SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C.  20549

                               FORM 10-K


      X    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

              For the fiscal year ended DECEMBER 31, 1993

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

       For the transition period from __________ to __________ 

                     Commission File Number 1-7120

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

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

200 CONCORD PLAZA DRIVE SUITE 800
        SAN ANTONIO, TEXAS                         78216
(Address of principal executive offices)        (Zip Code)

Registrant's telephone number, including area code -- 210-829-9000 


      Securities registered pursuant to Section 12(b) of the Act:

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

      Securities registered pursuant to Section 12(g) of the Act:

                                 NONE
                           (Title of class)

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

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

Aggregate market value of the Company's voting stock held by
non-affiliates on March 15, 1994, based on the $20 3/8 per share
closing price for the Company's Common Stock on the New York Stock
Exchange on such date: approximately $164,795,527.

Shares outstanding at March 15, 1994:     
     Common Stock - 18,158,400 shares

Documents incorporated by reference:
     The Company's Annual Report to Stockholders for the year ended
          December 31, 1993 (incorporated in Part II to the extent
          provided in Items 5, 6, 7 and 8 hereof).
     Definitive Proxy Statement for the Company's May 6, 1994 Annual
          Meeting of Stockholders to be filed pursuant to Regulation
          14A under the Securities Exchange Act of 1934 (incorporated
          in Part III to the extent provided in Items 10, 11 and 12
          hereof).
                          
                                   2

                   Harte-Hanks Communications, Inc.
                           Table of Contents
                           Form 10-K Report
                           December 31, 1993
PART I                                                        PAGE

    Item 1.   Business                                       3

    Item 2.   Properties                                     3

    Item 3.   Legal Proceedings                             17

    Item 4.   Submission of Matters to a Vote of Security   17
              Holders

PART II

    Item 5.   Market for Registrant's Common Equity and     17
              Related Stockholder Matters

    Item 6.   Selected Financial Data                       17

    Item 7.   Management's Discussion and Analysis of
              Financial Condition and Results
              of Operations                                 17

    Item 8.   Financial Statements and Supplementary Data   17

    Item 9.   Changes in and Disagreements with Accountants 17
              on Accounting and Financial Disclosure

PART III

    Item 10.  Directors and Executive Officers of the 
              Registrant                                    18

    Item 11.  Executive Compensation                        18

    Item 12.  Security Ownership of Certain Beneficial
              Owners and Management                         18

    Item 13.  Certain Relationships and Related
              Transactions                                  18

PART IV

    Item 14.  Exhibits, Financial Statement Schedules and   18
              Reports on Form 8-K.

Signatures                                                  23


                                3

ITEM 1.  BUSINESS and ITEM 2.  PROPERTIES

INTRODUCTION

      Harte-Hanks is a diversified communications company with
operations throughout the United States in four principal
businesses -- newspapers, shoppers, direct marketing and television. 
The Company's newspaper, shopper and television businesses operate in
local markets, while its direct marketing business operates
nationwide.  The Company believes that its leadership positions within
its markets have resulted from offering high-quality products,
utilizing advanced technologies and innovative marketing strategies,
and establishing strong relationships with its readers, viewers and
advertisers.  The Company's strategy is to increase revenues by
building upon its existing businesses and by applying its capabilities
both across its businesses and to new products and markets, enabling
it to capitalize on trends in the media industry toward the use of
more direct, targeted marketing.  Consistent with this strategy, the
Company is investing in advanced technologies, equipment and
personnel, introducing new products and services in existing markets,
entering new markets and making selective acquisitions.  In 1993, the
Company had revenues of $463.5 million.

      Harte-Hanks is the successor to a newspaper business begun in
Texas in the early 1920s by Houston Harte and Bernard Hanks.  In 1972,
the Company went public and was listed on the NYSE.  The Company went
private in a leveraged buyout initiated by management in 1984.  In
November 1993, the Company again went public and listed its common
stock on the NYSE.

      See Note H of Notes to Consolidated Financial Statements for
certain financial information by business segment.

HARTE-HANKS NEWSPAPERS

General

      Harte-Hanks publishes the only daily newspaper in Abilene,
Corpus Christi, San Angelo and Wichita Falls, Texas and Anderson,
South Carolina (the "five principal newspapers").  The Company also
publishes four daily newspapers and 19 nondaily newspapers in higher-
income suburban areas of Boston and Dallas (the "suburban
newspapers").  In all of its daily newspaper markets, the Company
realizes additional revenue from niche publications and specialized
services (such as special interest publications and direct mail
programs) aimed at targeted consumer groups.  Harte-Hanks' strategy in
its newspaper business is to build upon its strong local franchises,
to offer complementary products and services and to expand its market
areas.

      The Company's five principal newspapers have achieved high
levels of household penetration.  For 1993, daily circulation
penetration in the city zones for the five principal newspapers ranged
from 50% to 72%, and Sunday circulation penetration in the city zones
for the five principal newspapers ranged from 70% to 83%, providing
advertisers with broad coverage of the five principal newspapers'
local markets.  Based on Standard Rate & Data's CIRCULATION '94, the
daily editions of the Company's newspapers in Abilene, San Angelo and
Wichita Falls ranked among the top 50 in the United States based on
household penetration in United States Census Bureau metropolitan


                                4

statistical areas.  In addition, these same newspapers Sunday editions
rank in the top 25 in the United States based on household
penetration.  The Sunday editions of the newspapers in Wichita Falls,
San Angelo, Abilene and Corpus Christi rank first, second, fourth and
fifth among all Texas newspapers, respectively, based on household
penetration.  Harte-Hanks' suburban newspapers serve local communities
within larger metropolitan areas and concentrate on local news stories
and other items of interest to those communities.  Harte-Hanks
newspapers are recognized for their editorial excellence and community
leadership, with each newspaper edited locally to reflect the views
and interests of the particular market it serves.  In 1993, Harte-
Hanks newspapers had revenues of $131.5 million and accounted for
approximately 28% of the Company's revenues.

Five Principal Newspapers

      The Company believes that the high penetration levels of its
five principal newspapers are important to advertisers in their
determination of where to allocate advertising dollars as advertisers
increasingly require evidence that their messages are actually
reaching consumers.  The Company's five principal newspapers, together
with their related niche publications, accounted for approximately 70%
of revenues of Harte-Hanks' newspapers in 1993.

      The following table sets forth certain information with respect
to the Company's five principal newspapers for 1993:

                                                     AVERAGE
                                AVERAGE PAID       CIRCULATION
                               CIRCULATION(1)     PENETRATION(2)
PUBLICATION                  DAILY     SUNDAY   DAILY    SUNDAY

Corpus Christi Caller-Times  67,508    96,032     50%     70%
  (Founded 1877)

Abilene Reporter-News        42,505    54,163     61%     77%
  (Founded 1881)

Anderson Independent-Mail    42,532    48,477     72%     82%
  (Founded 1899)

Wichita Falls Times Record
  News (Founded 1907)        39,326    48,066     63%     78%

San Angelo Standard-Times    32,446    39,516     66%     83%
  (Founded 1884)

(1)  In 1993, approximately 83% of daily circulation was home
     delivered, with the remaining 17% derived from single copy sales.

(2)  Penetration is average paid circulation in the city zone divided
     by the number of households in the city zone.

                                5

     The CORPUS CHRISTI CALLER-TIMES is a morning newspaper serving
Corpus Christi, Texas and 17 surrounding counties in South Texas.  For
the years 1989, 1990, 1991 and 1993 the Dallas Press Club named the
Caller-Times the best daily newspaper in Texas with circulation under
100,000. Average circulation of the Sunday edition of the Caller-Times
increased from 87,475 in 1988 to 96,032 in 1993.  Sunday circulation
reached an all-time high of 98,815 in 1993.  The Corpus Christi
metropolitan statistical area had an estimated population of 359,000
as of December 31, 1992.  The Corpus Christi economy is based on
tourism, military, shipping, oil and gas production, petrochemicals,
refining, manufacturing, agriculture, higher education, regional
health services and regional retail services.  Texas A&M University-
Corpus Christi will become a four-year institution with graduate
programs in 1994.  The Port of Corpus Christi is the nation's sixth
largest in terms of shipping tonnage.

     The ABILENE REPORTER-NEWS is a morning newspaper serving Abilene,
Texas and its surrounding area.  The Abilene metropolitan statistical
area had an estimated population of 119,700 as of December 31, 1992. 
Abilene was recognized as one of ten All-America Cities in the United
States by the National Civic League in 1990 and is the heart of a
15-county regional trade market located in Central West Texas.  The
Abilene economy is built around the oil and gas industry, agriculture,
light industry, military, regional health services and higher
education, including three universities located in Abilene.

     The ANDERSON INDEPENDENT-MAIL is a morning newspaper serving
Anderson, South Carolina and its surrounding area.  It regularly
receives editorial and public service awards, particularly for its
programs to increase literacy. Average paid circulation of the Sunday
edition of the Anderson Independent-Mail increased for the last four
years, from 42,729 in 1989 to 48,477 in 1993.  Anderson County had an
estimated population of 148,300 as of December 31, 1992.  Anderson
County is the retail and manufacturing center for a 9 county area
(which includes Clemson University) covering the northwest corner of
South Carolina and the northeast corner of Georgia.  Other industries
include agriculture, healthcare, recreation and retirement services.

     The WICHITA FALLS TIMES RECORD NEWS is a morning newspaper
serving Wichita Falls, Texas and 18 surrounding counties in North
Texas and Southern Oklahoma.  The Wichita Falls metropolitan
statistical area had an estimated population of 130,000 as of December
31, 1992.  The Wichita Falls economy is diversified and consists of
manufacturing, military, agriculture, oil and gas and retail and
wholesale trade.  Sheppard Air Force Base is a significant factor in
the Wichita Falls economy and is currently undergoing a $200 million
facilities expansion.

     The SAN ANGELO STANDARD-TIMES is a morning newspaper serving San
Angelo, Texas and its surrounding area.  The San Angelo metropolitan
statistical area had an estimated population of 101,000 as of December
31, 1992.  San Angelo has a diversified economic base consisting of
petroleum, military, regional health services, agriculture and light
industry.  Goodfellow Air Force Base in San Angelo is currently
undergoing a $45 million facilities expansion.


                                6

Suburban Newspapers

     The Company publishes four daily newspapers and 19 nondaily
newspapers in higher income suburban communities within metropolitan
Boston and Dallas. Harte-Hanks' suburban newspapers concentrate on
local news stories and other items of interest to the communities they
serve and allow advertisers to target consumers in these communities. 
The suburban newspapers typically compete with daily newspapers
published in the same large metropolitan area and local editions of
some daily newspapers.  Readers of the suburban newspapers typically
subscribe to one or more other newspapers.  The Company's nondaily
suburban newspapers are published either once or twice a week, and
many of them are distributed free of charge.  The Company's suburban
newspapers, together with their related niche publications, accounted
for approximately 30% of Harte-Hanks newspaper revenues in 1993.

     The following table sets forth certain information with respect
to the Company's suburban newspapers for 1993:
                                                          AVERAGE
                                                TYPE OF    CIRCU-
LOCATION              PUBLICATION NAME        PUBLICATION  LATION

MASSACHUSETTS
    Framingham        The Middlesex News        Daily     38,000
                                                Sunday    48,000
    Waltham           Waltham News Tribune      Daily     10,000
    Dedham            Dedham Daily Transcript   Daily      9,000

    Other Boston Area Newton Graphic            Nondaily  28,000
    Communities       Needham Chronicle         Nondaily  12,000
                      Arlington Advocate        Nondaily  10,000
                      Wellesley Townsman        Nondaily   8,000
                      Belmont Citizen-Herald    Nondaily   6,000
                      Wayland-Weston Town Crier Nondaily   5,000
                      West Roxbury Transcript   Nondaily   5,000
                      Winchester Star           Nondaily   5,000
                      Sudbury Town Crier        Nondaily   4,000
                      Roslindale Parkway 
                        Transcript              Nondaily   3,000
                      Watertown Sun             Nondaily   3,000
TEXAS
    Dallas Area       Plano Star Courier        Daily     13,000
                                                Sunday    15,000
                      Mesquite News             Nondaily  33,000
                      Lewisville Leader         Nondaily  25,000
                      Carrollton Chronicle      Nondaily  24,000
                      The Colony Leader         Nondaily   8,000
                      Farmers Branch Times      Nondaily   8,000
                      Coppell Gazette           Nondaily   7,000
                      McKinney Messenger        Nondaily   7,000
                      Allen American            Nondaily   4,000


                                7

Niche Publications and Services

      In addition to its primary newspaper products, in all of its
markets the Company publishes numerous niche advertising and special
interest publications to allow advertisers to target specific consumer
groups more effectively or to achieve increased market coverage.  The
specialized publications include rack products, coupon books, guides
covering specialized subjects such as television and real estate,
editions zoned to particular geographic areas, weekly news products
and military publications.  Utilizing its national direct marketing
expertise, the Company has expanded into local direct marketing
services by starting direct mail services in each of its five
principal newspaper markets and by acquiring THE MONEY CLIP, a direct
mail coupon publication featuring local advertisers that is delivered
to all households in its market area.  Since acquiring THE MONEY CLIP,
the Company has added a Wichita Falls edition to the original Abilene
and San Angelo editions, and the Company may expand publication of THE
MONEY CLIP to other markets.  Harte-Hanks newspapers provide
commercial printing capabilities to their customers and also have
initiated audiotext "voice mail" capability, allowing readers to
access prerecorded messages and leave recorded messages by telephone. 
The CORPUS CHRISTI CALLER-TIMES uses its advertiser-sponsored
audiotext system to provide on a 24-hour basis more than 120
categories of updated news and information, all of which are
accessible through a single telephone number promoted in the
newspaper.

Sales and Marketing

      The Company maintains local sales offices in each of its
principal newspaper markets and in Boston and Dallas.  Each office has
commissioned sales representatives dedicated specifically to
advertising or circulation sales.  The Company uses its research
capabilities and twice-a-year customer surveys to communicate with
customers, track media competition and assess changes in advertising
patterns and needs of key customers.  Harte-Hanks has recently
initiated several new marketing techniques, including programs whereby
an advertiser purchases a package consisting of multiple
advertisements for a fixed budget amount.  Additionally, the Company
offers advertisers a combination of products and delivery methods,
including niche publications and direct marketing products, to further
increase market coverage or target specific consumer groups.

Facilities

      Harte-Hanks newspaper operations are housed in modern facilities
that are owned by the Company in its five principal newspaper markets
and are owned or leased in its suburban newspaper markets.  The
Company is installing a nine- unit offset printing press in a newly
expanded building in Corpus Christi.  The Company expects that this
press will be operational in the second quarter of 1994 and will
enhance the newspaper's production and color capacity and print
quality as well as support growth in that market.


                                8
Competition

      There are no competing daily newspapers published in the markets
where the Company publishes its five principal newspapers.  In recent
years, the Company's suburban newspapers have faced increasing
competition from strengthening daily metropolitan newspapers in Boston
and Dallas, including local editions of such newspapers.  Each of the
Company's newspapers competes in varying degrees for advertisers and
readers with newspapers, magazines, radio, broadcast and cable
television, shoppers, directories and other communications media that
operate in its markets.

SHOPPERS

General

      Harte-Hanks is the largest publisher of shoppers in North
America based on weekly circulation and revenues, and is the only
national media company that focuses on shoppers as a core business. 
Shoppers are weekly advertising publications delivered free by third-
class saturation mail to all households in a particular geographic
area.  Shoppers offer advertisers a targeted, cost-effective local
advertising system, with virtually 100% penetration in their area of
distribution.  Shoppers are particularly effective in large markets
with high media fragmentation in which major metropolitan newspapers
generally have low penetration.  As of December 31, 1993, the shoppers
currently owned by Harte-Hanks reached approximately 6.7 million
households in four markets each week -- Southern California, Northern
California, Miami/Ft. Lauderdale and Dallas/Fort Worth.  The Company's
Southern California shopper, THE ORIGINAL PENNYSAVER, accounted for
64% of these households.  In February 1994, the Company sold its
smallest shopper in Tucson, Arizona, which reached 297,000 households
each week.

      Harte-Hanks publishes 536 individual shopper editions each week
distributed to zones of approximately 12,500 households each, allowing
single location, local advertisers to saturate a single geographic
zone and allowing multiple location advertisers to saturate multiple
zones.  The Company believes that its zoning and marketing
capabilities and production technologies have enabled it to increase
its share of the advertising expenditures in its markets even in
difficult economic conditions, as presently exist in California.  The
Company's strategy in its shopper business is to increase its share of
local advertising in its existing circulation areas, increase
circulation through expansion into contiguous areas and make selective
acquisitions.  In 1993, Harte-Hanks shoppers had revenues of $174.5
million and accounted for approximately 38% of the Company's revenues.

      The combined circulation of the Company's shoppers has grown
from approximately 4.1 million households at January 1, 1986 to over
6.7 million households at December 31, 1993.  In 1993, 0.9 million
households were added, primarily in Southern California, Miami/Ft.
Lauderdale and Dallas/Fort Worth, through internal expansion and, to a
lesser degree, acquisitions.  The Company believes that this expansion
will provide increased revenue and operating income as the
publications in these areas mature.  The Company believes that
expansion opportunities of approximately 4 million additional
households exist in areas contiguous to current circulation areas.


                                9
Publications

      Harte-Hanks shoppers are published in Southern California,
Northern California, Miami/Ft. Lauderdale and Dallas/Fort Worth.  The
Southern California unit accounted for 67% of shopper revenues in
1993.

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

                                               DECEMBER 31,
                                                  1993    NUMBER OF
MARKET                 PUBLICATION NAME        CIRCULATION  ZONES  

Southern California    The Original PennySaver 4,279,000     348
Northern California    Potpourri                 964,000      72
Miami/Ft. Lauderdale   The Flyer                 945,000      72
Dallas/Fort Worth      Shopper's Guide           507,000      44

Total                                          6,695,000     536

      Shopper publications consist of classified and display
advertising and are delivered to consumers' homes by third-class
saturation mail.  The typical shopper publication has 50 pages of
classified and display advertising and is 8 1/2 by 10 inches in size. 
Each edition, or zone, is targeted around a natural neighborhood
marketing pattern.  Shoppers also serve as a distribution vehicle for
a four-color proprietary product, MARQUEE, carrying multiple national
and regional advertisers; "print-and-deliver," single sheet inserts
designed and printed by the Company; coupon books; and preprinted
inserts from major retail chains.  Harte-Hanks shopper publications
also use audiotext "voice mail" in both pay-per-call and free formats
allowing readers to access prerecorded advertising or personal
messages, leave recorded messages or participate in retail store
surveys targeted around local retail locations, reader opinion surveys
and interactive reader contests.

      The Company has acquired, developed and applied innovative
technology and customized equipment to the publication of its
shoppers, which have contributed to efficiency and growth.  A
proprietary data processing, job tracking and pagination system,
jointly developed by the Company and a software company, is currently
being installed in Southern California.  The Company anticipates
complete installation by mid-1994.  This computer controlled system,
which fully paginates both graphics and text, will replace manual
pagination and simplify production of multiple zoned editions.  It
also will permit designated types of advertisers to be pulled from the
database, thereby allowing production of specialized niche
publications, such as automotive, real estate and employment products,
which may be mailed or distributed through newsstands.  Harte-Hanks
has installed high speed automatic inserting equipment that decreases
production costs for work previously done largely by hand.


                                10
Sales and Marketing

      The Company maintains local sales offices throughout its
geographic markets and employs more than 500 commissioned sales
representatives who develop both targeted and saturation advertising
programs for customers. The sales organization provides service to
both national and local advertisers through its telemarketing
departments and its field sales representatives. Shopper customers
vary from individuals with a single item for sale to local
neighborhood advertisers to large multi-location advertisers. The core
customers continue to be local service businesses and small retailers.
The Company is increasingly focusing its marketing efforts on larger
national accounts by emphasizing its ability to deliver saturation
advertising in defined zones.

      The Company has installed SAMS (Sales and Marketing System), a
proprietary order entry system on a Unix platform in its Southern
California sales offices.  The Company typically processes 16,000
customer orders each week. SAMS speeds customer order entry and
facilitates placement of advertising in multiple zoned editions. The
Company is in the process of expanding SAMS so that, in addition to
entering advertising information for immediate publication, it will
build a relational customer database, allowing sales personnel to
access customer history by designated variables, thereby identifying
similar potential customers and assisting follow-up with existing
customers. The Company also believes the relational customer database
presents the opportunity for a new revenue stream through the sale and
use of customer lists. The Company anticipates that an expanded
version of SAMS will be installed at its Southern California shopper
by mid-1994 and in all of its shoppers by the end of 1995.

Facilities

      Harte-Hanks shoppers are produced at owned or leased facilities
in the markets they serve.  The Company has five production
facilities, two in Southern California and one in each of its other
markets, and 21 sales offices.

Competition

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

DIRECT MARKETING

General

      Harte-Hanks operates a nationwide direct marketing business
offering a


                                11

broad range of integrated services utilizing advanced technologies to
enable its customers to identify, target and reach specific consumers
or businesses by mail. The Company's strategy is to provide a single
source of solutions for its customers' direct marketing objectives.
The Company believes that developments in computer technology and
trends toward more sophisticated marketing analysis and measurement
will continue to result in increased usage of direct marketing
services. Harte-Hanks' direct marketing customers include many of the
nation's largest retailers, banks and insurance companies. Harte-Hanks
provides five broad direct marketing services -- marketing services,
database, data processing/addressing, transportation and integrated
direct marketing. In 1993, Harte-Hanks Direct Marketing had revenues
of $129.6 million, which accounted for approximately 28% of the
Company's revenues.

Marketing Services

      The Company provides a full range of marketing services,
assisting customers in defining objectives, developing direct
marketing programs, targeting markets and measuring the effectiveness
of their marketing efforts, including measuring consumer satisfaction
through the use of a proprietary scannable survey. The Company also
distributes marketing materials on behalf of its customers to
consumers and businesses who request information in response to a
customer's advertising program. The Company believes it is the
nation's largest external fulfillment provider to the mutual fund
industry, distributing prospectuses and other financial material on
behalf of more than 20 mutual fund companies. In addition, the Company
provides telemarketing services, including answering toll-free calls
generated by a customer's advertising program and, in the process,
collecting for its customers valuable data about the consumer.

Database

      The Company's database services build sophisticated databases
and deliver them to clients on personal computers, networks and
workstations.  These services provide user friendly applications to
allow customers to identify consumers most likely to respond to a
particular offer.  Databases are built using the Company's proprietary
name and address processing software to integrate the client's
customer files and other consumer and business files with individual,
demographic and lifestyle information. The Company's software then
screens the database for the desired characteristics, enabling
customers to make informed marketing decisions and to cost-effectively
target consumers and businesses likely to buy specific products. The
database is updated to reflect changes in customer status and response
to a particular offer, thereby increasing its effectiveness for future
programs.

      Database services are marketed to specific industries or markets
with software modifications tailored to each industry or market.
Having established the basic technological foundation for providing
database services, the Company is able to provide database services to
new industries and markets by making appropriate modifications to its
existing database technology. The Company currently provides database
services to the banking, retail and insurance industries and has
expanded into the utilities, mutual fund, automotive and
business-to-business markets. The Company also provides


                                12

database services in Canada and the United Kingdom, primarily in the
banking industry, and has expanded into Europe, Asia, Latin America
and New Zealand. Database services are provided in part under the
Company's trade name, Harte-Hanks Data Technologies.

Data Processing/Addressing

      Data processing services include maintaining customer files and
outside lists, preparing those lists for mailing, eliminating
duplicate addresses and updating mailing lists, to increase on-time
deliveries and lower postage expense. Harte-Hanks also identifies and
updates changed addresses through a nonexclusive license with the
United States Postal Service. The Company provides computerized
addressing and labeling of advertising mail pieces, primarily for
large retailers, at six mail production facilities. Data
processing/addressing services enable consumers to receive advertising
materials within a one- to three-day delivery window selected by the
customer.

Transportation

      The Company arranges for the transportation of time-sensitive
material such as dated advertising inserts and direct mail pieces to
postal facilities, newspapers and mailhouses nationwide. The Company
uses its proprietary software system -- Transportation Optimization of
Postal Savings -- to determine a transportation plan that optimizes
each customer's postal costs and improves on-time delivery of
advertising material. The transportation unit maintains seven
warehouses as staging locations across the nation and has personnel
located at five of the Company's mail production facilities. The
Company believes that it benefits from the nationwide location of its
facilities and its ability to combine printed material destined for
similar locations.

Integrated Direct Marketing

      In contrast to a typical mass mailing, which involves sending
consumers individually addressed but otherwise identical advertising
pieces, integrated direct marketing uses laser printing and
sophisticated insertion technology to target consumers with
personalized mail appealing directly to them. The Company designs and
creates personalized communications that may be combined with other
printed material from the customer for mailing to consumers and
businesses. The integrated direct marketing process begins when a
customer accesses a database and selects a consumer file for mailing.
A creative concept for that promotion is matched with the targeted
consumer. A personalized and individualized message is then produced.
The Company's services include printing promotional material and the
outside and inside envelopes, inserting the individual pieces into the
outside envelope, and binding and mailing. If the consumer responds to
the offer through purchases or by other means, the database is updated
with the response for later use. A customer may, based upon its needs,
use some components or all of the Company's integrated direct
marketing services.


                                13
Sales and Marketing

      Harte-Hanks' national direct marketing sales force is
headquartered in Cincinnati, Ohio, with sales offices maintained
throughout the United States, and in Toronto and London.  The focus of
the sales force is to position Harte-Hanks as a single source solution
for a customer's target marketing needs. The sales force emphasizes
cross-selling the range of direct marketing services. For example,
through its database, market research and integrated direct marketing
services, the Company can define new markets for its customers and
reach those markets through the creation and delivery of personalized
printed materials. The sales force is supported by employees in
specialized areas such as marketing services, transportation and
database. In addition, there are specialized sales forces for
literature fulfillment, database and transportation services. The
Company generally charges fees each time it provides direct marketing
services. For certain database projects it charges a one-time,
negotiated fee to build a database, plus an additional fee each time
the database is updated.

Facilities

      Market research is conducted from a leased facility in River
Edge, New Jersey and literature fulfillment from a leased facility in
Brockton, Massachusetts. Database services are headquartered in
Billerica, Massachusetts. Database services have specialty sales and
service offices in California, New Jersey, Toronto and Great Britain.
Data processing functions are primarily centralized in the Company's
Baltimore facility, with mail production at five additional facilities
nationwide. The transportation unit maintains warehouses across the
nation and has personnel located at five of the Company's mail
production plants. Integrated direct marketing services are performed
at the Company's recently constructed state-of-the-art facility in
Cincinnati and its recently acquired facility in Jacksonville,
Florida.

Competition

      Harte-Hanks' direct marketing business faces competition
primarily from other direct mail and database organizations, as well
as from print and electronic media and other forms of advertising.
Harte-Hanks believes that its database capabilities, combined with its
national production capability and its ability to offer a full range
of integrated services (i.e., targeting and identification of
potential markets, and production and delivery of advertising
materials), enable the Company to compete effectively.

TELEVISION

General

      The Company owns and operates KENS, a CBS-affiliated VHF
television station in San Antonio, Texas, the 36th largest television
market in the United States according to Arbitron Ratings Service. 
San Antonio is the business and retail center for South Texas and has
a growing, diversified economy based on tourism, military, health care
and international trade. KENS has been the number one-rated station in
its market, "sign-on to sign-off,"


                                14

for 21 consecutive years. In 1993, all five of its local daily and all
of its weekend news programs were the top-rated newscasts in their
time slots.  KENS' 10 p.m. newscast has consistently ranked as the
top-rated late newscast among the largest 50 television markets in the
United States.  KENS has consistently received the highest ratings in
65-75% of the time periods it programs locally. The Company believes
that its market dominance results from strong local newscasts and its
highly visible community involvement and public affairs projects. In
1993, Harte-Hanks television had revenues of $27.8 million, which
accounted for approximately 6% of the Company's revenues.

      According to the May 1993 Arbitron Ratings Index, KENS
broadcasts to a market of approximately 626,700 households, defined as
the Area of Dominant Influence (the "ADI"). The San Antonio ADI is
served by 14 stations, including stations affiliated with the other
two national networks, a Fox affiliate, five stations affiliated with
various Spanish language networks and low power stations. Cable
penetration is approximately 64% in the City of San Antonio. San
Antonio is a growing advertising market and is consistently ranked
higher in terms of total television advertising dollars spent than its
market ranking. Because of its market ranking and ethnic diversity,
San Antonio has experienced regional and national advertising growth
and frequently enjoys test-market status. Broadcast advertising in San
Antonio has also benefited from the closure of one of San Antonio's
two daily newspapers in 1992.

      Network affiliation can have a significant impact on the
revenues of a television station because the popularity of a network's
programming can affect the rates at which a station can sell time for
local advertising.  CBS was the number one-rated network in the
1992-93 primetime season.  The KENS network contract with CBS has been
renewed as of January 1994 for a successive three-year term.  KENS has
been affiliated with CBS since the station's inception.

      Harte-Hanks' strategy is to maintain its leadership position in
order to continue to increase its television revenues and to
capitalize on the station's reputation and leadership position by
providing additional products and services for advertisers.  The
Company recently acquired an AM radio station in San Antonio, which
began broadcasting as KENS-AM on October 15, 1993.  The Company has
moved the radio station offices and studio to its KENS television
facility.  KENS Radio features a news/talk and Texas music format,
capitalizing on the strong news reputation and advertising sales staff
of KENS-TV.  The Company also offers video production and graphics
services in its full-service production facility. Video production
services are provided for programming, commercial and industrial video
applications.  Graphics services provide print advertisers and other
Harte-Hanks units with a full range of graphics capabilities such as
ad design, ad layout, typesetting and color separation. The Company
has recently introduced KENS MARQUEE, which is a direct mail coupon
advertising magazine mailed to approximately 460,000 households in the
greater San Antonio area.  KENS MARQUEE is cross-promoted on KENS-TV
and Radio and features the KENS logo and personalities on its cover.
The Company also offers satellite uplinking services. In addition,
KENS has initiated a joint programming venture with the local cable
franchise, in which KENS produces programs for cable viewing and local
news inserts into CNN Headline News.


                                15
Sales and Marketing

      Local advertising spots are sold by KENS sales personnel. 
National advertising spots are sold by Katz Communications, an
independent advertising sales agent with offices throughout the United
States. Generally, advertising rates for national spot and local
advertising are determined by the individual station, which receives
all of the revenues (less sales representatives commissions).  Rates
are influenced both by the demand for advertising time and the
popularity of the station's programming. Most advertising during
network programs is sold by the network, which pays its affiliated
stations negotiated fees for broadcasting such programs. Advertising
rates charged by a television station are based primarily on the size
of the market and the station's ability to attract audiences as
reflected in surveys made by national ratings services. Rates are
highest during the most desirable viewing hours. Normally a majority
of local affiliate station revenues comes from locally programmed
dayparts, particularly local newscasts.

Sales of advertising in KENS MARQUEE and of graphics and production
services are handled by a separate sales staff working with KENS'
television sales staff. The Company employs a similar policy with
respect to KENS-AM.

Facilities

      KENS owns a modern 50,000 square foot facility constructed in
1982. The facility includes two video production studios with separate
technical control rooms, a graphics facility and a satellite uplink
facility. The offices and studio of KENS-AM radio are also located at
this facility.

Competition

      KENS ranks as the number one television station in its local
market, which enhances KENS' ability to attract advertising. KENS
competes with other advertising media such as newspapers and
magazines, and, within its coverage areas, television and radio
stations serving the same or nearby areas. KENS also competes with the
local cable television system, which has 64% penetration in the City
of San Antonio, according to a report published by Arbitron Ratings in
May 1993.

Regulation of Television and Radio

      The FCC regulates television and radio stations under the
Communications Act of 1934, as amended (the "Communications Act"),
which together with FCC rules and policies thereunder governs the
issuance, renewal and assignment of licenses; technical operation;
and, to a limited extent, program, employment and commercial
practices. Television broadcast station licenses are issued for a
maximum term of five years and are renewable upon application for
additional five-year terms. The KENS-TV broadcast station license was
renewed in September 1993 for an additional five-year term expiring
August 1, 1998. Radio broadcast station licenses are issued for a
maximum term of seven years and are renewable upon application for
additional seven-year terms. The license of the AM radio station will
expire August 1, 1997.  Renewal applications are granted without
hearing if the licensee's qualifications are not materially


                                16

challenged by either a third party or the FCC and if no competing
applications for the same facility are filed. Despite the relatively
short term license period, the broadcast industry has been
characterized by stability. Harte-Hanks has operated television
broadcast stations since 1962, and to date its renewal applications
have been granted without hearing. Under the Communications Act, a
broadcast license may not be granted to or held by any corporation
that has more than one-fifth of its capital stock owned or voted by
aliens or their representatives, by foreign governments or their
representatives, or by non-U.S. corporations, or that has an alien as
an officer or a director. Under the Communications Act, a broadcast
license also may not be granted to or held by any corporation that is
controlled, directly or indirectly, by any other corporation that has
an alien as an officer, more than one-fourth of whose directors are
aliens, or more than one-fourth of whose capital stock is owned or
voted by aliens or their representatives, by foreign governments or
their representatives, or by non-U.S. corporations, if the FCC finds
that the public interest will be served by the refusal or revocation
of such license. The Communications Act and FCC rules also generally
prohibit the common ownership, operation or control of a television
broadcast station and a radio broadcast station serving the same local
market and of a broadcast station and a daily newspaper serving the
same local market. However, the FCC has waived this rule as it applies
to the ownership of KENS-TV and the recently acquired radio station.
The FCC generally applies its ownership limits to "attributable"
interests held by an individual, corporation, partnership or other
association.

Employees

      As of December 31, 1993, Harte-Hanks employed 5,114 full time
employees and 1,036 part time employees, as follows: newspapers --
1,665 full time and 342 part time employees; shoppers -- 1,653 full
time and 458 part time employees; direct marketing -- 1,616 full time
and 203 part time employees; television -- 155 full time and 32 part
time employees; and corporate office -- 25 full time employees and one
part time employee.  None of the work force is represented by labor
unions. The Company considers its relations with its employees to be
good.

Facilities

      Harte-Hanks' executive offices are located in San Antonio, Texas
and occupy approximately 35,000 square feet in leased premises. The
Company's business is conducted in premises containing aggregate space
of approximately 2.3 million square feet nationwide. Approximately 1.4
million square feet are held under leases, which expire at dates
through 2003.  The balance of the properties, which are used primarily
in the Company's newspaper, Southern California shopper and television
operations, are owned by the Company.


                                17

ITEM 3.  LEGAL PROCEEDINGS

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

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

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

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

Incorporated herein by reference from the Company's Annual Report to
Stockholders for the year ended December 31, 1993 at pages 24 and 37.

ITEM 6.  SELECTED FINANCIAL DATA

Incorporated herein by reference from the Company's Annual Report to
Stockholders for the year ended December 31, 1993 at pages 32 and 33.

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

Incorporated herein by reference from the Company's Annual Report to
Stockholders for the year ended December 31, 1993 at pages 13 through
17.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following information is set forth in the Company's Annual Report
to Stockholders for the year ended December 31, 1993, which is
incorporated herein by reference:  All Consolidated Financial
Statements (pages 18 through 21); all Notes to Consolidated Financial
Statements (pages 22 through 31); and the "Independent Auditors'
Report" (page 34).  With the exception of the information herein
expressly incorporated by reference, the Company's Annual Report to
Stockholders for the year ended December 31, 1993 is not deemed filed
as part of this Annual Report on Form 10-K.

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

None.


                                18
ITEM 10.  MANAGEMENT

Incorporated herein by reference from the information the Company's
definitive proxy statement dated March 30, 1994 for the May 6, 1994
Annual Meeting of Stockholders under the caption "Management --
Directors and Executive Officers" on pages 5 and 6.

ITEM 11.  EXECUTIVE COMPENSATION

Incorporated herein by reference from the information the Company's
definitive proxy statement dated March 30, 1994 for the May 6, 1994
Annual Meeting of Stockholders under the caption "Executive
Compensation and Other Information" on pages 7 through 14.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

Incorporated herein by reference from the information the Company's
definitive proxy statement dated March 30, 1994 for the May 6, 1994
Annual Meeting of Stockholders under the caption "Security Ownership
of Management and Principal Stockholders" on pages 4 and 5.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

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

(a)(1)     The following consolidated financial statements are
           incorporated by reference from the Company's Annual Report
           to Stockholders for the year ended December 31, 1993
           attached hereto:

           Consolidated Balance Sheets, December 31, 1993 and 1992 

           Consolidated Statements of Operations, Years ended 
            December 31, 1993, 1992 and 1991

           Consolidated Statements of Cash Flows, Years ended December 
           31, 1993, 1992 and 1991

           Consolidated Statements of Stockholder's Equity, Years
            ended December 31, 1993, 1992 and 1991

           Notes to Consolidated Financial Statements 

           Independent Auditors' Report


                                19

(a)(2)     The following accountants' report and financial schedules
           for years ending December 31, 1993, 1992 and 1991 are
           submitted herewith:

           Independent Auditors' Report 10-K Schedules

           Schedule II - Amounts Receivable From Related Parties and
            Underwriters, Promoters, and Employees Other Than Related
            Parties

           Schedule V - Property, Plant and Equipment

           Schedule VI - Accumulated Depreciation and Amortization of
            Property, Plant and Equipment

           Schedule VIII - Valuation and Qualifying Accounts

           Schedule X - Supplementary Income Statement Information 

           All other schedules are omitted as the required information
           is inapplicable.


                                20

           (a)(3) Exhibits (continued).

EXHIBIT
  NO.                 DESCRIPTION OF EXHIBIT                     PAGE NO.


  2(a)     Certificate of Ownership and Merger (filed 
             as Exhibit 2(a) to the Company's Registration 
             Statement No. 33-69202 and incorporated by 
             reference herein).

* 3(a)     Amended and Restated Certificate of Incorporation.        30

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

  4(a)     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).

*10(b)     Registration Rights Agreement dated as of                 38
             September 11, 1984 among HHC Holding Inc. and 
             its stockholders.

 10(c)     HHC Holding Inc. 1991 Stock Option Plan (filed as 
             Exhibit 10(l) to the Company's Form 10-K for the 
             year ended December 31, 1991 and incorporated by 
             reference herein).

 10(d)     Amendment to HHC Holding Inc. 1991 Stock Option Plan 
             (filed as Exhibit 10(l) to the Company's Form 10-K 
             for the year ended December 31, 1992 and incorporated 
             by reference herein).

 10(e)     Third Amended and Restated Loan Agreement dated May 19, 
             1993 among the Company, The Toronto-Dominion Bank, 
             NationsBank of Texas, N.A., National Westminster Bank
             USA, The First National Bank of Boston, Bank of Hawaii, 
             Corestates Bank, N.A., The Bank of Nova Scotia, CIBC
             Inc., and National Bank of Canada; and Toronto-Dominion
             (Texas), Inc., as agent (filed as Exhibit 10(l) to the
             Company's 10-Q for the quarter ended June 30, 1993 and
             incorporated by reference herein).

                                21

           (a)(3) Exhibits (continued).

EXHIBIT
  NO.                 DESCRIPTION OF EXHIBIT           PAGE NO.


 10(f)     Note Purchase Agreement by and between HHC Holding 
             Inc. and The Goldman Sachs Group, L.P. (filed as 
             Exhibit 10(f) to the Company's Registration 
             Statement No. 33-69202 and incorporated by 
             reference herein).

 10(g)     Severance Agreement between Harte-Hanks
             Communications, Inc. and Larry Franklin, dated 
             as of July 23, 1993 (filed as Exhibit 10(f) to 
             the Company's Registration Statement No. 33-69202 
             and incorporated by reference herein).

 10(h)     Form of Severance Agreement between Harte-Hanks
             Communications, Inc. and certain Executive
             Officers of the Company, dated as of July 23, 
             1993 (filed as Exhibit 10(h) to the Company's 
             Registration Statement No. 33-69202 and 
             incorporated by reference herein).

 10(i)     Amendment No. 2 to HHC Holding Inc. 1991 Stock 
             Option Plan (filed as Exhibit 10(l) to the 
             Company's Registration Statement No. 33-69202 
             and incorporated by reference herein).

 10(j)     Harte-Hanks Communications, Inc. Pension
             Restoration Plan (filed as Exhibit 10(j) to 
             the Company's Registration Statement No. 
             33-69202 and incorporated by reference herein).

 10(k)     First Amendment, dated as of November 3, 1993 to 
             Third Amended and Restated Loan Agreement dated 
             May 19, 1993 among the Company, The Toronto-Dominion 
             Bank, NationsBank of Texas, N.A., National Westminster 
             Bank USA, The First National Bank of Boston, Bank of 
             Hawaii, Corestates Bank, N.A., The Bank of Nova Scotia, 
             CIBC Inc., and National Bank of Canada; and Toronto-
             Dominion (Texas), Inc., as agent (filed as Exhibit 
             10(l) to the Company's Form 10-Q for the quarter 
             ended September 30, 1993 and incorporated by 
             reference herein).

                                22

             (a)(3) Exhibits (continued).

EXHIBIT
  NO.                     DESCRIPTION OF EXHIBIT          PAGE NO.

 10(l)     Amendment No. 1, dated as of November 10, 1993 to 
             Note Purchase Agreement by and between Harte-Hanks 
             Communications, Inc. and GS Capital Partners, L.P., 
             Stone Street Fund 1992, L.P. and Bridge Street Fund 
             1992, L.P. (filed as Exhibit 10(l) to the Company's 
             Form 10-Q for the quarter ended September 30, 1993 
             and incorporated by reference herein).

*10(m)     Harte-Hanks Communications, Inc. Incentive Bonus Plan.    62

*11        Statement Regarding Computation of Net Income (Loss)      63
             Per Common Share.

*13        Annual Report to Securityholders (only those portions     64
             incorporated by reference into the Form 10-K are 
             filed herewith).

*21        Subsidiaries of the Company.                              91

*23        Consent of KPMG Peat Marwick.                             92

 24        Power of Attorney (included on the signature page of 
             the Registration Statement on Form S-2 filed with the 
             Commission on September 23, 1993).

*Filed herewith.

      (b)  Reports on Form 8-K

           No reports on Form 8-K have been filed during the fourth
           quarter  of 1993.

      (c)  Exhibits -- The response to this portion of Item 14 is
           submitted as separate section of this report on pages 30 to
           92.

      (d)  Financial Statement Schedules -- The response to this
           portion of Item 14 is submitted as a separate section of
           this report on pages 25 to 29.

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


                                23

                              SIGNATURES

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

                                 HARTE-HANKS COMMUNICATIONS, INC.

                                 By: /s/ LARRY D. FRANKLIN       
                                         Larry D. Franklin
                                    President & Chief Executive
                                              Officer

                                 By: /s/ RICHARD L. RITCHIE      
                                         Richard L. Ritchie
                                       Senior Vice President,
                                    Finance & Chief Financial and
                                         Accounting Officer
Date:  March 28, 1994

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

     /s/ HOUSTON H. HARTE              /s/ DR. PETER T. FLAWN
  Houston H. Harte, Chairman        Dr. Peter T. Flawn, Director

     /s/ LARRY D. FRANKLIN            /s/ CHRISTOPHER M. HARTE
  Larry D. Franklin, Director      Christopher M. Harte, Director

      /s/ EDWARD H. HARTE               /s/ JAMES L. JOHNSON
   Edward H. Harte, Director         James L. Johnson, Director

     /s/ ANDREW B. SHELTON
  Andrew B. Shelton, Director


                                24

              INDEPENDENT AUDITORS' REPORT 10-K SCHEDULES

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

Under date of January 28, 1994, we reported on the consolidated
balance sheets of Harte-Hanks Communications, Inc. and subsidiaries as
of December 31, 1993 and 1992 and the related consolidated statements
of operations, cash flows and stockholders' equity for each of the
years in the three-year period ended December 31, 1993, as contained
in the 1993 annual report to stockholders.  These consolidated
financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year 1993.  In
connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial
statement schedules as listed in Item 14(a)(2).  These financial
statement schedules are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statement schedules based on our audits.

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

San Antonio, Texas
January 28, 1994


                                25

           Harte-Hanks Communications, Inc. and Subsidiaries

                     Financial Statement Schedules

                              Schedule II
       Amounts Receivable From Related Parties and Underwriters,
          Promoters, and Employees Other Than Related Parties

                            (in thousands)
DEDUCTION BALANCE AT END OF BALANCE AT AMOUNTS YEAR BEGINNING OF AMOUNTS WRITTEN NOT NAME OF DEBTOR YEAR ADDITIONS COLLECTED OFF CURRENT CURRENT EMPLOYEE ADVANCES Year ended December 31, 1993.... $114 $-- $21 $-- $-- $ 93 Year ended December 31, 1992.... $125 $-- $11 $-- $-- $114 Year ended December 31, 1991.... $141 $ 7 $23 $-- $-- $125
26 Harte-Hanks Communications, Inc. and Subsidiaries Financial Statement Schedules Schedule V Property, Plant and Equipment (in thousands)
BALANCE AT BALANCE BEGINNING ADDITIONS OTHER AT END CLASSIFICATION OF YEAR AT COST ADDITIONS RETIREMENTS OF YEAR (3) Year ended December 31, 1993: Land......................... $ 9,894 $ -- $ 877 $ 92 $ 10,679 Buildings and improvements... 38,373 3,850 1,550 1,544 42,230 Equipment and furniture...... 119,135 12,924 746 2,071 130,733 Construction in progress..... 2,059 18,258 (1) -- 86 6,888 (13,343)(2) $169,461 $ 21,689 $3,173 $3,793 $190,530 Year ended December 31, 1992: Land......................... $ 9,894 $ -- $ -- $ -- $ 9,894 Buildings and improvements... 39,358 354 -- 1,339 38,373 Equipment and furniture...... 115,602 6,884 -- 3,351 119,135 Construction in progress..... 1,157 5,307 (1) -- -- 2,059 (4,405)(2) $166,011 $ 8,140 $ $4,690 $169,461 Year ended December 31, 1991: Land......................... $ 10,066 $ -- $ -- $ 172 $ 9,894 Buildings and improvements... 39,828 971 -- 1,441 39,358 Equipment and furniture...... 112,737 7,260 -- 4,395 115,602 Construction in progress..... 4,935 3,133 (1) -- -- 1,157 (6,911)(2) $167,566 $ 4,453 $ $6,008 $166,011 (1) Represents initiation of construction in progress. (2) Represents the completion of construction in progress. (3) Represents total cost of property, plant and equipment acquired through purchase of operating units.
27 Harte-Hanks Communications, Inc. and Subsidiaries Financial Statement Schedules Schedule VI Accumulated Depreciation and Amortization of Property, Plant and Equipment (in thousands)
ADDITIONS BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND AT END CLASSIFICATION OF YEAR EXPENSES RETIREMENTS OF YEAR Year ended December 31, 1993: Buildings and improvements... $17,445 $ 1,860 $1,224 $18,081 Equipment and furniture...... 73,806 9,646 1,812 81,640 $91,251 $11,506 $3,036 $99,721 Year ended December 31, 1992: Buildings and improvements... $16,088 $ 2,424 $1,067 $17,445 Equipment and furniture...... 66,809 9,760 2,763 73,806 $82,897 $12,184 $3,830 $91,251 Year ended December 31, 1991: Buildings and improvements... $14,060 $ 2,973 $ 945 $16,088 Equipment and furniture...... 60,083 9,996 3,270 66,809 $74,143 $12,969 $4,215 $82,897
28 Harte-Hanks Communications, Inc. and Subsidiaries Financial Statement Schedules Schedule VIII Valuation and Qualifying Accounts (in thousands)
ADDITIONS BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND AT END DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR Allowance for doubtful accounts: Year ended December 31, 1993... $2,512 $4,160 $4,647 $2,025 Year ended December 31, 1992... $2,620 $3,649 $3,757 $2,512 Year ended December 31, 1991... $3,309 $4,047 $4,736 $2,620 29 Harte-Hanks Communications, Inc. and Subsidiaries Financial Statement Schedules Schedule X Supplementary Income Statement Information (in thousands) YEAR ENDED DECEMBER 31, ITEMS CHARGED TO COSTS AND EXPENSES 1993 1992 1991 Maintenance and repairs............... $ 6,224 $ 5,671 $ 5,468 Goodwill amortization................. $10,176 $10,788 $10,785

As Filed                                          EXHIBIT 3(a)

                         AMENDED AND RESTATED
                     CERTIFICATE OF INCORPORATION
                                  OF
                   HARTE-HANKS COMMUNICATIONS, INC.


     The undersigned, Larry D. Franklin certifies that he is the
President and Chief Executive Officer of Harte-Hanks Communications,
Inc., a Delaware corporation (the "Corporation"), and further
certifies as follows:

     1.   The name of the Corporation is Harte-Hanks Communications, Inc.

     2.   The name under which the Corporation was originally
incorporated was Harte-Hanks Newspapers, Inc., and the original
certificate of incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on October 1, 1970.

     This Amended and Restated Certificate of Incorporation was duly
adopted by written consent of the holders of not less than a majority
of the outstanding stock of the Corporation entitled to vote, and
written notice of the Corporation action has been given to the
stockholders of the Corporation who have not so consented in writing,
all in accordance with the provisions of the Sections 228 and 245 of
the Delaware General Corporation Law ("DGCL").

     4.   The text of the Restated Certificate of Incorporation of the
Corporation as amended hereby is restated to read in its entirety, as
follows:

     FIRST.    The name of the Corporation is HARTE-HANKS
COMMUNICATIONS, INC.

     SECOND.   The name of its registered agent and the address of its
registered office in the State of Delaware are The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801

     THIRD.    The purpose of the Corporation is to engage in any
lawful activity for which corporations may be organized under the
DGCL.

     FOURTH.   The aggregate number of shares of capital stock that
the Company shall have the authority to issue is fifty-one million
(51,000,000), of which fifty million (50,000,000) shares shall be
Common Stock of the Corporation, par value $1.00 per share, and one
million (1,000,000) shares shall be Preferred Stock, par value $1.00
per share.  Shares of Preferred Stock may be issued from time to time
in one or more series, each such series to have such

                                  30


distinctive designation or title as may be fixed by the Board of
Directors prior to the issuance of any shares thereof.  Each share of
any series of Preferred Stock shall be identical with all other shares
of such series, except as to the date from which accumulated preferred
dividends, if any, shall be cumulative.  Each such series shall have
such voting powers, if any, and such preferences and relative,
participating, optional or other special rights, with such
qualifications, limitations or restrictions of such preferences and/or
rights, and the benefit of such affirmative or negative covenants as
shall be stated in the resolution or resolutions adopted by the Board
of Directors providing for the issue of such series of Preferred
Stock, including, but without limiting the generality of the
foregoing, the following:

     (a)  The rates and times at which, and the terms and conditions
on which, dividends on Preferred Stock or series thereof shall be
paid;

     (b)  The right, if any, of the holders of Preferred Stock or
series thereof to convert the same into, or exchange the same for,
shares of other classes or series of stock of the Corporation and the
terms and conditions of such conversion or exchange;

     (c)  The redemption price or prices, if any, and the time or
times at which, and the terms and condition of which, Preferred Stock
or series thereof may be redeemed;

     (d)  The rights of the holders of Preferred Stock or series
thereof, if any, upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or winding up of the Corporation;

     (e)  The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock or series
thereof; and

     (f)  Such other relative, participating, optional or other
special rights and qualifications, limitations or restrictions
thereof, all as may be stated in a resolution or resolutions providing
for the issue of such Preferred Stock.

     After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of this
Article FOURTH) shall have been met and  after the Corporation shall
have complied with all the requirements, if any, with respect to the
setting aside of sums as sinking funds or redemption or purchase
accounts (fixed in accordance with the provisions of this Article
FOURTH), then, and not otherwise, the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
                                  31

     After distribution in full of the preferential amount (fixed in
accordance with the provisions of this Article FOURTH) to be
distributed to the holders of Preferred Stock in the event of the
voluntary or involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders of the
Common Stock shall be entitled to receive ratably all of the remaining
assets of the Corporation available for distribution to stockholders.

     Except as may otherwise be required by law or provided herein,
each holder of Common Stock shall have one vote in respect of each
share of stock held by such holder on all matters voted upon by
stockholders.

     No holder of stock of any class of the Corporation shall be
entitled as of right to subscribe for or purchase any shares of stock
of any class whether now or hereafter authorized, or any bonds,
debentures, or other evidences of indebtedness whether or not
convertible into or exchangeable for stock.

     FIFTH.    (a)  CLASSIFIED BOARD OF DIRECTORS.  The number of
directors of the Corporation shall be as from time to time fixed by,
or in the manner provided in, the By-laws of the Corporation.  The
directors shall be divided into three classes, designated Class I,
Class II and Class III.  Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting
the entire Board of Directors.  The term of the initial Class I
directors shall terminate on the date of the 1994 annual meeting of
stockholders; the term of the initial Class II directors shall
terminate on the date of the 1995 annual meeting of stockholders; and
the term of the initial Class III directors shall terminate on the
date of the 1996 annual meeting of stockholders.  At each annual
meeting of stockholders beginning in 1994, successors to the class of
directors whose term expires at that annual meeting shall be elected
for a three-year term.  If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as
possible, and any additional directors of any class elected to fill a
vacancy resulting  from an increase in such class shall hold office
for a term that shall coincide with the remaining term of that class,
but in no case will a decrease in the number of directors shorten the
term of any incumbent director.  A director shall hold office until
the annual meeting for the year in which his term expires and until
his successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal from
office.  Any vacancy on the Board of Directors, however resulting, may
be filled by a majority of the directors then in office, even if less
than a quorum, or by a sole remaining director.  Any director elected
to fill a vacancy shall hold office for a term that shall coincide
with the term of the class to which such director shall have been
elected.
                                  32

     Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation
shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of
such directorships shall be governed by the terms of this Restated
Certificate of Incorporation or the resolution or resolutions adopted
by the Board of Directors pursuant to Article FOURTH applicable
thereto, and such directors so elected shall not be divided into
classes pursuant to this Article FIFTH unless expressly provided by
such terms.

     (b)  REMOVAL OF DIRECTORS.  Subject to the rights, if any, of the
holders of shares of Preferred Stock then outstanding, any or all of
the directors of the Corporation may be removed from office at any
time, but only for cause and only by the affirmative vote of the
holders of a majority of votes represented by the outstanding shares
of the Corporation then entitled to vote generally in the election of
directors, considered for purposes of this Article FIFTH as one class.

     SIXTH.    (a)  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 ("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 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
paragraph (b) hereof 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)

                                  33


was authorized by the Board of Directors of the Corporation.  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 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 paragraph (a) or otherwise.

     (b)  RIGHT OF CLAIMANT TO BRING SUIT.  If a claim under paragraph
(a) is not paid in full by the Corporation within sixty (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 twenty (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 paragraph (a) 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 its
Board of Directors, 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 determination by the Corporation (including
its Board of Directors, 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.

     (c)  NON-EXCLUSIVITY OF RIGHTS.  The rights conferred on any
person by paragraphs (a) and (b) shall not be exclusive of any other
right that such person may have or hereafter acquire under

                                 34


any statute, provision of the Amended and Restated Certificate of
Incorporation, By-laws, agreement, vote of stockholders or
disinterested directors, or otherwise.

     (d)  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.

     (e)  CONTINUANCE.  Any repeal or modification of the foregoing
paragraphs of this Article SIXTH 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.

     SEVENTH.  Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or
between the Corporation and its  stockholders or any class of them,
any court of equitable jurisdiction within the State of Delaware may,
on the application in a summary way of the Corporation or of any
creditor or stockholder thereof or on the application of any receiver
or receivers appointed for the Corporation under the provisions of
section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for
the Corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the
said court directs.  If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of the Corporation, as
the case may be, agree to any compromise or arrangement and to any
reorganization of the Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of
the Corporation, as the case may be, and also on the Corporation.

     EIGHTH.  The Bylaws of the Corporation may be adopted, repealed,
altered, amended, or rescinded by (a) a majority 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 or (b) the affirmative vote of
the holders of not less than 66 2/3% of the voting power of the
Company's capital stock and if such adoption, repeal, alteration,
amendment, or rescission is proposed by or on

                                  35


behalf of an interested stockholder or a director affiliated with an
interested stockholder, by a majority of the disinterested shares. 
"Continuing Director" means a director of the corporation who (i) was
a member of the Board of the Corporation as of September 20, 1993, or
(ii) is a beneficial owner, or affiliate of such beneficial owner, of
less than 20% 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 of
Directors of the Corporation.  The provisions of this Amended and
Restated Certificate of Incorporation may be altered, amended or
repealed by the affirmative vote of the holders a majority of the
issued and outstanding stock having voting power provided, that with
respect to the provisions of Articles Fifth, Seventh, Eighth, Tenth
and Eleventh, the affirmative vote of the holders of at least
sixty-six and  two-thirds percent (66 2/3%) of the issued and
outstanding stock having voting power shall be required.

     NINTH.  The Corporation may in its Bylaws by amendment thereto
make any lawful restriction upon the sale or transfer of stock of the
Corporation held by its stockholders; and all persons subscribing for
stock of the Corporation or purchasing stock, whether from the
Corporation itself or from any stockholder, shall take notice of and
be bound by such lawful restrictions, and shall be deemed to agree
thereto.

     TENTH.  (a) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL, or (iv) for any transaction from
which the director derived any improper personal benefit.  If the DGCL
is amended after approval by the stockholders of this article to
authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of
the Corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.

     (b)  Any repeal of modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right
or protection of a director of the Corporation existing at the time of
such repeal or modification.

     ELEVENTH.  Any action required or permitted to be taken at any
annual or special meeting of stockholders may be taken only upon the
vote of the stockholders at an annual or special meeting duly noticed
and called, as provided in the By-laws of the Corporation, and may not
be taken by a written consent of the stockholders.

                                  36

     Special meetings of the stockholders of the Corporation for any
purpose or purposes may be called at any time by the chief executive
officer or by a majority of the members of the Board of Directors. 
Special meetings of the stockholders of the Corporation may not be
called by any other person or persons.

     IN WITNESS WHEREOF, Harte-Hanks Communications has caused this
Amended and Restated Certificate of Incorporation to be signed by its
duly authorized officers, this 4th day of October, 1993.


                    HARTE-HANKS COMMUNICATIONS, INC.



                    By:  /s/ Larry D. Franklin
                         Larry D. Franklin
                         President

{SEAL}

ATTEST:

By:  /s/ Donald R. Crews
         Donald R. Crews
         Secretary
                                  37


                                                         EXHIBIT 10(b)
                     REGISTRATION RIGHTS AGREEMENT

          REGISTRATION RIGHTS AGREEMENT, dated as of September 11,
1984, among HH Holding Inc., a Delaware corporation (the "Company"),
and the other parties listed on the Schedule of Stockholders attached
to this Agreement.

          1.   INTRODUCTION.  The Company (a) is a party to the Common
Stock Subscription Agreement (the "Common Stock Subscription
Agreement"), dated as of the date hereof, among the Company and the
other parties (collectively, the "Investor Group") to this Agreement
other than Teachers Insurance and Annuity Association of America, a
New York corporation ("Teachers") and (b) pursuant to an assignment
from HH Acquiring Corp., a Delaware corporation and a wholly-owned
subsidiary of the Company ("Acquiring Corp."), has become a party to
the Purchase Agreement (the "Purchase Agreement"), dated as of August
15, 1984, between the Company (as assignee of Acquiring Corp.) and
Teachers.  On the terms and conditions set forth in the Common Stock
Subscription Agreement, each member of the Investor Group has agreed,
among other things, to purchase from the Company the number of shares
of the Company's Class A Common Stock, par value $1.00 per share (the
"Class A Common Stock"), specified opposite the name of such member in
the Schedule of Stockholders attached to this Agreement.  On the terms
and conditions set forth in the Purchase Agreement, Teachers has
agreed, among other things, to purchase from the Company 1,500,000
shares of the Company's Class B Common Stock, par value $1.00 per
share (the "Class B Common Stock" and, together with the Class A
Common Stock, the "Common Stock") and warrants (the "Warrants") to
purchase an additional number of shares of common stock on the terms
and conditions set forth in the Warrants.  This Registration Rights
Agreement shall become effective upon the issuance of Common Stock to
the members of the Investor Group and Teachers pursuant to the Common
Stock Subscription Agreement and the Purchase Agreement, respectively. 
Certain capitalized terms used in this Agreement are defined in
section 3.7.
                                  38

          2.   REGISTRATION UNDER SECURITIES ACT, ETC.

          2.1. REGISTRATION ON REQUEST.  (a) At any time or from time
to time after the third anniversary of the issuance of Common Stock
pursuant to the Common Stock Subscription Agreement and the Purchase
Agreement, upon the written request of one or more Qualified Holders
requesting that the Company effect the registration under the
Securities Act of all or any part of such Qualified Holders'
Registrable Securities and specifying the intended method of
disposition thereof, the Company shall promptly give written notice of
such requested registration to all registered holders of Registrable
Securities, and thereupon the Company shall, as expeditiously as
reasonably possible, use its best efforts to effect the registration
under the Securities Act of

          (i)  the Registrable Securities which the Company has been
so requested to register by such Qualified Holder or Holders, for
disposition in accordance with the intended method of disposition
stated in such request,

          (ii)  all other Registrable Securities the holders of which
shall have made a written request to the Company for registration
thereof within 30 days after the giving of such written notice by the
Company (which request shall specify the intended method of
disposition thereof), and          

          (iii)  all shares of Common Stock which the Company may
     elect to register in connection with the offering of Registrable
     Securities pursuant to this section 2.1,

all to the extent requisite to permit the disposition (in accordance
with the intended methods thereof as aforesaid) of the Registrable
Securities and the additional shares of Common Stock, if any, so to be
registered, PROVIDED that, on and prior to the fifth anniversary of
the date of this Agreement, the Company shall not be required to
effect any registration of Registrable Securities pursuant to this
section 2.1 unless (x) a single holder of Registrable Securities has
requested the registration of a number of shares of Registrable
Securities held by such holder which is equal to or greater than 10%

                                  39


of the shares of Common Stock at the time outstanding and (y) the
aggregate number of shares of Registrable Securities requested to be
registered by all holders of Registrable Securities is equal to or
greater than 15% of the number of shares of Common Stock at the time
outstanding.

          (b)  REGISTRATION STATEMENT FORM.  Registrations under this
section 2.1 shall be on such appropriate registration form of the
Securities and Exchange Commission as shall be selected by the
Company, and be reasonably acceptable to the holders of more than 50%
(by number of shares) of the Registrable Securities so to be disposed
of, and as shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition
specified in their request for such registration.  The Company agrees
to include in any such registration statement all information which
holders of Registrable Securities being registered shall reasonably
request.

          (c)  EXPENSES.  The Company will pay all  Registration
Expenses in connection with (i) each registration requested under this
section 2.1 if Teachers shall have requested that such registration
include all or any part of the Registrable Securities of Teachers,
PROVIDED that the provisions of this clause (i) shall not require the
Company to pay Registration Expenses in connection with any such
registration after the first three such registrations in connection
with which Teachers has so requested the registration of any
Registrable Securities of Teachers and in the case of each of such
three registrations 90% or more (by number of shares) of such
Registrable Securities were so registered, and (ii) three additional
registrations requested under this section 2.1 by one or more
Qualified Holders other than Teachers at a time when the provisions of
clause (i) above do not require the Company to pay Registration
Expenses or in connection with which Teachers has not requested the
registration of any Registrable Securities.  The Registration Expenses
in connection with each other registration requested under this
section 2.1 shall be allocated among all persons on whose behalf
securities of the Company are included in such registration, pro rata
among such persons on the basis of the respective amounts of the
securities then being registered on their behalf.

                                  40

          (d)  EFFECTIVE REGISTRATION STATEMENT.  A registration
requested pursuant to this section 2.1 will not be deemed to have been
effected (i) unless it has become effective, PROVIDED that a
registration which does not become effective after the Company has
filed a registration statement with respect thereto solely by reason
of the refusal to proceed of the holders of Registrable Securities who
initially requested registration of Registrable Securities shall be
deemed to have been effected by the Company at the request of such
holders, unless such holders shall have elected to pay all
Registration Expenses in connection with such registration, or (ii)
if, after it has become effective, such registration is interfered
with by any stop order, injunction or other order or requirement of
the Securities and Exchange Commission or other governmental agency or
of any court.

          (e)  PRIORITY IN REQUESTED REGISTRATIONS.  If a requested
registration pursuant to this section 2.1 involves an underwritten
offering, and the managing underwriter shall advise the Company in
writing (with a copy to each holder of Registrable Securities
requesting registration) that, in its opinion, the number of
securities requested to be included in such registration (including
securities of the Company which are not Registrable Securities)
exceeds the number which can be sold in such offering, the Company
will include in such registration to the extent of the number which
the Company is so advised can be sold in such offering (i) first,
Registrable Securities requested to be included in such registration
by the holder or holders of Registrable Securities, pro rata among
such holders on the basis of the number of Registrable Securities
requested to be included by such holders, and (ii) second, securities
the Company proposes to sell and other securities of the Company
included in such registration by the holders thereof.

          2.2.  INCIDENTAL REGISTRATION.  (a)  If the Company at any
time proposes to register its Common Stock under the Securities Act
(other than a registration in connection with an acquisition in a
manner which would not permit registration of Registrable Securities
for sale to the public or in connection with an acquisition for a
consideration of $10 million or less, other than a registration on
Form S-8, or any successor form thereto, relating to a stock option
plan, stock purchase plan, managing directors' plan, savings or 

                                  41


similar plan and other than pursuant to section 2.1), whether or not
for sale for its own account, the Company will each such time give
prompt written notice to all holders of Registrable Securities of its
intention to do so and of such holders' rights under this section 2.2. 
Upon the written request of any such holder made within 30 days after
the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and
shall state the intended method of disposition thereof), the Company
will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has
been so requested to register by the holders of Registrable
Securities, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the
Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the
Common Stock which the Company proposes to register, PROVIDED that if,
at any time after giving written notice of its intention to register
any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company
shall determine for any reason either not to register or to delay
registering such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable
Securities and, thereupon, (i) in the case of a determination not to
register, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not
from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any holder or
holders of Registrable Securities entitled to do so to request that
such registration be effected as a registration under section 2.1, and
(ii) in the case of a determination to delay registering, shall be
permitted to delay registering any Registrable Securities for the same
period as the delay in registering such other securities.

          (b)  No registration effected pursuant to a request or
requests referred to in this section 2.2 shall be deemed to have been
effected pursuant to section 2.1.  The Company will pay all
Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this section 2.2.

                                  42

          (c)  If (i) a registration pursuant to this section 2.2
involves an underwritten offering of the securities so being
registered, whether or not for sale for the account of the Company, to
be distributed (on a firm commitment basis) by or through one or more
underwriters of recognized standing under underwriting terms
appropriate for such a transaction, (ii) the Registrable Securities so
requested to be registered for sale for the account of holders of
Registrable Securities are not also to be included in such
underwritten offering (either because the Company has not been
requested so to include such Registrable Securities pursuant to
section 2.4 or, if requested to do so, is not obligated to do so under
section 2.4), and (iii) the managing underwriter of such underwritten
offering shall inform the holders of the Registrable Securities
requesting such registration by letter of its belief that the
distribution of all or a specified number of such Registrable
Securities concurrently with the securities being distributed by such
underwriters would interfere with the successful marketing of the
Common Stock being distributed by such underwriters (such writing to
state the basis of such belief and the approximate number of such
Registrable Securities which may be distributed without such effect),
then the Company may, upon written notice to all holders of such
Registrable Securities, reduce pro rata (if and to the extent stated
by such managing underwriter to be necessary to eliminate such effect)
the number of such Registrable Securities the registration of which
shall have been requested by each holder of Registrable Securities so
that the resultant aggregate number of such Registrable Securities so
included in such registration shall be equal to the number of shares
stated in such managing underwriter's letter.

          2.3.  REGISTRATION PROCEDURES.  If and whenever the Company
is required by the provisions of this Agreement to use its best
efforts to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Agreement, the
Company shall, as expeditiously as possible:

          (a)  prepare and file with the Securities and Exchange
     Commission (in the case of a registration pursuant to section
     2.1, such filing to be made within 60 days after the initial
     request of one or more Qualified Holders of Registrable
     Securities or in any event as soon thereafter as possible) the 

                                  43

     requisite registration statement with respect to such Registrable
     Securities (including such audited financial statements as may be
     required by the Securities Act or the rules and regulations
     promulgated thereunder) and use its best efforts to cause such
     registration statement to become and remain effective, PROVIDED
     that before filing such registration statement or any amendments
     thereto, the Company will furnish to the counsel selected by the
     holders of Registrable Securities which are to be included in
     such registration copies of all such documents proposed to be
     filed, which documents will be subject to the review of such
     counsel;

          (b)  prepare and file with the Securities and Exchange 
     Commission such amendments and supplements to such registration
     statement and the prospectus used in connection therewith as may
     be necessary to maintain the effectiveness of such registration
     statement and to comply with the provisions of the Securities Act
     with respect to the disposition of all securities covered by such
     registration statement until the earlier of such time as all of
     such securities have been disposed of in accordance with the
     intended methods of disposition by the seller or sellers thereof
     set forth in such registration statement or (i) in the case of a
     registration pursuant to section 2.1, the expiration of 180 days
     after such registration statement becomes effective, or (ii) in
     the case of a registration pursuant to section 2.2, the
     expiration of 90 days after such registration statement becomes
     effective, PROVIDED that if less than all the Registrable
     Securities are withdrawn from registration after the expiration
     of the relevant period, the shares to be so withdrawn shall be
     allocated pro rata among the holders thereof on the basis of the
     respective numbers of Registrable Securities held by them
     included in such registration;

          (c)  furnish to each seller of Registrable Securities
     covered by such registration statement and each underwriter, if
     any, of the securities being sold by such seller such number of
     copies of such registration statement and of each such amendment
     and supplement thereto (in each case including all exhibits),
     such number of copies of the prospectus included in

                                  44

     such registration statement (including each preliminary
     prospectus and any summary prospectus), in conformity with the
     requirements of the Securities Act, and such other documents, as
     such seller and underwriter, if any, may reasonably request in
     order to facilitate the public sale or other disposition of the
     Registrable Securities owned by such seller;

          (d) use its best efforts to register or qualify all
     Registrable Securities covered by such registration statement
     under such other securities laws or blue sky laws of such
     jurisdictions as any seller and each underwriter, if any, of the
     securities being sold by such seller shall reasonably request, to
     keep such registrations or qualifications in effect for so long
     as the registration statement remains in effect and do any and
     all other acts and things which may be necessary or advisable to
     enable such seller and underwriter, if any, to consummate the
     disposition in such jurisdictions of such Registrable Securities
     owned by such seller, except that the Company shall not for any
     such purpose be required to qualify generally to do business as a
     foreign corporation in any jurisdiction wherein it would not but
     for the requirements of this paragraph (d) be obligated to be
     qualified, to subject itself to taxation in any such jurisdiction
     or to consent to general service of process in any such
     jurisdiction;

          (e)  use its best efforts to cause all Registrable
     Securities covered by such registration statement to be
     registered with or approved by such other governmental agencies
     or authorities as may be necessary to enable the seller or
     sellers thereof to consummate the disposition of such Registrable
     Securities;

          (f)  notify each seller of Registrable Securities covered by
     such registration statement, at any time when a prospectus
     relating thereto is required to be delivered under the Securities     
     Act, of the Company's becoming aware that the prospectus included
     in such registration statement, as then in effect, includes an
     untrue statement of a material fact or omits to state any
     material fact required to be stated therein or necessary to make
     the statements therein not misleading in

                                  45

     the light of the circumstances then existing, and promptly
     prepare and furnish to such seller and each underwriter, if any,
     a reasonable number of copies of a prospectus supplemented or
     amended so that, as thereafter delivered to the purchasers of
     such Registrable Securities, such prospectus shall not include an
     untrue statement of a material fact or omit to state a material
     fact required to be stated therein or necessary to make the
     statements therein not misleading in the light of the
     circumstances then existing;

          (g) otherwise use its best efforts to comply with all
     applicable rules and regulations of the Securities and Exchange
     Commission, and make available to its security holders, as soon
     as reasonably practicable, an earnings statement covering the
     period of at least twelve months, but not more than eighteen
     months, beginning with the first day of the Company's first
     calendar quarter after the effective date of the registration
     statement, which earnings statement shall satisfy the provisions
     of section 11(a) of the Securities Act;

          (h)  provide a transfer agent and registrar for all such
     Registrable Securities covered by such registration statement not
     later than the effective date of such registration statement;

          (i)  enter into such agreements and take such other actions
     as sellers of such Registrable Securities holding 51% of the
     shares so to be sold shall reasonably request in order to
     expedite or facilitate the disposition of such Registrable
     Securities;

          (j)  furnish to each seller of Registrable Securities a
     signed counterpart, addressed to such seller (and the
     underwriters, if any), of

               (i)  an opinion of counsel for the Company, dated the
          effective date of such registration statement (and, if such
          registration includes an underwritten public offering, an
          opinion dated the date of the closing under the underwriting
          agreement), reasonably satisfactory in

                                  46

          form and substance to such seller and

               (ii)  a "comfort" letter, dated the effective date of
          such registration statement (and, if such registration
          includes an underwritten public offering, a letter dated the
          date of the closing under the underwriting agreement),
          signed by the independent public accountants who have
          certified the Company's financial statements included in
          such registration statement,

     covering substantially the same matters with respect to such
     registration statement (and the prospectus included therein) and,
     in the case of the accountants' letter, with respect to events
     subsequent to the date of such financial statements, as are
     customarily covered in opinions of issuer's counsel and in
     accountants' letters delivered to the underwriters in     
     underwritten public offerings of securities and, in the case of
     the accountants' letter, such other financial matters, as such
     seller (or the underwriters, if any) may reasonably request;

          (k)  give the holders of Registrable Securities whose
     Registrable Securities are registered under such registration
     statement and their underwriters, if any, and their respective
     counsel and accountants, the opportunity to participate in the
     preparation of such registration statement, each prospectus
     included therein or filed with the Securities and Exchange
     Commission, and each amendment thereof or supplement thereto, and
     give each of them such access to its books and records and such
     opportunities to discuss the business of the Company with its
     officers and the independent public accountants who have
     certified its financial statements as shall be necessary, in the
     opinion of the respective counsel of such holders and such
     underwriters, to conduct a reasonable investigation within the
     meaning of the Securities Act; and

          (l)  use its best efforts to list all Registrable Securities
     covered by such registration statement on each securities
     exchange on which any of the securities of the same class as the
     Registrable Securities are then listed.

                                  47

          Each holder of Registrable Securities shall be deemed to
have agreed by acquisition of such Registrable Securities that upon
receipt of any notice from the Company of the occurrence of any event
of the kind described in paragraph (f) of this section 2.3, such
holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement covering
such Registrable Securities until such holder's receipt of the copies
of the supplemented or amended prospectus contemplated by paragraph
(f) of this section 2.3 and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other
than permanent file copies, then in such holder's possession of the
prospectus covering such Registrable Securities current at the time of
receipt of such notice.  In the event the Company shall give any such
notice, the period mentioned in paragraph (b) of this section 2.3
shall be extended by the length of the period from and including the
date when each seller of any Registrable Securities covered by such
registration statement shall have received the copies of the
supplemented or amended prospectus contemplated by paragraph (f) of
this section 2.3.

          If any such registration or comparable statement refers to
any holder by name or otherwise as the holder of any securities of the
Company then such holder shall have the right to require (i) the
insertion therein of language, in form and substance satisfactory to
such holder, to the effect that the holding by such holder of such
securities is not to be construed as a recommendation by such holder
of the investment quality of the Company's securities covered thereby
and that such holding does not imply that such holder will assist in
meeting any future financial requirements of the Company, or (ii) in
the event that such reference to such holder by name or otherwise is
not required by the Securities Act or any similar federal statute then
in force, the deletion of the reference to such holder.  The Company
may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the
Company may from time to time reasonably request in writing.

          If, in connection with any registration under section 2.1
which is proposed by the Company to be on Form S-3 or any similar
                                   48


short form registration statement which is a successor to Form S-3,
the managing underwriters, if any, shall advise the Company in writing
that in their opinion the use of another permitted form is of material
importance to the success of the offering, then such registration
shall be on such other permitted form.

          2.4.  UNDERWRITTEN OFFERINGS.  (a)  SELECTION OF
UNDERWRITERS.  If a requested registration pursuant to section 2.1
involves an underwritten offering, the underwriter or underwriters
thereof shall be selected by the holders of at least a majority (by
number of shares) of the Registrable Securities as to which
registration has been requested and shall be acceptable to the
Company, which shall not unreasonably withhold its acceptance of such
underwriters.

          (b)  UNDERWRITING AGREEMENT.  If requested by the
     underwriters for any underwritten offering by holders of
     Registrable Securities pursuant to a registration requested under
     section 2.1, the Company will enter into an underwriting
     agreement with such underwriters for such offering, such
     agreement to be satisfactory in substance and form to the
     Company, each such holder and the underwriters and to contain
     such representations and warranties by the Company and such other
     terms as are customarily contained in agreements of that type,
     including, without limitation, indemnities to the effect and to
     the extent provided in section 2.5.  The holders of Registrable
     Securities which are to be distributed by such underwriters shall
     be parties to such underwriting agreement and may, at their
     option, require that any or all of the representations and
     warranties by, and the other agreements on the part of, the
     Company to and for the benefit of such underwriters shall also be
     made to and for the benefit of such holders of Registrable
     Securities and that any or all of the conditions precedent to the
     obligations of such underwriters under such underwriting
     agreement be conditions precedent to the obligations of such
     holders of Registrable Securities.  Such holders of Registrable
     Securities shall not be required to make any representations or
     warranties to or agreements with the Company or the underwriters
     other than representations, warranties or agreements regarding 

                                  49


     such holders and such holders' intended methods of distribution.

          (c)  INCIDENTAL UNDERWRITTEN OFFERINGS.  If the Company at
     any time proposes to register any of its Common Stock under the
     Securities Act as contemplated by section 2.2 and such securities
     are to be distributed by or through one or more underwriters, the
     Company will, if requested by any holder of Registrable
     Securities as provided in section 2.2, use its best efforts to
     arrange for such underwriters to include all the Registrable
     Securities to be offered and sold by such holder among the
     securities to be distributed by such underwriters, PROVIDED that
     if the managing underwriter of such underwritten offering shall
     inform the holders of the Registrable Securities requesting such
     registration and the holders of any other shares of Common Stock
     which shall have exercised, in respect of such underwritten
     offering, registration rights comparable to the rights under
     section 2.2 by letter of its belief that inclusion in such
     underwritten distribution of all or a specified number of such
     Registrable Securities or of such other shares of Common Stock so
     requested to be included would interfere with the successful     
     marketing of the Common Stock (other than such Registrable
     Securities and other shares of Common Stock so requested to be
     included) by the underwriters (such writing to state the basis of
     such belief and the approximate number of such Registrable
     Securities and shares of other Common Stock so requested to be
     included which may be included in such underwritten offering
     without such effect), then the Company may, upon written notice
     to all holders of such Registrable Securities and of such other
     shares of Common Stock so requested to be included, exclude pro
     rata from such underwritten offering (if and to the extent stated
     by such managing underwriter to be necessary to eliminate such
     effect) the number of such Registrable Securities and shares of
     such other Common Stock so requested to be included the
     registration of which shall have been requested by each holder of
     Registrable Securities and by the holders of such other Common
     Stock so that the resultant aggregate number of such Registrable
     Securities and of such other shares of Common Stock so requested
     to be included which are included in such underwritten offering
     shall be equal to the approximate number 
                                  50


     of shares stated in such managing underwriter's letter.  The
     holders of Registrable Securities whose Registrable Securities
     are to be distributed by such underwriters shall be parties to
     the underwriting agreement between the Company and such
     underwriters and may, at their option, require that any or all of
     the representations and warranties by, and the other agreements
     on the part of, the Company to and for the benefit of such
     underwriters shall also be made to and for the benefit of such
     holders of Registrable Securities and that any or all of the
     conditions precedent to the obligations of such underwriters
     under such underwriting agreement be conditions precedent to the
     obligations of such holders of Registrable Securities.  Such
     holders of Registrable Securities shall not be required to make
     any representations or warranties to or agreements with the
     Company or the underwriters other than representations,
     warranties or agreements regarding such holders and such holders'
     intended methods of distribution.

          (d)  HOLDBACK AGREEMENTS.  (i)  Each holder of Registrable
     Securities shall be deemed to have agreed by acquisition of such
     Registrable Securities, if so required by the managing
     underwriter, not to effect any public sale or distribution of
     such securities during the seven days prior to and the 90 days
     after any underwritten registration pursuant to section 2.1 or
     2.2 has become effective, except as part of such underwritten
     registration, whether or not such holder participates in such
     registration.

          (ii)  The Company agrees (x) if so required by the managing
     underwriter, not to effect any public sale or distribution of its
     equity securities or securities convertible into or exchangeable
     or exercisable for any of such securities during the seven days
     prior to and the 90 days after any underwritten registration
     pursuant to section 2.1 has become effective, except as part of
     such underwritten registration and except in connection with a
     stock option plan, stock purchase plan, managing directors' plan,
     savings or similar plan, or an acquisition of a business, merger
     or exchange of stock for stock, and (y) to cause each holder of
     its equity securities or of any securities convertible into or
     exchangeable or

                                  51
     
     exercisable for any of such securities, in each case purchased
     directly from the Company at any time after the date of this
     Agreement (other than in a public offering), to agree not to
     effect any such public sale or distribution of such securities
     during such period, except as part of such underwritten
     registration.

          2.5.  INDEMNIFICATION.  (a)  INDEMNIFICATION BY THE COMPANY. 
     In the event of any registration of any securities of the Company
     under the Securities Act, the Company will, and hereby does,
     indemnify and hold harmless in the case of any registration
     statement filed pursuant to section 2.1 or 2.2, the holder of any
     Registrable Securities which are covered by such registration
     statement, its directors and officers, each other Person who
     participates as an underwriter in the offering or sale of such
     Registrable Securities and each other Person, if any, who
     controls such holder or any such underwriter within the meaning
     of the Securities Act, against any losses, claims, damages or
     liabilities, joint or several, to which such holder or any such
     director or officer or underwriter or controlling person may
     become subject under the Securities Act or otherwise, insofar as
     such losses, claims, damages or liabilities (or actions or
     proceedings, whether commenced or threatened, in respect thereof)
     arise out of or are based upon any untrue statement or alleged
     untrue statement of any material fact contained in any
     registration statement under which such securities were
     registered under the Securities Act, any preliminary prospectus,
     final prospectus or summary prospectus contained therein, or any
     amendment or supplement thereto, or any omission or alleged
     omission to state therein a material fact required to be stated
     therein or necessary to make the statements therein not
     misleading, and the Company will reimburse such holder and each
     such director, officer, underwriter and controlling person for
     any legal or any other expenses reasonably incurred by them in
     connection with investigating or defending any such loss, claim,
     liability, action or proceeding, PROVIDED that (i) the Company
     shall not be liable in any such case to the extent that any such
     loss, claim, damage, liability (or action or proceeding in
     respect thereof) or expense arises out of or is based upon an
     untrue
                                  52


     statement or alleged untrue statement or omission or alleged
     omission made in such registration statement, any such
     preliminary prospectus, final prospectus, summary prospectus,
     amendment or supplement in reliance upon and in conformity with
     written information furnished to the Company specifically stating
     that it is for use in the preparation thereof and (ii) the
     provisions of this section 2.5(a) shall not inure to the benefit
     of any underwriter (or any person controlling such  underwriter)
     on account of any losses, claims, damages, liabilities or actions
     arising from the sale of securities to any Person if such
     underwriter failed to send or give a copy of the related
     prospectus, as the same may be then amended or supplemented, to
     such Person within the time required by the Securities Act.  Such
     indemnity shall remain in full force and effect regardless of any
     investigation made by or on behalf of such holder or any such
     director, officer, underwriter or controlling person and shall
     survive the transfer of such securities by such holder.

          (b)  INDEMNIFICATION BY THE SELLERS.  The Company may
     require, as a condition to including any Registrable Securities
     in any registration statement filed pursuant to section 2.3, that
     the Company shall have received an undertaking satisfactory to it
     from the prospective seller of such securities, to indemnify and     
     hold harmless (in the same manner and to the same extent as set
     forth in subdivision (a) of this section 2.5) the Company, each
     director of the Company, each officer of the Company and each
     other person, if any, who controls the Company within the meaning
     of the Securities Act, with respect to any statement or alleged
     statement in or omission or alleged omission from such
     registration statement, any preliminary prospectus, final
     prospectus or summary prospectus contained therein, or any
     amendment or supplement thereto, if such statement or alleged
     statement or omission or alleged omission was made in reliance
     upon and in conformity with written information furnished to the
     Company through an instrument duly executed by such seller
     specifically stating that it is for use in the preparation of
     such registration statement, preliminary prospectus, final
     prospectus, summary prospectus, amendment or supplement.  Such
     indemnity shall

                                  53


     remain in full force and effect regardless of any investigation
     made by or on behalf of the Company or any such director, officer
     or controlling person and shall survive the transfer of such
     securities by such seller.  

          (c)  NOTICES OF CLAIMS, ETC.  Promptly after receipt by an
     indemnified party of notice of the commencement of any action or
     proceeding involving a claim referred to in the preceding
     subdivisions of this section 2.5, such indemnified party will, if
     a claim in respect thereof is to be made against an indemnifying
     party, give written notice to the latter of the commencement of
     such action, PROVIDED that the failure of any indemnified party
     to give notice as provided herein shall not relieve the
     indemnifying party of its obligations under the preceding
     subdivisions of this section 2.5, except to the extent that the
     indemnifying party is actually prejudiced by such failure to give
     notice.  Incase any such action is brought against an indemnified
     party, unless in such indemnified party's reasonable judgment a
     conflict of interest between such indemnified and indemnifying
     parties may exist in respect of such claim, the indemnifying
     party shall be entitled to participate in and to assume the
     defense thereof, jointly with any other indemnifying party
     similarly notified, to the extent that it may wish, with counsel
     reasonably satisfactory to such indemnified party, and after
     notice from the indemnifying party to such indemnified party of
     its election so to assume the defense thereof, the indemnifying
     party shall not be liable to such indemnified party for any legal
     or other expenses subsequently incurred by the latter in
     connection with the defense thereof other than reasonable costs
     of investigation.  No indemnifying party shall consent to entry
     of any judgment or enter into any settlement without the consent
     of the indemnified party or which does not include as an
     unconditional term thereof the giving by the claimant or
     plaintiff to such indemnified party of a release from all
     liability, or a covenant not to sue, in respect of such claim or
     litigation.  No indemnified party shall consent to entry of any
     judgment or enter into any settlement of any such action the
     defense of which has been assumed by an indemnifying party
     without the consent of such indemnifying party.
                                  54

          (d)  OTHER INDEMNIFICATION.  Indemnification similar to that
     specified in the preceding subdivisions of this section 2.5 (with
     appropriate modifications) shall be given by the Company and each
     seller of Registrable Securities with respect to any required
     registration or other qualification of such Registrable     
     Securities under any federal or state law or regulation of any
     governmental authority, other than the Securities Act.

          (e)  PAYMENTS.  The indemnification required by this section
     2.5 shall be made by periodic payments of the amount thereof
     during the course of the investigation or defense, as and when
     bills are received or expense, loss, damage or liability is
     incurred.

          3.  GENERAL.

          3.1  ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES.  The
Company agrees that it shall not effect or permit to occur any
combination or subdivision of shares which would adversely affect the
ability of the holder of any Registrable Securities to include such
Registrable Securities in any registration contemplated by this
Agreement or the marketability of such Registrable Securities in any
such registration.

          3.2  RULE 144.  If the Company shall have filed a
registration statement pursuant to the requirements of section 12 of
the Exchange Act or a registration statement pursuant to the
requirements of the Securities Act, the Company covenants that it will
timely file the reports required to be filed by it under the
Securities Act or the Exchange Act (including but not limited to the
reports under sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act) and the rules and regulations
adopted by the Securities and Exchange Commission thereunder, and will
take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to
enable such holder to sell Registrable Securities without registration
under the Securities Act within the
                                  55


limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii)
any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission.  Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.

          3.3  NOMINEES FOR BENEFICIAL OWNERS.  In the event that
Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its option, be treated
as the holder of such Registrable Securities for purposes of any
request or other action by any holder or holders of Registrable
Securities pursuant to this Agreement (or any determination of any
number or percentage of shares constituting Registrable Securities
held by any holder or holders of Registrable Securities contemplated
by this Agreement).

          3.4  STOCKHOLDERS AGREEMENT.  Notwithstanding anything above
to the contrary, all transfers of Registrable Securities subject to
the provisions of the Stockholders Agreement shall, during the term
thereof, be made in accordance with said provisions.

          3.5  AMENDMENTS AND WAIVERS.  Any term of this Agreement may
be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the
Company, Teachers and the holders of 60% or more of the shares of
Common Stock originally issued pursuant to the Common Stock
Subscription Agreement, or issued in exchange or substitution
therefor, at the time outstanding.  Each holder of any shares of
Common Stock at the time or thereafter outstanding shall be bound by
any consent authorized by this section 3.5, whether or not such shares
of Common Stock shall have been marked to indicate such consent.  The
Company will not consent to any modification, supplement or waiver in
connection with the registration rights provisions of the Purchase
Agreement.

          3.6  NOTICES.  Except as otherwise provided in this
Agreement, notices and other communications under this Agreement

                                  56


shall be in writing and shall be delivered, or mailed by first-class
mail, postage prepaid, addressed, (a) if to a party other than the
Company, to such party at the address set forth in the Schedule of
Stockholders attached to this Agreement, or at such other address as
such party shall have furnished to the Company in writing and (b) if
to the Company, at 40 N.E. Loop 410, San Antonio, Texas  78216, to the
attention of its Secretary, or at such other address, or to the
attention of such other officer, as the Company shall have furnished
to each holder of Registrable Securities at the time outstanding.

          3.7  CERTAIN DEFINITIONS.  As used in this Agreement, the
following terms have the following respective meanings:

          ACQUIRING CORP.:  As defined in section 1 of this Agreement.

          CLASS A COMMON STOCK:  As defined in section 1 of this
Agreement.

          CLASS B COMMON STOCK:  As defined in section 1 of this
Agreement.

          COMMON STOCK:  As defined in section 1 of this Agreement.

          COMMON STOCK SUBSCRIPTION AGREEMENT:  As defined in section
1 of this Agreement.

          COMPANY:  As defined in the first paragraph of this
Agreement.

          EXCHANGE ACT:  The Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall
be amended from time to time.

          INVESTOR GROUP:  As defined in section 1 of this Agreement.

          MARKET PRICE:  The last sale price, regular way, of the
Common Stock on any date, or, if there shall have been no sale on any

                                  57


such date, the average of the closing bid and asked prices of the
Common Stock on such date, in each case as officially reported on the
principal national securities exchange on which the Common Stock is at
the time listed or admitted to trading, or if the Common Stock is not
then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD,
the last trading price of the Common Stock on such date, or if there
shall have been no trade on such date or if the Common Stock is not so
designated, the average of the closing bid and asked prices of the
Common Stock on such date as shown by the NASD automated quotation
system.  If at any time the Common Stock is not listed on any exchange
or quoted in the domestic over-the-counter market, the "Market Price"
shall be deemed to be the fair value thereof, as determined in good
faith by an independent brokerage firm selected by the Company and
satisfactory to holders of a majority of the Registrable Securities in
respect of which a request for registration under section 2.1 has been
made, as of a date which is within 15 days preceding the date as of
which the determination is to be made.

          NASD:  The National Association of Securities Dealers, Inc.

          PERSON:  A corporation, an association, a partnership, an
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.

          PURCHASE AGREEMENT:  As defined in section 1 of this
Agreement.

          QUALIFIED HOLDERS:  Any holder or holders of Registrable
Securities making a written request pursuant to section 2.1 for the
registration of all or part of the Registrable Securities held by such
holder or holders if on the date of such request (a) the Market Price
of such Registrable Securities to be registered exceeds $40,000,000
and (b) the number of shares of such Registrable Securities to be
registered is equal to or greater than 10% of the number of shares of
Common Stock at the time outstanding.

          REGISTRABLE SECURITIES:  All shares of Class A Common Stock
issued or issuable pursuant to the Common Stock Subscription

                                  58


Agreement or the Purchase Agreement, upon exercise of any Warrants or
upon conversion of any shares of Class B Common Stock issued pursuant
to the Purchase Agreement or upon exercise of any Warrants, including
any securities issued or issuable with respect to such shares of
Common Stock or Warrants by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise, except for shares
of Common Stock which have been distributed to the public pursuant to
a registration statement or Rule 144 (or any successor provision)
under the Securities Act.  Holders of Warrants or shares of Class B
Common Stock shall be deemed to be holders of the Registrable
Securities which are at the time issuable upon exercise of such
Warrants or upon conversion of such shares of Class B Common Stock.

          REGISTRATION EXPENSES:  All expenses incident to the
Company's performance of or compliance with section 2, including,
without limitation, all registration, filing and NASD fees, all fees
and expenses of complying with securities or blue sky laws, all
printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits and/or "cold
comfort" letters required by or incident to such performance and
compliance, the fees and disbursements of a single counsel retained by
the holders of the Registrable Securities being registered (or, if
Teachers has requested the registration of Registrable Securities in
connection with a registration under section 2, at Teachers' election,
one counsel for Teachers and one counsel for all other holders of
Registrable Securities being registered) and any fees and
disbursements of underwriters customarily paid by issuers or sellers
of securities, but excluding underwriting discounts and commissions
and transfer taxes, if any, PROVIDED that, in any case where
Registration Expenses are not to be borne by the Company, such
expenses shall not include salaries of Company personnel or general
overhead expenses of the Company, and shall not include auditing fees,
premiums or other expenses relating to liability insurance required by
underwriters or the Company, or other expenses for the preparation of
financial statements or other data normally prepared by the Company in
the ordinary course of its business or which the Company would have
incurred in any event.
                                  59

          SECURITIES ACT:  The Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same shall be amended from
time to time.

          SECURITIES AND EXCHANGE COMMISSION:  The U.S. Securities and
Exchange Commission, or any other federal agency at the time
administering the Exchange Act or the Securities Act, whichever is the
relevant statute for the particular purpose.

          STOCKHOLDERS AGREEMENT:  The Stockholders Agreement, dated
as of the date of this Agreement, in the form set forth as Exhibit I
to the Purchase Agreement.

          TEACHERS:  As defined in section 1 of this Agreement.

          WARRANTS:  As defined in section 1 of this Agreement.

          3.8  MISCELLANEOUS.  This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties thereto, whether so expressed or
not.  This Agreement embodies the entire agreement and understanding
between the Company and each other party hereto and supersedes all
prior agreements and understandings relating to the subject matter
hereof.  This Agreement shall be construed and enforced in accordance
with and governed by the law of the State of Delaware, without
reference to the principles of the conflicts of laws thereof.  The
headings in this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.  This
Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one
instrument.
                                  60

          IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed on the date first written above.

                              HH HOLDING INC.

                              By /s/ Donald R. Crews

                              TEACHERS INSURANCE AND ANNUITY
                              ASSOCIATION OF AMERICA

                              By /s/ Kent M. Phillips

                                  61


                                                         Exhibit 10(m)
                        INCENTIVE BONUS PLAN

1.   This Plan continues and confirms the incentive bonus arrangements
     which have applied to the Senior Management Group for the last
     several years and which the Board intends to continue until
     amended or terminated by further action of the Board.

2.   The members of the Senior Management Group, and such other
     officers of the Company as may be selected from time to time by
     the Compensation Committee, are entitled to participate in this
     Plan.

3.   Prior to the beginning of each year, the Compensation Committee
     shall establish in writing for each participant specific
     financial or other goals against which the participant's
     performance shall be measured.  Those goals may relate to
     revenues, operating income, debt levels, earnings per share or
     otherwise, and may apply to the company on a consolidated basis,
     to a core business or unit thereof, or any combination of the
     foregoing.

4.   The goals shall be established in gradients, and participants
     shall be entitled to receive each year as a cash bonus pursuant
     to this Plan an amount up to 70% of base compensation.

5.   All determinations of levels of goal achievement shall be based
     on the Company's audited financial statements or other objective
     sources.

6.   Bonus payments shall be made only after the Compensation
     Committee has certified the extent to which goals have been
     attained.

7.   The Compensation Committee shall have the authority to interpret
     this Plan and to adopt such rules as it deems appropriate for
     administrative purposes.  Board approval is required to adopt any
     material modification to this Plan.

                                62


                                                           Exhibit 11

          HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES
                   EARNINGS PER SHARE COMPUTATIONS

                (in thousands, except per share data)

                                            YEAR ENDED DECEMBER 31,
                                         1993         1992       1991

Income (loss) before extraordinary 
  item and cumulative effect of
  accounting change . . . . . . . .   $(45,472)  $ 2,336     $(7,052)
Extraordinary item. . . . . . . . .     (7,393)      --          -- 
Cumulative effect of change
  in method of accounting . . . . .        --        --        3,114
Net income (loss) . . . . . . . . .   $(52,865)  $ 2,336     $(3,938)

Shares used in net earnings 
  per share computations. . . . . .     13,038    12,214      12,343

Net income (loss) per share:
Income (loss) before extraordinary 
  item and cumulative effect of
  accounting change . . . . . . . .    $  (349)   $   19      $  (57)
Extraordinary item. . . . . . . . .        (56)      --          -- 
Cumulative effect of change
  in method of accounting . . . . .        --        --           25
Net income (loss) . . . . . . . . .    $  (405)   $   19      $  (32)


      COMPUTATION OF SHARES USED IN NET EARNINGS PER SHARE
                         COMPUTATIONS

                                           YEAR ENDED DECEMBER 31
                                        1993      1992         1991

Average outstanding common shares .    12,873    11,910       12,214
Average common equivalent shares -- 
  dilutive effect of option shares.      --         175         --  
Dilutive effect of shares, options 
  and warrants issued in the 
  preceding twelve months . . . . .       165       129          129
Shares used in net earnings 
  per share computations. . . . . .    13,038    12,214       12,343

                                63


                                                            EXHIBIT 13


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

OVERVIEW

             From the time of the leveraged buyout in 1984 until
1992, the Company focused on improving operating cash flows and
reducing debt by reducing costs, selectively introducing new products
and implementing a corporatewide quality program.  Beginning in 1992,
the Company developed a strategy to accelerate growth by taking
advantage of opportunities in the businesses and markets in which it
operates.  It began increasing its investments in technology,
equipment and personnel, introducing new products and services in
existing markets, entering new markets and making acquisitions.  As a
result of these investments and improving economies in some of the
Company's markets, revenues grew $47.3 million from $416.2 million in
1991 to $463.5 million in 1993.  Nevertheless, sluggish local
economies in Massachusetts affected revenues in the Company's Boston
suburban newspaper operation and in California affected the Company's
shopper operations.  At the same time, operating income, excluding the
goodwill write-down discussed under "Goodwill Write-Down" (page 16),
increased from $38.3 million in 1991 to $51.9 million in 1993.

             In 1993, Harte-Hanks redeemed all of its $200 million
principal amount 11 7/8% Subordinated Debentures and significantly
reduced its interest expense.  A portion of this redemption ($100
million) was funded in August 1993 with borrowings under the Company's
credit facility, which at December 31, 1993 had an effective rate of
5.0%.  The remaining $100 million redemption in December 1993 was
funded primarily with proceeds from the Company's initial public
offering in November 1993.  The Company issued 6,250,000 shares of its
common stock at an initial public offering price of $16.50 per share
for net proceeds of $95.3 million.  With these redemptions, the
Company reduced its total borrowings from $394.0 million at December
31, 1992 to $321.1 million at December 31, 1993.  As a result of both
of these redemptions, the Company expects to save approximately $18
million in annual interest based upon its effective borrowing rate of
5.0% at December 31, 1993.

             Harte-Hanks derives the majority of its revenues from
the sale of advertising and direct marketing services.  In addition,
the Company's newspapers earn revenues from paid circulation.  The
Company's newspapers, shoppers and television station operate in local
markets and are affected by the strength of the local economies as
well as by national trends that affect these local economies.  As a
national business, direct marketing is affected to a greater extent by
general national economic trends and developments in national markets
for its services and products.  The Company's principal expense items
are payroll, postage and newsprint.  Newsprint prices were low by
historical standards during 1992 and 1993.  Postal rates, which
typically increase every three to four years, rose in 1991 and are
expected to increase in 1995.
                                  64


RESULTS OF OPERATIONS

             Operating results, excluding the effect of the goodwill
write-down, extraordinary items and the cumulative effect of a change
in accounting method, were as follows:
___________________________________________________________________________
IN THOUSANDS                 1993     CHANGE   1992      CHANGE   1991   

Revenues                     $463,510  9.5%    $423,296   1.7 %   $416,227
Operating expenses            411,587  9.5%     376,048  (0.5)%    377,899
Operating income             $ 51,923  9.9%    $ 47,248  23.3 %   $ 38,328
Net income (loss)            $  9,991          $  2,336           $ (7,052)

             Revenues grew in all business segments in 1993.  The growth
was influenced by the development of new products and services, as well as
investments in shopper circulation expansion.  The acquisition of a direct
marketing company in April 1993 also was a factor, as were improving
economies in some of the Company's markets.  The same factors also caused
operating expenses to increase $35.5 million (9.5%), excluding the effect
of the goodwill write-down of $55.5 million.  During 1993, the Company's
California markets continued to be affected by weak economic conditions.

             Total revenues increased in 1992 despite difficult economies
in California, which affected the Company's largest shopper, and in Boston,
which affected the Company's newspapers in suburban Boston.  In addition,
Hurricane Andrew affected the Company's shopper in Miami.  The 1992 revenue
increase was due to growth in direct marketing and television revenues. 
Operating expenses during the same period decreased $1.9 million (0.5%) as
a result of the Company's continued focus on cost control.

NEWSPAPERS

             Newspaper operating results, excluding the effect of the
goodwill write-down, were as follows:
___________________________________________________________________________
IN THOUSANDS                   1993    CHANGE   1992     CHANGE    1991   

Revenues                     $131,545   4.2%   $126,222  (0.7)%   $127,061
Operating expenses            109,812   4.3%    105,249  (4.7)%    110,397
Operating income             $ 21,733   3.6%   $ 20,973   25.9%   $ 16,664

             Advertising revenues rose $4.1 million in 1993 due to
increased volumes and new products.  Retail and classified advertising
revenues grew 2.5% and 7.8%, respectively.  In addition, circulation
revenues grew $1.0 million due primarily to higher rates.  In 1993, payroll
costs increased $2.9 million resulting primarily from normal payroll
increases as well as from investments made to develop niche publications
and specialized services.  Higher volumes and, to a lesser extent, price
increases caused newsprint costs to increase by $1.7 million.

             In 1992, both retail and classified advertising revenues were
relatively flat.  Commercial printing revenues declined $1.3 million,
partially offset by 
                                     65


circulation revenue increases of $0.7 million, which resulted from
increased circulation.  In 1992, production and distribution costs
decreased $3.9 million, which included a $3.1 million decline in newsprint
costs as well as expense reductions resulting from cost control measures. 
Newsprint costs declined due to lower prices coupled with reduced usage,
principally due to a decrease in commercial printing operations.

SHOPPERS

             Shopper operating results, excluding the effect of the
goodwill write-down, were as follows:
___________________________________________________________________________
IN THOUSANDS                   1993     CHANGE   1992      CHANGE    1991   

Revenues                     $174,521    6.4%    $164,021  (0.5)%   $164,928
Operating expenses            159,080    7.1%     148,504  (0.1)%    148,694
Operating income             $ 15,441   (0.5)%   $ 15,517  (4.4)%   $ 16,234

             Shopper advertising revenues grew in 1993 primarily as a
result of increased circulation of 0.9 million households (79 zones) to 7.0
million households at December 31, 1993.  This circulation growth occurred
in the Southern California, Miami/Ft. Lauderdale and Dallas/Fort Worth
markets.  Higher insert volumes in existing zones and restored circulation
in the Company's Miami shopper, which was negatively impacted by Hurricane
Andrew in August 1992, were also factors in the 1993 revenue growth.  Also,
shoppers' 1993 results as compared to 1992 results were affected by there
being one more publishing week in 1992 than in 1993.  In February 1994, the
Company sold its smallest shopper located in Tucson, Arizona.  This shopper
had circulation of 0.3 million at December 31, 1993.

             In 1993, postage costs increased $5.1 million, and newsprint
costs increased $1.6 million.  Other expense categories, except payroll,
also rose due to the increase in shopper advertising volumes.  Postage
costs increased due to higher circulation and higher insert volumes, which
result in increased postage costs due to the application of the overweight
postal rate.  Newsprint costs rose as a result of increased circulation in
expansion zones as well as higher ad volumes in existing zones.  While
increased circulation caused postage and newsprint costs to rise, payroll
costs remained relatively flat due to the Company's use of automatic
inserting technology and other cost control measures.  New circulation has
lower revenues per thousand households than mature zones, which initially
results in lower shopper operating margins.

             The shopper operating revenue decrease in 1992 primarily
reflected the effect of Hurricane Andrew on the Company's shopper in Miami,
Florida.  While the Company's shopper experienced an interruption in
operations and decreased advertising for a short period of time, the storm
had little effect on its ongoing operations.  Commercial printing revenues
also declined $0.7 million.  In addition, the Company's Tucson shopper
revenues declined.  These revenue decreases were slightly offset by an
additional publishing week in 1992 as compared to 1991 and by increased
advertising revenues in the Southern California market, where circulation
expansions added 0.2 million households (27 zones) in 1992.  Increased
insert advertising by new major retail accounts offset decreased local
advertising that resulted from the weak economies in Northern and Southern
California.  
                                     66

             Payroll costs and newsprint costs each decreased $1.7 million
in 1992.  These decreases were partially offset by increased postage costs
of $2.8 million.  Major customer insert advertising volumes increased,
which resulted in higher postage costs due to the application of the
overweight postal rate.  Circulation expansion in Southern California also
contributed to the higher postage costs.  Newsprint costs decreased due to
lower newsprint prices.  Payroll costs decreased as a result of continued
focus on controlling costs.

DIRECT MARKETING

             Direct marketing operating results were as follows:
___________________________________________________________________________
IN THOUSANDS                   1993     CHANGE   1992     CHANGE   1991   

Revenues                     $129,626   20.7%   $107,351   6.4%    $100,930
Operating expenses            116,806   21.1%     96,439   3.3%      93,399
Operating income             $ 12,820   17.5%   $ 10,912  44.9%    $  7,531

             The 1993 direct marketing revenue growth is a result of
continued development and marketing of database and customized data
processing services and products.  The development and marketing activities
resulted in increased sales to existing customers, additional new customers
and expansion into international markets.  In addition, the Company
purchased technology to grow its integrated direct marketing business,
which contributed to 1993 revenue growth.  Also, the Company acquired a
direct marketing company in Jacksonville, Florida in April 1993, which
accounted for approximately $7 million of 1993 direct marketing revenues.

             Payroll costs in 1993 rose as a result of an increased
customer base and investments in new product development and sales force
infrastructure.  In addition, the Company incurred operating costs
associated with the move of its Cincinnati direct marketing operation as
well as startup costs associated with its integrated direct marketing
business.  In addition, operating expenses associated with the newly
acquired direct marketing operation in Jacksonville were part of the 1993
operating expense increase.

             In 1992, transportation services revenues increased $3.5
million due, in part, to the Company's use of its TOPS (Transportation
Optimization of Postal Savings) software program, which optimizes
customers' postal costs and improves on-time delivery of customers'
advertising material.  Database revenues rose $2.5 million from marketing
efforts for new database products and services as well as from growth in
applications for database products in new industry sectors, particularly
retail.

             Transportation services costs increased $2.1 million and
payroll costs increased $1.7 million in 1992 to support the increased
demand for the Company's direct marketing services and products.
                                     
                                     67


TELEVISION

             Television operating results were as follows:
__________________________________________________________________________
IN THOUSANDS            1993      CHANGE      1992      CHANGE      1991  

Revenues                     $27,818   8.2%    $25,702   10.3%    $23,308
Operating expenses            19,654   0.5%     19,562    3.6%     18,889
Operating income             $ 8,164  33.0%    $ 6,140   38.9%    $ 4,419

             Both local and national television advertising revenues grew
in 1993.  In addition, KENS-TV introduced a direct mail product in 1993,
which influenced revenue growth.  Local television advertising revenues
grew 12.6% due to increased volumes and higher rates resulting from KENS'
continued leadership position in a healthy San Antonio economy and the 1992
closure of one of San Antonio's two competing daily newspapers.  National
television advertising also increased 5.5% due to higher demand.  Political
revenues decreased $0.4 million in 1993, which partially offset these
revenue increases.  Payroll costs and production costs related to the
direct mail product increased in 1993 but were offset by decreases in film
programming costs.

             Local and national television advertising revenues increased
7.1% and 8.6%, respectively, in 1992.  Political advertising revenues were
$0.6 million higher due to the national, state and local elections that
year.  Local television advertising revenues increased as a result of KENS'
continued leadership position in a strong San Antonio market.  National
advertising revenues grew due to special events, including the 1992 Winter
Olympics and the 1992 Super Bowl.  Payroll costs increased in 1992, while
the remainder of the Company's television operating expenses remained
relatively flat due to continued efforts to control costs.

GOODWILL WRITE-DOWN

             In connection with the Company's review of the carrying
amount of its investments, including assigned goodwill, the Company
determined that goodwill associated with certain of its investments should
be written down.  That resulted in a charge of $55.5 million in the second
quarter of 1993.  The write-down was solely related to daily, semi-weekly
and weekly newspapers in suburban markets in Boston, Massachusetts ($43.9
million), and in Dallas, Texas ($8.8 million) and to the Company's shopper
publication in Tucson, Arizona ($2.8 million).

             In connection with its review, the Company projected
undiscounted cash flows for each of its investments over the investment's
associated remaining goodwill amortization period.  After these projections
were compared to corresponding net book values of fixed assets and
unamortized goodwill balances, the net goodwill balances were reduced such
that the net fixed assets and unamortized goodwill values assigned to these
investments were equal to the projected future cash flows discounted at the
Company's incremental borrowing rate.

             The cash flow projections were based on economic conditions
in those markets and the historical financial performance of these
investments, as well as recent changes in competitive conditions in those
markets.  Management believes operating performance and growth
opportunities for each of these investments have

                                     68


been permanently affected.  See Note K of Notes to Consolidated Financial
Statements.

INTEREST EXPENSE

             Interest expense decreased $6.1 million in 1993 and $4.6
million in 1992.  The most significant factor in the 1993 decrease was the
redemption of the Company's $200 million 11 7/8% Subordinated Debentures. 
$100 million of this redemption occurred in August 1993 with borrowings
under the Company's credit facility, which at December 31, 1993 had an
effective rate of 5.0%.  The remaining $100 million redemption occurred in
December 1993 primarily with proceeds from the Company's initial public
offering.  As a result of both redemptions, the Company expects to save
approximately $18 million in annual interest based upon its effective
borrowing rate of 5% at December 31, 1993.

             Interest expense declined in 1992 due to lower interest rates
and reduced debt levels.

INCOME TAXES

             The Company's income tax expense relating to income before
extraordinary items increased $1.8 million in 1993 and $6.3 million in 1992
as a result of increased income.  The 1993 increase included a benefit of
$1.0 million as a result of the Company's recognition of a deferred tax
asset, which resulted from state net operating loss carryforwards.  In
1991, the Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes."  As a result, the Company recognized
the cumulative favorable effect of a change in the method of accounting for
income taxes of $3.1 million in 1991.

             The increase of the corporate federal income tax rate from
34% to 35%, effective as of January 1993, did not have a material effect on
the Company's 1993 income tax provision.

EXTRAORDINARY ITEMS

             As a result of the 1993 redemptions discussed under "Interest
Expense," the Company incurred extraordinary losses totaling $7.4 million,
net of income tax benefits of $4.3 million, from the payment of redemption
premiums and the write-off of related unamortized financing costs and
issuance costs.

CAPITAL INVESTMENTS

             Investing activities for 1993 included $21.7 million in
capital expenditures and $10.9 million in expenditures for acquisitions and
reflect the Company's increased investment activities begun in late 1992. 
The capital expenditures included a nine-unit offset printing press and
related building project for the Company's newspaper in Corpus Christi,
Texas; shopper inserting and pagination technology; and equipment that
supports the Company's integrated direct marketing business.  Additionally,
equipment was replaced at the Company's Miami shopper damaged during
Hurricane Andrew, for which the Company was substantially reimbursed by
insurance proceeds.  The acquisitions consisted of the purchases of a
direct marketing company in Jacksonville, Florida; a radio station in San

                                     69


Antonio, Texas (KENS-AM), and a West Texas direct mail coupon publication
incorporated into the newspaper products in Abilene, San Angelo and Wichita
Falls, Texas.  These acquisitions and capital expenditures, which support
the Company's growth strategy, were funded by the issuance of $20 million
of Convertible Notes in September 1992, proceeds of which were used
initially to reduce bank debt, and from cash provided by operating
activities.

             The Company expects capital expenditures in the next two to
three years to be in the range of $10 million annually.  Additional amounts
may be spent on selective acquisitions as opportunities arise that are
consistent with the Company's strategy.

LIQUIDITY AND CAPITAL RESOURCES

             Cash provided by operating activities for the year ended
December 31, 1993 was $26.4 million.  Net cash outflows for investing
activities, which consist primarily of capital expenditures and
acquisitions, were $34.7 million for the year ended December 31, 1993 as
compared to $10.3 million for the year ended December 31, 1992.  See above
discussion of capital expenditures under "Capital Investments."

             Cash provided by operating activities for the years ended
December 31, 1992 and 1991 was $23.8 million and $23.1 million,
respectively.  For the years ended December 31, 1992 and 1991, capital
expenditures were $6.9 million and $4.5 million, respectively, and
consisted principally of the purchase of equipment.

             Capital resources are also available from and provided
through the Company's unsecured credit facility.  On May 19, 1993, the
Company entered into a $320 million credit facility, which includes a $220
million revolving loan commitment and a $100 million term loan.  This
credit facility replaced the Company's $200 million revolving credit
commitment that was scheduled to expire December 31, 1993.  All borrowings
under the revolving credit facility are to be repaid by December 31, 1999. 
Management believes that its credit facility, together with cash provided
by operating activities, will be sufficient to fund operations, anticipated
capital and film expenditures and debt service requirements for the
foreseeable future.  As of December 31, 1993, the Company had $50.2 million
of unused borrowing capacity under its credit facility, of which $28.2
million was reserved to serve as backup for the Company's outstanding
commercial paper.

SEASONALITY AND CYCLICALITY

             The Company's businesses tend to be seasonal, with higher
revenues and profits occurring in the second through the fourth quarters
due to the increased advertising activity during these periods.  In
addition, the Company's television operation experiences higher revenues
and profits during those years when political elections are held.  See Note
L of Notes to Consolidated Financial Statements.

                                     70

   
Harte-Hanks Communications, Inc. and Subsidiaries

                               CONSOLIDATED BALANCE SHEETS
                   (IN THOUSANDS, EXCEPT PER SHARE  AND SHARE AMOUNTS)
December 31, ASSETS 1993 1992 Current assets Cash.............................................. $ 4,392 $ 3,279 Accounts receivable (less allowance for doubtful accounts of $2,025 in 1993 and $2,512 in 1992).. 61,130 56,087 Inventory......................................... 8,032 7,986 Prepaid expenses.................................. 5,385 5,071 Current deferred income tax benefit............... 4,549 4,763 Other current assets.............................. 3,765 4,685 Total current assets............................ 87,253 81,871 Property, plant and equipment Land.............................................. 10,679 9,894 Buildings and improvements........................ 42,230 38,373 Equipment and furniture........................... 130,733 119,135 183,642 167,402 Less accumulated depreciation..................... 99,721 91,251 83,921 76,151 Construction and equipment installations in progress........................................ 6,888 2,059 Net property, plant and equipment............. 90,809 78,210 Goodwill (less accumulated amortization of $95,996 in 1993 and $85,812 in 1992)............... 292,944 347,105 Other assets........................................ 7,932 8,293 Total assets.................................... $478,938 $515,479 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable.................................. $ 24,422 $ 22,675 Accrued payroll and related expenses.............. 12,607 10,701 Accrued interest.................................. 950 11,004 Prepaid subscriptions............................. 3,753 3,510 Current portion of film contracts................. 1,233 2,143 Income taxes payable.............................. 235 2,191 Other current liabilities......................... 10,765 8,780 Current portion of long term debt................. 977 175,215 Total current liabilities....................... 54,942 236,219 Long term debt...................................... 320,087 218,828 Other long term liabilities (including deferred income taxes of $10,424 in 1993 and $11,262 in 1992)........................................... 20,045 18,993 Total liabilities............................... 395,074 474,040 Stockholders' equity Common stock, $1 par value, authorized 50,000,000 shares. Issued and outstanding 1993: 18,129,400 shares; 1992: 11,880,900 shares (excluding 2,119,100 treasury shares in 1992)......................................... 18,129 11,881 Additional paid-in capital........................ 142,664 53,615 Accumulated deficit............................... (76,929) (24,057) Total stockholders' equity...................... 83,864 41,439 Total liabilities and stockholders' equity...... $478,938 $515,479
See Notes to Consolidated Financial Statements. 71 Harte-Hanks Communications, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year Ended December 31, 1993 1992 1991 Revenues................................... $463,510 $423,296 $416,227 Operating expenses Payroll.................................. 174,557 160,241 159,601 Production and distribution.............. 165,993 147,853 149,341 Advertising, selling, general and administrative......................... 49,355 44,982 45,203 Depreciation............................. 11,506 12,184 12,969 Goodwill amortization.................... 10,176 10,788 10,785 Goodwill write-down...................... 55,463 -- -- 467,050 376,048 377,899 Operating income (loss).................... (3,540) 47,248 38,328 Other expenses (income) Interest expense......................... 30,872 37,015 41,582 Interest income.......................... (160) (522) (703) Other, net............................... 865 (101) 2,300 31,577 36,392 43,179 Income (loss) before income taxes.......... (35,117) 10,856 (4,851) Income tax expense......................... 10,355 8,520 2,201 Income (loss) before extraordinary item and cumulative effect of accounting change........................ (45,472) 2,336 (7,052) Extraordinary item -- Loss due to early extinguishment of debt, net of income tax benefit of $4,319.................... (7,393) -- -- Cumulative effect to January 1, 1991 of change in method of accounting for income taxes......................... -- -- 3,114 Net income (loss).......................... $(52,865) $ 2,336 $ (3,938) Earnings (loss) per common share: Income (loss) before extraordinary item and cumulative effect of accounting change...................... $ (3.49) $ .19 $ (.57) Extraordinary item....................... (.56) -- -- Cumulative effect of accounting change................................. -- -- .25 Net income (loss)........................ $ (4.05) $ .19 $ (.32) Weighted average common and common equivalent shares outstanding............ 13,038 12,214 12,343
See Notes to Consolidated Financial Statements. 72 Harte-Hanks Communications, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Year Ended December 31, 1993 1992 1991 Operating Activities Net income (loss)........................... $ (52,865) $ 2,336 $ (3,938) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation............................. 11,506 12,184 12,969 Goodwill amortization.................... 10,176 10,788 10,785 Bad debt expense......................... 4,160 3,649 4,047 Film amortization........................ 3,293 4,209 4,034 Deferred income taxes.................... (585) (694) (2,456) Other, net............................... (223) 280 1,581 Goodwill write-down...................... 55,463 -- -- Extraordinary loss due to early extinguishment of debt.................. 11,712 -- -- Changes in operating assets and liabilities, net of effects from acquisitions: Increase in accounts receivable, net..... (9,203) (12,841) (3,157) (Increase) decrease in inventory......... (46) 3,544 1,071 (Increase) decrease in prepaid expenses and other current assets....... (346) 574 3,441 Increase (decrease) in accounts payable.. 1,784 791 (1,092) Decrease in other accrued expenses and other liabilities.......... (8,500) (1,462) (3,378) Other, net................................. 103 480 (792) Net cash provided by operating activities.. 26,429 23,838 23,115 Cash Flows from Investing Activities: Acquisitions................................ (10,896) (1,550) -- Purchases of property, plant and equipment.. (21,689) (6,886) (4,453) Proceeds from the sale of property, plant and equipment.............................. 1,101 1,942 898 Payments on film contracts.................. (3,182) (3,800) (4,312) Net cash used in investing activities....... (34,666) (10,294) (7,867) Cash Flows from Financing Activities: Long term debt borrowings................... 580,615 163,385 95,267 Payments on debt, including current maturities and financing costs............. (659,663) (174,140) (105,455) Payment of premium on early extinguishment of debt..................... (6,892) -- -- Issuance of common stock.................... 95,305 -- -- Sale of treasury stock...................... -- 5 57 Purchase of treasury stock.................. (15) (2,258) (10,391) Payments received on notes receivable -- management group........................... -- -- 4,397 Net cash provided from (used in) financing activities................................. 9,350 (13,008) (16,125) Net increase (decrease) in cash............. 1,113 536 (877) Cash at beginning of period................. 3,279 2,743 3,620 Cash at end of period....................... $ 4,392 $ 3,279 $ 2,743
See Notes to Consolidated Financial Statements. 73 Harte-Hanks Communications, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Notes Additional Receivable- Total Common Paid-In Accumulated Management Shareholders' In thousands Stock Capital Deficit Group Equity Balance at January 1, 1991........ $ 6,582 $ 60,245 $(11,199) $(4,397) $ 51,231 Stock split on a two-for-one basis by means of a stock dividend... 6,067 -- (6,067) -- -- Purchase of treasury stock........ (524) (5,657) (4,210) -- (10,391) Sale of treasury stock............ 11 46 -- -- 57 Net loss.......................... -- -- (3,938) -- (3,938) Decrease in notes receivable -- management group............... -- -- -- 4,397 4,397 Balance at December 31, 1991...... 12,136 54,634 (25,414) -- 41,356 Purchase of treasury stock........ (256) (1,023) (979) -- (2,258) Sale of treasury stock............ 1 4 -- -- 5 Net income........................ -- -- 2,336 -- 2,336 Balance at December 31, 1992...... 11,881 53,615 (24,057) -- 41,439 Common stock issuance............. 6,250 89,055 -- -- 95,305 Purchase of treasury stock........ (2) (6) (7) -- (15) Net loss.......................... -- -- (52,865) -- (52,865) Balance at December 31, 1993...... $18,129 $142,664 $(76,929) $ -- $ 83,864
See Notes to Consolidated Financial Statements. 74 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A -- SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION The accompanying consolidated financial statements present the financial position of Harte-Hanks Communications, Inc. and subsidiaries (the "Company"). Harte-Hanks Communications, Inc. is the successor of HHC Holding Inc., the former parent company of Harte-Hanks Communications, Inc., which was merged into Harte-Hanks Communications, Inc. on October 7, 1993. All of the stock of HHC Holding Inc. was converted, on a share-for-share basis, into stock of Harte-Hanks Communications, Inc. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified for comparative purposes. TELEVISION REVENUES Television revenues are presented net of advertising agency commissions. Television revenues for the years ended December 31, 1992 and 1991 have been reclassified to reflect this presentation. INVENTORY Inventory, consisting primarily of newsprint and operating supplies, is stated at the lower of cost (first-in, first-out method) or market. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated on the basis of cost. Depreciation of buildings and equipment is computed generally on the straight-line method at rates calculated to amortize the cost of the assets over their useful lives. The general ranges of estimated useful lives are: Buildings and improvements................... 10 to 40 years Equipment and furniture...................... 4 to 20 years GOODWILL Goodwill is stated on the basis of cost, adjusted as discussed below, and is amortized on a straight-line basis over 40-year periods. For each of its investments, the Company assesses the recoverability of its goodwill by determining whether the amortization of the goodwill balance over its remaining life can be recovered through projected undiscounted future cash flows over the remaining amortization period. If projected future cash flows indicate 75 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) that unamortized goodwill will not be recovered, an adjustment is made to reduce the net goodwill to an amount consistent with projected future cash flows discounted at the Company's incremental borrowing rate. Cash flow projections are based on trends of historical performance and management's estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions. FILM CONTRACTS Film contract rights represent agreements with film syndicators for television program material. When a program or film becomes available for telecasting, the cost of the contract is recorded as an asset and the corresponding contractual obligation as a liability. The cost is amortized over the expected number of telecasts. The portions of the cost to be amortized within one year and after one year are reflected in the consolidated balance sheets as current and noncurrent other assets, respectively. The payments under these contracts due within one year and after one year are similarly classified as current and noncurrent liabilities. INCOME TAXES Effective January 1, 1991, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which changed the criteria for measuring the provision for income taxes and recognizing deferred tax assets and liabilities. Under the asset and liability method, deferred income taxes are recognized for the tax consequences resulting from "temporary differences" by applying enacted statutory tax rates applicable to future years. These "temporary differences" are associated with differences between the financial statement amounts and the tax bases of existing assets and liabilities. Under SFAS No. 109, a statutory change in tax rates will be recognized immediately in deferred taxes and income. ACCOUNTS PAYABLE Included in accounts payable are outstanding checks in excess of cash balances of $5.1 million in 1993 and in 1992. EARNINGS (LOSS) PER SHARE Primary earnings (loss) per common share is based upon the weighted average number of common shares outstanding and dilutive common stock equivalents from the assumed exercise of stock options using the treasury stock method. Fully diluted earnings (loss) per common share is based upon the weighted average number of common shares outstanding, dilutive common stock equivalents from the assumed exercise of stock options and assumed conversion of convertible notes. Fully diluted earnings (loss) per common share is the same as primary earnings (loss) per share because the effect of the Company's 6 1/4% Convertible Notes due 2002 (the "Convertible Notes") is antidilutive for the applicable periods presented. Stock options issued within one year of the Company's initial public offering have been considered outstanding for all periods presented in accordance with the rules of the Securities and Exchange Commission. 76 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) NOTE B -- LONG TERM DEBT Long term debt consists of the following: December 31, In thousands 1993 1992 Revolving loan commitment, various interest rates (effective rate of 5.3% at December 31, 1993), due in mandatory reductions beginning June 30, 1996 through December 31, 1999................. $169,800 $168,100 Term loan, various interest rates (effective rate of 5.0% at December 31, 1993), due in mandatory reductions beginning June 30, 1995 through June 30, 1999.................................. 100,000 -- Commercial paper (effective rate of 4.7% at December 31, 1993)............................. 28,220 6,644 6 1/4% Convertible Notes due September 15, 2002.. 20,000 20,000 11 7/8% Subordinated Debentures due August 1, 2000, net of discount ($1,809 in 1992)......... -- 198,191 Miscellaneous notes payable, interest rates ranging from 8% to 10%, due on various dates through 1998................................... 3,044 1,108 321,064 394,043 Less current maturities......................... 977 175,215 $320,087 $218,828 CREDIT FACILITY On May 19, 1993, the Company entered into a $320 million credit facility, which includes a $220 million revolving loan commitment and a $100 million term loan. This credit facility replaced the Company's $200 million revolving credit commitment that was scheduled to expire December 31, 1993. The $220 million revolving loan commitment requires mandatory reductions of $22 million in 1996, $27.5 million in 1997, $33 million in 1998, and $137.5 million in 1999. The $100 million term loan requires repayments of $10 million in 1995, $20 million in both 1996 and 1997, and $25 million in both 1998 and 1999. The Company pays a 3/8% per annum commitment fee on the unused portion of this revolving loan commitment. As of December 31, 1993, the Company had $50.2 million of unused borrowing capacity under its credit facility, of which $28.2 million was reserved to serve as backup for the Company's outstanding commercial paper. As of December 31, 1992, all borrowings under the $200 million revolving credit commitment were to be repaid by December 31, 1993. Therefore, of the $175.2 million classified as current maturities as of December 31, 1992, $174.7 million represents borrowings under the Company's revolving credit commitment and its commercial paper borrowings. 77 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) COMMERCIAL PAPER The Company maintains unused and available credit under its credit facility in an amount equal to its outstanding commercial paper borrowings. 6 1/4% CONVERTIBLE NOTES In September 1992, the Company issued $20 million principal amount of its Convertible Notes due September 15, 2002 to an affiliate of Goldman, Sachs & Co. The proceeds from the Convertible Notes were used to fund various capital projects and acquisitions. The Convertible Notes bear interest at 6 1/4%, payable on March 15 and September 15 of each year. The Convertible Notes are convertible into shares of common stock at a conversion price of $14.00. The Convertible Notes may be called at par after March 15, 1996 or at any earlier time that the closing price of the Company's common stock equals or exceeds $21.00 per share for at least 20 out of the previous 30 trading days. 11 7/8% SUBORDINATED DEBENTURES In 1993, the Company redeemed all of its $200 million principal amount Subordinated Debentures at the redemption percentage of 103.446% plus accrued interest, which resulted in an extraordinary loss of approximately $7.4 million, net of $4.3 million of income tax benefits, from the payment of premiums and the write-off of related unamortized financing costs and original issue discount. A portion of this redemption ($100 million) was funded in August 1993 with borrowings under the Company's credit facility. The remaining $100 million redemption was funded primarily with net proceeds from the Company's initial public offering in November 1993. OTHER DEBT INFORMATION As of December 31, 1993, the minimum annual maturities of long term debt (excluding the borrowings under the Company's credit facility) for each of the following years ending December 31 are as follows: IN THOUSANDS 1994 ........................................... $ 977 1995 ........................................... 337 1996 ........................................... 380 1997 ........................................... 100 1998 ........................................... 1,250 78 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Cash payments for interest were $40.8 million, $37.5 million and $42.1 million for the years ended December 31, 1993, 1992 and 1991, respectively. The Company's credit facility and Convertible Notes purchase agreement contain certain restrictive covenants, including limitations on additional indebtedness and payment of dividends, and require the Company to maintain certain financial ratios. At December 31, 1993, the Company was prohibited under the credit facility from paying dividends. NOTE C -- INCOME TAXES Effective January 1, 1991, the Company adopted SFAS No. 109, "Accounting for Income Taxes," which changed the criteria for measuring the provision for income taxes and recognizing deferred tax assets and liabilities. In accordance with the provisions of SFAS No. 109, the Company elected to report the effect of applying this statement as a cumulative effect of a change in accounting principle. The cumulative effect to January 1, 1991 of this change in accounting for income taxes was to decrease the 1991 net loss by $3.1 million with a corresponding reduction in deferred income tax liability. The components of income tax expense are as follows: Year Ended December 31, In thousands 1993 1992 1991 Current Deferred Current Deferred Current Deferred Federal $ 9,438 $ 1,395 $7,840 $(935) $ 976 $ 296 State and local 1,210 (1,688) 1,361 254 567 362 Income tax expense $10,648 $ (293) $9,201 $(681) $1,543 $ 658 Included in income tax expense is an adjustment for changes in federal tax laws of $0.1 million in 1993 and an adjustment for changes in state tax laws of $0.2 million in 1991. Of the $1.7 million recognized as a deferred state income tax benefit in 1993, $1.0 million represents an adjustment to the beginning of the year valuation allowance due to the realization of benefits from state operating loss carryforwards. The Company also recognized $4.1 million of current income tax benefits and $0.2 million of deferred income tax benefits related to the extraordinary loss resulting from the redemption of all of its 11 7/8% Subordinated Debentures. 79 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The differences between total income tax expense and the amount computed by applying the statutory Federal income tax rate to income before income taxes were as follows: Year Ended December 31, In thousands 1993 1992 1991 Income tax expense (benefit) at statutory Federal income tax rates on income (loss) before income taxes................... $(12,291) 35% $3,691 34% $(1,650) 34% Effect of goodwill amortization.. 3,528 (9%) 3,668 34% 3,667 (75%) Effect of goodwill write-down.... 19,412 (54%) -- -- -- -- Change in the beginning of the year balance of the valuation allowance ........... (967) (3%) -- -- -- -- Net effect of state income taxes.......................... 656 2% 1,066 10% 613 (13%) Current change in prior tax estimate....................... (25) -- -- -- (381) 8% Other, net....................... 42 -- 95 -- (48) 1% Income tax expense for the period......................... $ 10,355 (29%) $8,520 78% $2,201 (45%) The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows: Year Ended December 31, In thousands 1993 1992 Deferred tax assets: State net operating losses..................... $ 4,048 $ 3,360 Accrued benefit costs, primarily pension and vacation pay................................. 3,798 3,387 Accrued casualty and health insurance expense.. 1,278 1,543 Accounts receivable, net....................... 708 854 Other, net..................................... 368 655 Total gross deferred tax assets.............. 10,200 9,799 Less valuation allowance..................... (2,461) (3,047) Net deferred tax assets...................... 7,739 6,752 Deferred tax liabilities: Property, plant and equipment.................. (13,038) (12,798) Other, net..................................... (576) (453) Total gross deferred tax liabilities......... (13,614) (13,251) Net deferred tax liability..................... $ (5,875) $ (6,499) 80 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The valuation allowance for deferred tax assets as of January 1, 1992 was $1.0 million. The valuation allowance at December 31, 1993 and 1992 related to state net operating losses. The net deferred tax liability is recorded both as a current deferred income tax benefit and as other long term liabilities based upon the classification of the related temporary difference. As of December 31, 1993, the Company has net state loss carryforwards, which are available to offset future taxable income. These carryforwards are expected to generate state income tax savings of $1.6 million and will expire by the year 1999. The Company has recognized a deferred tax asset relating to these carryforwards. Cash payments for income taxes were $8.4 million, $7.2 million and $2.4 million in 1993, 1992 and 1991, respectively. The Company received income tax refunds of $1.0 million and $3.4 million in 1992 and 1991, respectively. NOTE D -- EMPLOYEE RETIREMENT PLANS Under the Company's defined benefit pension plans, benefits are based on years of service and the employee's compensation for the five highest consecutive years of salary during the last ten years of service. Benefits vest to the participants upon completion of five years of service or upon reaching age 65, whichever is earlier. Harte-Hanks' policy is to accrue as expense an amount computed by its actuary and to fund at least the minimum amount required by ERISA. Net pension cost included the following components: YEAR ENDED DECEMBER 31, IN THOUSANDS 1993 1992 1991 Service cost -- benefits earned during the period................... $ 2,861 $ 2,639 $ 2,552 Interest cost on projected benefit obligation.................. 4,283 3,862 3,616 Actual return on plan assets.......... (3,700) (2,920) (6,767) Net deferrals and amortization........ (685) (991) 3,487 Net periodic pension cost............. $ 2,759 $ 2,590 $ 2,888 In determining the 1993 actuarial present value of projected benefit obligations, a discount rate of 7 1/2% and an annual rate of increase in future compensation levels of 4% were used. In determining the 1992 and 1991 actuarial present value of projected benefit obligations, a discount rate of 9% and an annual rate of increase in future compensation levels of 5% were used. The expected long term rate of return on plan assets was 10%. 81 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The status of Harte-Hanks' employee retirement plans at year-end was as follows: December 31, In thousands 1993 1992 Actuarial present value of benefit obligations: Vested.............................. $ 43,961 $ 34,493 Non-vested.......................... 4,442 3,664 Total accumulated benefit obligations....................... 48,403 38,157 Additional obligation related to projected salary increases.......... 13,722 10,180 Projected benefit obligations for service rendered to date........ 62,125 48,337 Fair value of plan assets, primarily listed stocks and government securities............... (46,244) (42,351) Projected benefit obligation in excess of plan assets............... 15,881 5,986 Unrecognized net loss from past experience different from that assumed........................ (11,458) (1,538) Unrecognized prior service costs...... (63) (68) Unrecognized net assets at January 1, 1987 being recognized over average expected remaining service period of employees........................ 1,201 1,326 Recorded pension liability............ $ 5,561 $ 5,706 The Company also sponsors a 401(k) plan to provide employees with additional income upon retirement. The Company matches a portion of employees' voluntary before-tax contributions. Employees are fully vested in their own contributions and vest in the Company's matching contributions upon three years of service. 82 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) NOTE E -- STOCKHOLDERS' EQUITY On November 3, 1993, the Company issued 6,250,000 shares of its common stock in an initial public offering for net cash proceeds of approximately $95.3 million. These proceeds were used to redeem the remainder of its outstanding 11 7/8% Subordinated Debentures in the aggregate principal amount of $100 million, at the redemption price of 103.446% of principal plus accrued interest. On October 4, 1993, the Company amended its Certificate of Incorporation to increase its total authorized capitalization to 50,000,000 shares of common stock and 1,000,000 shares of preferred stock. In February 1991, the Company repurchased $10.3 million of common stock from certain employees and former employees. In turn, these employees and former employees repaid the related notes receivable held by the Company. NOTE F -- STOCK OPTION PLANS In 1984, the Company adopted a Stock Option Plan ("1984 Plan") pursuant to which it issued to officers and key employees options to purchase shares of common stock at prices equal to the market price on the grant date. Market price was determined by the Board of Directors for purposes of granting stock options and making repurchase offers. Options granted under the 1984 Plan become exercisable five years after date of grant. At December 31, 1993, 1992 and 1991, options to purchase 722,300 shares, 732,300 shares and 779,300 shares, respectively, were outstanding under the 1984 Plan, with exercise prices ranging from $5 to $10 per share. No additional options will be granted under the 1984 Plan. The Company adopted the 1991 Stock Option Plan ("1991 Plan") pursuant to which it may issue to officers and key employees options to purchase up to 2,000,000 shares of common stock. Options have been granted at prices equal to the market price on the grant date ("market price options") and at $1.00 per share ("performance options"). As of December 31, 1993, 1992 and 1991, market price options to purchase 826,000 shares, 341,100 shares and 163,500 shares, respectively, were outstanding with an exercise price of $10 per share, and performance options to purchase 321,000 shares, 198,250 shares and 101,250 shares, respectively, were outstanding with an exercise price of $1 per share. Market price options become exercisable after the fifth anniversary of their date of grant. The performance options become exercisable after the third anniversary of their date of grant, and the extent to which they become exercisable at that time depends upon the extent to which the Company achieves certain goals which are established at the time the options are granted. Compensation expense of $1.2 million, $0.5 million and $0.2 million was recognized for the performance options for the years ended December 31, 1993, 1992 and 1991, respectively. At December 31, 1993, no options under the 1991 Plan were exercisable. 83 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The following summarizes stock option plans activity during 1993, 1992 and 1991: Year Ended December 31, 1993 1992 1991 Options outstanding at January 1.... 1,271,650 1,044,050 705,700 Options granted..................... 622,150 285,600 384,250 Options exercised................... -- (1,000) (10,000) Options cancelled................... (24,500) (57,000) (35,900) Options outstanding at December 31.. 1,869,300 1,271,650 1,044,050 Options exercisable at December 31.. 363,300 188,900 151,300 Option prices per share: Granted............................ $1.00-$10.00 $1.00-$10.00 $1.00-$10.00 Exercised.......................... -- $5.00 $5.00 Cancelled.......................... $1.00-$10.00 $1.00-$10.00 $1.00-$10.00 NOTE G -- LEASES The Company leases certain real estate and equipment under various operating leases. Most of the leases contain renewal options for varying periods of time. The total rent expense under all operating leases was $9.7 million for the years ended December 31, 1993 and 1992 and $10.8 million for the year ended December 31, 1991. The future minimum rental commitments for all non-cancellable operating leases with terms in excess of one year as of December 31, 1993 are as follows: IN THOUSANDS 1994...................................$ 7,260 1995................................... 6,142 1996................................... 4,737 1997................................... 1,887 1998................................... 722 After 1998............................. 2,261 Total future minimum rental payments...$23,009 84 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) NOTE H -- BUSINESS SEGMENTS YEAR ENDED DECEMBER 31, In thousands 1993 1992 1991 Operating revenues Newspapers......................... $131,545 $126,222 $127,061 Shoppers........................... 174,521 164,021 164,928 Direct marketing................... 129,626 107,351 100,930 Television......................... 27,818 25,702 23,308 Total operating revenues......... $463,510 $423,296 $416,227 Operating income (loss)(1) Newspapers(1)...................... $(30,974) $20,973 $ 16,664 Shoppers(1)........................ 12,685 15,517 16,234 Direct marketing................... 12,820 10,912 7,531 Television......................... 8,164 6,140 4,419 General corporate expense, net..... (6,235) (6,294) (6,520) Total operating income (loss).... $ (3,540) $47,248 $ 38,328 Identifiable assets Newspapers......................... $224,280 $276,891 $289,606 Shoppers........................... 107,617 111,823 110,259 Direct marketing................... 66,164 43,488 38,313 Television......................... 71,729 72,408 76,194 General corporate.................. 9,148 10,869 12,536 Total identifiable assets........ $478,938 $515,479 $526,908 Depreciation and goodwill amortization Newspapers......................... $ 10,489 $11,828 $ 12,209 Shoppers........................... 5,579 5,733 5,951 Direct marketing................... 2,697 2,242 2,225 Television......................... 2,770 2,964 2,982 General corporate.................. 147 205 387 Total depreciation and goodwill amortization........... $ 21,682 $22,972 $23,754 Capital expenditures Newspapers......................... $ 9,744 $ 1,387 $ 1,094 Shoppers........................... 5,857 3,176 1,957 Direct marketing................... 5,498 2,520 1,082 Television......................... 573 1,036 311 General corporate.................. 17 21 9 Total capital expenditures(2).... $ 21,689 $ 8,140 $ 4,453 (1) Year ended December 31, 1993 includes goodwill write-down of $55.5 million. As a result of this write-down, 1993 newspaper and shopper operating income was reduced by $52.7 million and $2.8 million, respectively. (2) Includes $1.2 million of capitalized expenditures purchased under capital leases for the period ended December 31, 1992. 85 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) NOTE I -- COMMITMENTS AND CONTINGENCIES At December 31, 1993, the Company had outstanding letters of credit in the amount of $7.9 million. These letters of credit exist to support the Company's insurance programs relating to worker's compensation, automobile and general liability. NOTE J -- FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS No. 107, "Disclosure about Fair Value of Financial Instruments," requires the disclosure of the fair value of financial instruments. The Convertible Notes, issued in September 1992, are not publicly traded. Based on the conversion rights of the notes and the market value of the common stock at December 31, 1993, the estimated fair value of the Convertible Notes was $27.9 million at December 31, 1993. Because of their maturities and/or interest rates, the Company's other financial instruments have a fair value approximating their carrying value. These instruments include accounts receivable, revolving credit borrowings, commercial paper, trade and film payables, and miscellaneous notes receivable and payable. NOTE K -- GOODWILL WRITE-DOWN In connection with its review of the carrying amount, including assigned goodwill, of its investments, the Company determined, based on management's estimate of future cash flows from its properties, that goodwill associated with certain of its investments should be written down. This resulted in a charge of $55.5 million in the second quarter of 1993. The write-down was solely related to daily, semi-weekly and weekly newspapers in suburban markets in Boston, Massachusetts ($43.9 million), Dallas, Texas ($8.8 million) and a shopper publication in Tucson, Arizona ($2.8 million). See Note A of Notes to Consolidated Financial Statements. 86 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) NOTE L -- SELECTED QUARTERLY DATA (UNAUDITED)
(In thousands, except per share amounts) QUARTER ENDED DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 1993 Operating revenues................ $129,369 $117,512 $116,011 $100,618 Operating income (loss)........... 17,836 13,478 (40,822)(1) 5,968 Income (loss) before extraordinary item.............. 6,650 2,167 (53,167)(1) (1,122) Extraordinary loss due to early extinguishment of debt, net of income taxes............. (3,543)(2) (3,850)(2) -- -- Net income (loss)................. 3,107 (1,683) (53,167)(1) (1,122) Income (loss) before extraordinary items per common share.......... .40 .17 (4.43)(1) (.09) Net income (loss) per common share........................... .19 (.14) (4.43)(1) (.09) 1992 Operating revenues................ $116,646 $106,267 $105,541 $94,842 Operating income.................. 15,455 12,954 13,632 5,207 Net income (loss)................. 1,329 970 (353) 390 Net income (loss) per common share............................ .11 .08 (.03) .03 Notes: (1) Includes a goodwill write-down of $55.5 million. See Notes A, H and K of Notes to Consolidated Financial Statements. (2) Represents extraordinary losses from the redemption of all of the Company's 11 7/8% Subordinated Debentures. See Note B of Notes to Consolidated Financial Statements. 87
FIVE-YEAR FINANCIAL SUMMARY YEAR ENDED DECEMBER 31, (in thousands, except per share amounts) 1993 1992 1991 1990 1989 (1) Income Statement Data: Revenues................................... $463,510 $423,296 $416,227 $426,280 $432,878 Operating expenses: Payroll, production and distribution..... 340,550 308,094 308,942 314,526 321,350 Selling, general and administrative...... 49,355 44,982 45,203 48,498 49,534 Depreciation............................. 11,506 12,184 12,969 15,062 15,631 Goodwill amortization.................... 10,176 10,788 10,785 10,785 10,763 Goodwill write-down...................... 55,463 -- -- -- -- Total operating expenses............... 467,050 376,048 377,899 388,871 397,278 Operating income (loss).................... (3,540) 47,248 38,328 37,409 35,600 Interest expense, net...................... 30,712 36,493 40,879 47,230 52,987 Income (loss) from continuing operations(2) (45,472) 2,336 (7,052) (9,279) (17,732) Net income (loss).......................... (52,865)(3) 2,336 (3,938)(4) (18,257)(5) (17,732) Income (loss) from continuing operations per common share(2)...................... (3.49) .19 (.57) (.70) (1.29) Net income (loss) per common share......... (4.05)(6) .19 (.32) (1.37) (1.29) Weighted average common and common equivalent shares outstanding............ 13,038 12,214 12,343 13,301 13,778 Segment Data: Revenues: Newspapers............................... $131,545 $126,222 $127,061 $134,613 $149,290 Shoppers................................. 174,521 164,021 164,928 171,864 168,124 Direct Marketing......................... 129,626 107,351 100,930 95,120 92,959 Television............................... 27,818 25,702 23,308 24,683 22,505 Total revenues......................... $463,510 $423,296 $416,227 $426,280 $432,878 Operating income (loss): Newspapers............................... $(30,974) $ 20,973 $ 16,664 $ 15,058 $ 15,654 Shoppers................................. 12,685 15,517 16,234 20,330 21,976 Direct Marketing......................... 12,820 10,912 7,531 6,602 5,655 Television............................... 8,164 6,140 4,419 5,225 4,099 General corporate........................ (6,235) (6,294) (6,520) (9,806) (11,784) Total operating income (loss).......... $ (3,540) $ 47,248 $ 38,328 $ 37,409 $ 35,600 Other Data: Operating Cash Flow(7)..................... $ 73,605 $ 70,220 $ 62,082 $ 63,256 $ 61,994 Capital expenditures....................... 21,689 8,140 4,453 11,884 9,340 Balance Sheet Data (at end of period): Property, plant and equipment, net......... $ 90,809 $ 78,210 $ 83,114 $ 93,423 $ 97,702 Goodwill, net.............................. 292,944 347,105 356,511 367,294 374,949 Total assets............................... 478,938 515,479 526,908 556,129 572,030 Total long term debt....................... 320,087 218,828(8) 399,243 415,994 410,805 Total stockholders' equity(9).............. 83,864(10) 41,439 41,356 51,231 69,258 (1) Includes goodwill write-down of $55.5 million ($4.25 per share). Newspaper and shopper operating income was affected by $52.7 million and $2.8 million, respectively. See Notes A, H and K of Notes to Consolidated Financial Statements. (2) Represents income (loss) and income (loss) per common share before extraordinary item and cumulative effect of change in accounting method. (3) Includes extraordinary loss from the early extinguishment of debt of $7.4 million, net of $4.3 million income tax benefit. 88 (4) Includes the cumulative favorable effect of change in method of accounting for income taxes of $3.1 million. See Note C of Notes to Consolidated Financial Statements. (5) Includes extraordinary loss resulting from the early extinguishment of debt of $9.0 million, net of $4.6 million income tax benefit. (6) Excluding the goodwill write-down and extraordinary items, earnings per share on a fully diluted basis were 71 cents per share. (7) Operating cash flow is defined as operating income plus depreciation and amortization and goodwill write-down. Operating cash flow is not intended to represent cash flow or any other measure of performance in accordance with generally accepted accounting principles. (8) Long term debt in 1992 excludes $174.7 million of borrowings under the Company's revolving credit commitment and commercial paper borrowings classified as current maturities. See Note B of Notes to Consolidated Financial Statements. (9) There were no dividends declared in periods presented. (10) Includes the net proceeds from issuance of 6,250,000 shares of the Company's common stock at $16.50 per share in an initial public offering in November 1993.
89 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Harte-Hanks Communications, Inc.: We have audited the accompanying consolidated balance sheets of Harte- Hanks Communications, Inc. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, cash flows, and stockholders' equity for each of the years in the three- year period ended December 31, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Harte-Hanks Communications, Inc. and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Note C to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1991 to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." KPMG Peat Marwick San Antonio, Texas January 28, 1994 90


SUBSIDIARIES                                                     Exhibit 21

                                               State of       % of Voting
Name of Corporation                         Incorporation  Securities Owned

Advertising Distributors of Maryland, Inc.     Maryland            100
Baltimore Press Company                        Delaware            100
Direct Market Concepts, Inc.                   Florida             100
The Flyer Publishing Corporation               Florida             100
HTS, Inc.                                      Connecticut         100
Harte-Hanks Shoppers, Inc.                     California          100
Harte-Hanks Community Newspapers, Inc.         Texas               100
Harte-Hanks Direct Mail/California, Inc.       California          100
Harte-Hanks Limited (1)                        United Kingdom      100
Harte-Hanks Television, Inc.                   Delaware            100
Independent Publishing Company                 South Carolina      100
Jordan Dennis Company, Inc.                    Massachusetts       100
Mid-America CDM, Inc.                          Ohio                100
NSO, Inc.                                      Ohio                100
Northern Comprint Co.                          California          100
Pennysaver Publications, Inc.                  Texas               100
Potpourri Shopper, Inc.                        California          100
RMH Research, Inc.                             New Jersey          100
Shopper's Guide, Inc.                          Arizona             100
Southern Comprint Co.                          California          100
Urban Data Processing, Inc.                    Massachusetts       100
                                           
(1)  Owned by Urban Data Processing, Inc.

                                91


                                                          Exhibit 23

                      INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Harte-Hanks Communications, Inc.:

We consent to incorporation by reference in the registration
statement (No. 33-51723) on Form S-8 of Harte-Hanks Communications,
Inc. of our report dated January 28, 1994, relating to the
consolidated balance sheets of Harte-Hanks Communications, Inc.and
subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of operations, cash flows, and stockholders'
equity for each of the years in the three-year period ended December
31, 1993, which report appears in the 1993 annual report to
shareholders which is incorporated by reference in the December 31,
1993 annual report on Form 10-K of Harte-Hanks Communications, Inc.
and our report dated January 28, 1994, relating to the related
financial statement schedules as of and for each of the years in the
three-year period ended December 31, 1993, which report appears in
the December 31, 1993 annual report on Form 10-K of the Company.

Our report relating to the consolidated financial statements refers
to a change in method of accounting for income taxes.
                                                
                                                   KPMG Peat Marwick

San Antonio, Texas
March 21, 1994

                                92