"
                  unless done, or omitted to be done, by the Executive not in
                  good faith and without reasonable belief that his action or
                  omission was in the best interest of the Company.

<PAGE>   2

                                        2                          EXHIBIT 10(c)


                  (b) Change in Control. A "Change in Control" of the Company
         shall have occurred if any of the following events shall occur:

                           (i) The Company is merged, consolidated or
                  reorganized into or with another corporation or other legal
                  person and as a result of such merger, consolidation or
                  reorganization less than 60% of the combined voting power of
                  the then outstanding securities of the remaining corporation
                  or legal person or its ultimate parent immediately after such
                  transaction is received in respect of or in exchange for
                  voting securities of the Company pursuant to such transaction;

                           (ii) The Company sells all or substantially all of
                  its assets to any other corporation or other legal person and
                  as a result of such sale less than 60% of the combined voting
                  power of the then outstanding securities of such corporation
                  or legal person or its ultimate parent immediately after such
                  transaction is received in respect of or in exchange for
                  voting securities of the Company pursuant to such sale;

                           (iii) Any person (including any "person" as such term
                  is used in Section 13(d)(3) or Section 14(d)(2) of the
                  Exchange Act), has become the beneficial owner (as the term
                  "beneficial owner, is defined under Rule 13d-3 or any
                  successor rule or regulation promulgated under the Exchange
                  Act) of securities which when added to any securities already
                  owned by such person would represent in the aggregate 30% or
                  more of the combined voting power of the then outstanding
                  securities of the Company; or

                           (iv) Such other events that cause a Change in Control
                  of the Company as determined by the Board in its sole
                  discretion.

                  (c) Code. The "Code" shall mean the Internal Revenue Code of
         1986, as amended.

                  (d) Disability. "Disability" shall have the meaning given to
         disability in the Company's disability insurance plan.

                  (e) Severance Compensation. The "Severance Compensation" shall
         be a lump sum cash amount equal to 200% of the sum of (A) the annual
         base salary of the Executive in effect immediately prior to the
         Termination Date, (or in the case of payment under Section 3(b) below,
         immediately prior to the Change in Control) plus (B) the average of the
         bonus or incentive compensation of the Executive received from the
         Company for the two fiscal years preceding the Termination Date (or, in
         the case of payment Section 3(b) below, preceding the Change in
         Control).

                  (f) Termination Date. The "Termination Date" shall be the date
         upon which the Executive or the Company effectively terminates the
         employment of the Executive.

         3.       Rights of Executive Upon Termination or Change in Control.

                  (a) The Company shall provide the Executive, within ten days
         following the Termination Date, or if later, within ten days after the
         execution of the release described in Section 10 below, Severance
         Compensation in lieu of compensation to the Executive for periods
         subsequent to the Termination Date, if any of the following events
         shall occur:

                           (1) the Company terminates the Executive's employment
                  during the Term of this Agreement other than for any of the
                  following reasons:


<PAGE>   3

                                        3                          EXHIBIT 10(c)


                                    (i)   the Executive dies;

                                    (ii)  the Executive suffers a Disability and
                           is unable to work, with or without reasonable
                           accommodation, for a period of 180 consecutive days;
                           or

                                    (iii) for Cause.

                           (2) the Executive terminates his employment after the
                  occurrence of at least one of the following events:

                                    (i) Without the mutual agreement of the
                           Company and the Executive (a) a change in the nature
                           or scope of the authorities, functions or duties
                           attached to the position with the Company that the
                           Executive had immediately prior to such change; (b) a
                           reduction in the Executive's salary, bonus or
                           incentive compensation; (c) a significant reduction
                           in scope or value of other monetary or nonmonetary
                           benefits (other than benefits pursuant to a broad
                           based employee benefit plan) to which the Executive
                           was entitled from the Company; any of which is not
                           remedied within ten calendar days after receipt by
                           the Company of written notice from the Executive of
                           such change, reduction, alteration or termination, as
                           the case may be;

                                    (ii) A determination by the Executive made
                           in good faith that as a result of a change in policy
                           of the Company made by the Board, he has been
                           rendered substantially unable to carry out, or has
                           been substantially hindered in the performance of,
                           the authorities, functions or duties attached to his
                           position immediately prior to such change, which
                           situation is not remedied within ten calendar days
                           after receipt by the Company of written notice from
                           the Executive of such determination;

                                    (iii) The Company shall require the
                           Executive to relocate his principal location of work
                           from the location thereof at the time this Agreement
                           was entered or to travel away from his office in the
                           course of discharging his responsibilities or duties
                           significantly more than required of him at the time
                           this Agreement was entered without, in either case,
                           the Executive's prior written consent; or

                                    (iv) The Company commits any material
                           breach of this Agreement.

                  (b) The Company shall provide the Executive, within ten days
         following a Change in Control, or if later, within ten days after
         execution of the release described in Section 10 below, Severance
         Compensation, provided that Executive has remained employed by the
         Company immediately prior to the Change in Control, and grounds for
         termination of the Executive for Cause did not exist at such time.
         Payment under this paragraph 3(b) shall be in lieu of payment under
         paragraph 3(a) above.

                  (c) Severance Compensation will not be subject to offset or
         mitigation.

                  (d) Upon a Change in Control, or in the event the Company
         becomes obligated to provide Severance Compensation pursuant to Section
         3(a), all stock options not yet exercised will become vested and fully
         exercisable by the Executive. Such options shall remain exercisable for
         their original term, notwithstanding the Executive's termination of
         employment; provided, however, that the Company has the right to
         require the Executive to exercise such options within 90 days after
         receipt of written notice to the Executive. If the Executive fails to
         exercise his options within such 90-day period the Company has the
         right to cancel the options.


<PAGE>   4

                                        4                          EXHIBIT 10(c)


                  (e) If the Executive's employment is terminated (except for
         reasons set forth in Section 3(a)(1)(i), (ii) or (iii)), the Company
         shall pay to the Executive, in addition to the Severance Compensation
         payable hereunder, a lump sum cash payment in the amount necessary to
         make continuation coverage (COBRA) payments under the Company's group
         health insurance plan for a period of 18 months following the
         Termination Date.

                  (f) The Company on behalf of the Executive will continue to
         pay all premiums for split dollar life insurance and individual term
         insurance for a period of two years.

                  (g) If the amounts due to the Executive in connection with a
         Change of Control under this and/or other agreements, plans or
         arrangements would result in an "excess parachute payment" within the
         meaning of Section 280G of the Code, and the total amounts due to the
         Executive would have to be reduced by more than ten percent (10%) to
         avoid such an "excess parachute payment," then the Company shall pay to
         Executive an additional amount in cash (a "Gross-Up Payment") equal to
         the amount necessary to cause the amount of the aggregate after-tax
         compensation and benefits received by the Executive hereunder (after
         payment of the excise tax under Section 4999 of the Code with respect
         to any excess parachute payment, and any state and federal income and
         FICA taxes with respect to the Gross-Up Payment) to be equal to the
         aggregate after-tax compensation and benefits such Participant would
         have received if Sections 280G and 4999 of the Code had not been
         enacted. A nationally recognized public accounting firm selected by the
         Company shall determine the amount of the Gross-Up Payment at the
         Company's expense. Notwithstanding the foregoing, no Gross-Up Payment
         shall be made if, in the opinion of tax counsel selected by the
         Company, no excess parachute payments would occur if the total amounts
         due to the executive in connection with a Change of Control were
         reduced by ten percent (10%) or less; in such event, total benefits
         under this Agreement shall be reduced by up to ten percent (10%) in
         value in the following order: (i) cash amounts payable as Severance
         Compensation under Section 3(a) or 3(b) above shall be reduced first;
         (ii) if necessary, amounts for the maintenance of continuation coverage
         under Section 3(e) above shall be reduced next; and (iii) if necessary,
         the accelerated vesting of options as provided in Section 3(d) above
         shall be reduced.

         4. Successors; Binding Agreement. This Agreement will be binding upon
the Company, its successors and assigns, and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

         5. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or received after being mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed as follows:

         If to the Executive:

         Larry Franklin
         c/o Harte-Hanks, Inc.
         200 Concord Plaza Drive, Suite 800
         San Antonio, Texas  78216

         If to the Company:

         Harte-Hanks, Inc.
         200 Concord Plaza Drive, Suite 800
         San Antonio, Texas  78216
         Attention:  Donald R. Crews


<PAGE>   5

                                        5                          EXHIBIT 10(c)


or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

         6. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, unless specifically
referred to herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the substantive laws of the State of Delaware, without regard to principles
of conflicts of law. This Agreement amends in full and replaces all prior
agreements, both written and oral, between the Company and the Executive with
respect to the subject matter of this Agreement.

         7. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

         8. Employment Rights. Nothing expressed or implied in this Agreement
shall create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company. The Executive may,
at any time during the Term, upon the giving of 30 days prior written notice,
terminate his employment. If this Agreement or the employment of the Executive
is terminated under circumstances in which the Executive is not entitled to any
Severance Compensation, neither the Executive nor the Company will have any
further obligation or liability hereunder.

         9. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling; provided,
however, that no withholding pursuant to Section 4999 of the Code shall be made
unless, in the opinion of tax counsel selected by the Company and acceptable to
the Executive, such withholding relates to payments which result in the
imposition of an excise tax pursuant to Section 4999 of the Code.

         10. Release. In consideration for the benefits and payments provided
under Sections 3(a), 3(b) and 3(e) of this Agreement, unless such requirement is
waived by the Board in its sole discretion, the Executive agrees to execute a
release acceptable to the Company releasing the Company, its subsidiaries,
shareholders, partners, officers, directors, employees and agents from any and
all claims and from any and all causes of action of any kind, including but not
limited to all claims or causes of action arising out of the Executive's
employment with the Company or the termination of such employment. The Executive
shall execute such release prior to or as soon as practicable after his
Termination Date or a Change in Control, as applicable, unless the Board in its
sole discretion waives such requirement.


<PAGE>   6

                                        6                          EXHIBIT 10(c)


         IN WITNESS WHEREOF, the parties have executed this Agreement effective
on the date and year first above written.

                                        HARTE-HANKS, INC.


                                        By: /s/ DONALD R. CREWS
                                            --------------------------------

                                        Title:  Senior Vice President, Legal


                                        EXECUTIVE:

                                        /s/ LARRY FRANKLIN
                                        ------------------------------------
                                        Larry Franklin

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(D)
<SEQUENCE>3
<FILENAME>d85151ex10-d.txt
<DESCRIPTION>FORM OF SEVERANCE AGREEMENT RICHARD M. HOCHHAUSER
<TEXT>

<PAGE>   1
                                        1                          EXHIBIT 10(d)


                              AMENDED AND RESTATED
                               SEVERANCE AGREEMENT


         AGREEMENT made as of December 15, 2000, between Harte-Hanks, Inc., a
Delaware corporation (the "Company"), and Richard M. Hochhauser (the
"Executive").

         WHEREAS, the Executive is currently serving as the Company's President,
Chief Operating Officer and a member of the Board of Directors (the "Board");

         WHEREAS, the Executive possesses an intimate knowledge of the business
and affairs of the Company, its policies, methods, personnel and plans for the
future and has acquired contacts of considerable value to the Company; and

         WHEREAS, the Board recognizes that the Executive's contribution to the
growth and success of the Company has been substantial and wishes to offer an
inducement to the Executive to remain in the employ of the Company; and

         WHEREAS, the Company desires to amend and restate Executive's existing
Severance Agreement dated as of January 25, 2000 ("Prior Agreement") to read as
hereinafter provided, in order to recognize Executive's increased
responsibilities with the Company and to reflect currently competitive
compensation practices for individuals of Executive's experience and
responsibility;

         NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, this Agreement amends
and restates the Prior Agreement and sets forth benefits which the Company will
pay to Executive in the event of termination of Executive's employment during
the Term of this Agreement:

         1.       Term. The term of this Agreement shall be effective upon its
execution and continue until the earliest of (i) August 25, 2009, provided, that
if the Executive's employment with the Company is terminated (other than for
reasons set forth in Section 3(a)(1)(i), (ii) or (iii)) or a Change in Control
occurs, then this Agreement will continue past such date until the expiration of
the second anniversary of the Termination Date or the Change in Control,
respectively, (ii) the Executive's death or (iii) the Executive's earlier
voluntary retirement (except as provided in Section 3(a)(2)) (the "Term").

         2.       Definitions.

                  (a) Cause. For "Cause" means that the Executive shall have
         committed:

                           (i) an intentional material act of fraud or
                  embezzlement in connection with his duties or in the course of
                  his employment with the Company;

                           (ii) intentional wrongful material damage to property
                  of the Company; or

                           (iii) intentional wrongful disclosure of material
                  secret processes or material confidential information of the
                  Company.

                  For the purposes of this Agreement, no act, or failure to act,
                  on the part of the Executive will be deemed "intentional"
                  unless done, or omitted to be done, by the Executive not in
                  good faith and without reasonable belief that his action or
                  omission was in the best interest of the Company.

<PAGE>   2

                                        2                          EXHIBIT 10(d)


                  (b) Change in Control. A "Change in Control" of the Company
         shall have occurred if any of the following events shall occur:

                           (i) The Company is merged, consolidated or
                  reorganized into or with another corporation or other legal
                  person and as a result of such merger, consolidation or
                  reorganization less than 60% of the combined voting power of
                  the then outstanding securities of the remaining corporation
                  or legal person or its ultimate parent immediately after such
                  transaction is received in respect of or in exchange for
                  voting securities of the Company pursuant to such transaction;

                           (ii) The Company sells all or substantially all of
                  its assets to any other corporation or other legal person and
                  as a result of such sale less than 60% of the combined voting
                  power of the then outstanding securities of such corporation
                  or legal person or its ultimate parent immediately after such
                  transaction is received in respect of or in exchange for
                  voting securities of the Company pursuant to such sale;

                           (iii) Any person (including any "person" as such term
                  is used in Section 13(d)(3) or Section 14(d)(2) of the
                  Exchange Act), has become the beneficial owner (as the term
                  "beneficial owner, is defined under Rule 13d-3 or any
                  successor rule or regulation promulgated under the Exchange
                  Act) of securities which when added to any securities already
                  owned by such person would represent in the aggregate 30% or
                  more of the combined voting power of the then outstanding
                  securities of the Company; or

                           (iv) Such other events that cause a Change in Control
                  of the Company as determined by the Board in its sole
                  discretion.

                  (c) Code. The "Code" shall mean the Internal Revenue Code of
         1986, as amended.

                  (d) Disability. "Disability" shall have the meaning given to
         disability in the Company's disability insurance plan.

                  (e) Severance Compensation. The "Severance Compensation" shall
         be a lump sum cash amount equal to 200% of the sum of (A) the annual
         base salary of the Executive in effect immediately prior to the
         Termination Date, (or, in the case of payment under Section 3(b) below,
         immediately prior to the Change in Control) plus (B) the average of the
         bonus or incentive compensation the Executive received from the Company
         for the two fiscal years preceding the Termination Date (or, in the
         case of payment under Section 3(b) below, preceding the Change in
         Control).

                  (f) Termination Date. The "Termination Date" shall be the date
         upon which the Executive or the Company effectively terminates the
         employment of the Executive.

         3.       Rights of Executive Upon Termination or Change in Control.

                  (a) The Company shall provide the Executive, within ten days
         following the Termination Date, or if later, within ten days after the
         execution of the release described in Section 10 below, Severance
         Compensation in lieu of compensation to the Executive for periods
         subsequent to the Termination Date, if any of the following events
         shall occur:

                           (1) the Company terminates the Executive's employment
                  during the Term of this Agreement other than for any of the
                  following reasons:


<PAGE>   3

                                        3                          EXHIBIT 10(d)


                                    (i) the Executive dies;

                                    (ii) the Executive suffers a Disability and
                           is unable to work, with or without reasonable
                           accommodation, for a period of 180 consecutive days;
                           or

                                    (iii) for Cause.

                           (2) the Executive terminates his employment after the
                  occurrence of at least one of the following events:

                                    (i) Without the mutual agreement of the
                           Company and the Executive (a) a change in the nature
                           or scope of the authorities, functions or duties
                           attached to the position with the Company that the
                           Executive had immediately prior to such change; (b) a
                           reduction in the Executive's salary, bonus or
                           incentive compensation; (c) a significant reduction
                           in scope or value of other monetary or nonmonetary
                           benefits (other than benefits pursuant to a broad
                           based employee benefit plan) to which the Executive
                           was entitled from the Company; any of which is not
                           remedied within ten calendar days after receipt by
                           the Company of written notice from the Executive of
                           such change, reduction, alteration or termination, as
                           the case may be;

                                    (ii) A determination by the Executive made
                           in good faith that as a result of a change in policy
                           of the Company made by the Board, he has been
                           rendered substantially unable to carry out, or has
                           been substantially hindered in the performance of,
                           the authorities, functions or duties attached to his
                           position immediately prior to such change, which
                           situation is not remedied within ten calendar days
                           after receipt by the Company of written notice from
                           the Executive of such determination;

                                    (iii) The Company shall require the
                           Executive to relocate his principal location of work
                           from the location thereof at the time this Agreement
                           was entered or to travel away from his office in the
                           course of discharging his responsibilities or duties
                           significantly more than required of him at the time
                           this Agreement was entered without, in either case,
                           the Executive's prior written consent; or

                                    (iv)  The Company commits any material
                           breach of this Agreement.

                  (b) The Company shall provide the Executive, within ten days
         following a Change in Control, or if later, within ten days after
         execution of the release described in Section 10 below, Severance
         Compensation, provided that Executive has remained employed by the
         Company immediately prior to the Change in Control, and grounds for
         termination of the Executive for Cause did not exist at such time.
         Payment under this paragraph 3(b) shall be in lieu of payment under
         paragraph 3(a) above.

                  (c) Severance Compensation will not be subject to offset or
         mitigation.

                  (d) Upon a Change in Control, or in the event the Company
         becomes obligated to provide Severance Compensation pursuant to Section
         3(a), all stock options not yet exercised will become vested and fully
         exercisable by the Executive. Such options shall remain exercisable for
         their original term, notwithstanding the Executive's termination of
         employment; provided, however, that the Company has the right to
         require the Executive to exercise such options within 90 days after
         receipt of written notice to the Executive. If the Executive fails to
         exercise his options within such 90-day period the Company has the
         right to cancel the options.


<PAGE>   4

                                        4                          EXHIBIT 10(d)


                  (e) If the Executive's employment is terminated (except for
         reasons set forth in Section 3(a)(1)(i), (ii) or (iii)), the Company
         shall pay to the Executive, in addition to the Severance Compensation
         payable hereunder, a lump sum cash payment in the amount necessary to
         make continuation coverage (COBRA) payments under the Company's group
         health insurance plan for a period of 18 months following the
         Termination Date.

                  (f) If the amounts due to the Executive in connection with a
         Change of Control under this and/or other agreements, plans or
         arrangements would result in an "excess parachute payment" within the
         meaning of Section 280G of the Code, and the total amounts due to the
         Executive would have to be reduced by more than ten percent (10%) to
         avoid such an "excess parachute payment," then the Company shall pay to
         Executive an additional amount in cash (a "Gross-Up Payment") equal to
         the amount necessary to cause the amount of the aggregate after-tax
         compensation and benefits received by the Executive hereunder (after
         payment of the excise tax under Section 4999 of the Code with respect
         to any excess parachute payment, and any state and federal income and
         FICA taxes with respect to the Gross-Up Payment) to be equal to the
         aggregate after-tax compensation and benefits such Executive would have
         received if Sections 280G and 4999 of the Code had not been enacted. A
         nationally recognized public accounting firm selected by the Company
         shall determine the amount of the Gross-Up Payment at the Company's
         expense. Notwithstanding the foregoing, no Gross-Up Payment shall be
         made if, in the opinion of tax counsel selected by the Company, no
         excess parachute payments would occur if the total amounts due to the
         executive in connection with a Change of Control were reduced by ten
         percent (10%) or less; in such event, total benefits under this
         Agreement shall be reduced by up to ten percent (10%) in value in the
         following order: (i) cash amounts payable as Severance Compensation
         under Section 3(a) or 3(b) above shall be reduced first; (ii) if
         necessary, amounts for the maintenance of continuation coverage under
         Section 3(e) above shall be reduced next; and (iii) if necessary, the
         accelerated vesting of options as provided in Section 3(d) above shall
         be reduced.

         4. Successors; Binding Agreement. This Agreement will be binding upon
the Company, its successors and assigns, and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

         5. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or received after being mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed as follows:

         If to the Executive:

         Richard M. Hochhauser
         c/o Harte-Hanks, Inc.
         200 Concord Plaza Drive, Suite 800
         San Antonio, Texas  78216

         If to the Company:

         Harte-Hanks, Inc.
         200 Concord Plaza Drive, Suite 800
         San Antonio, Texas  78216
         Attention:  Donald R. Crews


<PAGE>   5

                                        5                          EXHIBIT 10(d)


or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

         6. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, unless specifically
referred to herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the substantive laws of the State of Delaware, without regard to principles
of conflicts of law. This Agreement amends in full and replaces all prior
agreements, both written and oral, between the Company and the Executive with
respect to the subject matter of this Agreement.

         7. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

         8. Employment Rights. Nothing expressed or implied in this Agreement
shall create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company. The Executive may,
at any time during the Term, upon the giving of 30 days prior written notice,
terminate his employment. If this Agreement or the employment of the Executive
is terminated under circumstances in which the Executive is not entitled to any
Severance Compensation, neither the Executive nor the Company will have any
further obligation or liability hereunder.

         9. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling; provided,
however, that no withholding pursuant to Section 4999 of the Code shall be made
unless, in the opinion of tax counsel selected by the Company and acceptable to
the Executive, such withholding relates to payment which result in the
imposition of an excise tax pursuant to Section 4999 of the Code.

         10. Release. In consideration for the benefits and payments provided
under Sections 3(a), 3(b) and 3(e) of this Agreement, unless such requirement is
waived by the Board in its sole discretion, the Executive agrees to execute a
release acceptable to the Company releasing the Company, its subsidiaries,
shareholders, partners, officers, directors, employees and agents from any and
all claims and from any and all causes of action of any kind, including but not
limited to all claims or causes of action arising out of the Executive's
employment with the Company or the termination of such employment. The Executive
shall execute such release prior to or as soon as practicable after his
Termination Date or a Change in Control, as applicable, unless the Board in its
sole discretion waives such requirement.



<PAGE>   6

                                        6                          EXHIBIT 10(d)


         IN WITNESS WHEREOF, the parties have executed this Agreement effective
on the date and year first above written.

                                        HARTE-HANKS, INC.


                                        By: /s/ Larry Franklin
                                            ------------------------------

                                        Title:  Chairman and CEO

                                        EXECUTIVE

                                        /s/ Richard M. Hochhauser
                                        ----------------------------------
                                        Richard M. Hochhauser

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(E)
<SEQUENCE>4
<FILENAME>d85151ex10-e.txt
<DESCRIPTION>FORM 1 OF SEVERANCE AGREEMENT - DECEMBER 15, 2000
<TEXT>

<PAGE>   1
                                       1                           EXHIBIT 10(e)


                               SEVERANCE AGREEMENT

         AGREEMENT made as of December 15, 2000, between Harte-Hanks, Inc., a
Delaware corporation (the "Company"), and __________ (the "Executive").

         WHEREAS, the Executive is currently serving as a Senior Vice President
of the Company;

         WHEREAS, the Executive possesses an intimate knowledge of the business
and affairs of the Company, its policies, methods, personnel and plans for the
future and has acquired contacts of considerable value to the Company; and

         WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the Executive's contribution to the growth and success of the Company has
been substantial and wishes to offer an inducement to the Executive to remain in
the employ of the Company;

         NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, this Agreement sets
forth benefits which the Company will pay to Executive in the event of
termination of Executive's employment under the circumstances described herein:

1.       Term. The term of this Agreement shall be effective upon a Change in
Control (as defined herein) and continue until the earlier of (i) the expiration
of the second anniversary of the occurrence of a Change in Control, (ii) the
Executive's death, or (iii) the Executive's earlier voluntary retirement (except
as provided in Section 3(a)(2)) (the "Term").

2.       Definitions.

         (a)      Cause. For "Cause" means that the Executive shall have
                  committed:

                  (i)      an intentional material act of fraud or embezzlement
                           in connection with his duties or in the course of his
                           employment with the Company;

                  (ii)     intentional wrongful material damage to property of
                           the Company; or

                  (iii)    intentional wrongful disclosure of material secret
                           processes or material confidential information of the
                           Company.

For the purposes of this Agreement, no act, or failure to act, on the part of
the Executive will be deemed "intentional" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company.

         (b)      Change in Control. A "Change in Control" of the Company shall
                  have occurred if any of the following events shall occur:

                  (i)      The Company is merged, consolidated or reorganized
                           into or with another corporation or other legal
                           person and as a result of such merger, consolidation
                           or reorganization less than 60% of the combined
                           voting power of the then outstanding securities of
                           the remaining corporation or legal person or its
                           ultimate parent immediately after such transaction is
                           received in respect of or in exchange for voting
                           securities of the Company pursuant to such
                           transaction;

<PAGE>   2
                                       2                          EXHIBIT 10(e)


                  (ii)     The Company sells all or substantially all of its
                           assets to any other corporation or other legal person
                           and as a result of such sale less than 60% of the
                           combined voting power of the then outstanding
                           securities of such corporation or legal person or its
                           ultimate parent immediately after such transaction is
                           received in respect of or in exchange for voting
                           securities of the Company pursuant to such sale;

                  (iii)    Any person (including any "person" as such term is
                           used in Section 13(d)(3) or Section 14(d)(2) of the
                           Exchange Act), has become the beneficial owner (as
                           the term "beneficial owner, is defined under Rule
                           13d-3 or any successor rule or regulation promulgated
                           under the Exchange Act) of securities which when
                           added to any securities already owned by such person
                           would represent in the aggregate 30% or more of the
                           combined voting power of the then outstanding
                           securities of the Company; or

                  (iv)     Such other events that cause a Change in Control of
                           the Company as determined by the Board in its sole
                           discretion.

         (c)      Code. The "Code" shall mean the Internal Revenue Code of 1986,
                  as amended.

         (d)      Disability. "Disability" shall have the meaning given to
                  disability in the Company's long term disability insurance
                  plan.

         (e)      Severance Compensation. The "Severance Compensation" shall be
                  a lump sum cash amount equal to 200% of the sum of (A) the
                  annual base salary of the Executive in effect immediately
                  prior to the Change in Control or the Termination Date,
                  whichever is larger, plus (B) the average of the bonus or
                  incentive compensation of the Executive, received from the
                  Company for the two fiscal years preceding the year in which
                  the Change in Control occurred or for the two fiscal years
                  preceding the year in which the Termination Date occurs,
                  whichever is larger.

         (f)      Termination Date. The "Termination Date" shall be the date
                  upon which the Executive or the Company terminates the
                  employment of the Executive.

3.       Rights of Executive Upon Change in Control and Termination.

         (a)      The Company shall provide the Executive, within ten days
                  following the Termination Date, or, if later, within ten days
                  following the execution of the release described in Section 6
                  below, Severance Compensation in lieu of compensation to the
                  Executive for periods subsequent to the Termination Date, if,
                  following the occurrence of a Change in Control, any of the
                  following events shall occur:

                  (1)      the Company terminates the Executive's employment
                           during the term of this Agreement other than for any
                           of the following reasons:

                           (i)      the Executive dies;

                           (ii)     the Executive suffers a Disability and is
                                    unable to work (with or without reasonable
                                    accommodation) for a period of 180
                                    consecutive days; or

                           (iii)    for Cause,


<PAGE>   3
                                       3                          EXHIBIT 10(e)


                  (2)      the Executive terminates his employment after such
                           Change in Control and the occurrence of at least one
                           of the following events:

                           (i)      A material adverse change in the nature or
                                    scope of the authorities, functions or
                                    duties attached to the position with the
                                    Company that the Executive had immediately
                                    prior to the Change in Control; a reduction
                                    in the Executive's salary, bonus or
                                    incentive compensation or a significant
                                    reduction in scope or value of other
                                    monetary or non-monetary benefits (other
                                    than benefits pursuant to a broad based
                                    employee benefit plan) to which the
                                    Executive was entitled from the Company
                                    immediately prior to the Change in Control,
                                    any of which is not remedied within ten
                                    calendar days after receipt by the Company
                                    of written notice from the Executive of such
                                    change, reduction, alteration or
                                    termination, as the case may be;

                           (ii)     A determination by the Executive made in
                                    good faith that as a result of a Change in
                                    Control and a change in circumstances
                                    thereafter, he has been rendered
                                    substantially unable to carry out, or has
                                    been substantially hindered in the
                                    performance of, the authorities, functions
                                    or duties attached to his position
                                    immediately prior to the Change in Control,
                                    which situation is not remedied within ten
                                    calendar days after receipt by the Company
                                    of written notice from the Executive of such
                                    determination;

                           (iii)    The Company shall require the Executive to
                                    relocate his principal location of work from
                                    the location thereof immediately prior to
                                    the Change in Control, or to travel away
                                    from his office in the course of discharging
                                    his responsibilities or duties significantly
                                    more than required of him prior to the
                                    Change in Control without, in either case,
                                    the Executive's prior written consent; or

                           (iv)     the Company commits any material breach of
                                    this Agreement.

                  (3)      the Executive terminates his employment for any
                           reason during the 30-day period following the first
                           anniversary of the Change in Control.

         (b)      Severance Compensation pursuant to this Section 3 will not be
                  subject to setoff or mitigation.

         (c)      Upon a Change in Control, all stock options previously granted
                  by the Company to the Executive and not yet exercised will
                  become vested and fully exercisable by the Executive. Such
                  options shall remain exercisable for their original term;
                  provided, however, that the Company has the right to require
                  the Executive to exercise such options within 90 days after
                  receipt of written notice to the Executive. If the Executive
                  fails to exercise his options within such 90-day period, the
                  Company has the right to cancel the options.

         (d)      In the event the Company becomes obligated hereunder to pay
                  the Executive the Severance Compensation, the Company shall
                  also pay the Executive a lump sum cash payment in the amount
                  necessary to make continuation coverage (COBRA) payments under
                  the Company's group health insurance plan for a period of 18
                  months.

         (e)      If the amounts due to the Executive in connection with a
                  Change of Control under this and/or other agreements, plans or
                  arrangements would result in an "excess parachute payment"
                  within the meaning of Section 280G of the Code, and the total
                  amounts due to the Executive would have to be reduced by more
                  than ten percent (10%) to avoid such an "excess parachute
                  payment," then the Company shall pay to Executive an


<PAGE>   4

                                       4                           EXHIBIT 10(e)


                  additional amount in cash (a "Gross-Up Payment") equal to the
                  amount necessary to cause the amount of the aggregate
                  after-tax compensation and benefits received by the Executive
                  hereunder (after payment of the excise tax under Section 4999
                  of the Code with respect to any excess parachute payment, and
                  any state and federal income and FICA taxes with respect to
                  the Gross-Up Payment) to be equal to the aggregate after-tax
                  compensation and benefits such Executive would have received
                  if Sections 280G and 4999 of the Code had not been enacted. A
                  nationally recognized public accounting firm selected by the
                  Company shall determine the amount of the Gross-Up Payment at
                  the Company's expense. Notwithstanding the foregoing, no
                  Gross-Up Payment shall be made if, in the opinion of tax
                  counsel selected by the Company, no excess parachute payments
                  would occur if the total amounts due to the Executive in
                  connection with a Change of Control were reduced by ten
                  percent (10%) or less; in such event, total benefits under
                  this Agreement shall be reduced by up to ten percent (10%) in
                  value in the following order: (i) cash amounts payable as
                  Severance Compensation under Section 3(a) above shall be
                  reduced first; (ii) if necessary, amounts for the maintenance
                  of continuation coverage under Section 3(d) above shall be
                  reduced next; and (iii) if necessary, the accelerated vesting
                  of options as provided in Section 3(c) above shall be
                  reduced.

4.       Successors, Binding Agreement. This Agreement will be binding upon the
Company, its successors and assigns, and all rights of the Executive hereunder
shall inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributes, devisees and legatees.

5.       Notice. The Company shall give written notice to Executive within ten
days after any Change in Control. Failure to give such notice shall constitute a
material breach of this Agreement. For purposes of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or received after being
mailed by United States registered mail, return receipt requested, postage
prepaid, addressed as follows:

If to the Executive:


- --------------------------------
c/o Harte-Hanks, Inc.
200 Concord Plaza Drive
Suite 800
San Antonio, Texas 78216

If to the Company:
Harte-Hanks, Inc.
200 Concord Plaza Drive
Suite 800
San Antonio, Texas 78216
Attention:  Donald R. Crews

or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

6.       Release. In consideration for the benefits and payments provided for
under Sections 3(a) and 3(d) of this Agreement, unless such requirement is
waived by the Board in its sole discretion, the Executive agrees to execute a
release acceptable to the Company releasing the Company, its subsidiaries,
shareholders, partners, officers, directors, employees and agents from any and
all claims and from any and all causes of action of any kind, including but not
limited to all claims or causes of action arising out of the Executive's
employment with the Company or the termination of such employment. The Executive
shall execute such release prior to or as soon as practicable after his
Termination Date.


<PAGE>   5

                                       5                           EXHIBIT 10(e)


7.       Miscellaneous. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, unless specifically
referred to herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the substantive laws of the State of Delaware, without regard to principles
of conflicts of law. This Agreement replaces any prior severance agreement
between the Company and the Executive.

8.       Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

9.       Employment Rights. Nothing expressed or implied in this Agreement shall
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company prior to any Change in
Control; provided, however, that any termination of employment of the Executive
or removal of the Executive as an elected officer of the Company following the
commencement of any discussion authorized by the Board of Directors of the
Company with a third person that ultimately results in a Change in Control shall
be deemed to be a termination or removal of the Executive after a Change in
Control for purposes of this Agreement and shall entitle the Executive to all
Severance Compensation. Notwithstanding any other provision hereof to the
contrary, the Executive may, at any time during his employment with the Company
upon the giving of 30 days prior written notice, terminate his employment
hereunder. If this Agreement or the employment of the Executive is terminated
under circumstances in which the Executive is not entitled to any Severance
Compensation, neither the Executive nor the Company shall have any further
obligation or liability hereunder.

10.      Withholding of Taxes. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling; provided,
however, that no withholding pursuant to Section 4999 of the Code shall be made
unless, in the opinion of tax counsel selected by the Company and acceptable to
the Executive, such withholding relates to payments which result in the
imposition of an excise tax pursuant to Section 4999 of the Code.


<PAGE>   6

                                       6                           EXHIBIT 10(e)


         IN WITNESS WHEREOF, the parties have executed this Agreement effective
on the date and year first above written.

                                       HARTE-HANKS, INC.


                                       By:
                                           ------------------------------------

                                       Title: Chairman and Chief Executive
                                                Officer

                                       EXECUTIVE


                                       ----------------------------------------

Craig Combest
Charles R. Dall'Acqua
Gary J. Skidmore


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(F)
<SEQUENCE>5
<FILENAME>d85151ex10-f.txt
<DESCRIPTION>FORM 2 OF SEVERANCE AGREEMENT - DECEMBER 15, 2000
<TEXT>

<PAGE>   1
                                       1                           EXHIBIT 10(f)


                               SEVERANCE AGREEMENT

         AGREEMENT made as of December 15, 2000, between Harte-Hanks, Inc., a
Delaware corporation (the "Company"), and __________ (the "Executive").

         WHEREAS, the Executive is currently serving as a Senior Vice President
of the Company;

         WHEREAS, the Executive possesses an intimate knowledge of the business
and affairs of the Company, its policies, methods, personnel and plans for the
future and has acquired contacts of considerable value to the Company; and

         WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the Executive's contribution to the growth and success of the Company has
been substantial and wishes to offer an inducement to the Executive to remain in
the employ of the Company;

         NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, this Agreement sets
forth benefits which the Company will pay to Executive in the event of
termination of Executive's employment under the circumstances described herein:

1.       Term. Except as otherwise provided in Section 4, the term of this
Agreement shall be effective upon a Change in Control (as defined herein) and
continue until the earlier of (i) the expiration of the second anniversary of
the occurrence of a Change in Control, (ii) the Executive's death, or (iii) the
Executive's earlier voluntary retirement (except as provided in Section 3(a)(2))
(the "Term").

2.       Definitions.

         (a)      Cause. For "Cause" means that the Executive shall have
                  committed:

                  (i)      an intentional material act of fraud or embezzlement
                           in connection with his duties or in the course of his
                           employment with the Company;

                  (ii)     intentional wrongful material damage to property of
                           the Company; or

                  (iii)    intentional wrongful disclosure of material secret
                           processes or material confidential information of the
                           Company.

For the purposes of this Agreement, no act, or failure to act, on the part of
the Executive will be deemed "intentional" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company.

         (b)      Change in Control. A "Change in Control" of the Company shall
                  have occurred if any of the following events shall occur:

                  (i)      The Company is merged, consolidated or reorganized
                           into or with another corporation or other legal
                           person and as a result of such merger, consolidation
                           or reorganization less than 60% of the combined
                           voting power of the then outstanding securities of
                           the remaining corporation or legal person or its
                           ultimate parent immediately after such transaction is
                           received in respect of or in exchange for voting
                           securities of the Company pursuant to such
                           transaction;

<PAGE>   2
                                       2                           EXHIBIT 10(f)


                  (ii)     The Company sells all or substantially all of its
                           assets to any other corporation or other legal person
                           and as a result of such sale less than 60% of the
                           combined voting power of the then outstanding
                           securities of such corporation or legal person or its
                           ultimate parent immediately after such transaction is
                           received in respect of or in exchange for voting
                           securities of the Company pursuant to such sale;

                  (iii)    Any person (including any "person" as such term is
                           used in Section 13(d)(3) or Section 14(d)(2) of the
                           Exchange Act), has become the beneficial owner (as
                           the term "beneficial owner, is defined under Rule
                           13d-3 or any successor rule or regulation promulgated
                           under the Exchange Act) of securities which when
                           added to any securities already owned by such person
                           would represent in the aggregate 30% or more of the
                           combined voting power of the then outstanding
                           securities of the Company; or

                  (iv)     Such other events that cause a Change in Control of
                           the Company as determined by the Board in its sole
                           discretion.

         (c)      Code. The "Code" shall mean the Internal Revenue Code of 1986,
                  as amended.

         (d)      Disability. "Disability" shall have the meaning given to
                  disability in the Company's long term disability insurance
                  plan.

         (e)      Severance Compensation. The "Severance Compensation" shall be
                  a lump sum cash amount equal to 200% of the sum of (A) the
                  annual base salary of the Executive in effect immediately
                  prior to the Change in Control or the Termination Date,
                  whichever is larger, plus (B) the average of the bonus or
                  incentive compensation of the Executive, received from the
                  Company for the two fiscal years preceding the year in which
                  the Change in Control occurred or for the two fiscal years
                  preceding the year in which the Termination Date occurs,
                  whichever is larger.

         (f)      Termination Date. The "Termination Date" shall be the date
                  upon which the Executive or the Company terminates the
                  employment of the Executive.

3.       Rights of Executive Upon Change in Control and Termination.

         (a)      The Company shall provide the Executive, within ten days
                  following the Termination Date, or, if later, within ten days
                  following the execution of the release described in Section 7
                  below, Severance Compensation in lieu of compensation to the
                  Executive for periods subsequent to the Termination Date, if,
                  following the occurrence of a Change in Control, any of the
                  following events shall occur:

                  (1)      the Company terminates the Executive's employment
                           during the term of this Agreement other than for any
                           of the following reasons:

                           (i)      the Executive dies;

                           (ii)     the Executive suffers a Disability and is
                                    unable to work (with or without reasonable
                                    accommodation) for a period of 180
                                    consecutive days; or

                           (iii)    for Cause,

<PAGE>   3
                                       3                           EXHIBIT 10(f)


                  (2)      the Executive terminates his employment after such
                           Change in Control and the occurrence of at least one
                           of the following events:

                           (i)      A material adverse change in the nature or
                                    scope of the authorities, functions or
                                    duties attached to the position with the
                                    Company that the Executive had immediately
                                    prior to the Change in Control; a reduction
                                    in the Executive's salary, bonus or
                                    incentive compensation or a significant
                                    reduction in scope or value of other
                                    monetary or non-monetary benefits (other
                                    than benefits pursuant to a broad based
                                    employee benefit plan) to which the
                                    Executive was entitled from the Company
                                    immediately prior to the Change in Control,
                                    any of which is not remedied within ten
                                    calendar days after receipt by the Company
                                    of written notice from the Executive of such
                                    change, reduction, alteration or
                                    termination, as the case may be;

                           (ii)     A determination by the Executive made in
                                    good faith that as a result of a Change in
                                    Control and a change in circumstances
                                    thereafter, he has been rendered
                                    substantially unable to carry out, or has
                                    been substantially hindered in the
                                    performance of, the authorities, functions
                                    or duties attached to his position
                                    immediately prior to the Change in Control,
                                    which situation is not remedied within ten
                                    calendar days after receipt by the Company
                                    of written notice from the Executive of such
                                    determination;

                           (iii)    The Company shall require the Executive to
                                    relocate his principal location of work from
                                    the location thereof immediately prior to
                                    the Change in Control, or to travel away
                                    from his office in the course of discharging
                                    his responsibilities or duties significantly
                                    more than required of him prior to the
                                    Change in Control without, in either case,
                                    the Executive's prior written consent; or

                           (iv)     the Company commits any material breach of
                                    this Agreement.

                  (3)      the Executive terminates his employment for any
                           reason during the 30-day period following the first
                           anniversary of the Change in Control.

         (b)      Severance Compensation pursuant to this Section 3 will not be
                  subject to setoff or mitigation.

         (c)      Upon a Change in Control, or in the event the Company becomes
                  obligated to make the payments specified in Section 4(a), all
                  stock options previously granted by the Company to the
                  Executive and not yet exercised will become vested and fully
                  exercisable by the Executive. Such options shall remain
                  exercisable for their original term; provided, however, that
                  the Company has the right to require the Executive to exercise
                  such options within 90 days after receipt of written notice to
                  the Executive. If the Executive fails to exercise his options
                  within such 90-day period, the Company has the right to cancel
                  the options.

         (d)      In the event the Company becomes obligated hereunder to pay
                  the Executive the Severance Compensation or the payments
                  specified in Section 4(a), the Company shall also pay the
                  Executive a lump sum cash payment in the amount necessary to
                  make continuation coverage (COBRA) payments under the
                  Company's group health insurance plan for a period of 18
                  months.

         (e)      If the amounts due to the Executive in connection with a
                  Change of Control under this and/or other agreements, plans or
                  arrangements would result in an "excess parachute payment"
                  within

<PAGE>   4
                                       4                           EXHIBIT 10(f)


                  the meaning of Section 280G of the Code, and the total amounts
                  due to the Executive would have to be reduced by more than ten
                  percent (10%) to avoid such an "excess parachute payment,"
                  then the Company shall pay to Executive an additional amount
                  in cash (a "Gross-Up Payment") equal to the amount necessary
                  to cause the amount of the aggregate after-tax compensation
                  and benefits received by the Executive hereunder (after
                  payment of the excise tax under Section 4999 of the Code with
                  respect to any excess parachute payment, and any state and
                  federal income and FICA taxes with respect to the Gross-Up
                  Payment) to be equal to the aggregate after-tax compensation
                  and benefits such Executive would have received if Sections
                  280G and 4999 of the Code had not been enacted. A nationally
                  recognized public accounting firm selected by the Company
                  shall determine the amount of the Gross-Up Payment at the
                  Company's expense. Notwithstanding the foregoing, no Gross-Up
                  Payment shall be made if, in the opinion of tax counsel
                  selected by the Company, no excess parachute payments would
                  occur if the total amounts due to the Executive in connection
                  with a Change of Control were reduced by ten percent (10%) or
                  less; in such event, total benefits under this Agreement shall
                  be reduced by up to ten percent (10%) in value in the
                  following order: (i) cash amounts payable as Severance
                  Compensation under Section 3(a) above shall be reduced first;
                  (ii) if necessary, amounts for the maintenance of continuation
                  coverage under Section 3(d) above shall be reduced next; and
                  (iii) if necessary, the accelerated vesting of options as
                  provided in Section 3(c) above shall be reduced.

4.       Additional Rights of Executive Prior to Change in Control.

         (a)      In the event the employment of the Executive with the Company
                  is terminated prior to a Change in Control, the Company shall
                  provide the Executive, within ten days following the
                  Termination Date, Severance Compensation in lien of
                  compensation to the Executive for periods subsequent to the
                  Termination Date, if, and only if,

                  (i)      the Company terminates the Executive's employment
                           without "Justification" (as defined herein); or

                  (ii)     the Executive terminates his employment with "Good
                           Reason" (as defined herein).

         (b)      "Justification" means that the Executive shall have (i)
                  committed an act of fraud, dishonesty, gross misconduct or
                  other unethical practices, or (H) materially failed to perform
                  his duties to the satisfaction of the chief executive officer
                  of the Company, which failure has not been cured within 60
                  days after receipt of written notice from the chief executive
                  officer.

         (c)      With "Good Reason" means that the Executive shall have
                  terminated his employment following a reduction (which is
                  instituted without his consent and which is not rescinded
                  within 30 days after the Executive delivers written notice of
                  objection to the chief executive officer) in his functions,
                  duties or responsibilities (i) to a level that is not
                  commensurate with those of an executive in the position of the
                  Executive prior to such reduction (it being understood that
                  the reassignment of any of the Executive's functions, duties
                  or responsibilities to one or more persons who report directly
                  or indirectly to the Executive is not such a reduction), or
                  (ii) which causes the Employee's position with the Company to
                  become one of lesser importance or scope.

5.       Successors, Binding Agreement. This Agreement will be binding upon the
Company, its successors and assigns, and all rights of the Executive hereunder
shall inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributes, devisees and legatees.

<PAGE>   5
                                       5                           EXHIBIT 10(f)


6.       Notice. The Company shall give written notice to Executive within ten
days after any Change in Control. Failure to give such notice shall constitute a
material breach of this Agreement. For purposes of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or received after being
mailed by United States registered mail, return receipt requested, postage
prepaid, addressed as follows:

If to the Executive:


- --------------------------------
c/o Harte-Hanks, Inc.
200 Concord Plaza Drive
Suite 800
San Antonio, Texas 78216

If to the Company:
Harte-Hanks, Inc.
200 Concord Plaza Drive
Suite 800
San Antonio, Texas 78216
Attention:  Donald R. Crews

or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

7.       Release. In consideration for the benefits and payments provided for
under Sections 3(a) and 3(d) of this Agreement, unless such requirement is
waived by the Board in its sole discretion, the Executive agrees to execute a
release acceptable to the Company releasing the Company, its subsidiaries,
shareholders, partners, officers, directors, employees and agents from any and
all claims and from any and all causes of action of any kind, including but not
limited to all claims or causes of action arising out of the Executive's
employment with the Company or the termination of such employment. The Executive
shall execute such release prior to or as soon as practicable after his
Termination Date.

8.       Miscellaneous. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, unless specifically
referred to herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the substantive laws of the State of Delaware, without regard to principles
of conflicts of law. This Agreement replaces any prior severance agreement
between the Company and the Executive.

9.       Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

10.      Employment Rights. Nothing expressed or implied in this Agreement shall
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company


<PAGE>   6
                                       6                          EXHIBIT 10(f)


prior to any Change in Control; provided, however, that any termination of
employment of the Executive or removal of the Executive as an elected officer of
the Company following the commencement of any discussion authorized by the Board
of Directors of the Company with a third person that ultimately results in a
Change in Control shall be deemed to be a termination or removal of the
Executive after a Change in Control for purposes of this Agreement and shall
entitle the Executive to all Severance Compensation. Notwithstanding any other
provision hereof to the contrary, the Executive may, at any time during his
employment with the Company upon the giving of 30 days prior written notice,
terminate his employment hereunder. If this Agreement or the employment of the
Executive is terminated under circumstances in which the Executive is not
entitled to any Severance Compensation, neither the Executive nor the Company
shall have any further obligation or liability hereunder.

11.      Withholding of Taxes. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling; provided,
however, that no withholding pursuant to Section 4999 of the Code shall be made
unless, in the opinion of tax counsel selected by the Company and acceptable to
the Executive, such withholding relates to payments which result in the
imposition of an excise tax pursuant to Section 4999 of the Code.

         IN WITNESS WHEREOF, the parties have executed this Agreement effective
on the date and year first above written.

                                     HARTE-HANKS, INC.


                                     By:
                                        ----------------------------------------

                                     Title: Chairman and Chief Executive Officer

                                     EXECUTIVE


                                     -------------------------------------------


Donald R. Crews
Peter E. Gorman
Jacques D. Kerrest

JDK's Agreement: (other than those customarily performed by a chief financial
officer of a business of comparable size and complexity)


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(L)
<SEQUENCE>6
<FILENAME>d85151ex10-l.txt
<DESCRIPTION>AMENDMENT ONE AMENDED AND RESTATED PENSION PLAN
<TEXT>

<PAGE>   1
                                        1                          EXHIBIT 10(l)


                                AMENDMENT ONE TO

                                HARTE-HANKS, INC.

                            RESTORATION PENSION PLAN

                As Amended and Restated Effective January 1, 2000



         WHEREAS, effective as of January 1, 2000, Harte-Hanks, Inc. (the
"Corporation") amended and restated the Harte-Hanks, Inc. Restoration Pension
Plan (the "Plan") to provide retirement and retirement-related benefits for a
select group of highly compensated employees;

         WHEREAS, by the terms of Section 8 of the Plan, the Plan may be amended
by the Board of Directors of the Corporation; and

         WHEREAS, the Board of Directors of the Corporation has approved the
amendment to the Plan set forth below in order to change the definition of
"Covered Compensation" to reflect a change in the manner in which the
Corporation sets maximum potential bonuses;

         NOW, THEREFORE, the Plan is hereby amended, effective as of January 1,
2000, as follows:

         1.       The third sentence of Section 2 of the Plan is hereby amended
to read in its entirety as follows:

                  " 'Covered Compensation' shall mean Compensation as defined in
                  the Basic Plan without regard to the limitation imposed by
                  Section 401(a)(17) of the Code, except that (a) the amount of
                  bonus that otherwise would have been included in the
                  Participant's Compensation for a given calendar year ending
                  prior to January 1, 2001 shall not exceed an amount equal to
                  the 100% potential bonus level established for that
                  Participant for the year for which such bonus was paid, (b)
                  the amount of bonus that otherwise would have been included in
                  the Participant's Compensation for a given calendar year
                  ending after December 31, 2000 shall not exceed an amount
                  equal to the 50% potential bonus level established for that
                  Participant for the year for which such bonus was paid, and
                  (c) any salary or bonuses deferred by the Participant under an
                  unfunded, nonqualified deferred compensation plan of the
                  Employer pursuant to the Participant's election shall be
                  included in the Participant's Covered Compensation for the
                  purposes of the Restoration Plan in the calendar year during
                  which such salary or bonuses would have been paid to the
                  Participant in the absence of such election to defer."

         IN WITNESS WHEREOF, HARTE-HANKS, INC. has caused this instrument to be
executed by its duly authorized officer on the ____ day of ________________,
20___, to be effective as of January 1, 2000.

                                          HARTE-HANKS, INC.


                                          By
                                            ----------------------------------

                                          Title:
                                                ------------------------------

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>7
<FILENAME>d85151ex11.txt
<DESCRIPTION>STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TEXT>

<PAGE>   1
                                                                      EXHIBIT 11


                       HARTE-HANKS, INC. AND SUBSIDIARIES
                         EARNINGS PER SHARE COMPUTATIONS
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                           Year Ended December 31,
In thousands, except per share amounts                                            2000             1999              1998
                                                                                  ----             ----              ----
<S>                                                                             <C>              <C>              <C>
                                                                    BASIC EPS

Net income...................................................................    $81,886          $72,941          $68,371
                                                                                 =======          =======          =======

Weighted-average common shares
   outstanding used in earnings per
   share computations.......................................................      67,517           69,914           72,716
                                                                                 =======          =======          =======

Earnings per share..........................................................     $  1.21          $  1.04          $  0.94
                                                                                 =======          =======          =======


                                                                   DILUTED EPS

Net income..................................................................     $81,886          $72,941          $68,371
                                                                                 =======          =======          =======

Shares used in earnings per
   share computations.......................................................      69,653           72,144           76,057
                                                                                 =======          =======          =======

Earnings per share..........................................................     $  1.18          $  1.01          $  0.90
                                                                                 =======          =======          =======

Computation of Shares Used in Earnings Per Share Computations

Average outstanding common shares...........................................      67,517           69,914           72,716
Average common equivalent shares --
   dilutive effect of option shares.........................................       2,136            2,230            3,341
                                                                                 -------          -------          -------
Shares used in earnings per
   share computations.......................................................      69,653           72,144           76,057
                                                                                 =======          =======          =======
</TABLE>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>8
<FILENAME>d85151ex13.txt
<DESCRIPTION>2000 ANNUAL REPORT TO STOCKHOLDERS
<TEXT>

<PAGE>   1
                                                                      EXHIBIT 13

                               FINANCIAL CONTENTS


<TABLE>
<S>                                                          <C>
MANAGEMENT'S DISCUSSION AND ANALYSIS..........................12

CONSOLIDATED BALANCE SHEETS...................................18

CONSOLIDATED STATEMENTS OF OPERATIONS.........................19

CONSOLIDATED STATEMENTS OF CASH FLOWS.........................20

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY...............21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....................22

FIVE-YEAR FINANCIAL SUMMARY...................................31

INDEPENDENT AUDITORS' REPORT..................................32

CORPORATE INFORMATION.........................................32

DIRECTORS, OFFICERS AND HARTE-HANKS OPERATIONS................33
</TABLE>



                                                                              11
<PAGE>   2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS


                                                                        OVERVIEW

     The Company's overall performance reflects its commitment to its growth
strategy of being a market leader in the targeted media industry, introducing
new products and entering new markets, investing in technology and people, and
increasing shareholder value. Harte-Hanks now operates as an international
direct and interactive marketing services company that provides end-to-end CRM
and related solutions to a wide range of industries serving both consumer and
business-to-business markets. The Company also publishes highly targeted
advertising shopper publications which reach nearly 10 million households each
week. Since December 31, 1998, Harte-Hanks has grown revenues 29.2% and
operating income 35.2%, excluding the results of operations sold by the Company
during that time.

     Harte-Hanks has grown internally by adding new customers and products,
cross-selling existing products, entering new markets and expanding its
international presence. The Company also used proceeds from the sales of its
newspaper and television operations and its excess cash flows to fund several
acquisitions in 1998, 1999 and 2000. These acquisitions, as well as several
previous acquisitions, have enhanced the Company's growth over the past three
years. Harte-Hanks has funded $240.4 million in acquisitions during the period
1998 through 2000. These acquisitions have all been in the Company's direct and
interactive marketing segment, which now comprises 69% of the Company's
revenues.

     Harte-Hanks derives the majority of its revenues from the sale of direct
and interactive marketing and advertising services. As a national business,
direct and interactive marketing is affected by general national economic
trends. The Company's shoppers operate in local markets and are affected by the
strength of the local economies. The Company's principal expense items are
payroll, postage, transportation and paper.



12
<PAGE>   3


RESULTS OF OPERATIONS

Operating results were as follows:

<TABLE>
<CAPTION>
In thousands             2000          % Change     1999         % Change        1998
                       ---------       --------   ---------      --------     ---------
<S>                    <C>             <C>        <C>            <C>          <C>
Revenues               $ 960,773           15.8   $ 829,752          10.8     $ 748,546

Operating expenses       822,552           15.6     711,524          10.0       646,588
                       ---------                  ---------                   ---------
Operating income       $ 138,221           16.9   $ 118,228          16.0     $ 101,958
                       =========                  =========                   =========
</TABLE>

     Consolidated revenues grew 15.8% to $960.8 million and operating income
grew 16.9% to $138.2 million in 2000 compared to 1999. The Company's overall
growth resulted from acquisitions, increased business with both new and existing
customers and from the sale of new products and services. Overall operating
expenses increased 15.6% to $822.6 million as a result of the acquisitions and
overall revenue growth.

     Overall growth in the Company's 1999 revenues and operating income resulted
from acquisitions and increased business from both new and existing customers.
Overall operating expenses increased as a result of the overall revenue growth,
including the acquisitions, and the hiring of additional personnel to support
the growth.


- --------------------------------------------------------------------------------



DIRECT MARKETING

Direct marketing operating results were as follows:


<TABLE>
<CAPTION>
In thousands             2000          % Change     1999         % Change     1998
                       ---------       --------   ---------      --------   ---------
<S>                    <C>             <C>        <C>            <C>        <C>
Revenues               $ 662,044           18.4   $ 559,262          13.2   $ 493,898

Operating expenses       570,594           18.8     480,098          13.2     424,250
                       ---------                  ---------                 ---------
Operating income       $  91,450           15.5   $  79,164          13.7   $  69,648
                       =========                  =========                 =========
</TABLE>


     Direct and interactive marketing revenues increased $102.8 million, or
18.4%, in 2000 compared to 1999. CRM experienced significant revenue growth in
2000 due to increased data processing, Internet and fulfillment business with
both new and existing customers. Also contributing to the CRM revenue growth
was the October 1999 acquisition of ZD Market Intelligence, renamed Harte-Hanks
Market Intelligence, and to a much lesser extent the November 2000 acquisition
of Information Resource Group and the June 2000 acquisition of Hi-Tech Marketing
Limited. The traditional growth oriented business-to-business activities of CRM
had significant growth. The high-tech, mutual fund, non-bank finance,
telecommunications and healthcare industry sectors contributed significantly to
overall CRM revenue growth, offsetting slowdowns in the insurance industry.
Marketing Services also experienced good revenue growth in 2000, led by its
targeted mail operations. Marketing Services revenues increased due to increased
product sales to both new and existing customers, primarily in the non-bank
finance, banking and pharmaceutical industry sectors, offsetting slowdowns in
the retail industry. The May 1999 acquisition of Direct Marketing Associates,
Inc. also contributed to the Marketing Services revenue growth. Overall, revenue
growth for direct and interactive marketing increased as a result of increased
business with both new and existing customers across several industry sectors
including high-tech, non-bank finance, mutual fund, healthcare, banking,
telecommunications and pharmaceutical, as well as the acquisitions noted above.

     Operating expenses rose $90.5 million, or 18.8%, in 2000 compared to 1999
due primarily to revenue growth contributed by acquisitions, which accounted for
approximately 58% of this increase. Excluding these acquisitions, operating
expenses increased 8.3%. This remaining increase was due to increased production
costs directly associated with increased product volumes, increased payroll
costs due to expanded hiring to support revenue growth and increased general and
administrative expense from professional and business service fees and employee
expenses. Depreciation and amortization expense increased $8.8 million due to
goodwill associated with acquisitions and higher levels of capital investment to
support growth.


                                                                              13
<PAGE>   4


     Direct and interactive marketing revenues increased $65.4 million, or
13.2%, in 1999 compared to 1998. CRM and Marketing Services both experienced
significant revenue growth in 1999. CRM revenues increased due to increased
Internet, consulting, data processing and fulfillment business with both new and
existing customers, the October 1999 acquisition of ZD Market Intelligence,
renamed Harte-Hanks Market Intelligence, and to a lesser extent the August 1998
acquisition of Cornerstone Integrated Services. The traditional growth oriented
business-to-business activities of CRM had significant growth during the year.
The high-tech, non-bank finance, retail and mutual fund industry sectors
contributed significantly to overall CRM revenue growth. This growth was
partially offset by softness in the healthcare, managed care, business services
and publishing industries as well as revenue declines in the outbound credit
card business. Marketing Services revenues, led by its targeted mail and
logistics operations, increased due to increased product sales, including sales
of new products, to new and existing customers, primarily in the retail,
government/not-for-profit, and non-bank finance industry sectors. The November
1998 acquisition of Printing Management Systems, Inc. and the May 1999
acquisition of Direct Marketing Associates, Inc. also contributed to the
Marketing Services revenue growth. Overall, revenue growth for direct and
interactive marketing increased as a result of increased business with both new
and existing customers across several industry sectors including retail,
financial services, high-tech, pharmaceutical, automotive and telecommunications
industries, as well as the acquisitions noted above.

     Operating expenses rose $55.8 million, or 13.2%, in 1999 compared to 1998
due primarily to revenue growth contributed by acquisitions, which accounted for
$43.0 million of the increase. Excluding these acquisitions, operating expenses
increased 3.1%. This remaining increase was due to increased production costs
directly associated with the increased product volumes, increased payroll costs
due to expanded hiring to support revenue growth and increased general and
administrative expense from professional and outside service fees. Depreciation
and amortization expense increased $5.7 million due to goodwill associated with
acquisitions and higher levels of capital investment to support growth.


- --------------------------------------------------------------------------------


SHOPPERS

Shopper operating results were as follows:

<TABLE>
<CAPTION>
In thousands             2000          % Change     1999         % Change     1998
                       ---------       --------   ---------      --------   ---------
<S>                    <C>             <C>        <C>            <C>        <C>
Revenues               $ 298,729         10.4     $ 270,490          6.2    $ 254,648

Operating expenses       243,019          8.7       223,475          4.4      214,141
                       ---------                  ---------                 ---------
Operating income       $  55,710         18.5     $  47,015         16.1    $  40,507
                       =========                  =========                 =========
</TABLE>


     Shopper revenues increased $28.2 million, or 10.4%, in 2000 when compared
to 1999. Revenue increases were the result of improved sales in established
markets as well as geographic expansions into new neighborhoods in both
California and Florida. On a product basis, revenues increased due to growth in
in-book products, primarily employment and automotive related advertising and
core sales, and distribution products, primarily pre-printed inserts and
four-color glossy flyers. Shoppers also experienced growth from up-selling ads
onto its Web site.

     Shopper operating expenses rose $19.5 million, or 8.7%, in 2000 compared to
1999. The increase in operating expenses was primarily due to increases in
labor costs of $6.5 million and additional production costs of $8.8 million,
including increased postage of $5.3 million due to increased circulation and
insert volume growth.

     Shopper revenues increased $15.8 million, or 6.2%, in 1999 when compared to
1998. Excluding the effects of the sale of the Dallas-Fort Worth Shoppers Guide
and the Wichita, Kansas and Springfield, Missouri PennyPower in May 1998,
revenues increased $20.7 million, or 8.3%. Revenue increases were the result of
improved sales in established markets as well as geographic expansions into new
neighborhoods in both Northern and Southern California. On a product basis,
revenues increased due to growth in in-book products, primarily employment and
core sales, and distribution products, primarily four-color glossy flyers and
pre-printed inserts. These increases were partially offset by declining revenues
in the personals advertising segment.

     Shopper operating expenses rose $9.3 million, or 4.4%, in 1999 compared to
1998. Excluding the divestiture mentioned above, the increase in operating
expenses was primarily due to increases in labor costs of $4.8 million and
additional production costs of $6.9 million, including increased postage of $4.0
million due to increased circulation and insert volume growth.


14
<PAGE>   5
ACQUISITIONS/DIVESTITURES

     As described in Note B of the "Notes to Consolidated Financial Statements"
included herein, the Company made several acquisitions in the past three years.

     The Company acquired Detroit-based Information Resource Group, a leading
provider of business-to-business intelligence solutions to the high-tech,
telecommunications and other industries in November 2000 and Hi-Tech Marketing
Limited, a London based leading pan-European provider of CRM services to the
high-tech, telecommunications and financial services industries in June 2000.

     In October 1999, the Company acquired ZD Market Intelligence, renamed
Harte-Hanks Market Intelligence, for $101 million in cash from Ziff-Davis, Inc.
Harte-Hanks Market Intelligence is a leading provider of database products and
solutions to the high-tech and telecommunications industries in the United
States, Canada and Europe.

     The Company acquired Direct Marketing Associates, Inc. of Baltimore,
Maryland, a leading provider of integrated direct marketing services to
commercial, government and non-profit organizations in May 1999 and LYNQS
Newmedia of Kansas City, Missouri, a developer of new media applications for the
financial services, pharmaceutical and other industries in June 1999.

     The Company acquired Cornerstone Integrated Services of Austin, Texas, a
leading provider of technical and marketing support services to major computer
hardware and software manufacturers, as well as other manufacturers in the
high-tech industry in August 1998; Printing Management Systems, Inc. of
Bellmawr, New Jersey, a leading provider of direct marketing services geared to
addressing clients' needs in database marketing, inventory control, information
processing, fulfillment and direct mail in November 1998; and Spectral
Resources, Inc. of Woodstock, New York, a leading provider of interactive
solutions to the pharmaceutical industry in December 1998.

     The Company sold three of its smallest shopper publications, located in
Dallas, Texas, Wichita, Kansas and Springfield, Missouri, in May 1998.



INTEREST EXPENSE/INTEREST INCOME

     Interest expense increased $1.3 million in 2000 over 1999 due primarily to
interest, commitment charges and the amortization of financing costs associated
with the Company's two unsecured revolving credit facilities. Interest relating
to the Company's unsecured credit facility obtained for the purpose of
constructing a new building in Belgium to expand and support the Company's CRM
operations, and a note payable issued in connection with the Company's June
2000 acquisition of Hi-Tech Marketing Limited also contributed to the increase
in interest expense. Total interest expense increased in 1999 when compared to
1998 primarily due to interest and commitment charges from the two unsecured
revolving credit facilities the Company obtained in November 1999. The Company's
debt at December 31, 2000 and 1999 is described in Note D of the "Notes to
Consolidated Financial Statements" included herein.

     Interest income decreased $3.6 million in 2000 over 1999 due to the sale of
all of the Company's short-term investments during 1999, the proceeds of which
were used to fund acquisitions and repurchase the Company's stock, and lower
overall cash balances. Interest income decreased $7.8 million in 1999 over 1998
for the same reasons.



PENSION CURTAILMENT GAIN

     The Company recognized a pension curtailment gain of $2.15 million and
related income tax expense of $0.8 million in 1998. This non-recurring gain
resulted from the freezing of benefits under its defined benefit plan. (See Note
F of the "Notes to Consolidated Financial Statements" included herein.)
Excluding the non-recurring gain and related tax, net income was $67.1 million
for the year ended December 31, 1998.


INCOME TAXES

     Income taxes increased $5.1 million in 2000 due to higher income levels.
Excluding income taxes related to the 1998 pension curtailment gain, income
taxes increased $2.9 million in 1999 due to higher income levels. The effective
income tax rate (excluding the unusual item) was 40.2%, 40.6% and 41.2% in 2000,
1999 and 1998, respectively.



CAPITAL INVESTMENTS

     Net cash used in investing activities for 2000 included $43.9 million for
acquisitions and $36.5 million for capital expenditures. The acquisition
investments were made in the direct and interactive marketing segment, discussed
under "Direct Marketing." The capital expenditures consisted primarily of the
construction of a new building to expand and support the Company's CRM
operations in Belgium, additional computer capacity, technology, systems and
equipment upgrades for the direct and interactive marketing segment to support
its growth in all sectors. The Company also invested in facility expansions in
its CRM and Marketing Services sectors. The shopper


                                                                              15
<PAGE>   6


segment's capital expenditures were primarily related to new press, computer and
other production equipment.

     Net cash used in investing activities for 1999 included $136.5 million for
acquisitions and $28.9 million for capital expenditures. The acquisition
investments were made in the direct and interactive marketing segment, discussed
under "Direct Marketing." In addition, the Company made equity investments
totaling $4.0 million in three companies in order to further strengthen its CRM
capabilities. The capital expenditures consisted primarily of additional
computer capacity, technology, systems and equipment upgrades for the direct
and interactive segment to support its growth in all sectors. The Company also
invested in facility expansions in its CRM and Marketing Services sectors. The
shopper segment's capital expenditures were primarily related to the Northern
California operations consolidation, replacement of Southern California's order
entry and related accounting applications and new press and computer equipment.
Additionally, the Company continued with its implementation of new accounting
systems software begun in December 1997.



LIQUIDITY AND CAPITAL RESOURCES

     Cash provided by operating activities for 2000 was $110.9 million. Net cash
outflows from investing activities were $79.5 million for 2000, resulting
primarily from the acquisitions and capital investments described above. Net
cash outflows from financing activities in 2000 were $43.7 million. The cash
outflow from financing activities is attributable primarily to the repurchase
of treasury stock throughout 2000 totaling $92.7 million. The acquisitions and
repurchases of treasury stock in 2000 were funded through the Company's cash
flows and borrowings under the Company's credit facilities.

     Cash provided by operating activities for 1999 was $115.4 million. Net cash
outflows from investing activities were $29.6 million for 1999, resulting
primarily from the acquisitions described above and funded by the sale and
maturity of short-term investments. Net cash outflows from financing activities
in 1999 were $81.0 million. The cash outflow from financing activities is
attributable primarily to the repurchase of treasury stock throughout 1999
totaling $87.6 million.

     Capital resources are available from, and provided through, the Company's
two unsecured credit facilities. These credit facilities, two $100 million
variable rate, revolving loan commitments, were put in place on November 4,
1999. All borrowings under the $100 million revolving Three-Year Credit
Agreement are to be repaid by November 4, 2002. On November 2, 2000 the Company
was granted a 364-day extension to its $100 million revolving 364-Day Credit
Agreement. All borrowings under the $100 million revolving 364-Day Credit
Agreement are to be repaid by November 1, 2001.

     Management believes that its credit facilities, together with cash provided
by operating activities, will be sufficient to fund operations and anticipated
acquisitions and capital expenditures needs for the foreseeable future. As of
December 31, 2000, the Company had $145.0 million of unused borrowing capacity
under its credit facilities.



FACTORS THAT MAY AFFECT FUTURE RESULTS
AND FINANCIAL CONDITION

     From time to time, in both written reports and oral statements by senior
management, the Company may express its expectations regarding its future
performance. These "forward-looking statements" are inherently uncertain, and
investors should realize that events could turn out to be other than what senior
management expected. Set forth below are some key factors which could affect
the Company's future performance.


     LEGISLATION -- There could be a material adverse impact on the Company's
direct and interactive marketing business due to the enactment of legislation or
industry regulations arising from public concern over consumer privacy issues.
Restrictions or prohibitions could be placed upon the collection and use of
information that is currently legally available.


     DATA SUPPLIERS -- There could be a material adverse impact on the Company's
direct and interactive marketing business if owners of the data the Company uses
were to withdraw the data. Data providers could withdraw their data if there is
a competitive reason to do so or if legislation is passed restricting the use of
the data.


     ACQUISITIONS -- In recent years the Company has made a number of
acquisitions in its direct and interactive marketing segment, and it expects to
pursue additional acquisition opportunities. Acquisition activities, even if
not consummated, require substantial amounts of management time and can
distract from normal operations. In addition, there can be no assurance that
the synergies and other objectives sought in acquisitions will be achieved.


16
<PAGE>   7


     COMPETITION -- Direct and interactive marketing is a rapidly evolving
business, subject to periodic technological advancements, high turnover of
customer personnel who make buying decisions, and changing customer needs and
preferences. Consequently, the Company's direct and interactive marketing
business faces competition in both of its sectors -- CRM and Marketing Services.
The Company's shopper business competes for advertising, as well as for
readers, with other print and electronic media. Competition comes from local and
regional newspapers, magazines, radio, broadcast and cable television, shoppers
and other communications media that operate in the Company's markets. The
extent and nature of such competition is, in large part, determined by the
location and demographics of the markets targeted by a particular advertiser,
and the number of media alternatives in those markets. Failure to continually
improve the Company's current processes and to develop new products and services
could result in loss of the Company's customers to current or future
competitors. In addition, failure to gain market acceptance of new products and
services could adversely affect the Company's growth.


     QUALIFIED PERSONNEL -- The Company believes that its future prospects will
depend, in large part, upon its ability to attract, train and retain highly
skilled technical, client services and administrative personnel. Qualified
personnel are in great demand and are likely to remain a limited resource for
the foreseeable future.


     POSTAL RATES -- The Company's shoppers are delivered by standard mail, and
postage is the second largest expense, behind payroll, in the Company's shopper
business. Overall postal rates, which typically increase every 3 to 4 years,
increased in January 1999. Shopper postal costs were relatively unaffected by
this increase as base rates remained flat and overweight rates changed very
little. Postal rates again increased in January 2001. Overall shopper postage
costs are expected to grow moderately as a result of this increase as well as
anticipated increases in circulation and insert volumes. Postal rates also
influence the demand for the Company's direct and interactive marketing services
even though the cost of mailings is borne by the Company's customers and is not
directly reflected in the Company's revenues or expenses.


     PAPER PRICES -- Paper represents a substantial expense in the Company's
shopper operations. Paper prices increased slightly at the beginning of 1998,
but leveled out toward the end of 1998. The Company benefited from decreasing
paper prices throughout 1999, although prices increased in the fourth quarter.
Paper prices continued to increase throughout 2000. Fluctuations in paper
prices, such as those experienced in recent years, can materially affect the
results of the Company's operations.

     ECONOMIC CONDITIONS -- Changes in national economic conditions can affect
levels of advertising expenditures generally, and such changes can affect each
of the Company's businesses. Revenues from the Company's shopper business are
dependent to a large extent on local advertising expenditures in the markets in
which they operate. Such expenditures are substantially affected by the strength
of the local economies in those markets. Direct and interactive marketing
revenues are dependent on national and international economics.


                                                                              17
<PAGE>   8


HARTE-HANKS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                     December 31,
   In thousands, except per share and share amounts                                2000         1999
                                                                                 ---------    ---------
<S>                                                                              <C>          <C>
   ASSETS
   Current assets
        Cash and cash equivalents............................................    $  22,928    $  35,196
        Accounts receivable
          (less allowance for doubtful accounts of $4,644 in 2000 and
           $3,751 in 1999)...................................................      179,838      154,030
        Inventory............................................................        6,260        7,099
        Prepaid expenses.....................................................       14,072       12,651
        Current deferred income tax asset....................................        7,648        6,848
        Other current assets.................................................        5,127        4,309
                                                                                 ---------    ---------
        Total current assets.................................................      235,873      220,133
                                                                                 ---------    ---------

   Property, plant and equipment
        Land.................................................................        3,428        3,302
        Buildings and improvements...........................................       28,374       23,863
        Software.............................................................       34,966       22,736
        Equipment and furniture..............................................      171,560      163,848
                                                                                 ---------    ---------
                                                                                   238,328      213,749
        Less accumulated depreciation........................................     (130,544)    (113,376)
                                                                                 ---------    ---------
                                                                                   107,784      100,373
        Construction and equipment installations in progress.................        4,281        5,877
                                                                                 ---------    ---------
             Net property, plant and equipment...............................      112,065      106,250
                                                                                 ---------    ---------

   Intangible and other assets
        Goodwill and other intangibles
          (less accumulated amortization of $66,344 in 2000 and $51,118
          in 1999)...........................................................      439,148      409,791
        Other assets.........................................................       20,019       33,253
                                                                                 ---------    ---------
             Total intangible and other assets...............................      459,167      443,044
                                                                                 ---------    ---------
             Total assets....................................................    $ 807,105    $ 769,427
                                                                                 =========    =========

   LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities
        Accounts payable.....................................................    $  60,069   $   64,812
        Accrued payroll and related expenses.................................       31,429       25,511
        Customer deposits and unearned revenue...............................       42,712       35,622
        Income taxes payable.................................................        5,135       13,667
        Other current liabilities............................................       10,619       14,405
                                                                                 ---------    ---------
             Total current liabilities.......................................      149,964      154,017
   Long-term debt............................................................       65,370        5,000
   Other long-term liabilities
          (including deferred income taxes of $26,007 in 2000 and $20,180
          in 1999)...........................................................       40,768       32,792
                                                                                 ---------    ---------
             Total liabilities...............................................      256,102      191,809
                                                                                 ---------    ---------

   Stockholders' equity
        Common stock, $1 par value, authorized 250,000,000 shares
             Issued 2000: 76,916,339; 1999: 76,392,063 shares................       76,916       76,392
        Additional paid-in capital...........................................      202,222      197,454
        Accumulated other comprehensive income (loss)........................       (2,105)      12,316
        Retained earnings....................................................      568,512      493,362
                                                                                 ---------    ---------
                                                                                   845,545      779,524
        Less treasury stock, 2000: 12,230,388; 1999: 8,285,966
             shares at cost..................................................     (294,542)    (201,906)
                                                                                 ---------    ---------
             Total stockholders' equity......................................      551,003      577,618
                                                                                 ---------    ---------
             Total liabilities and stockholders' equity......................    $ 807,105    $ 769,427
                                                                                 =========    =========
</TABLE>


See Notes to Consolidated Financial Statements

18
<PAGE>   9


HARTE-HANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS






<TABLE>
<CAPTION>
                                                                          Year Ended December 31,

   In thousands, except per share amounts                            2000          1999          1998
                                                                  ----------    ----------    ----------
<S>                                                               <C>           <C>           <C>
   Revenues ...................................................   $  960,773    $  829,752    $  748,546
                                                                  ----------    ----------    ----------
   Operating expenses
        Payroll ...............................................      350,058       300,336       268,957
        Production and distribution ...........................      336,444       306,340       284,572
        Advertising, selling, general and administrative ......       92,330        70,060        64,082
        Depreciation ..........................................       28,494        24,126        21,087
        Goodwill and intangible amortization ..................       15,226        10,662         7,890
                                                                  ----------    ----------    ----------
                                                                     822,552       711,524       646,588
                                                                  ----------    ----------    ----------
   Operating income ...........................................      138,221       118,228       101,958
   Other expenses (income)
        Interest expense ......................................        1,678           349           193
        Interest income .......................................       (2,062)       (5,662)      (13,474)
        Other, net ............................................        1,746           730         1,230
        Pension curtailment gain ..............................           --            --        (2,150)
                                                                  ----------    ----------    ----------
                                                                       1,362        (4,583)      (14,201)
                                                                  ----------    ----------    ----------
   Income before income taxes .................................      136,859       122,811       116,159
   Income tax expense .........................................       54,973        49,870        47,788
                                                                  ----------    ----------    ----------
   Net income .................................................   $   81,886    $   72,941    $   68,371
                                                                  ==========    ==========    ==========

   Basic earnings per common share ............................   $     1.21    $     1.04    $     0.94
                                                                  ==========    ==========    ==========

        Weighted-average common shares outstanding ............       67,517        69,914        72,716
                                                                  ==========    ==========    ==========

   Diluted earnings per common share ..........................   $     1.18    $     1.01    $     0.90
                                                                  ==========    ==========    ==========

        Weighted-average common and
        common equivalent shares outstanding ..................       69,653        72,144        76,057
                                                                  ==========    ==========    ==========
</TABLE>


See Notes to Consolidated Financial Statements

                                                                              19
<PAGE>   10


HARTE-HANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS





<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,

   In thousands                                                                 2000         1999           1998
                                                                             ----------    ----------    ----------
<S>                                                                          <C>           <C>           <C>
   Cash Flows from Operating Activities
        Net income .......................................................   $   81,886    $   72,941    $   68,371
        Adjustments to reconcile net income
         to net cash provided by continuing operations:
             Depreciation ................................................       28,494        24,126        21,087
             Goodwill and intangible amortization ........................       15,226        10,662         7,890
             Amortization of option-related compensation .................          441           430           592
             Deferred income taxes .......................................        5,942        10,572         4,130
             Pension curtailment gain ....................................           --            --        (2,150)
             Other, net ..................................................          424           224           534
        Changes in operating assets and liabilities,
         net of effects from acquisitions and divestitures:
             Increase in accounts receivable, net ........................      (22,514)      (13,827)      (12,415)
             (Increase) decrease in inventory ............................          839          (848)          900
             Increase in prepaid expenses and other current assets .......       (1,848)       (2,058)       (2,549)
             Increase (decrease) in accounts payable .....................        1,451         5,597        (2,206)
             Increase in other accrued expenses and other liabilities ....        5,095        10,826        10,034
             Other, net ..................................................       (4,511)       (3,281)        1,210
                                                                             ----------    ----------    ----------
                   Net cash provided by continuing operations ............      110,925       115,364        95,428
        Net cash used in discontinued operating activities ...............           --            --      (265,650)
                                                                             ----------    ----------    ----------
                   Net cash provided by (used in) operating activities ...      110,925       115,364      (170,222)
                                                                             ----------    ----------    ----------
   Cash Flows from Investing Activities
        Acquisitions .....................................................      (43,873)     (136,469)      (47,386)
        Purchases of property, plant and equipment .......................      (36,465)      (28,928)      (24,443)
        Proceeds from the sale of property, plant and equipment ..........          432           976         1,385
        Proceeds from divestiture ........................................           --            --         5,769
        Net sales and maturities of available-for-sale
          short-term investments .........................................           --       138,874       249,840
        Other investing activities .......................................          391        (4,005)           --
                                                                             ----------    ----------    ----------
                   Net cash provided by (used in) investing activities ...      (79,515)      (29,552)      185,165
                                                                             ----------    ----------    ----------
   Cash Flows from Financing Activities
        Long-term borrowings .............................................       58,494         5,000            --
        Payments on debt .................................................       (5,000)           --            --
        Issuance of common stock .........................................        6,506         7,082         7,452
        Issuance of treasury stock .......................................           81            87            23
        Purchase of treasury stock .......................................      (92,706)      (87,574)      (71,354)
        Warrants repurchased .............................................       (4,317)           --            --
        Dividends paid ...................................................       (6,736)       (5,578)       (4,372)
                                                                             ----------    ----------    ----------
                   Net cash used in financing activities .................      (43,678)      (80,983)      (68,251)
                                                                             ----------    ----------    ----------

   Net increase (decrease) in cash .......................................      (12,268)        4,829       (53,308)
   Cash and cash equivalents at beginning of period ......................       35,196        30,367        83,675
                                                                             ----------    ----------    ----------
   Cash and cash equivalents at end of period ............................   $   22,928    $   35,196    $   30,367
                                                                             ==========    ==========    ==========

   Supplemental Cash Flow Information:
   Non-cash investing and financing activities:
        Acquisitions -- debt issued (2000) and stock issued (1998) .......   $    6,876    $       --    $    5,752
                                                                             ==========    ==========    ==========
</TABLE>


See Notes to Consolidated Financial Statements

20
<PAGE>   11


HARTE-HANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY


<TABLE>
<CAPTION>
                                                                                                       Accumulated
                                                                  Additional                                 Other          Total
                                                         Common      Paid-in    Retained   Treasury  Comprehensive  Stockholders'
In thousands                                              Stock      Capital    Earnings      Stock  Income (Loss)         Equity
                                                      ---------   ----------  ----------  ---------  -------------  -------------
<S>                                                   <C>         <C>         <C>         <C>        <C>            <C>
Balance at January 1, 1998 .......................... $  74,843   $  177,238  $  362,000  $ (47,267) $        (577) $     566,237
Common stock issued -- employee benefit plans........       218        4,018          --         --             --          4,236
Exercise of stock options ...........................       728        2,862          --         --             --          3,590
Tax benefit of options exercised ....................        --        4,031          --         --             --          4,031
Dividends paid ($0.06 per share) ....................        --           --      (4,372)        --             --         (4,372)
Treasury stock issued in conjunction with
  acquisition .......................................        --        1,545          --      4,207             --          5,752
Treasury stock issued ...............................        --            4          --         19             --             23
Treasury stock repurchase ...........................        --           --          --    (71,354)            --        (71,354)
Comprehensive income, net of tax:
     Net income .....................................        --           --      68,371         --             --         68,371
     Change in unrealized gain (loss) on short-term
         investments, net of reclassification
         adjustments (net of tax of $311) ...........        --           --          --         --            577            577
                                                                                                                    -------------
Total comprehensive income ..........................                                                                      68,948

                                                      ---------   ----------  ----------  ---------  -------------  -------------
Balance at December 31, 1998 ........................    75,789      189,698     425,999   (114,395)            --        577,091


Common stock issued -- employee benefit plans .......       215        4,172          --         --             --          4,387
Exercise of stock options ...........................       388        2,307          --         --             --          2,695
Tax benefit of options exercised ....................        --        1,253          --         --             --          1,253
Dividends paid ($0.08 per share) ....................        --           --      (5,578)        --             --         (5,578)
Treasury stock issued ...............................        --           24          --         63             --             87
Treasury stock repurchase ...........................        --           --          --    (87,574)            --        (87,574)
Comprehensive income, net of tax:
     Net income .....................................        --           --      72,941         --             --         72,941
     Change in unrealized gain (loss) on
         long-term investments, net of
         reclassification adjustments
         (net of tax of $6,632) .....................        --           --          --         --         12,316         12,316
                                                                                                                    -------------
Total comprehensive income ..........................                                                                      85,257

                                                      ---------   ----------  ----------  ---------  -------------  -------------
Balance at December 31, 1999 ........................    76,392      197,454     493,362   (201,906)        12,316        577,618


Common stock issued -- employee benefit plans .......       196        3,809          --         --             --          4,005
Exercise of stock options ...........................       328        2,173          --         --             --          2,501
Tax benefit of options exercised ....................        --        1,581          --         --             --          1,581
Dividends paid ($0.10 per share) ....................        --           --      (6,736)        --             --         (6,736)
Treasury stock issued ...............................        --           11          --         70             --             81
Treasury stock repurchase ...........................        --           --          --    (92,706)            --        (92,706)
Warrants repurchased (net of tax of $1,511) .........        --       (2,806)         --         --             --         (2,806)
Comprehensive income, net of tax:
     Net income .....................................        --           --      81,886         --             --         81,886
     Foreign currency translation adjustment ........        --           --          --         --         (1,208)        (1,208)
     Change in unrealized gain (loss) on
          long-term investments, net of
          reclassification adjustments
          (net of tax of $7,115) ....................        --           --          --         --        (13,213)       (13,213)
                                                                                                                    -------------
Total comprehensive income ..........................                                                                      67,465

Balance at December 31, 2000 ........................ $  76,916   $  202,222  $  568,512  $(294,542) $      (2,105) $     551,003
                                                      =========   ==========  ==========  =========  =============  =============
</TABLE>



See Notes to Consolidated Financial Statements


                                                                              21
<PAGE>   12


HARTE-HANKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE A -- SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

The accompanying Consolidated Financial Statements present the financial
position of Harte-Hanks, Inc. and subsidiaries (the "Company"). The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods.

All intercompany accounts and transactions have been eliminated in
consolidation. Certain prior year amounts have been reclassified for comparative
purposes.


CASH EQUIVALENTS AND AVAILABLE-FOR-SALE SECURITIES

All highly liquid investments with a remaining maturity of 90 days or less at
the time of purchase are considered to be cash equivalents. Cash equivalents are
carried at cost, which approximates fair value. The Company considers its
investments to be available-for-sale and has recorded its investments at fair
value, with the unrealized gain (loss) recognized as a component of accumulated
other comprehensive income.


INVENTORY

Inventory, consisting primarily of newsprint and operating supplies, is stated
at the lower of cost (first-in, first-out method) or market.


PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated on the basis of cost. Depreciation of
buildings and equipment is computed generally on the straight-line method at
rates calculated to amortize the cost of the assets over their useful lives. The
general ranges of estimated useful lives are:

<TABLE>
<S>                                     <C>
     Buildings and improvements         10 to 40 years
     Equipment and furniture             3 to 20 years
     Software                            3 to 10 years
</TABLE>

GOODWILL AND OTHER INTANGIBLES

Goodwill and other intangibles are stated on the basis of cost, adjusted as
discussed below. Goodwill is amortized on a straight-line basis over 15 to 40
year periods. Other intangibles are amortized on a straight-line basis over a
period of 5 to 10 years.

The Company assesses the recoverability of its goodwill and other intangibles by
determining whether the amortization of the intangible balance over its
remaining life can be recovered through projected undiscounted future cash flows
over the remaining amortization period. If projected undiscounted future cash
flows indicate that an unamortized intangible will not be recovered, an
impairment loss is recognized based on projected discounted future cash flows.
Cash flow projections are based on trends of historical performance and
management's estimate of future performance, giving consideration to existing
and anticipated competitive and economic conditions.

At December 31, 2000 and 1999 the Company's goodwill balance was $434.7
million, net of $65.7 million of accumulated amortization, and $405.9 million,
net of $51.0 million of accumulated amortization, respectively.


INCOME TAXES

Income taxes are calculated using the asset and liability method required by
Statement of Financial Accounting Standards ("SFAS") No. 109. Deferred income
taxes are recognized for the tax consequences resulting from "temporary
differences" by applying enacted statutory tax rates applicable to future years.
These "temporary differences" are associated with differences between the
financial and the tax basis of existing assets and liabilities. Under SFAS No.
109, a statutory change in tax rates will be recognized immediately in deferred
taxes and income.


EARNINGS PER SHARE

Basic earnings per common share are based upon the weighted-average number of
common shares outstanding. Diluted earnings per common share are based upon the
weighted-average number of common shares outstanding and dilutive common stock
equivalents from the assumed exercise of stock options using the treasury stock
method.


REVENUE RECOGNITION

The Company recognizes revenue at the time the service is rendered or the
product is delivered. Payments received in advance of the performance of
services are recorded as deferred revenue until such time as the services are
performed.

Direct and interactive marketing revenue from the production and delivery of
data is recognized upon completion and shipment of the work. Revenue from
database subscriptions is recognized ratably over the term of the subscription.
Service revenue from time-and-materials services is recognized as the services
are provided. Revenue from certain service contracts is recognized over the
contractual period, using the percentage-of-completion method based on
individual costs incurred to date compared with total estimated contract costs.
In other instances, progress toward completion is based on performance
milestones specified in the contract where such milestones fairly reflect
progress toward contract completion.

Revenue from software is recognized in accordance with the American Institute of
Certified Public Accountants' (AICPA) Statement of Position ("SOP") 97-2
"Software Revenue Recognition," as amended by SOP 98-9. SOP 97-2 generally
requires revenue earned on software arrangements involving multiple elements to
be allocated to each element based on the vendor-specific objective evidence of
fair values of the respective elements. In accordance with SOP 97-2, the Company
has analyzed all of the elements included in its multiple-element arrangements
and determined that it has Company-specific objective evidence of fair value to
allocate revenue to the license and postcontract customer support (PCS)
component of its software license arrangements. The revenue allocated to
software products, including time-based software licenses, is recognized upon
execution of a licensing agreement and shipment of the software or ratably over
the term of the license, depending on the


22
<PAGE>   13


structure and terms of the arrangement. The revenue allocated to PCS is
recognized ratably over the term of the support. Revenue allocated to
professional services is recognized as the services are performed.

Shopper services are considered rendered when all printing, sorting, labeling
and ancillary services have been provided and the mailing material has been
received by the United States Postal Service.


RECENT ACCOUNTING PRONOUNCEMENT

Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," issued in June 1998, establishes
accounting and reporting standards for derivative instruments and hedging
activities. This statement requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Company will adopt SFAS No. 133, as
amended, in the first quarter of 2001 and does not expect it to have a material
effect on the Company's financial position or results of operations.


NOTE B -- ACQUISITIONS/DIVESTITURES

PURCHASES

In November 2000, the Company acquired Detroit-based Information Resource Group,
a leading provider of business-to-business intelligence solutions to the
high-tech, telecommunications and other industries.

In June 2000, the Company acquired the UK based Hi-Tech Marketing Limited, a
leading pan-European provider of CRM services to the high-tech,
telecommunications and financial services industries.

In October 1999, the Company acquired ZD Market Intelligence, renamed
Harte-Hanks Market Intelligence, for $101 million cash from Ziff-Davis, Inc.
Harte-Hanks Market Intelligence is a leading provider of database products and
solutions to the high- tech and telecommunications industries in the United
States, Canada and Europe.

In June 1999, the Company acquired LYNQS Newmedia of Kansas City, Missouri, a
developer of new media applications for the financial services, pharmaceutical
and other industries.

In May 1999, the Company acquired Direct Marketing Associates, Inc. of
Baltimore, Maryland, a leading provider of integrated direct marketing services
to commercial, government and non-profit organizations.

In December 1998, the Company acquired Spectral Resources, Inc. of Woodstock,
New York, a leading provider of interactive solutions to the pharmaceutical
industry.

In November 1998, the Company acquired Printing Management Systems, Inc. of
Bellmawr, New Jersey, a leading provider of direct marketing services geared to
addressing clients' needs in database marketing, inventory control, information
processing, fulfillment and direct mail.

In August 1998, the Company acquired Cornerstone Integrated Systems of Austin,
Texas, a leading provider of technical and marketing support services to major
computer hardware and software manufacturers, as well as other manufacturers in
the high-tech industry.

The total cash outlay in 2000 for acquisitions was $43.9 million. In addition,
the Company incurred $6.9 million in notes payable for its June 2000
acquisition. The total cash outlay in 1999 for acquisitions was $136.5 million.
The total cash outlay in 1998 for acquisitions was $47.4 million. In addition,
the Company issued stock with a value of $5.8 million for its November 1998
acquisition.

The operating results of the acquired companies have been included in the
accompanying Consolidated Financial Statements from the date of acquisition
under the purchase method of accounting.

The following table summarizes, on an unaudited pro forma basis, the estimated
combined results of operations of the Company and the 2000 and 1999 acquisitions
(Information Resource Group, Hi-Tech Marketing Limited, ZD Market Intelligence,
LYNQS Newmedia and Direct Marketing Associates) assuming the acquisitions had
taken place at the beginning of the respective year. The pro forma information
includes adjustments for a reduction in interest income on cash equivalents and
increased interest expense on debt used to finance the acquisitions and
amortization of the intangible assets acquired. The unaudited pro forma results
of operations are not necessarily indicative of the results that actually would
have occurred had the acquisitions been completed at the beginning of the
respective year.

<TABLE>
<CAPTION>
In thousands                              For the years ended December 31,
except per share amounts                    2000                  1999
                                          ---------              ---------
<S>                                       <C>                    <C>
   Revenues...................            $ 972,280              $ 891,576

   Net income.................               81,530                 72,580

   Diluted earnings per
      common share ...........                 1.17                   1.01
</TABLE>


DIVESTITURES

In May 1998, the Company sold three of its smallest shopper publications,
located in Dallas, Texas, Wichita, Kansas and Springfield, Missouri.


NOTE C -- INVESTMENTS

SHORT-TERM INVESTMENTS

In 1999 the Company sold all of its short-term investments and at December 31,
2000 and 1999 held no such investments.

The gross realized gains and losses on the sale of short-term
available-for-sale securities were immaterial for the years ended December 31,
1999 and 1998.


LONG-TERM INVESTMENTS

The Company made equity investments totaling $0.7 million and $4.0 in 2000 and
1999, respectively. These investments have been classified as other assets. All
such investments for which fair value was readily determinable are considered to
be available-for-sale and are recorded at fair value. The related unrealized
gains



                                                                              23
<PAGE>   14




and losses have been reported as a separate component of accumulated other
comprehensive income. All other equity investments have been recorded at cost.
Long-term investments for which the fair value was readily determinable at
December 31, 2000 and 1999 consisted of the following:

<TABLE>
<CAPTION>
                                        December 31, 2000
                                                Gross
                               Original    Unrealized        Fair
In thousands                       Cost   Gain (Loss)       Value
                               --------  ------------      ------
<S>                            <C>       <C>               <C>
Equity securities...........   $  3,150  $     (1,380)     $1,770
                               --------  ------------      ------
Total.......................   $  3,150  $     (1,380)     $1,770
                               ========  ============      ======
</TABLE>



<TABLE>
<CAPTION>
                                        December 31, 1999
                                                Gross
                               Original    Unrealized         Fair
In thousands                       Cost   Gain (Loss)        Value
                               --------  ------------      -------
<S>                            <C>       <C>               <C>
Equity securities...........   $  2,003  $     18,948      $20,951
                               --------  ------------      -------
Total.......................   $  2,003  $     18,948      $20,951
                               ========  ============      =======
</TABLE>


Proceeds from the sale of long-term investments were $1.1 million in 2000. Gross
realized gains included in 2000 income were $0.5 million, determined using the
average cost method.


NOTE D -- LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                             December 31,
In thousands                                 2000      1999
                                           --------   -------
<S>                                        <C>        <C>
Revolving loan commitment, various
   interest rates (effective rate of
   7.15% at December 31, 2000),
   due November 4, 2002...............     $ 55,000   $ 5,000

Revolving loan commitment, various
   interest rates (effective rate of
   5.09% at December 31, 2000),
   $2.3 million due December 16,
   2002, remaining $1.2 million
   due July 20, 2003..................        3,493        --

Acquisition note payable, various
   interest rates (effective rate of
   5.51% at December 31, 2000)........        6,877        --

Less current maturities...............           --        --
                                           --------   -------
                                           $ 65,370   $ 5,000
                                           ========   =======
</TABLE>

Cash payments for interest were $1.3 million, $0.1 million and $0.1 million for
the years ended December 31, 2000, 1999 and 1998, respectively.

CREDIT FACILITIES

On November 4, 1999 the Company obtained two unsecured revolving credit
facilities. All borrowings under the $100 million revolving Three-Year Credit
Agreement are to be repaid by November 4, 2002. On November 2, 2000 the Company
was granted a 364-day extension to its $100 million revolving 364-Day Credit
Agreement. All borrowings under the $100 million revolving 364-Day Credit
Agreement are to be repaid by November 1, 2001 unless the Company requests and
is granted another 364-day extension. Commitment fees on the total credit and
interest rates for drawn amounts are determined according to a grid based on the
Company's total debt to earnings ratio. Commitment fees range from .08% to .125%
for the 364-day facility, and .1% to .15% for the three-year facility. Interest
rates on drawn amounts range from EUROLIBOR plus .4% to EUROLIBOR plus .75%. As
of December 31, 2000, the Company had $45 million and $100 million of unused
borrowing capacity under its Three-Year Credit Agreement and 364-Day Credit
Agreement, respectively.

On November 29, 1999 the Company obtained an unsecured credit facility in the
amount of 100 million Belgium Francs for the purpose of financing the
construction of a new building in Hasselt, Belgium. This facility was increased
to 150 million Belgium Francs on July 18, 2000. All borrowings under the
original facility amount are to be repaid by December 16, 2002 and any remaining
outstanding amounts are to be repaid by July 20, 2003. The Company pays a
commitment fee of .1% on the undrawn portion of the commitment. Interest rates
on drawn amounts are at EURIBOR plus .15%. As of December 21, 2000, the Company
had no unused borrowing capacity under this credit facility.


ACQUISITION NOTE PAYABLE

In June 2000, the Company issued a note payable of 4.6 million British Pounds in
connection with an acquisition. This note payable is due upon demand, but must
be repaid no later than December 31, 2001. Interest on the note is at LIBOR
minus .75%. It is the Company's intent to repay this note with borrowings under
the Company's three-year revolving credit facility.


NOTE E -- INCOME TAXES

The components of income tax expense are as follows:

<TABLE>
<CAPTION>
                                    Year Ended December 31,
   In thousands                  2000         1999         1998
                              ----------   ----------   ----------
<S>                           <C>          <C>          <C>
   Current

       Federal ............   $   40,502   $   32,099   $   33,949

       State and local ....        6,679        6,079        9,012

       Foreign ............        1,850        1,120          697
                              ----------   ----------   ----------
          Total current ...   $   49,031   $   39,298   $   43,658
                              ==========   ==========   ==========

   Deferred

       Federal ............   $    5,321   $    8,564   $    4,175

       State and local ....          621        2,008          (45)
                              ----------   ----------   ----------
          Total deferred ..   $    5,942   $   10,572   $    4,130
                              ==========   ==========   ==========
</TABLE>

Included in income tax expense for 1998 is tax expense of $0.8 million related
to the pension curtailment gain.


24
<PAGE>   15


The differences between total income tax expense and the amount computed by
applying the statutory federal income tax rate to income before income taxes
were as follows:

<TABLE>
<CAPTION>
                                          Year Ended December 31,
In thousands                       2000             1999           1998
                               -------------   -------------   -------------
<S>                            <C>             <C>             <C>
Computed expected
  income tax
  expense ..................   $ 47,900  35%   $ 42,984  35%   $ 40,656  35%

Net effect of state
  income taxes .............      4,857   4%      5,256   4%      5,891   5%

Effect of goodwill
  amortization .............      1,633   1%      1,344   1%      1,230   1%

Effect of
  non-taxable
  investment
  income ...................         --   0%        (50)  0%       (424)  0%

Change in the beginning
  of the year balance
  of the valuation
  allowance ................       (112)  0%         --   0%        (63)  0%

Other, net .................        695   0%        336   0%        498   0%
                               --------  --    --------  --    --------  --
Income tax expense
  for the period ...........   $ 54,973  40%   $ 49,870  41%   $ 47,788  41%
                               ========  ==    ========  ==    ========  ==
</TABLE>


Total income tax expense (benefit) was allocated as follows:

<TABLE>
<CAPTION>
                              Year Ended December 31,
In thousands                  2000      1999      1998
                            --------  --------  --------
<S>                         <C>       <C>       <C>
Results of operations....   $ 54,973  $ 49,870  $ 47,788

Stockholders' equity.....    (10,207)    5,379    (3,720)
                            --------  --------  --------
Total....................   $ 44,766  $ 55,249  $ 44,068
                            ========  ========  ========
</TABLE>


The tax effects of temporary differences that gave rise to significant portions
of the deferred tax assets and deferred tax liabilities were as follows:

<TABLE>
<CAPTION>
                                                         December 31,
   In thousands                                       2000           1999
                                                    --------       --------
<S>                                                 <C>            <C>
   Deferred tax assets:

      Deferred compensation
         and retirement plans ...................   $  2,430       $  4,229

      Accrued expenses not
         deductible until paid ..................      2,979          3,068

      Accounts receivable, net ..................      1,264            583

      Other, net ................................        806            157

      State net operating loss
         carryforwards ..........................        455            475
                                                    --------       --------
            Total gross deferred
               tax assets .......................      7,934          8,512

      Less valuation allowance ..................       (455)          (475)
                                                    --------       --------
         Net deferred tax assets ................      7,479          8,037
                                                    --------       --------

   Deferred tax liabilities:

      Property, plant and equipment .............    (13,646)       (12,823)

      Goodwill ..................................    (11,626)        (8,052)

      State income tax ..........................       (566)          (493)

      Other, net ................................         --             (1)
                                                    --------       --------

            Total gross deferred
               tax liabilities ..................    (25,838)       (21,369)
                                                    --------       --------
         Net deferred tax liabilities ...........   $(18,359)      $(13,332)
                                                    ========       ========
</TABLE>

The valuation allowance for deferred tax assets as of January 1, 1999 was
$188,650. The valuation allowance at December 31, 2000 and 1999 relate to state
net operating losses, which are not expected to be realized.

The net deferred tax asset (liability) is recorded both as a current deferred
income tax asset and as other long-term liabilities based upon the
classification of the related temporary difference.

Cash payments for income taxes were $47.8 million, $39.1 million and $302.1
million ($265.7 million related to gain on sale of discontinued operations) in
2000, 1999 and 1998, respectively.


NOTE F -- EMPLOYEE BENEFIT PLANS

Prior to January 1, 1999, the Company maintained a defined benefit pension plan
for which most of its employees were eligible. In conjunction with significant
enhancements to the Company's 401(k) plan, the Company elected to freeze
benefits under this defined benefit pension plan as of December 31, 1998,
resulting in recognition of a curtailment gain of $2.15 million.

In 1994, the Company adopted a non-qualified, supplemental pension plan
covering certain employees, which provides for incremental pension payments so
that total pension payments equal those amounts that would have been payable
from the Company's principal pension plan if it were not for limitations imposed
by income tax regulation. The benefits under this supplemental pension plan will
continue to accrue as if the principal pension plan had not been frozen.


                                                                              25
<PAGE>   16


The status of the Company's defined benefit pension plans at year-end was as
follows:

<TABLE>
<CAPTION>
                                           Year ended December 31,
   In thousands                               2000          1999
                                           ----------    ----------
<S>                                        <C>           <C>
   CHANGE IN BENEFIT OBLIGATION

   Benefit obligation
      at beginning of year .............   $   68,685    $   86,332

   Service cost ........................          338           365

   Interest cost .......................        5,373         5,215

   Actuarial loss (gain) ...............       15,729       (18,708)

   Benefits paid .......................       (4,756)       (4,519)
                                           ----------    ----------
   Benefit obligation at end of year ...       85,369        68,685
                                           ----------    ----------

   CHANGE IN PLAN ASSETS

   Fair value of plan assets
      at beginning of year .............      101,679        85,548

   Actual return on plan assets ........       (6,567)       20,650

   Benefits paid .......................       (4,756)       (4,519)
                                           ----------    ----------

   Fair value of plan assets
      at end of year ...................       90,356       101,679
                                           ----------    ----------

   Funded status .......................        4,987        32,994

   Unrecognized actuarial loss (gain) ..        3,919       (29,904)

   Unrecognized prior service cost .....          684           750
                                           ----------    ----------
   Net amount recognized ...............   $    9,590    $    3,840
                                           ==========    ==========
</TABLE>

The Company's non-qualified pension plan has an accumulated benefit obligation
in excess of its assets of $7.0 million at December 31, 2000.

The weighted-average assumptions used for measurement of the defined pension
plans were as follows:

<TABLE>
<CAPTION>
                                                 December 31,
                                         2000        1999        1998
                                        ------      ------      ------
<S>                                     <C>         <C>         <C>
WEIGHTED-AVERAGE ASSUMPTIONS
   AS OF DECEMBER 31

Discount rate ..................          7.50%       8.00%       6.00%

Expected return
   on plan assets ..............         10.00%      10.00%      10.00%

Rate of compensation
   increase ....................          4.00%       4.00%       4.00%
</TABLE>

Net pension cost for both plans included the following components:

<TABLE>
<CAPTION>
                                              December 31,
In thousands                          2000        1999        1998
                                    --------    --------    --------
<S>                                 <C>         <C>         <C>
COMPONENTS OF NET PERIODIC
   BENEFIT COST (INCOME)

Service cost ....................   $    338    $    365    $  4,207

Interest cost ...................      5,373       5,215       5,759

Expected return
   on plan assets ...............     (9,951)     (8,351)     (8,243)

Amortization of
   prior service cost ...........         65          65           4

Recognized actuarial loss
   (gain) .......................     (1,575)        151          27

Recognized curtailment
   (gain) .......................         --          --      (2,150)
                                    --------    --------    --------
Net periodic benefit income .....   $ (5,750)   $ (2,555)   $   (396)
                                    ========    ========    ========
</TABLE>


Prior to January 1, 1999, the Company also sponsored several 401(k) plans to
provide employees with additional income upon retirement. The Company generally
matched a portion of employees' voluntary before-tax contributions. Employees
were fully vested in their own contributions and generally vested in the
Company's matching contributions upon three years of service. Effective January
1, 1999, changes were made that combined all 401(k) plans and allowed for
immediate vesting of enhanced Company matching contributions. Total 401(k)
expense recognized by the Company in 2000, 1999 and 1998 was $6.2 million, $5.1
million, and $1.4 million, respectively.

The 1994 Employee Stock Purchase Plan provides for a total of 2,000,000 shares
to be sold to participating employees at 85% of the fair market value at
specified quarterly investment dates. Shares available for sale totaled 453,198
at December 31, 2000.


NOTE G -- STOCKHOLDERS' EQUITY

In January 2001, the Company announced an increase in the regular quarterly
dividend from 2.5 cents per share to 3 cents per share, payable March 15, 2001
to holders of record on March 1, 2001.

During 2000 the Company repurchased 3,947,856 shares of its common stock for
$92.7 million under its stock repurchase program. In December 2000, the Company
authorized an increase of four million shares in the Company's stock repurchase
program. As of December 31, 2000 the Company has repurchased 14.0 million shares
since the beginning of its stock repurchase program in January 1997. Under this
program, the Company has authorization to repurchase an additional 4.6 million
shares.

26
<PAGE>   17


NOTE H -- STOCK OPTION PLANS

1984 PLAN

In 1984, the Company adopted a Stock Option Plan ("1984 Plan") pursuant to which
it issued to officers and key employees options to purchase shares of common
stock at prices equal to the market price on the grant date. Market price was
determined by the Board of Directors for purposes of granting stock options and
making repurchase offers. Options granted under the 1984 Plan become exercisable
five years after date of grant. At December 31, 2000, 1999 and 1998, options to
purchase 126,000 shares, 216,000 shares and 340,800 shares, respectively, were
outstanding under the 1984 Plan, with an exercise price of $3.33 per share at
December 31, 2000. No additional options will be granted under the 1984 Plan.

1991 PLAN

The Company adopted the 1991 Stock Option Plan ("1991 Plan") pursuant to which
it may issue to officers and key employees options to purchase up to 8,000,000
shares of common stock. Options have been granted at prices equal to the market
price on the grant date ("market price options") and at prices below market
price ("performance options"). As of December 31, 2000, 1999 and 1998, market
price options to purchase 6,597,025 shares, 5,873,475 shares and 5,058,550
shares, respectively, were outstanding with exercise prices ranging from $3.33
to $26.19 per share at December 31, 2000. Market price options granted prior to
January 1998 become exercisable after the fifth anniversary of their date of
grant. Beginning January 1998, market price options generally become exercisable
in 25% increments on the second, third, fourth and fifth anniversaries of their
date of grant. The weighted-average exercise price for outstanding options and
exercisable options at December 31, 2000 was $15.10 and $7.43, respectively. The
weighted-average remaining life for outstanding options was 6.18 years.

At December 31, 2000, 1999 and 1998, performance options to purchase 716,600
shares, 739,400 shares and 724,700 shares, respectively, were outstanding with
exercise prices ranging from $0.33 to $2.00 per share at December 31, 2000. The
performance options become exercisable in whole or in part after three years,
and the extent to which they become exercisable at that time depends upon the
extent to which the Company achieves certain goals established at the time the
options are granted. That portion of the performance options which does not
become exercisable at an earlier date becomes exercisable after the ninth
anniversary of the date of grant. Compensation expense of $0.4 million, $0.4
million and $0.6 million was recognized for the performance options for the
years ended December 31, 2000, 1999 and 1998, respectively. The weighted-average
exercise price for outstanding options and exercisable options at December 31,
2000 was $0.54 and $0.41, respectively. The weighted-average remaining life for
outstanding options was 3.09 years.


DIMARK

In connection with the DiMark merger, DiMark's outstanding stock options were
converted into options to acquire approximately 3.0 million shares of
Harte-Hanks common stock. There were no outstanding DiMark options as of
December 31, 2000. As of December 31, 1999 and 1998, DiMark options to purchase
54,792 shares and 182,864 shares, respectively, were outstanding.

The following summarizes all stock option plans activity during 2000, 1999 and
1998:

<TABLE>
<CAPTION>
                                                    WEIGHTED
                                      NUMBER        AVERAGE
                                     OF SHARES    OPTION PRICE
                                    ----------    ------------
<S>                                 <C>           <C>
   Options outstanding at
      January 1, 1998 ...........    5,996,916    $       7.13

   Granted ......................    1,315,050           19.13

   Exercised ....................     (727,980)           4.45

   Cancelled ....................     (277,072)          12.05
                                   -----------

   Options outstanding
      at December 31, 1998 ......    6,306,914            9.72

   Granted ......................    1,575,350           22.29

   Exercised ....................     (388,097)           6.76

   Cancelled ....................     (610,500)          17.88
                                   -----------

   Options outstanding
      at December 31, 1999 ......    6,883,667           12.04

   GRANTED ......................    1,163,600           22.01

   EXERCISED ....................     (327,992)           7.37

   CANCELLED ....................     (279,650)          20.20
                                   -----------

   OPTIONS OUTSTANDING
      AT DECEMBER 31, 2000 ......    7,439,625    $      13.50
                                   ===========
   EXERCISABLE AT
      DECEMBER 31, 2000 .........    2,852,831    $       5.75
                                   ===========
</TABLE>

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting For Stock-Based Compensation."
Accordingly, no compensation expense has been recognized for options granted
where the exercise price is equal to the market price of the underlying stock at
the date of grant. For options issued with an exercise price below the market
price of the underlying stock on the date of grant, the Company recognizes
compensation expense under the provisions of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees, as permitted under
SFAS No. 123.

Had compensation expense for the Company's options been determined based on the
fair value at the grant date for awards since January 1, 1995, consistent with
the provisions of SFAS No. 123, the Company's net income and diluted earnings
per share would have been reduced to the pro forma amounts indicated below.



<TABLE>
<CAPTION>
In thousands                                    Year ended December 31,
except per share amounts                   2000         1999         1998
<S>                                     <C>          <C>          <C>
Net income -- as reported ...........   $   81,866   $   72,941   $   68,371

Net income -- pro forma .............       77,245       68,923       65,636

Diluted earnings
   per share -- as reported .........         1.18         1.01         0.90

Diluted earnings
   per share -- pro forma ...........         1.11         0.95         0.86
</TABLE>


                                                                              27
<PAGE>   18


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                Year ended December 31,
                                          2000         1999           1998
                                       ----------   ----------     ----------
<S>                                    <C>          <C>            <C>
   Expected dividend yield...........         0.4%         0.3%           0.3%

   Expected stock price volatility...        23.0%        22.0%          21.0%

   Risk free interest rate...........         6.0%         6.0%           6.0%

   Expected life of options..........  3-10 years   3-10 years     3-10 years
</TABLE>


The weighted-average fair value of market price options granted during 2000,
1999 and 1998 was $9.66, $9.24 and $7.79, respectively. The weighted-average
fair value of performance options granted during 1999 and 1998 was $22.54 and
$16.82, respectively. The Company did not grant any performance options during
2000.


NOTE I -- FAIR VALUE OF FINANCIAL INSTRUMENTS

Because of their maturities and/or variable interest rates, certain financial
instruments of the Company have fair values approximating their carrying values.
These instruments include revolving credit agreements, accounts receivable,
trade payables, and miscellaneous notes receivable and payable. The Company's
equity securities which have a readily determinable fair value are recorded at
fair value. (See Note C.)

NOTE J -- COMMITMENTS AND CONTINGENCIES

At December 31, 2000, the Company had outstanding letters of credit in the
amount of $12.6 million. These letters of credit exist to support an acquisition
related note, the Company's insurance programs relating to worker's
compensation, automobile and general liability, and leases.


NOTE K -- LEASES

The Company leases certain real estate and equipment under various operating
leases. Most of the leases contain renewal options for varying periods of time.
The total rent expense applicable to operating leases was $26.3 million, $23.0
million and $18.5 million for the years ended December 31, 2000, 1999 and 1998,
respectively.

The future minimum rental commitments for all non-cancellable operating leases
with terms in excess of one year as of December 31, 2000 are as follows:

<TABLE>
<CAPTION>
   In thousands
<S>                                               <C>
   2001........................................   $ 23,135

   2002........................................     18,697

   2003........................................     13,768

   2004........................................      9,656

   2005........................................      5,184

   After 2005..................................     21,613
                                                  --------
                                                  $ 92,053
                                                  ========
</TABLE>


NOTE L -- EARNINGS PER SHARE

A reconciliation of basic and diluted earnings per share is as follows:

<TABLE>
<CAPTION>
   In thousands                                   Year ended December 31,
   except per share amounts                     2000       1999       1998
   ------------------------                   --------   --------   --------
<S>                                           <C>        <C>        <C>
   BASIC EPS

   Net income .............................   $ 81,886   $ 72,941   $ 68,371
                                              ========   ========   ========

   Weighted-average common
      shares outstanding used
      in earnings per share
       computations .......................     67,517     69,914     72,716
                                              ========   ========   ========

   Earnings per share .....................   $   1.21   $   1.04   $   0.94
                                              ========   ========   ========

   DILUTED EPS

   Net income .............................   $ 81,886   $ 72,941   $ 68,371
                                              ========   ========   ========

   Shares used in earnings per
      share computations ..................     69,653     72,144     76,057
                                              ========   ========   ========

   Earnings per share .....................   $   1.18   $   1.01   $   0.90
                                              ========   ========   ========

   COMPUTATION OF SHARES USED IN EARNINGS
      PER SHARE COMPUTATIONS

   Average outstanding
      common shares .......................     67,517     69,914     72,716

   Average common equivalent
      shares -- dilutive effect
      of option shares ....................      2,136      2,230      3,341
                                              --------   --------   --------

   Shares used in net earnings
      per share computations ..............     69,653     72,144     76,057
                                              ========   ========   ========
</TABLE>


As of December 31, 2000 the Company had 864,864 antidilutive market price
options outstanding.


28
<PAGE>   19



NOTE M -- SELECTED QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
   In thousands,                                  2000 Quarter Ended                           1999 Quarter Ended
                                 ----------------------------------------------  ---------------------------------------------
   except per share amounts      December 31  September 30  June 30   March 31   December 31  September 30  June 30   March 31
                                 -----------  ------------  -------   ---------  -----------  ------------  --------  --------
<S>                              <C>          <C>           <C>       <C>        <C>          <C>           <C>       <C>
   Revenues....................  $   255,818  $    243,205  $235,693  $ 226,057  $   236,959  $    207,632  $197,033  $188,128

   Operating income............       36,824        35,400    35,846     30,151       33,423        30,263    30,441    24,101

   Net income..................       21,605        21,132    21,395     17,754       20,236        18,603    18,768    15,334

   Basic earnings per share....         0.33          0.31      0.31       0.26         0.30          0.27      0.27      0.22

   Diluted earnings per share..         0.32          0.30      0.30       0.25         0.29          0.26      0.26      0.21
</TABLE>

NOTE N -- BUSINESS SEGMENTS

Harte-Hanks is a highly focused targeted media company with operations in two
segments -- direct and interactive marketing and shoppers.

The Company's direct and interactive marketing segment offers a complete range
of specialized, coordinated and integrated direct marketing services from a
single source. CRM and Marketing Services are provided in the direct and
interactive marketing segment. CRM revenues were $419.5 million, $335.5 million
and $301.3 million in 2000, 1999 and 1998, respectively. Marketing Services'
revenues were $242.5 million, $223.8 million and $192.6 million in 2000, 1999
and 1998, respectively. The Company utilizes advanced technologies to enable its
customers to identify, reach, influence and nurture specific consumers or
businesses. The Company's direct and interactive marketing customers include
many of America's largest retailers, banks, mutual fund companies,
pharmaceutical companies, healthcare organizations, insurance companies,
high-tech firms and telecommunications firms, along with a growing number of
customers in such selected markets as automotive, utilities and hospitality. Its
client base is both domestic and international.

The Company's shoppers segment produces weekly advertising publications
primarily delivered free by third-class mail to all households in a particular
geographic area. Shoppers offer advertisers a targeted, cost-effective local
advertising system, with virtually 100% penetration in their area of
distribution. Shoppers are particularly effective in large markets with high
media fragmentation in which major metropolitan newspapers generally have low
penetration.

Included in Corporate Activities are general corporate expenses. Assets of
Corporate Activities include unallocated cash and investments and deferred
income taxes.

Information as to the operations of Harte-Hanks in different business segments
is set forth below based on the nature of the products and services offered.
Harte-Hanks evaluates performance based on several factors, of which the primary
financial measures are segment revenues and operating income.
The accounting policies of the business segments are the same as those
described in the summary of significant accounting policies (Note A).

The operating results of Harte-Hanks Direct Marketing include the acquisitions
of Information Resource Group in November 2000 and Hi-Tech Marketing Limited in
June 2000.



29
<PAGE>   20


NOTE N -- BUSINESS SEGMENTS (CONTINUED)

         Information about the Company's operations in different industry
segments:





<TABLE>
<CAPTION>
                                                         Year Ended December 31,

   In thousands                                      2000          1999          1998
                                                  ----------    ----------    ----------
<S>                                               <C>           <C>           <C>
   Revenues
      Direct Marketing ........................   $  662,044    $  559,262    $  493,898
      Shoppers ................................      298,729       270,490       254,648
                                                  ----------    ----------    ----------
        Total revenues ........................   $  960,773    $  829,752    $  748,546
                                                  ==========    ==========    ==========

   Operating income
      Direct Marketing ........................   $   91,450    $   79,164    $   69,648
      Shoppers ................................       55,710        47,015        40,507
      Corporate Activities ....................       (8,939)       (7,951)       (8,197)
                                                  ----------    ----------    ----------
        Total operating income ................   $  138,221    $  118,228    $  101,958
                                                  ==========    ==========    ==========

   Income before income taxes
      Operating income ........................   $  138,221    $  118,228    $  101,958
      Interest expense ........................       (1,678)         (349)         (193)
      Interest income .........................        2,062         5,662        13,474
      Other, net ..............................       (1,746)         (730)       (1,230)
      Pension curtailment gain ................           --            --         2,150
                                                  ----------    ----------    ----------
        Total income before income taxes ......   $  136,859    $  122,811    $  116,159
                                                  ==========    ==========    ==========

   Depreciation
      Direct Marketing ........................   $   23,022    $   18,804    $   15,977
      Shoppers ................................        5,393         5,235         5,025
      Corporate Activities ....................           79            87            85
                                                  ----------    ----------    ----------
        Total depreciation ....................   $   28,494    $   24,126    $   21,087
                                                  ==========    ==========    ==========

   Goodwill and intangible amortization
      Direct Marketing ........................   $   11,156    $    6,593    $    3,703
      Shoppers ................................        4,070         4,069         4,187
                                                  ----------    ----------    ----------
        Total goodwill and intangible
           amortization........................   $   15,226    $   10,662    $    7,890
                                                  ==========    ==========    ==========

   Total assets
      Direct Marketing ........................   $  589,552    $  512,066    $  341,653
      Shoppers ................................      187,905       196,121       197,885
      Corporate Activities ....................       29,648        61,240       175,675
                                                  ----------    ----------    ----------
        Total assets ..........................   $  807,105    $  769,427    $  715,213
                                                  ==========    ==========    ==========

   Capital expenditures
      Direct Marketing ........................   $   34,030    $   24,450    $   18,655
      Shoppers ................................        2,408         4,434         5,764
      Corporate Activities ....................           27            44            24
                                                  ----------    ----------    ----------
        Total capital expenditures ............   $   36,465    $   28,928    $   24,443
                                                  ==========    ==========    ==========
</TABLE>


Information about the Company's operations in different geographic areas:

<TABLE>
<CAPTION>
                                                    Year Ended December 31,

   In thousands                                 2000           1999       1998
                                              ---------     ---------   ---------
<S>                                           <C>           <C>         <C>
Revenues(a)
   United States............................  $ 917,160     $ 800,700   $ 724,659
   Other countries..........................     43,613        29,052      23,887
                                              ---------     ---------   ---------
        Total revenues......................  $ 960,773     $ 829,752   $ 748,546
                                              =========     =========   =========

Long-lived assets(b)
   United States............................  $ 104,507     $ 102,630   $  89,905
   Other countries..........................      7,558         3,620       2,369
                                              ---------     ---------   ---------
        Total long-lived assets.............  $ 112,065     $ 106,250   $  92,274
                                              =========     =========   =========
</TABLE>


(a)  Geographic revenues are based on the location of the customer.
(b)  Long-lived assets are based on physical location.


30
<PAGE>   21


FIVE-YEAR FINANCIAL SUMMARY


<TABLE>
<CAPTION>
   IN THOUSANDS, EXCEPT PER SHARE AMOUNTS                  2000          1999          1998             1997             1996
                                                        ----------    ----------    ----------       ----------       ----------
<S>                                                     <C>           <C>           <C>              <C>              <C>
   Statement of Operations Data
     Revenues .......................................   $  960,773    $  829,752    $  748,546       $  638,349       $  515,460
     Operating expenses
        Payroll, production and distribution ........      686,502       606,676       553,529          479,742          392,494
        Selling, general and administrative .........       92,330        70,060        64,082           59,054           43,632
        Depreciation ................................       28,494        24,126        21,087           17,327           13,779
        Goodwill and intangible amortization ........       15,226        10,662         7,890            5,134            3,658
        Merger costs ................................           --            --            --               --           12,136(a)
                                                        ----------    ----------    ----------       ----------       ----------
           Total operating expense ..................      822,552       711,524       646,588          561,257          465,699
                                                        ----------    ----------    ----------       ----------       ----------
   Operating income .................................      138,221       118,228       101,958           77,092           49,761
   Interest expense, net ............................         (384)       (5,313)      (13,281)           1,777            6,629
   Income from continuing operations(b) .............       81,886        72,941        68,371(c)        44,271(d)        23,084(e)
   Income from continuing operations
        after extraordinary items, net of taxes .....       81,886        72,941        68,371           43,396(f)        23,084
   Earnings from continuing operations
        per common share -- diluted .................         1.18          1.01          0.90(c)          0.57(d)          0.30(e)
   Earnings from continuing operations after extra-
        ordinary items per common share -- diluted ..         1.18          1.01          0.90(c)          0.56(f)          0.30(e)
   Cash dividends per common share ..................         0.10          0.08          0.06             0.04             0.03
   Weighted-average common and common
        equivalent shares outstanding -- diluted ....       69,653        72,144        76,057           77,000           77,154
   Segment Data
        Revenues
           Direct Marketing .........................   $  662,044    $  559,262    $  493,898       $  425,489       $  330,255
           Shoppers .................................      298,729       270,490       254,648          212,860          185,205
                                                        ----------    ----------    ----------       ----------       ----------
           Total revenues ...........................   $  960,773    $  829,752    $  748,546       $  638,349       $  515,460
                                                        ==========    ==========    ==========       ==========       ==========

        Operating income
           Direct Marketing .........................   $   91,450    $   79,164    $   69,648       $   54,360       $   44,794
           Shoppers .................................       55,710        47,015        40,507           31,089           24,017
           General corporate ........................       (8,939)       (7,951)       (8,197)          (8,357)         (19,050)
                                                        ----------    ----------    ----------       ----------       ----------
           Total operating income ...................   $  138,221    $  118,228    $  101,958       $   77,092       $   49,761
                                                        ==========    ==========    ==========       ==========       ==========

   Other Data
        Operating cash flow(g) ......................   $  181,941    $  153,016    $  130,935       $   99,553       $   67,198(h)
        Capital expenditures ........................       36,465        28,928        24,443           28,396           23,885
   Balance Sheet Data (at end of period)
        Property, plant and equipment, net ..........   $  112,065    $  106,250    $   92,274       $   89,351       $   72,195
        Goodwill and other intangibles, net .........      439,148       409,791       290,831          250,363          142,053
        Total assets ................................      807,105       769,427       715,213          954,923          343,005
        Total long term debt ........................       65,370         5,000            --               --          218,005
        Total stockholders' equity ..................      551,003       577,618       577,091          566,237          252,692
</TABLE>



(a) Merger costs of $12.1 million related to DiMark merger.
(b) Represents income and earnings from continuing operations per common share
    before extraordinary items.
(c) Includes non-recurring pension gain of $1.3 million, or two cents per share,
    net of $0.8 million income tax expense. Excluding this gain, earnings were
    $0.88 per share.
(d) Includes non-recurring income of $0.4 million, or one-half cent per share,
    net of $0.4 million income tax expense related to the sale of stock in
    another company partially offset by other non-recurring items. Excluding
    this income, earnings were $0.57 per share.
(e) Includes merger costs of $8.7 million, or 11 cents per share, net of $3.4
    million income tax benefit. Excluding these costs, earnings were $0.41 per
    share.
(f) Includes extraordinary loss from the early extinguishment of debt of $0.9
    million, net of $0.6 million income tax benefit.
(g) Operating cash flow is defined as operating income plus depreciation and
    goodwill amortization. Operating cash flow is not intended to represent cash
    flow or any other measure of performance in accordance with generally
    accepted accounting principles.
(h) Excluding 1996 merger costs, operating cash flow was $79,334.


                                                                              31
<PAGE>   22


INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Harte-Hanks, Inc.:


     We have audited the accompanying consolidated balance sheets of
Harte-Hanks, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of operations, cash flows, and stockholders'
equity for each of the years in the three-year period ended December 31, 2000.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Harte-Hanks, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.



/s/ KPMG LLP

San Antonio, Texas

January 29, 2001


CORPORATE INFORMATION

COMMON STOCK

     The Company's common stock is listed on the New York Stock Exchange
(symbol: HHS). The quarterly stock price ranges for 2000 and 1999 were as
follows:

<TABLE>
<CAPTION>
                              2000                 1999
                         High      Low       High      Low
                       --------  --------  --------  --------
<S>                    <C>       <C>       <C>       <C>
   First Quarter.....   26.7500   19.6250   29.2500   24.1250

   Second Quarter....   25.9375   21.0000   28.0000   22.6250

   Third Quarter.....   27.8750   24.3750   27.4375   21.7500

   Fourth Quarter....   28.4375   21.5000   23.9375   19.5625
</TABLE>


   In 2000, quarterly dividends were paid at the rate of 2.5 cents per share. In
   1999, quarterly dividends were paid at the rate of 2 cent per share.

There are approximately 3,100 holders of record.


     TRANSFER AGENT AND REGISTRAR
     State Street Bank and Trust Company
     c/o EquiServe Limited Partnership
     P. O. Box 8200
     Boston, Massachusetts  02266-8200


     Annual Meeting of Stockholders
     The annual meeting of stockholders will be held at
     10:00 a.m. on May 8, 2001, at 200 Concord Plaza Drive,
     First Floor, San Antonio, Texas.

     FORM 10-K ANNUAL REPORT
     A copy of the Company's annual report to the Securities
     and Exchange Commission on Form 10-K may be obtained,
     without charge, upon written request to:


     Donald R. Crews, Secretary
     Harte-Hanks, Inc.
     P. O. Box 269
     San Antonio, Texas 78291-0269

<PAGE>   23


<TABLE>
<S>                                    <C>                                      <C>
DIRECTORS                              OFFICERS                                 GARY J. SKIDMORE
                                                                                Senior Vice President,
DAVID L. COPELAND                      LARRY FRANKLIN                           Direct Marketing
President, SIPCO, Inc.                 Chairman and
                                       Chief Executive Officer                  ROBERT G. BROWN
DR. PETER T. FLAWN                                                              Vice President, Direct Marketing
President Emeritus                     RICHARD M. HOCHHAUSER
The University of Texas at Austin      President and                            KATHY S. CALTA
Chairman, Audit Committee              Chief Operating Officer                  Vice President, Direct Marketing

LARRY FRANKLIN                         CRAIG COMBEST                            JAMES S. DAVIS
Chairman and                           Senior Vice President,                   Vice President, Direct Marketing
Chief Executive Officer                Direct Marketing
                                                                                Bill Goldberg
CHRISTOPHER M. HARTE                   DONALD R. CREWS                          Vice President, Direct Marketing
Private Investor                       Senior Vice President,
                                       Legal and Secretary                      Spencer A. Joyner, Jr.
HOUSTON H. HARTE                                                                Vice President, Direct Marketing
Vice Chairman                          CHARLES DALL'ACQUA
                                       Senior Vice President,                   FEDERICO ORTIZ
RICHARD M. HOCHHAUSER                  Direct Marketing                         Vice President, Tax
President and
Chief Operating Officer                PETER E. GORMAN                          R. TANN TUELLER
                                       Senior Vice President, Shoppers          Vice President, Direct Marketing
JAMES L. JOHNSON
Chairman Emeritus,                     JACQUES D. KERREST                       JESSICA M. HUFF
GTE Corporation                        Senior Vice President,                   Controller and
Chairman, Compensation Committee       Finance and Chief Financial Officer      Chief Accounting Officer
</TABLE>

- --------------------------------------------------------------------------------


<TABLE>
<S>                                  <C>                             <C>
HARTE-HANKS OPERATIONS               Bloomfield, Connecticut         Slough, England
                                     Cherry Hill, New Jersey         Thatcham, England
CORPORATE OFFICE                     Cincinnati, Ohio                Toronto, Canada
                                     Clearwater, Florida
San Antonio, Texas                   Dallas/Grand Prairie, Texas     SHOPPERS
http://www.harte-hanks.com           Deerfield Beach, Florida
                                     Fullerton, California           THE FLYER
DIRECT AND                           Jacksonville, Florida           South Florida
INTERACTIVE MARKETING                Kansas City, Kansas             http://www.theflyer.com
                                     Langhorne, Pennsylvania
CRM                                  Memphis, Tennessee              PENNYSAVER
                                     New York, New York              Northern California
Austin, Texas                        Sacramento, California          http://www.pennysaverusa.com
Billerica, Massachusetts             Westville, New Jersey
Dallas, Texas                        Wilkes-Barre, Pennsylvania      PENNYSAVER/SOUTH COAST SHOPPER
Glen Burnie, Maryland                                                Southern California --
La Jolla, California                 NATIONAL SALES HEADQUARTERS     Greater Los Angeles Area
Lake Katrine, New York                                               http://www.pennysaverusa.com
Lake Mary, Florida                   Cincinnati, Ohio
Los Angeles, California              Kansas City, Kansas             PENNYSAVER/BARGAIN BULLETIN
New York, New York                   La Jolla, California            Southern California --
River Edge, New Jersey                                               Greater San Diego Area
Sterling Heights, Michigan           INTERNATIONAL OFFICES           http://www.pennysaverusa.com
Sunnyvale, California
West Bridgewater, Massachusetts      Dublin, Ireland
                                     Hasselt, Belgium
MARKETING SERVICES                   London, England
                                     Madrid, Spain
Baltimore, Maryland                  Melbourne, Australia
Bellmawr, New Jersey                 Sao Paulo, Brazil
                                     Sevres, France
</TABLE>


                                                                              33


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>9
<FILENAME>d85151ex21.txt
<DESCRIPTION>SUBSIDIARIES OF THE COMPANY
<TEXT>

<PAGE>   1
                                                                      EXHIBIT 21


                        SUBSIDIARIES OF HARTE-HANKS, INC.
                              As of January 1, 2001

<TABLE>
<CAPTION>
                                                                    Jurisdiction of
Name of Entity                                                      Organization                % Owned
- --------------                                                      ------------                -------
<S>                                                                 <C>                         <C>
DiMark, Inc.                                                        New Jersey                    100%
Direct Market Concepts, Inc.                                        Florida                       100%
DMK, Inc.                                                           Delaware                      100%(2)
The Flyer Publishing Corporation                                    Florida                       100%
Harte-Hanks Data Services LLC                                       Maryland                      100%
Harte-Hanks Data Technologies LLC                                   Delaware                      100%
Harte-Hanks Delaware, Inc.                                          Delaware                      100%
Harte-Hanks Direct, Inc.                                            Delaware                      100%(1)
Harte-Hanks Direct Marketing/Baltimore, Inc.                        Maryland                      100%
Harte-Hanks Direct Marketing/Cincinnati, Inc.                       Ohio                          100%
Harte-Hanks Direct Marketing/Dallas, Inc.                           Delaware                      100%
Harte-Hanks Direct Marketing/Fullerton, Inc.                        California                    100%
Harte-Hanks Direct Marketing/Kansas City, Inc.                      Missouri                      100%
Harte-Hanks do Brazil Consultoria e Servicos Ltda.                  Brazil                        100%(3)
Harte-Hanks IRG, Inc.                                               Michigan                      100%
Harte-Hanks Limited                                                 England                       100%(3)
Harte-Hanks Market Intelligence, Inc.                               California                    100%
Harte-Hanks Market Intelligence Espana LLC                          Colorado                      100%
Harte-Hanks Market Intelligence Europe B.V.                         Netherlands                   100%
Harte-Hanks Market Intelligence GmbH                                Germany                       100%(4)
Harte-Hanks Market Intelligence Limited                             Ireland                       100%(4)
Harte-Hanks Market Intelligence Limited                             England                       100%(4)
Harte-Hanks Market Intelligence SAS                                 France                        100%(4)
Harte-Hanks Market Research, Inc.                                   New Jersey                    100%
Harte-Hanks Partnership, Ltd.                                       Texas                         100%(5)
Harte-Hanks Pty. Limited                                            Australia                     100%(3)
Harte-Hanks Response Management/Austin L.P.                         Delaware                      100%(6)
Harte-Hanks Response Management/Boston, Inc.                        Massachusetts                 100%
Harte-Hanks Response Management Call Centers, Inc.                  Delaware                      100%
Harte-Hanks Response Management Europe                              Belgium                       100%
Harte-Hanks Shoppers, Inc.                                          California                    100%
Harte-Hanks Stock Plan, Inc.                                        Delaware                      100%
Hi-Tech Marketing Limited                                           England                       100%
H&R Communications, Inc.                                            New Jersey                    100%(2)
HTS, Inc.                                                           Connecticut                   100%
Information for Marketing Limited (shell corporation)               England                       100%(7)
Mars Graphic Services, Inc.                                         New Jersey                    100%(8)
NSO, Inc.                                                           Ohio                          100%
Printing Management Systems, Inc.                                   Delaware                      100%
PRO Direct Response Corp.                                           New Jersey                    100%(2)
Southern Comprint Co.                                               California                    100%
Spectral Resources, Inc.                                            New York                      100%
</TABLE>

(1) Owned by Mars Graphic Services, Inc.
(2) Owned by Harte-Hanks Direct, Inc.
(3) Owned by Harte-Hanks Data Technologies LLC
(4) Owned by Harte-Hanks Market Intelligence Europe B.V.
(5) 99.5% Owned by Harte-Hanks Delaware, Inc.
      .5% Owned by Harte-Hanks , Inc.
(6) 99% Owned by Harte-Hanks Stock Plan, Inc.
     1% Owned by Harte-Hanks Response Management Call Centers, Inc.
(7) Owned by Harte-Hanks Limited
(8) Owned by DiMark, Inc.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>10
<FILENAME>d85151ex23.txt
<DESCRIPTION>CONSENT OF KPMG LLP
<TEXT>

<PAGE>   1
                                                                      EXHIBIT 23


                          Independent Auditors' Consent


The Board of Directors
Harte-Hanks, Inc.:

We consent to incorporation by reference in the registration statements (No.
333-63105, No. 33-51723, No. 33-54303, No. 333-03045 and No. 333-30995) on Form
S-8 of Harte-Hanks, Inc. of (i) our report dated January 29, 2001 relating to
the consolidated balance sheets of Harte-Hanks, Inc. and subsidiaries as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, cash flows and stockholders' equity for each of the years in the
three-year period ended December 31, 2000, which report appears in the 2000
annual report to stockholders which is incorporated by reference in the December
31, 2000 annual report on Form 10-K of Harte-Hanks, Inc. and (ii) our report
dated January 29, 2001, relating to the related financial statement schedule as
of and for each of the years in the three-year period ended December 31, 2000,
which report appears in the December 31, 2000 annual report on Form 10-K of the
Company.



                                          /s/ KPMG LLP


San Antonio, Texas
March 29, 2001


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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