-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gdd6WzX3M+MO7hMqFdIiUZPLnWosTspS7a04vaeuEOD+Jp3bwgBvaUOyiUWTxA68 KSrTG5dExiX7qdi5Gh4c/g== 0000950134-01-508431.txt : 20020410 0000950134-01-508431.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950134-01-508431 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07120 FILM NUMBER: 1785353 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 10-Q 1 d92005e10-q.txt FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X Quarterly report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For the quarterly period ended September 30, 2001 ------------------ Transition report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For the transition period from __________ to __________ Commission File Number 1-7120 ------ HARTE-HANKS, 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, San Antonio, Texas 78216 ------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code -- 210/829-9000 ------------ 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 the number of shares outstanding of each of the issuer's classes of common stock: $1 par value, 63,032,119 shares as of October 31, 2001. 2 HARTE-HANKS, INC. AND SUBSIDIARIES TABLE OF CONTENTS FORM 10-Q REPORT September 30, 2001
Page ---- Part I. Financial Information Item 1. Interim Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - September 30, 3 2001 and December 31, 2000 Condensed Consolidated Statements of Operations - 4 Three months ended September 30, 2001 and 2000 Condensed Consolidated Statements of Operations - 5 Nine months ended September 30, 2001 and 2000 Condensed Consolidated Statements of Cash Flows - 6 Nine months ended September 30, 2001 and 2000 Condensed Consolidated Statements of Stockholders' 7 Equity - Nine months ended September 30, 2001 and twelve months ended December 31, 2000 Notes to Unaudited Condensed Consolidated Financial 8 Statements Item 2. Management's Discussion and Analysis of Financial 13 Condition and Results of Operations Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 17 (a) Exhibits (b) Reports on Form 8-K Signature 18
3 Harte-Hanks, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except share amounts) - --------------------------------------------------------------------------------
(Unaudited) September 30, December 31, 2001 2000 ------------- ------------- Assets Current assets Cash and cash equivalents ................................ $ 20,022 $ 22,928 Accounts receivable, net ................................. 145,701 179,838 Inventory ................................................ 5,876 6,260 Prepaid expenses ......................................... 13,971 14,072 Current deferred income tax asset ........................ 8,102 7,648 Other current assets ..................................... 4,751 5,127 ------------- ------------- Total current assets .................................. 198,423 235,873 Property, plant and equipment, net .......................... 110,550 112,065 Goodwill and other intangibles, net ......................... 426,145 439,148 Other assets ................................................ 19,383 20,019 ------------- ------------- Total assets .......................................... $ 754,501 $ 807,105 ============= ============= Liabilities and Stockholders' Equity Current liabilities Accounts payable ......................................... $ 49,015 $ 60,069 Accrued payroll and related expenses ..................... 20,101 31,429 Customer deposits and unearned revenue ................... 37,451 42,712 Income taxes payable ..................................... 22,222 5,135 Other current liabilities ................................ 7,375 10,619 ------------- ------------- Total current liabilities ............................. 136,164 149,964 Long-term debt .............................................. 40,143 65,370 Other long-term liabilities ................................. 45,498 40,768 ------------- ------------- Total liabilities ..................................... 221,805 256,102 ------------- ------------- Stockholders' equity Common stock, $1 par value, 250,000,000 shares authorized. 78,106,103 and 76,916,339 shares issued at September 30, 2001 and December 31, 2000, respectively .................................... 78,106 76,916 Additional paid-in capital ............................... 215,985 202,222 Accumulated other comprehensive loss ..................... (1,378) (2,105) Retained earnings ........................................ 621,923 568,512 ------------- ------------- 914,636 845,545 Less treasury stock: 16,025,804 and 12,230,388 shares at cost at September 30, 2001 and December 31, 2000, respectively ....................... (381,940) (294,542) ------------- ------------- Total stockholders' equity ............................ 532,696 551,003 ------------- ------------- Total liabilities and stockholders' equity ............ $ 754,501 $ 807,105 ============= =============
See Notes to Unaudited Condensed Consolidated Financial Statements. 4 Harte-Hanks, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (in thousands, except per share amounts) - -------------------------------------------------------------------------------- (Unaudited)
Three Months Ended September 30, -------------------------------- 2001 2000 ------------ ------------ Operating revenues .............................................. $ 224,130 $ 243,205 ------------ ------------ Operating expenses Payroll ..................................................... 79,232 86,852 Production and distribution ................................. 77,489 86,047 Advertising, selling, general and administrative ............ 19,059 23,676 Depreciation ................................................ 8,072 7,394 Goodwill and intangible amortization ........................ 4,232 3,836 ------------ ------------ 188,084 207,805 ------------ ------------ Operating income ................................................ 36,046 35,400 ------------ ------------ Other expenses (income) Interest expense ............................................ 637 275 Interest income ............................................. (57) (619) Other, net .................................................. 2,303 312 ------------ ------------ 2,883 (32) ------------ ------------ Income before income taxes ...................................... 33,163 35,432 Income tax expense .............................................. 13,250 14,300 ------------ ------------ Net income ...................................................... $ 19,913 $ 21,132 ============ ============ Basic: Earnings per common share ................................... $ 0.32 $ 0.31 ============ ============ Weighted-average common shares outstanding .................. 62,600 67,519 ============ ============ Diluted: Earnings per common share ................................... $ 0.31 $ 0.30 ============ ============ Weighted-average common and common equivalent shares outstanding ....................................... 64,022 69,782 ============ ============
See Notes to Unaudited Condensed Consolidated Financial Statements. 5 Harte-Hanks, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (in thousands, except per share amounts) - -------------------------------------------------------------------------------- (Unaudited)
Nine Months Ended September 30, -------------------------------- 2001 2000 -------------- -------------- Operating revenues ......................................... $ 684,904 $ 704,955 -------------- -------------- Operating expenses Payroll ................................................ 253,722 260,151 Production and distribution ............................ 230,349 242,761 Advertising, selling, general and administrative ....... 59,978 68,523 Depreciation ........................................... 23,769 21,050 Goodwill and intangible amortization ................... 12,629 11,073 -------------- -------------- 580,447 603,558 -------------- -------------- Operating income ........................................... 104,457 101,397 -------------- -------------- Other expenses (income) Interest expense ....................................... 2,370 749 Interest income ........................................ (271) (1,644) Other, net ............................................. 3,914 1,125 -------------- -------------- 6,013 230 -------------- -------------- Income before income taxes ................................. 98,444 101,167 Income tax expense ......................................... 39,332 40,886 -------------- -------------- Net income ................................................. $ 59,112 $ 60,281 ============== ============== Basic: Earnings per common share .............................. $ 0.93 $ 0.89 ============== ============== Weighted-average common shares outstanding ............. 63,577 68,043 ============== ============== Diluted: Earnings per common share .............................. $ 0.91 $ 0.86 ============== ============== Weighted-average common and common equivalent shares outstanding .................................. 65,155 70,192 ============== ==============
See Notes to Unaudited Condensed Consolidated Financial Statements. 6 Harte-Hanks, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (in thousands) - -------------------------------------------------------------------------------- (Unaudited)
Nine Months Ended September 30, -------------------------------- 2001 2000 ------------ ------------ Operating Activities Net income ............................................................. $ 59,112 $ 60,281 Adjustments to reconcile net income to cash provided by operating activities: Depreciation ........................................................ 23,769 21,050 Goodwill and intangible amortization ................................ 12,629 11,073 Amortization of option-related compensation ......................... 158 418 Deferred income taxes ............................................... 2,918 3,878 Other, net .......................................................... 4,026 961 Changes in operating assets and liabilities, net of acquisitions: Decrease (increase) in accounts receivable, net ..................... 34,137 (6,220) Decrease in inventory ............................................... 384 837 Decrease (increase) in prepaid expenses and other current assets ................................................... 477 (246) Decrease in accounts payable ........................................ (10,348) (12,874) Increase (decrease) in other accrued expenses and other current liabilities .................................... (1,486) 2,524 Other, net .......................................................... 242 (5,406) ------------ ------------ Net cash provided by operating activities ........................ 126,018 76,276 ------------ ------------ Investing Activities Acquisitions .......................................................... (453) (9,207) Purchases of property, plant and equipment ............................ (23,503) (26,125) Proceeds from sale of property, plant and equipment ................... 682 144 Net sales and maturities of available-for-sale investments ...................................... -- 88 ------------ ------------ Net cash used in investing activities ............................ (23,274) (35,100) ------------ ------------ Financing Activities Long-term borrowings ................................................... 242,000 3,288 Repayment of long-term borrowings ...................................... (267,000) (5,000) Issuance of common stock ............................................... 7,330 4,369 Purchase of treasury stock ............................................. (82,336) (33,406) Issuance of treasury stock ............................................. 57 61 Dividends paid ......................................................... (5,701) (5,099) ------------ ------------ Net cash used in financing activities ............................ (105,650) (35,787) ------------ ------------ Net increase (decrease) in cash ........................................ (2,906) 5,389 Cash and cash equivalents at beginning of year ......................... 22,928 35,196 ------------ ------------ Cash and cash equivalents at end of period ............................. $ 20,022 $ 40,585 ============ ============
See Notes to Unaudited Condensed Consolidated Financial Statements. 7 Harte-Hanks, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders' Equity (2001 Unaudited) - --------------------------------------------------------------------------------
Accumulated Additional Other Total Common Paid-In Retained Treasury Comprehensive Stockholders' Stock Capital Earnings Stock Income (Loss) Equity ----------- ----------- --------- --------- ------------- ------------- 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 repurchase ......... -- -- -- (92,706) -- (92,706) Treasury stock issued ............. -- 11 -- 70 -- 81 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 net 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 Common stock issued- employee benefit plans ....... 136 2,525 -- -- -- 2,661 Exercise of stock options for cash and by surrender of shares .......... 1,054 5,211 -- (5,114) -- 1,151 Tax benefit of options exercised .................... -- 6,022 -- -- -- 6,022 Dividends paid ($0.09 per share) ....................... -- -- (5,701) -- -- (5,701) Treasury stock repurchase ......... -- -- -- (82,336) -- (82,336) Treasury stock issued ............. -- 5 -- 52 -- 57 Comprehensive income, net of tax: Net income ................... -- -- 59,112 -- -- 59,112 Foreign currency translation adjustment ... -- -- -- -- (170) (170) Change in net unrealized gain (loss) on long-term investments, net of reclassification adjustments (net of tax of $483) ............. -- -- -- -- 897 897 ------------- Total comprehensive income ........ 59,839 ----------- ----------- --------- --------- ------------- ------------- Balance at September 30, 2001 ......................... $ 78,106 $ 215,985 $ 621,923 $(381,940) $ (1,378) $ 532,696 =========== =========== ========= ========= ============= =============
See Notes to Unaudited Condensed Consolidated Financial Statements. 8 Harte-Hanks, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements NOTE A - BASIS OF PRESENTATION The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Harte-Hanks, Inc. and subsidiaries (the "Company"). The statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosure required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months and nine months ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 2000. Certain prior period amounts have been reclassified for comparative purposes. NOTE B - INCOME TAXES The Company's quarterly and nine month income tax provision of $13.3 million and $39.3 million, respectively, was calculated using an effective income tax rate of approximately 40.0%. The Company's effective income tax rate is derived by estimating pretax income and income tax expense for the year ending December 31, 2001. The effective income tax rate calculated is higher than the federal statutory rate of 35% due to the addition of state taxes and to certain expenses recorded for financial reporting purposes (primarily goodwill amortization) which are not deductible for federal income tax purposes. 9 NOTE C - EARNINGS PER SHARE A reconciliation of basic and diluted earnings per share (EPS) is as follows:
Three Months Ended September 30, In thousands, except per share amounts 2001 2000 ---------- ---------- BASIC EPS Net Income ........................................................ $ 19,913 $ 21,132 ========== ========== Weighted-average common shares outstanding used in earnings per share computations ......................... 62,600 67,519 ========== ========== Earnings per common share ......................................... $ 0.32 $ 0.31 ========== ========== DILUTED EPS Net Income ........................................................ $ 19,913 $ 21,132 ========== ========== Shares used in diluted earnings per share computations ............ 64,022 69,782 ========== ========== Earnings per common share ......................................... $ 0.31 $ 0.30 ========== ========== Computation of shares used in earnings per share computations: Average outstanding common shares ................................. 62,600 67,519 Average common equivalent shares - dilutive effect of option shares ................................ 1,422 2,263 ---------- ---------- Shares used in diluted earnings per share computations ............ 64,022 69,782 ========== ==========
Nine months ended September 30, In thousands, except per share amounts 2001 2000 ------------ ------------ BASIC EPS Net Income ........................................................ $ 59,112 $ 60,281 ============ ============ Weighted-average common shares outstanding used in earnings per share computations ......................... 63,577 68,043 ============ ============ Earnings per common share ......................................... $ 0.93 $ 0.89 ============ ============ DILUTED EPS Net Income ........................................................ $ 59,122 $ 60,281 ============ ============ Shares used in diluted earnings per share computations ............ 65,155 70,192 ============ ============ Earnings per common share ......................................... $ 0.91 $ 0.86 ============ ============ Computation of shares used in earnings per share computations: Average outstanding common shares ................................. 63,577 68,043 Average common equivalent shares - dilutive effect of option shares ................................ 1,578 2,149 ------------ ------------ Shares used in diluted earnings per share computations ............ 65,155 70,192 ============ ============
As of September 30, 2001 the Company had approximately 1,202,000 antidilutive market price options outstanding, which have been excluded from the EPS calculations. 10 NOTE D - BUSINESS SEGMENTS Harte-Hanks is a highly focused targeted media company with operations in two segments - direct and interactive marketing and shoppers.
Three Months Ended September 30 In thousands 2001 2000 ------------ ------------ Operating revenues Direct Marketing ........................ $ 143,474 $ 165,608 Shoppers ................................ 80,656 77,597 ------------ ------------ Total operating revenues ............ $ 224,130 $ 243,205 ============ ============ Operating Income Direct Marketing ........................ $ 20,624 $ 21,544 Shoppers ................................ 17,597 15,603 Corporate Activities .................... (2,175) (1,747) ------------ ------------ Total operating income .............. $ 36,046 $ 35,400 ============ ============ Income before income taxes Operating income ........................ $ 36,046 $ 35,400 Interest expense ........................ (637) (275) Interest income ......................... 57 619 Other, net .............................. (2,303) (312) ------------ ------------ Total income before income taxes .... $ 33,163 $ 35,432 ============ ============
Nine Months Ended September 30 In thousands 2001 2000 ------------ ------------ Operating revenues Direct Marketing ........................ $ 449,021 $ 481,150 Shoppers ................................ 235,883 223,805 ------------ ------------ Total operating revenues ............ $ 684,904 $ 704,955 ============ ============ Operating Income Direct Marketing ........................ $ 63,380 $ 65,094 Shoppers ................................ 47,811 42,549 Corporate Activities .................... (6,734) (6,246) ------------ ------------ Total operating income .............. $ 104,457 $ 101,397 ============ ============ Income before income taxes Operating income ........................ $ 104,457 $ 101,397 Interest expense ........................ (2,370) (749) Interest income ......................... 271 1,644 Other, net .............................. (3,914) (1,125) ------------ ------------ Total income before income taxes .... $ 98,444 $ 101,167 ============ ============
11 NOTE E - RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. SFAS No. 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. SFAS No. 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of". The Company is required to adopt the provisions of SFAS No. 141 immediately, except with regard to business combinations initiated prior to July 1, 2001 and SFAS No. 142 effective January 1, 2002. Furthermore, any goodwill and any intangible asset determined to have an indefinite useful life that are acquired in a purchase business combination completed after June 30, 2001 will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-SFAS No. 142 accounting literature. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of SFAS No. 142. SFAS No. 141 will require, upon adoption of SFAS No. 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in SFAS No. 141 for recognition apart from goodwill. Upon adoption of SFAS No. 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of SFAS No. 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. In connection with the transitional goodwill impairment evaluation, SFAS No. 142 will require the Company to perform an assessment of whether there is an indication that goodwill and equity-method goodwill is impaired as of the date of adoption. To accomplish this, the Company must identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of it assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with SFAS No. 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company's statement of operations. As of the date of adoption, the Company expects to have unamortized goodwill in the amount of $418.2 million and unamortized identifiable intangible assets in the amount of $3.9 million, all of which will be subject to the transition provisions of SFAS No. 141 and 142. Amortization expense related to goodwill was $14.8 million and $12.2 million for the year ended December 31, 2000 and the nine months ended September 30, 2001, respectively. Because of the extensive effort needed to comply with adopting SFAS No. 141 and 142, it is not practicable to reasonably estimate the impact of adopting these Statements on the Company's financial statements at the date of this report, including whether any transitional impairment losses will be required to be recognized as the cumulative effect of a change in accounting principle. 12 SFAS No. 143, "Accounting for Asset Retirement Obligations," issued in June 2001, addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the asset. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The Company will adopt SFAS No. 143 as of January 1, 2003. At this time the Company does not believe that the adoption of SFAS No. 143 will have a material impact on its financial statements. SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," issued in August 2001, addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes both SFAS No. 121 and APB Opinion No. 30, and establishes a single accounting model for long-lived assets to be disposed of by sale. The Company will adopt SFAS No. 144 as of January 1, 2002. At this time the Company does not believe that the adoption of SFAS No. 144 will have a material impact on its financial statements. 13 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - ------------------------------------------------------------------------------- RESULTS OF OPERATIONS Operating results were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED In thousands SEPT. 30, 2001 SEPT. 30, 2000 CHANGE SEPT. 30, 2001 SEPT. 30, 2000 CHANGE -------------- -------------- ------ -------------- -------------- ------ Revenues $ 224,130 243,205 -7.8% $ 684,904 $ 704,955 -2.8% Operating expenses 188,084 207,805 -9.5% 580,447 603,558 -3.8% -------------- -------------- -------------- -------------- Operating income $ 36,046 $ 35,400 1.8% $ 104,457 $ 101,397 3.0% ============== ============== ============== ============== Net income $ 19,913 $ 21,132 -5.8% $ 59,112 $ 60,281 -1.9% ============== ============== ============== ============== Diluted earnings per share $ 0.31 $ 0.30 3.3% $ 0.91 $ 0.86 5.8% ============== ============== ============== ==============
Consolidated revenues declined 7.8% to $224.1 million while operating income grew 1.8% to $36.0 million in the third quarter of 2001 when compared to the third quarter of 2000. Overall operating expenses compared to 2000 decreased 9.5% to $188.1 million. Net income declined 5.8% to $19.9 million in the third quarter of 2001 when compared to the third quarter of 2000. Diluted earnings per share grew 3.3% to 31 cents per share, compared to 30 cents per share. The net income decline resulted from the growth in operating income offset by $0.9 million in net interest expense and $2.0 million of write-downs on equity investments. DIRECT MARKETING Direct and interactive marketing operating results were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED In thousands SEPT. 30, 2001 SEPT. 30, 2000 CHANGE SEPT. 30, 2001 SEPT. 30, 2000 CHANGE -------------- -------------- ------ -------------- -------------- ------ Revenues $ 143,474 $ 165,608 -13.4% $ 449,021 $ 481,150 -6.7% Operating expenses 122,850 144,064 -14.7% 385,641 416,056 -7.3% -------------- -------------- -------------- -------------- Operating income $ 20,624 $ 21,544 -4.3% $ 63,380 $ 65,094 -2.6% ============== ============== ============== ==============
Direct and interactive marketing revenues decreased $22.1 million, or 13.4%, in the third quarter of 2001 compared to 2000. These results reflect declines in almost all of direct and interactive marketing's vertical markets, including declines in the segment's largest vertical markets, retail, financial services and high tech/telecom. The overall decline was partially offset by strong growth in revenues from the pharmaceutical industry. Both Customer Relationship Management (CRM) and Marketing Services revenues declined from the prior year. CRM experienced revenue declines in data processing, agency, fulfillment, consulting, telesales and brokered customer list business, partially offset by increased software revenue and increased revenues attributable to acquisitions. Marketing Services experienced revenue declines in its targeted mail, logistics, and personalized direct mail. Operating expenses decreased $21.2 million, or 14.7%, in the third quarter of 2001 compared to 2000. The overall decrease in operating expenses was primarily due to the Company's continuing efforts to manage its cost structure during the current difficult economic environment and to control discretionary costs. Production and distribution costs decreased $9.0 million due to decreased volumes and better pricing obtained from vendors. Also contributing to the decreased operating expenses were decreased labor costs of $7.8 due to a smaller workforce. General and administrative expense decreased $5.5 million due to decreased employee and professional services expenses. Depreciation and amortization expense increased $1.1 million due to goodwill associated with prior year acquisitions and depreciation of new capital investments to support future growth. Operating expenses were also impacted by prior year acquisitions. Direct and interactive marketing revenues decreased $32.1 million, or 6.7%, in the first nine months of 2001 compared to the first nine months of 2000. Both CRM and Marketing 14 Services experienced decreased revenues in the first nine months of 2001. Overall, these results were impacted by declines in almost all of direct and interactive marketing's vertical markets, including declines in the segment's largest vertical markets, retail, financial services and high tech/telecom. Partially offsetting these declines were revenues attributable to prior year acquisitions and strong revenue growth in the health care and pharmaceutical industries. Operating expenses decreased $30.4 million, or 7.3%, in the first nine months of 2001 compared to the first nine months of 2000. The overall decrease in operating expenses was primarily due to the Company's efforts to manage its cost structure during the current difficult economic environment and to control discretionary costs. Production and distribution costs decreased $16.5 million due to decreased volumes and better pricing obtained from vendors. Also contributing to the decreased operating expenses were decreased labor costs of $8.1 million due to a smaller workforce. General and administrative expense decreased $10.3 million primarily due to decreased employee and professional services expenses. Depreciation and amortization expense increased $4.4 million due to goodwill associated with prior year acquisitions and new capital investment to support future growth. Operating expenses were also impacted by prior year acquisitions. SHOPPERS Shopper operating results were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED In thousands SEPT. 30, 2001 SEPT. 30, 2000 CHANGE SEPT. 30, 2001 SEPT. 30, 2000 CHANGE -------------- -------------- ------ -------------- -------------- ------ Revenues $ 80,656 $ 77,597 3.9% $ 235,883 $ 223,805 5.4% Operating expenses 63,059 61,994 1.7% 188,072 181,256 3.8% -------------- -------------- -------------- -------------- Operating income $ 17,597 $ 15,603 12.8% $ 47,811 $ 42,549 12.4% ============== ============== ============== ==============
Shopper revenues increased $3.1 million, or 3.9%, in the third quarter of 2001 compared to 2000. Revenue increases were the result of improved sales in established markets as well as new year-over-year geographic expansions into new neighborhoods in both California and Florida. From a product-line perspective, Shoppers had growth in both its in-book products, primarily core sales and real estate related advertising, and its distribution products, primarily 4-color glossy heatset flyers. In the quarter, Shoppers experienced declines in its in-book employment advertising section and in its coupon book and print-and-deliver product lines. Operating expenses increased $1.1 million, or 1.7%, in the third quarter of 2001 compared to 2000. The increase in operating expenses was primarily due to additional promotion costs of $0.8 million and increased production costs of $0.4 million, including increased postage of $0.3 million due to higher postage rates and increased insurance costs of $0.5 million. Labor costs decreased $0.2 million in the quarter, partially offsetting the increased operating expenses. Shopper revenues increased $12.1 million, or 5.4%, in the first nine months of 2001 compared to the first nine months of 2000. Revenue increases were the result of improved sales in established markets as well as new year-over-year geographic expansions into new neighborhoods in both California and Florida. From a product-line perspective, Shoppers had growth in both its in-book products, primarily core sales and real estate and employment related advertising, and its distribution products, primarily pre-printed inserts and 4-color glossy heatset flyers. In the first nine months of 2000, Shoppers experienced slowdowns in its in-book automotive advertising section and its coupon book and print-and-deliver product lines. Operating expenses increased $6.8 million, or 3.8%, in the first nine months of 2001 compared to the first nine months of 2000. The increase in operating expenses was primarily due to increases in labor costs of $1.2 million, additional promotion costs of $2.3 million and additional production costs of $4.1 million, including increased postage of $2.8 million due to increased volumes and higher postage rates, and increased paper costs of $0.9 million due to higher paper rates. 15 Other Income and Expense During the first nine months of 2001 the Company recorded losses of approximately $2.7 million on the write-down of investments which are classified as available-for-sale and $1.0 million on the write-down of an investment which was being accounted for under the cost method. These investments were written down due to the fact that their estimated fair values fell below their carrying values for a period of time that was viewed as other than temporary by the Company's management. Interest Expense/Interest Income Interest income decreased $0.6 million in the third quarter of 2001 and $1.4 million in the first nine months of 2001 when compared to the same periods in 2000. These decreases were due to larger cash and investment balances and higher interest rates during the first nine months of 2000. Interest expense increased $0.4 million in the third quarter of 2001 and $1.6 million in the first nine months of 2001 over the same periods in 2000. The increase was primarily due to higher debt levels during the first nine months of 2001, the proceeds of which were primarily used to repurchase the Company's stock. Income Taxes The Company's income tax expense decreased $1.1 million in the third quarter of 2001 and $1.6 million in the first nine months of 2001 compared to the same periods in 2000. This decrease was due primarily to the lower pre-tax income levels. The effective tax rate was 40.0% for the third quarter and the first nine months of 2001 compared to 40.4% for the same periods in 2000. Liquidity and Capital Resources Cash provided by operating activities for the nine months ended September 30, 2001 was $126.0 million, compared to $76.3 million for the nine months ended September 30, 2000. The increase in 2001 primarily related to increased collections of a higher accounts receivable balance at December 31, 2000 than at December 31, 1999. Net cash outflows from investing activities were $23.3 million for the first nine months of 2001 compared to net cash outflows of $35.1 million for the first nine months of 2000. The cash outflows in 2001 primarily relate to purchases of fixed assets, while the cash outflows in 2000 were attributable to purchases of fixed assets and acquisitions. Net cash outflows from financing activities were $105.7 million in 2001 compared to net cash outflows of $35.8 million in 2000. The cash outflow in 2001 is attributable primarily to the repurchase of the Company's stock and net repayments of borrowings, while the cash outflow in 2000 primarily related to the repurchase of the Company's stock. Capital resources are also 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, 2001 the Company was granted a 364-day extension to its $100 million revolving 364-Day Credit Agreement. All borrowings under the 364-Day Credit Agreement are to be repaid by November 1, 2002. As of September 30, 2001, the Company had $170 million of unused borrowing capacity under these two credit facilities. Management believes that its credit facilities, together with cash provided from operating activities, will be sufficient to fund operations and anticipated acquisitions and capital service needs for the foreseeable future. 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, including its revenues, net 16 income and earnings per share; however, the risks described below are not the only ones the Company faces. Additional risks and uncertainties that are not presently known, or that the Company currently considers immaterial, could also impair the Company's business operations. 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. 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 are, 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 the 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. While dependent on employment levels and general economic conditions, qualified personnel historically have been in great demand and from time to time in the foreseeable future will likely remain a limited resource. Postal Rates and Service -- The Company's shoppers and direct and interactive marketing services depend on the United States Postal Service ("USPS") to deliver products. The Company's shoppers are delivered by standard mail, and postage is the second largest expense, behind payroll, in the Company's shopper business. The present standard postage rates went into effect in the third quarter of 2001 and are expected to increase in the second half of 2002. Future postage rates may also be impacted by the USPS's response to recent threats to the postal system. 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. In recent years newsprint prices have fluctuated widely, and such fluctuations can materially affect the results of the Company's operations. Economic Conditions -- Changes in national economic conditions, such as events following the September 11, 2001 attacks, can affect levels of advertising expenditures generally, and such changes can affect each of the Company's businesses. In addition, 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 17 strength of the local economies in those markets. Direct and interactive marketing revenues are dependent on national and international economics. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. See index to Exhibits on Page 19. (b) No Form 8-K has been filed during the three months ended September 30, 2001. 18 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HARTE-HANKS, INC. November 14, 2001 /s/ Jacques D. Kerrest ----------------- --------------------------------------- Date Jacques D. Kerrest Senior Vice President, Finance and Chief Financial Officer EXHIBIT INDEX
Exhibit No. Description of Exhibit Page No. - ------- --------------------------------------------------------------- -------- 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) Second Amended and Restated Bylaws 22 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. 3 dated October 26, 2001 to 364-Day Credit Agreement [$100 million]. 47 4(d) Other long term debt instruments are not being filed pursuant to Section (b)(4)(iii) of Item 601 of Regulation S-K. Copies of such instruments will be furnished to the Commission upon request. 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).
Exhibit No. Description of Exhibit Page No. - ------- --------------------------------------------------------------- -------- 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 (filed as Exhibit 10(c) to the Company's Form 10-K for the year ended December 31, 2000 and incorporated by reference herein). 10(d) Severance Agreement between Harte-Hanks, Inc. and Richard M. Hochhauser dated as of December 15, 2000 (filed as Exhibit 10(d) to the Company's Form 10-K for the year ended December 31, 2000 and incorporated by reference herein). 10(e) Form 1 of Severance Agreement between Harte-Hanks, Inc. and certain Executive Officers of the Company, dated as of December 15, 2000 (filed as Exhibit 10(e) to the Company's Form 10-K for the year ended December 31, 2000 and incorporated by reference herein). 10(f) Form 2 of Severance Agreement between Harte-Hanks, Inc. and certain Executive Officers of the Company, dated as of December 15, 2000 (filed as Exhibit 10(f) to the Company's Form 10-K for the year ended December 31, 2000 and incorporated by reference herein). 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(h) to the Company's Form 10-Q for the six months ended June 30, 2000 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).
Exhibit No. Description of Exhibit Page No. - ------- --------------------------------------------------------------- -------- 10(l) Amendment One to Harte-Hanks, Inc. Amended and Restated Restoration Plan dated December 18, 2000 (filed as Exhibit 10(l) to the Company's Form 10-K for the year ended December 31, 2000 and incorporated by reference herein). *21 Subsidiaries of the Company. 53
- ---------- *Filed herewith EX-3.(B) 3 d92005ex3-b.txt 2ND AMENDMENT TO BYLAWS 25 EXHIBIT 3(b) SECOND AMENDED AND RESTATED BY-LAWS HARTE-HANKS, INC. (A DELAWARE CORPORATION) AS ADOPTED AND IN EFFECT ON SEPTEMBER 5, 2001 26 HARTE-HANKS, INC. (A DELAWARE CORPORATION) SECOND AMENDED AND RESTATED BY-LAWS AS ADOPTED AND IN EFFECT ON SEPTEMBER 5, 2001 ARTICLE I - STOCKHOLDERS Section 1.1 Annual Meetings. An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held on such date and at such time as the Board of Directors of the Corporation (the "Board") shall each year fix, which date shall be within 13 months subsequent to the date of the last annual meeting of stockholders. An annual meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine. Section 1.2 Special Meetings. Special meetings of the stockholders, for any purpose or purposes prescribed in the notice of the meeting, may be called by the Board or the Chief Executive Officer of the Corporation and shall be held on such date and at such time as the Board or such officer shall fix. A special meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine. Section 1.3 Notice of Stockholder Business; Nominations. No business may be transacted at an annual meeting of stockholders, other than business that is either (i) specified in 27 the notice of meeting (or any supplement thereto) given by or at the direction of the Board (or any duly authorized committee thereof), (ii) otherwise properly brought before the annual meeting by or at the direction of the Board (or any duly authorized committee thereof) or (iii) otherwise properly brought before the annual meeting by any stockholder of the Corporation (1) who is a stockholder of record on the date of the giving of the notice provided for in this Section 1.3 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (2) who complies with the notice procedures set forth in this Section 1.3. For business to be properly brought before an annual meeting by a stockholder, including a nomination of a person for election to the Board to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation and such business must otherwise be a proper matter for stockholder action. No business may be transacted at a special meeting of stockholders other than business that is specified in the Corporation's notice of such meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of such meeting (a) by or at the direction of the Board or (b) provided that the Board has determined that directors shall be elected at such special meeting, by any stockholder who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.3. To be timely, a stockholder's notice to the Secretary of the Corporation must be delivered to or mailed and received at the principal executive offices of the Corporation (i) in the case of an annual meeting, not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary 28 date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs. To be in proper written form, a stockholder's notice to the Secretary of the Corporation must set forth as to each matter such stockholder proposes to bring before the annual meeting (1) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (2) the name and record address of such stockholder, (3) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (4) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (5) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. To be in proper written form with respect to stockholder nominations for director, a stockholder's notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or 29 of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understanding between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 1.3, provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 1.3 shall be deemed to preclude discussion by any stockholder of any such business. If the presiding officer at an annual meeting determines that business was not properly brought before the annual meeting in accordance with 30 the foregoing procedures, the presiding officer shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. No person shall be eligible for election as a stockholder nominee of the Corporation unless nominated in accordance with the procedures set forth in this Section 1.3. If the presiding officer of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the presiding officer shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 1.3, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 1.3 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. Section 1.4 Notice of Meetings. Notice of all meetings of the stockholders shall be given in writing or by electronic transmission in the manner provided by law (meaning, here and hereinafter, as required from time to time by the Delaware General Corporation Law (the "DGCL") or the Certificate of Incorporation of the Corporation) stating the date, time and place, if any, of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called. Such notice shall be given not less than ten nor more than 60 days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law. When a meeting is adjourned to another date, time or place (if any), written notice need not be given of the adjourned meeting if the date, time or place (if any) thereof are announced at 31 the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than 30 days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the date, time and place (if any) of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. Section 1.5 Quorum. At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law. Where a separate vote by class or classes is required, a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter. When any meeting is convened, the presiding officer, if directed by the Board, may adjourn the meeting if (a) no quorum is present for the transaction of business, or (b) the Board determines that adjournment is necessary or appropriate to enable the stockholders (i) to consider fully information which the Board determines has not been made sufficiently or timely available to stockholders or (ii) otherwise to exercise effectively their voting rights. Prior to the time when any meeting is convened the officer who would be the presiding officer at such meeting, if directed by the Board, may postpone the meeting if the Board determines that adjournment is necessary or appropriate to enable the stockholders (a) to consider fully information which the 32 Board determines has not been made sufficiently or timely available to stockholders or (b) otherwise to exercise effectively their voting rights. If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then except as otherwise required by law, those present at such adjourned meeting shall constitute a quorum, and all matters shall be determined by a majority of the votes cast at such meeting. Section 1.6 Organization. Such person as the Board may have designated or, in the absence of such a person, the Chief Executive Officer of the Corporation or, in his or her absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary of the Corporation, the secretary of the meeting shall be such person as the chairman appoints. Section 1.7 Conduct of Business. The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him or her in order. Section 1.8 Proxies and Voting. At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy. Such a proxy may be prepared, transmitted and delivered in any manner established for the meeting and permitted by law. 33 Each stockholder shall have one vote for every share of stock entitled to vote which is registered in his or her name on the record date for the meeting, except as otherwise provided herein or required by law. All voting, including on the election of directors but excepting where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefore by a stockholder entitled to vote or his or her proxy, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting and, if authorized by the Board, the ballot may be submitted by electronic transmission in the manner provided by law. Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the chairman of the meeting. All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law, all other matters shall be determined by a majority of the votes cast. Where a separate vote by class is required, unless otherwise prescribed by law, the affirmative vote of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class. Section 1.9 Stock List. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the record address of each such stockholder and the number of shares registered in his or her name, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten days prior to the meeting, either on a reasonably accessible electronic network as permitted by law (provided that the information 34 required to gain access to the list is provided with the notice of the meeting) or during normal business hours at the principal place of business of the Corporation. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present at the meeting. If the meeting is held solely by means of remote communication, then the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access the list shall be provided with the notice of the meeting. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. ARTICLE II - BOARD OF DIRECTORS Section 2.1 Number and Term of Office. The number of directors who shall constitute the whole board shall be such number as the Board shall at the time have designated, except that in the absence of any such designation, such number shall be seven. Each director shall be elected for a term of three years and until his or her successor is elected and qualified, except as otherwise provided herein or required by law. Whenever the authorized number of directors is increased between annual meetings of the stockholders, a majority of the directors then in office shall have the power to elect such new directors for the balance of a term and until their successors are elected and qualified. Any decrease in the authorized number of directors shall not become effective until the expiration of the term of the directors then in office unless, at the time of such decrease, there shall be vacancies on the Board which are being eliminated by the decrease. 35 Section 2.2 Vacancies. If the office of any director becomes vacant by reason of death, resignation, disqualification, removal or other cause, a majority of the directors remaining in office, although less than a quorum, may elect a successor for the unexpired term and until his or her successor is elected and qualified. Section 2.3 Regular Meetings. Regular meetings of the Board shall be held at such place or places on such date or dates, and at such time or times as shall have been established by the Board and publicized among all directors. Further notice of each regular meeting shall not be required. Section 2.4 Special Meetings. Special meetings of the Board may be called by one-third of the directors then in office (rounded up to the nearest whole number) or by the Chief Executive Officer of the Corporation and shall be held at such place, on such date, and at such time as they or such officer shall fix. Notice of the place, date, and time of each such special meeting shall be given each director by whom it is not waived at least five days before the meeting if the notice is mailed, or at least 24 hours before the meeting if such notice is given by telephone, hand delivery, telegram, telex, mailgram, facsimile, electronic mail or other means of electronic transmission. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. Section 2.5 Quorum. At any meeting of the Board, a majority of the total number of the whole Board shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, 36 without further notice or waiver thereof. Section 2.6 Remote Meetings Permitted. Members of the Board, or of any committee thereof, may participate in a meeting of the Board or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other and such participation pursuant to a conference telephone or other communications equipment shall constitute presence in person at such meeting. Section 2.7 Conduct of Business. At any meeting of the Board, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law. Action may be taken by the Board without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Section 2.8 Powers. The Board may, except as otherwise required by law, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, including, without limiting the generality of the foregoing, the unqualified power: (1) To declare dividends from time to time in accordance with law; (2) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine; 37 (3) To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith; (4) To remove any officer of the Corporation with or without cause, and from time to time to devolve the powers and duties of any officer upon any other person for the time being; (5) To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents; (6) To adopt from time to time such stock, option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; (7) To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; (8) To adopt from time to time regulations, not inconsistent with these By-laws, for the management of the Corporation's business and affairs; and (9) To appoint a Chairman to preside at meetings of the Board and to perform such other duties as may be specified from time to time by the Board. Section 2.9 Compensation of Directors. Directors, as such, may receive, pursuant to resolution of the Board, fixed fees and other compensation for their services as directors, including, without limitation, their services as members of committees of the Board. 38 ARTICLE III - COMMITTEES Section 3.1 Committees of the Board of Directors. The Board, by a vote of a majority of the whole Board, may from time to time designate committees of the Board, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. Any committee so designated may exercise the power and authority of the Board to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the DGCL, if the resolution which designates the committee or a supplemental resolution of the Board shall so provide. In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may by unanimous vote appoint another member of the Board to act at the meeting in the place of the absent or disqualified member. Section 3.2 Conduct of Business. Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-third of the members shall constitute a quorum unless the committee shall consist of one or two members, in which event one member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all members thereof consent thereto in 39 writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of such committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. ARTICLE IV - OFFICERS Section 4.1 Generally. The officers of the Corporation shall consist of a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary and such other officers, including a Chairman of the Board, as may from time to time be appointed by the Board. Officers shall be elected by the Board, which shall consider that subject at its first meeting after every annual meeting of stockholders. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any number of offices may be held by the same person. Section 4.2 Chairman of the Board. The Board may, in its discretion, choose a Chairman of the Board. In the event that there is a Chairman of the Board, he or she shall preside at all meetings of the Board and shall have and perform such duties as are prescribed by these By-laws and as may delegated by the Board may from time to time. Section 4.3 Chief Executive Officer. The Board shall designate either the Chairman of the Board or the President to serve as the Chief Executive Officer of the Corporation. Subject to the control of the Board, the Chief Executive Officer shall be vested with authority to act for the Corporation and shall have supervisory direction and control of the business and affairs of the 40 Corporation and such other general powers and duties of supervision and management which are commonly incident to the office of Chief Executive Officer or that are delegated to him or her by the Board. Section 4.4 The President. The President shall be the chief operating officer of the Corporation. Subject to the provisions of these By-laws and to the direction of the Board and the supervisory powers of the Chief Executive Officer of the Corporation, the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of President or that are delegated to him or her by the Board. The President shall have power to sign all stock certificates, contracts and other instruments of the Corporation, which are authorized and shall have general supervision and direction of all of the other officers, employees and agents of the Corporation (other than the Chief Executive Officer of the Corporation, if the Chief Executive Officer is an officer other than the President). Section 4.5 Vice President. Each Vice President shall have such powers and duties as are commonly incident to the office of Vice President or that are delegated to him or her by the Board. A Vice President may be designated by the Board to perform the duties and exercise the powers of the President in the event of the President's absence or disability. Section 4.6 Secretary. The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board. The Secretary shall have charge of the corporate books and shall perform such other 41 duties as the Board may from time to time prescribe. Section 4.7 Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof. Section 4.8 Removal. Any officer of the Corporation may be removed at any time, with or without cause, by the Board. Section 4.9 Action with Respect to Securities of Other Corporations. Unless otherwise directed by the Board, the Chief Executive Officer shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which the Corporation may hold securities and otherwise to exercise any and all rights and powers which the Corporation may possess by reason of its ownership of securities in such other corporation. ARTICLE V - STOCK Section 5.1 Certificates of Stock. Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by the Chairman, the Chief Executive Officer, the President or a Vice President, and by the Secretary or an Assistant Secretary, certifying the number of shares owned by such stockholder. Any or all of the signatures on the certificate may be facsimile. 42 Section 5.2 Transfers of Stock. Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 5.4 of these By-laws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefore. Section 5.3 Record Date. The Board may fix a record date, which shall not be more than 60 nor less than ten days before the date of any meeting of stockholders, nor more than 60 days prior to the time for the other action hereinafter described, as of which there shall be determined the stockholders who are entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof; to receive payment of any dividend or other distribution or allotment of any rights; or to exercise any rights with respect to any change, conversion or exchange of stock or with respect to any other lawful action. Section 5.4 Lost, Stolen or Destroyed Certificates. In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity. Section 5.5 Regulations. The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board may establish. 43 ARTICLE VI - NOTICES Section 6.1 Notices. Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, director, officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mails, postage paid, or by sending such notice by prepaid telegram, mailgram, telex, overnight express courier or facsimile. Any such notice shall be addressed to such stockholder, director, officer, employee or agent at his or her last known address as the same appears on the books of the Corporation. The notice shall be deemed given (a) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (b) in the case of delivery by mail, upon deposit in the mail, (c) in the case of delivery by overnight express courier, when dispatched, and (d) in the case of delivery via telegram, telex, mailgram or facsimile, when dispatched. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these By-laws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (i) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 6.1 shall be deemed given: (1) if by facsimile telecommunication, when directed to a number at which the stockholder 44 has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (3) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) if by any other form of electronic transmission, when directed to the stockholder. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated herein. Section 6.2 Waivers. A written waiver of any notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to such person. Neither the business nor the purpose of any meeting need be specified in such a waiver. ARTICLE VII - MISCELLANEOUS Section 7.1 Facsimile Signatures. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these By-laws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board or a committee thereof. Section 7.2 Corporate Seal. The Board may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by 45 the Board or a committee thereof, duplicates of the seal may be kept and used by an Assistant Secretary. Section 7.3 Reliance upon Books, Reports and Records. Each director, each member of any committee designated by the Board, and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation, including reports made to the Corporation by any of its officers, by an independent certified public accountant, or by an appraiser selected with reasonable care. Section 7.4 Fiscal Year. The fiscal year of the Corporation shall be as fixed by the Board. Section 7.5 Time Periods. In applying any provision of these By-laws which requires that an act be done or not done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included. ARTICLE VIII - INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 8.1 Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit, or proceeding whether civil, criminal, administrative, or investigative (a "Proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the 46 Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation or as its representative in a partnership, joint venture, trust, or other enterprise, including service with respect to employee benefit plans, whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, representative or in any other capacity while serving as a director, officer, or representative, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys' fees, judgments, fines, excise taxes under the Employee Retirement Income Security Act or penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer or representative and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that, except as provided in Section 8.2 with respect to Proceedings to enforce rights to indemnification, the Corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by the Board. Such rights shall be contract rights and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the DGCL requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance 47 of the final disposition of such proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it should ultimately be determined by final judicial decision from which there is no further right to appeal that such director or officer is not entitled to be indemnified under this Section 8.1 or otherwise. Section 8.2 Right of Claimant to Bring Suit. If a claim under Section 8.1 is not paid in full by the Corporation within 60 days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses in which case the applicable period shall be 20 days, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part in any such suit, or in a suit brought by the Corporation against the claimant to recover an advancement of expenses pursuant to the terms of an undertaking referred to in Section 8.1 hereof, the claimant shall be entitled to be paid also the expense of prosecuting or defending such claim. In any suit brought by the claimant to enforce a right to indemnification hereunder, and in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover any advanced expenses upon a final adjudication that the claimant has not met the standards of conduct that make it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of providing such defense shall be on the Corporation. Neither the failure of the Corporation (including the Board, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, nor an actual 48 determination by the Corporation (including the Board, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant had not met the applicable standard of conduct. Section 8.3 Non-Exclusivity of Rights. The rights conferred on any person by Sections 8.1 and 8.2 shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Corporation's Certificate of Incorporation, these By-laws, any agreement, vote of stockholders or disinterested directors, or otherwise. Section 8.4 Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any such director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. Section 8.5 Continuance. Any repeal or modification of the foregoing sections of this Article VIII by the stockholders of the Corporation shall not adversely affect any right or protection of an officer, director or representative of the Corporation existing at the time of such repeal or modification. ARTICLE IX - AMENDMENTS These By-laws may be altered, amended, rescinded or repealed by either by (a) a majority 49 of the authorized number of directors and, if one or more interested stockholders (as defined in Section 203 of the DGCL) exists, by a majority of the directors who are Continuing Directors (as defined below) or (b) the affirmative vote of the holders of not less than sixty-six and two-thirds percent of the voting power of the Corporation's capital stock and, if such alteration, amendment, rescission of repeal is proposed by or on behalf of an interested stockholder or director affiliated with an interested stockholder, by a majority of the disinterested shares. As used herein, a "Continuing Director" means a director of the Corporation who (i) was a member of the Board as of September 20, 1993, or (ii) is a beneficial owner, or an affiliate of such beneficial owner, of less than 20 percent of the Common Stock of the Corporation and who became a director of the Corporation subsequent to September 20, 1993, and whose initial election or initial nomination for election was approved by a majority of the Continuing Directors then on the Board. EX-4.(C) 4 d92005ex4-c.txt AMENDMENT NO. 3 TO CREDIT AGREEMENT 50 EXHIBIT 4(c) AMENDMENT NO. 3 AMENDMENT NO. 3 dated as of October 26, 2001, between HARTE-HANKS, INC. (the "Borrower") and the lenders party hereto (the "Lenders"). WHEREAS, the Borrower, the Lenders and The Chase Manhattan Bank as Administrative Agent are parties to a 364-Day Credit Agreement dated as of November 4, 1999 (as amended by Amendment No. 1 thereto dated as of November 9, 1999 and as further amended by Amendment No. 2 thereto dated as of October 30, 2000, the "Credit Agreement"); WHEREAS, the Borrower and the Lenders wish to extend the Commitment Termination Date (as such term is defined in the Credit Agreement) and, in that connection, reallocate certain of the Commitments. NOW THEREFORE, in consideration of the premises and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Definitions. Except as otherwise defined in this Amendment No. 2, terms defined in the Credit Agreement are used herein as defined therein. Section 2. Amendments. Subject to the satisfaction of the condition specified in Section 3, but with effect on and after the date hereof, the Credit Agreement is hereby amended as follows: 2.01. Extension of Commitment Termination Date. The definition of "Commitment Termination Date" in Section 1.01 of the Credit Agreement is hereby amended to read in its entirety as follows: "Commitment Termination Date" means October 25, 2002, subject to extension as provided in Section 2.10 (or, if such date is not a Business Day, the preceding Business Day). 2.02. Adjustment to Commitments. The Commitments of the Lenders shall be adjusted so that, after giving effect thereto, the Commitments of the Lenders are allocated as provided in Annex I hereto. Section 3. Condition Precedent. The amendments to the Credit Agreement set forth in Section 2 above shall become effective upon (i) the execution and delivery of this Amendment No. 3 by the Borrower and each Lender, (ii) delivery to the Administrative Agent of resolutions of the Board of Directors of the Borrower adopted in respect of the transactions contemplated hereby, in form and substance satisfactory to the Administrative Agent and (iii) the payment to each Lender of an extension fee in the amount of .03% of the Commitment of such Lender after giving effect to the amendment set forth in Section 2. In addition, in the event that on the date of such effectiveness there shall be any outstanding Loans under the Credit Agreement, then it shall be an additional condition to such effectiveness that, notwithstanding any provision of the Credit Agreement requiring that Loans and prepayments be allocated ratably, the Lenders that are increasing their Commitments shall make Syndicated Loans under the Credit Agreement, the proceeds of which shall be applied to the prepayment of Syndicated Loans held by the Lenders whose Commitments are decreasing, so that after giving effect thereto the Syndicated Loans are held by the Lenders ratably in accordance with their Commitments as adjusted hereunder, and the Borrower shall have paid any amounts owing under Section 2.16 of the Credit Agreement in connection with such prepayment. 51 Section 4. Representations and Warranties. The Borrower represents and warrants to the Lenders that the representations and warranties set forth in Article III of the Credit Agreement (as amended hereby) are true and complete on the date hereof as if made on and as of the date hereof (or, if such representation or warranty is expressly stated to be made as of a specific date, as of such specific date) and as if each reference in said Article III to "this Agreement" included reference to this Amendment No. 3. Section 5. Miscellaneous. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Amendment No. 3 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 3 by signing any such counterpart. This Amendment No. 3 shall be governed by, and construed in accordance with, the law of the State of New York. [Remainder of the page intentionally left blank] 52 IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to be duly executed and delivered as of the day and year first above written. HARTE-HANKS, INC. By ---------------------------- Name: Title: LENDERS THE CHASE MANHATTAN BANK By ---------------------------- Name: Title: BANK OF AMERICA, N.A. By ---------------------------- Name: Title: BANK OF TOKYO-MITSUBISHI, LTD. By ---------------------------- Name: Title: UMB BANK, N.A. By ---------------------------- Name: Title: 53 WELLS FARGO BANK NATIONAL ASSOCIATION By ---------------------------- Name: Title: WESTDEUTSCHE LANDESBANK GIROZENTRALE NEW YORK BRANCH By ---------------------------- Name: Title: By ---------------------------- Name: Title: THE BANK OF NEW YORK By ---------------------------- Name: Title: MELLON BANK, N.A. By ---------------------------- Name: Title: 54 RETIRING LENDER BANK ONE, TEXAS, N.A. By ---------------------------- Name: Title: 55 SCHEDULE I Commitments
Name of Lender Commitment - -------------- ----------- The Chase Manhattan Bank $ 14,500,000.00 Bank of America, N.A. 14,500,000.00 Bank of Tokyo-Mitsubishi, Ltd. 12,500,000.00 UMB Bank, N.A. 12,500,000.00 Wells Fargo Bank, N.A. 12,500,000.00 Westdeutsche Landesbank Girozentrale New York Branch 12,500,000.00 The Bank of New York 10,500,000.00 Mellon Bank, N.A. 10,500,000.00 ---------------- Total $ 100,000,000.00
EX-21 5 d92005ex21.txt SUBSIDIARIES OF THE REGISTRANT 56 EXHIBIT 21 RESTRICTED SUBSIDIARIES OF HARTE-HANKS , INC. As of September, 2001
Jurisdiction of Name of Entity Organization % Owned - -------------- --------------- ------- DiMark, Inc. New Jersey 100% Direct Market Concepts, Inc. Florida 100% DMK, Inc. Delaware 100%(2) The Flyer Publishing Corporation Florida 100% Harte-Hanks CRM Services UK Limited England 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% 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%
(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. -----END PRIVACY-ENHANCED MESSAGE-----