<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
GRAY COMMUNICATIONS SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
GRAY COMMUNICATIONS SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Time: 9:30 a.m., local time
Date: May 25, 2000
Place: The Peachtree Insurance Center
The Executive Board Room, 5th Floor
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319
Purpose:
- to elect nine directors;
- to consider and vote upon a proposal to confirm the
appointment of Ernst & Young LLP as the independent auditors;
and
- to consider and act upon such other business and matters or
proposals as may properly come before the meeting.
The board of directors has fixed the close of business on March 21, 2000
as the record date for determining the holders of Gray class A common stock and
class B common stock having the right to receive notice of, and to vote at, the
meeting. Only holders of record of Gray class A common stock and class B common
stock at the close of business on such date are entitled to notice of, and to
vote at, the meeting.
Your vote is very important. We encourage you to vote as soon as possible
by one of three convenient methods: by calling the toll-free number listed on
the form of proxy, by accessing the Internet site listed on the form of proxy or
by signing, dating and returning the form of proxy in the enclosed postage-paid
envelope.
By Order of the Board of Directors,
J. Mack Robinson
President and Chief Executive Officer
Atlanta, Georgia
March 31, 2000
<PAGE> 3
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2000
GENERAL INFORMATION
This proxy statement is being furnished to the holders of Gray class A
common stock and class B common stock in connection with the solicitation of
proxies by the Gray board of directors for use at the annual meeting of
shareholders to be held at 9:30 a.m., local time, on May 25, 2000, at The
Peachtree Insurance Center, The Executive Board Room, 5th Floor, 4370 Peachtree
Road, N.E., Atlanta, Georgia 30319, or any adjournment or postponement thereof.
This proxy statement is first being mailed to Gray shareholders on or
about March 31, 2000.
REQUIRED VOTES
Approval of the confirmation of Ernst & Young LLP as the independent
auditors requires a majority of the votes cast at the meeting by the holders of
the shares of Gray class A common stock and class B common stock, voting
together as a single class. Election of directors requires a plurality of votes
cast at the meeting by the holders of the shares of Gray class A common stock
and class B common stock, voting together as a single class.
RECORD DATE AND VOTING RIGHTS
The Gray board of directors has fixed the close of business on March 21,
2000 as the record date for determining holders of Gray class A common stock and
class B common stock entitled to notice of, and to vote at, the meeting. Only
holders of record of Gray class A common stock and class B common stock on that
date will be entitled to notice of, and to vote at, the meeting. On the record
date, 6,834,967 shares of Gray class A common stock and 8,634,741 shares of Gray
class B common stock were outstanding and entitled to vote. Each record holder
of Gray class A common stock on the record date is entitled to cast 10 votes per
share and each record holder of Gray class B common stock on the record date is
entitled to cast one vote per share, in each case, exercisable in person,
telephonically, by Internet or by properly executed proxy, on each matter
properly submitted for the vote of the shareholders at the meeting.
The presence, in person or by properly executed proxy, of the holders of a
majority of the votes represented by the outstanding Gray class A common stock
and class B common stock entitled to vote at the meeting is necessary to
constitute a quorum and transact business at the meeting. Abstentions or broker
non-votes will be counted for purposes of determining a quorum, but are not
counted as votes cast on any matter to which they relate.
VOTING AND REVOCATION OF PROXIES
All shares of Gray class A common stock and class B common stock that are
entitled to vote and are represented at the meeting by valid proxies, and not
duly and timely revoked, will be voted at the meeting in accordance with the
instructions indicated on the proxies. If no instructions are indicated, the
proxies will be voted "for" the election of the directors specified in this
proxy statement and the confirmation of Ernst & Young LLP as the independent
auditors of Gray. If any other matters are properly presented for consideration
at the meeting, including consideration of a motion to adjourn or postpone the
meeting to another time or place, the persons named in the enclosed form of
proxy will have discretion to vote on those matters in accordance with their
best judgment.
A Gray shareholder may revoke his or her proxy at any time before its use
by delivering to the Secretary of Gray, a signed notice of revocation or a
later, dated, signed proxy or by attending
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<PAGE> 4
the meeting and voting in person. Attendance at the meeting will not, in itself,
constitute the revocation of a proxy. All written notices of revocation and
other communications with respect to revocation of proxies should be sent to:
Gray Communications Systems, Inc., 4370 Peachtree Road, N.E., Atlanta, Georgia
30319, Attention: Corporate Secretary.
The cost of solicitation of proxies will be paid by Gray. In addition to
solicitation by mail, proxies may be solicited in person by directors, officers
and employees of Gray, without additional compensation, and by telephone,
telegram, facsimile or similar method. Arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries to send proxy material to
beneficial owners. Gray will, upon request, reimburse them for their reasonable
expenses in doing so.
PROPOSAL 1: ELECTION OF DIRECTORS
NOMINEES
At the shareholder meeting, nine directors are to be elected to hold
office (subject to Gray's bylaws) until the next annual meeting of shareholders
and until their successors have been elected and qualified. In case any nominee
listed in the table below should be unavailable for any reason, which management
of Gray has no reason to anticipate, the proxy will be voted for any substitute
nominee or nominees who may be selected by management prior to or at the
meeting, or, if no substitute is selected by management prior to or at the
meeting, a motion to reduce the membership of the board to the number of
nominees available will be presented. Gray's board of directors recommends that
its shareholders vote "for" the election of those directors specified in this
proxy statement.
Set forth below is information concerning each of the nominees.
<TABLE>
<CAPTION>
DIRECTOR
NAME SINCE AGE POSITION
- ----------------------- -------- ------ --------------------------------------------------
<S> <C> <C> <C>
J. Mack Robinson 1993 76 Director, President and Chief Executive Officer
Robert S. Prather, Jr. 1993 55 Director and Executive Vice President-Acquisitions
William E. Mayher, III 1990 61 Chairman of the Board of Directors
Richard L. Boger 1991 53 Director
Hilton H. Howell, Jr. 1993 38 Director
Zell Miller 1999 68 Director
Howell W. Newton 1991 53 Director
Hugh Norton 1987 67 Director
Harriett J. Robinson 1997 69 Director
</TABLE>
J. MACK ROBINSON has been Gray's President and Chief Executive Officer
since 1996. Mr. Robinson has served as Chairman of the Board of Bull Run
Corporation, a principal stockholder of Gray, since 1994, Chairman of the Board
and President of Delta Life Insurance Company and Delta Fire and Casualty
Insurance Company since 1958, President of Atlantic American Corporation, an
insurance holding company, from 1988 until 1995 and Chairman of the Board of
Atlantic American Corporation since 1974. He serves as a director of the
following companies: Bankers Fidelity Life Insurance Company, American
Independent Life Insurance Company, Georgia Casualty & Surety Company, American
Southern Insurance Company and American Safety Insurance Company. He is director
emeritus of Wachovia Corporation. He is the Chairman of the Executive Committee
and a member of the Management Personnel Committee of Gray's Board of Directors.
Mr. Robinson is the husband of Harriett J. Robinson and the father-in-law of
Hilton H. Howell, Jr.
ROBERT S. PRATHER, JR. has been Executive Vice President-Acquisitions
of Gray since 1996. He has served as President and Chief Executive Officer and a
director of Bull Run Corporation, a principal stockholder of Gray, since 1992.
He serves as a director of the following companies:
2
<PAGE> 5
Host Communications, Inc., Universal Sports America, Inc., Rawlings Sporting
Goods Company, Inc. and The Morgan Group, Inc. He is a member of the Executive
Committee and Management Personnel Committee of Gray's Board of Directors.
WILLIAM E. MAYHER, III was a neurosurgeon in Albany, Georgia from
1970 to 1998. He also serves as a director of the following: Medical College of
Georgia Foundation, American Association of Neurological Surgeons, Gaston
Loughlin, Inc. and Palmyra Medical Centers. Dr. Mayher is a member of the 1992
Long Term Incentive Plan Committee, Executive Committee and Management Personnel
Committee of Gray's Board of Directors and has served as Chairman of Gray's
Board of Directors since August 1993.
RICHARD L. BOGER has been President and Chief Executive Officer of Export
Insurance Services, Inc., an insurance organization, and a director of CornerCap
Group of Funds, a "Series" investment company since prior to 1992. Mr. Boger is
a member of the Audit Committee and Executive Committee of Gray's Board of
Directors and he is Chairman of the Management Personnel Committee and the 1992
Long Term Incentive Plan Committee of Gray's Board of Directors.
HILTON H. HOWELL, JR. has been President and Chief Executive Officer of
Atlantic American Corporation, an insurance holding company, since 1995 and
Executive Vice President from 1992 to 1995. He has been Executive Vice President
and General Counsel of Delta Life Insurance Company and Delta Fire and Casualty
Insurance Company since 1991, and Vice Chairman of Bankers Fidelity Life
Insurance Company and Georgia Casualty & Surety Company since 1992. He has been
a director, Vice President and Secretary of Bull Run Corporation, a principal
stockholder of Gray, since 1994. He also serves as a director of the following
companies: Atlantic American Corporation, Bankers Fidelity Life Insurance
Company, Delta Life Insurance Company, Delta Fire and Casualty Insurance
Company, Georgia Casualty & Surety Company, American Southern Insurance Company,
American Safety Insurance Company, Association Casualty Insurance Company and
Association Risk Management General Agency. He is the son-in-law of J. Mack
Robinson and Harriett J. Robinson.
ZELL MILLER was Governor of Georgia from January 1991 to January 1999. He
also serves as Chairman of the Board of Kollmann USA Inc. and as a director of
the following companies: Post Properties, Inc., Georgia Power Company, United
Community Banks, Inc., EZGOV.com, Overseas Private Investment Corporation and
Law Companies Group. He is a professor at Young Harris College and a
Distinguished Professor of Higher Education of the University of Georgia. Mr.
Miller is a member of the Audit Committee of Gray's Board of Directors.
HOWELL W. NEWTON has been President and Treasurer of Trio Manufacturing
Co., a textile manufacturing company since 1978. Mr. Newton is Chairman of the
Audit Committee of Gray's Board of Directors.
HUGH NORTON has been President of Norco, Inc., an insurance agency since
1973. He is one of the founders and directors of Community Bank of Georgia. Mr.
Norton is also a real estate developer in Destin, Florida. He is a member of the
1992 Long Term Incentive Plan Committee and Management Personnel Committee of
Gray's Board of Directors.
HARRIETT J. ROBINSON has been a director of Atlantic American
Corporation since 1989. Mrs. Robinson has also been a director of Delta Life
Insurance Company and Delta Fire and Casualty Insurance Company since 1967. Mrs.
Robinson is the wife of J. Mack Robinson and the mother-in-law of Hilton H.
Howell, Jr.
COMPLIANCE WITH SECTION 16 (A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 (a) of the Securities Exchange Act of 1934 requires the
directors, executive officers and persons who own more than 10 percent of a
registered class of a company's equity
3
<PAGE> 6
securities to file with the Securities and Exchange Commission (the
"SEC") initial reports of ownership (Form 3) and reports of changes in ownership
(Forms 4 and 5) of such class of equity securities. Such officers, directors and
greater than 10 percent shareholders of a company are required by SEC
regulations to furnish the company with copies of all such Section 16(a) reports
that they file.
To Gray's knowledge, based solely on its review of the copies of such
reports furnished to Gray during the year ended December 31, 1999, all Section
16(a) filing requirements applicable to its officers, directors and 10 percent
beneficial owners were met.
BOARD COMMITTEES AND MEMBERSHIP
The Gray Board has an Executive Committee. The Executive Committee has and
may exercise all the lawful authority of the full Board of Directors in the
management and direction of the affairs of Gray in all cases in which specific
direction shall not have been given by the Board of Directors. All actions by
the Executive Committee are subject to revision and alteration by the Board of
Directors provided that no rights of third parties shall be affected by any such
revision or alteration. The Executive Committee held one meeting during 1999.
The members of the Executive Committee are Messrs. Boger, Mayher, Prather and
Robinson.
The Gray board has an Audit Committee, the purpose of which is to review
and evaluate the results and scope of the audit and other services provided by
Gray's independent auditors, as well as Gray's accounting principles and system
of internal accounting controls, and to review and approve any transactions
between Gray and its directors, officers or significant shareholders. The Audit
Committee held two meetings during 1999. The members of the Audit Committee are
Messrs. Boger, Miller and Newton.
The Gray board has a Management Personnel Committee, the purpose of which
is to make recommendations with respect to executive salaries, bonuses and
compensation and to serve as the nominating committee with respect to the
principal officers and other committees of the board of directors, as well as
making nominations respecting membership of the board of directors of Gray. The
Management Personnel Committee will consider recommendations for nominees for
directorship submitted by shareholders. Shareholders wishing to recommend
director candidates for consideration by the Management Personnel Committee may
do so by writing to the Secretary of Gray, giving the candidate's name,
biographical data and qualifications. The Management Personnel Committee held
three meetings in 1999, and its members are Messrs. Boger, Mayher, Norton,
Prather and Robinson.
The Gray board has a 1992 Long Term Incentive Plan Committee, the purpose
of which is to make recommendations concerning grants of stock options, awards
and grants with respect to the 1992 Long Term Incentive Plan. The 1992 Long Term
Incentive Plan Committee held one meeting in 1999, and its members are Messrs.
Boger, Mayher and Norton.
Gray does not have a nominating committee. The Gray board held four
meetings during 1999. During 1999, each of the directors attended at least 75%
of the aggregate number of meetings of the board and meetings of all committees
of the board on which such directors served.
4
<PAGE> 7
SHARE OWNERSHIP
The following table sets forth certain information regarding the ownership
of Gray class A common stock and class B common stock as of March 21, 2000 by
(i) any person who is known to Gray to be the beneficial owner of more than five
percent of the Gray class A common stock or the class B common stock, (ii) all
directors, (iii) all executive officers named in the Summary Compensation Table
herein and (iv) all directors and executive officers as a group. Warrants and
options to acquire Gray class A common stock or class B common stock included in
the amounts listed below are currently exercisable or will be exercisable within
60 days of March 21, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK COMBINED
BENEFICIALLY OWNED BENEFICIALLY OWNED VOTING PERCENT
----------------------- ---------------------- OF COMMON
NAME SHARES PERCENT SHARES PERCENT STOCK
- ---------------------------------------- ------------- -------- --------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Robert A. Beizer (1) -0- 0.0% 44,266 * *
Richard L. Boger (1) 10,726 * 16,865 * *
Ray M. Deaver (2) -0- 0.0% 426,373 4.9% *
Hilton H. Howell, Jr. (1), (3), (4), (5) 3,623,032 46.1% 189,997 2.2% 41.8%
Wayne M. Martin (1) 7,224 * 12,063 * *
William E. Mayher, III (1) 13,500 * 18,750 * *
Zell Miller (1) -0- 0.0% 7,500 * *
Howell W. Newton (1) 2,625 * 9,500 * *
Hugh Norton (1) 13,500 * 18,750 * *
Robert S. Prather, Jr. (3), (6) 3,226,323 41.2% 99,800 1.1% 37.2%
Harriett J. Robinson (1), (3), (5), (7) 4,631,632 56.9% 250,600 2.9% 51.7%
J. Mack Robinson (1), (3), (5), (8) 4,631,632 56.9% 250,600 2.9% 51.7%
James C. Ryan -0- 0.0% 2,236 * *
Thomas J. Stultz (1) 2,250 * 25,641 * *
Bull Run Corporation (9) 3,007,647 38.4% 11,750 * 34.6%
The Capital Group Companies, Inc. (10) -0- 0.0% 466,600 5.4% *
Mario J. Gabelli (11) -0- 0.0% 1,215,299 14.1% 1.6%
George H. Nader (12) 359,998 5.3% -0- 0.0% 4.7%
Shapiro Capital Management Company,
Inc. (13) 11,350 * 1,807,914 20.9% 2.5%
LBJ Co. Inc. (14) -0- 0.0% 645,531 7.5% *
All directors and executive officers
as a group 4,993,958 61.4% 1,092,841 12.3% 56.5%
</TABLE>
* Less than 1%.
(1) Includes options to purchase Gray class B common stock as follows: each
of Messrs. Boger, Howell, Mayher, Newton, Norton, Miller and Mrs.
Robinson - 7,500 shares of Gray class B common stock; Mr. Martin -
11,250 shares of Gray class B common stock; Mr. Beizer - 43,500 shares
of Gray class B common stock and Mr. Stultz - 22,500 shares of Gray
class B common stock.
(2) Includes 220,853 shares of Gray class B common stock owned by Mr.
Deaver's wife, over which he disclaims beneficial ownership.
(3) Includes 2,017,647 shares of Gray class A common stock and 11,750
shares of Gray class B Stock owned by Bull Run Corporation and warrants
to purchase 990,000 shares of Gray class A common stock by Bull Run
Corporation as described in footnote (9) below, because Messrs. Howell,
Prather and Robinson are directors and officers of Bull Run Corporation
and Messrs. Prather and Robinson are principal shareholders of Bull
5
<PAGE> 8
Run Corporation and Mrs. Robinson is the spouse of Mr. Robinson and, as
such, may be deemed to be beneficial owners of such shares. Each of
Messrs. Howell, Prather, Robinson and Mrs. Robinson disclaims
beneficial ownership of the shares owned by Bull Run Corporation.
(4) Includes 58,575 shares of Gray class A common stock owned by Mr.
Howell's wife, over which he disclaims beneficial ownership.
(5) Includes as to Messrs. Robinson and Howell and Mrs. Robinson, an
aggregate of 490,060 shares of Gray class A common stock and 6,000
shares of Gray class B common stock owned by certain companies of which
Mr. Howell is an officer and a director. Mr. Robinson is also an
officer, director and a principal or sole shareholder and Mrs. Robinson
is also a director of these companies. Also includes warrants to
purchase 31,500 shares of Gray class A common stock by one of the above
described companies.
(6) Includes 225 shares of Gray class A common stock and 100 shares of Gray
class B common stock owned by Mr. Prather's wife, over which he
disclaims beneficial ownership. Includes options to purchase 75,000
shares of Gray class B common stock.
(7) Includes (1) an aggregate of 381,975 shares of Gray class A common
stock and 92,950 shares of Gray class B common stock, options to
purchase 75,000 shares of Gray class B common stock and warrants to
purchase 63,000 shares of Gray class A common stock owned by Mrs.
Robinson's husband, as to which Mrs. Robinson disclaims beneficial
ownership; (2) warrants to purchase 94,500 shares of Gray class A
common stock; (3) 256,950 shares of Gray class A common stock, 40,000
shares of Gray class B common stock and warrants to purchase 126,000
shares of Gray class A common stock owned by Mrs. Robinson, as trustee
for their daughters, as to which Mrs. Robinson disclaims beneficial
ownership. Mrs. Robinson's address is 4370 Peachtree Road NE, Atlanta,
Georgia 30319.
(8) Includes (1) options to purchase 75,000 shares of Gray class B common
stock; (2) warrants to purchase 63,000 shares of Gray class A common
stock held by Mr. Robinson and (3) 436,950 shares of Gray class A
common stock and 57,400 shares of Gray class B common stock owned by
Mr. Robinson's wife directly and as trustee for their daughters,
warrants to purchase 220,500 shares of Gray class A common stock held
by Mr. Robinson's wife directly and as trustee for their daughters, as
to which securities Mr. Robinson disclaims beneficial ownership. Mr.
Robinson's address is 4370 Peachtree Road NE, Atlanta, Georgia 30319.
(9) Includes warrants to purchase 990,000 shares of Gray class A common
stock. The address of Bull Run Corporation is 4370 Peachtree Road NE,
Atlanta, Georgia 30319.
(10) This information was furnished to Gray on a Schedule 13G filed by The
Capital Group Companies, Inc. and Capital Guardian Trust Company.
Capital Guardian Trust Company, a wholly owned subsidiary of The
Capital Group Companies, Inc., is the beneficial owner of these shares
as a result of its serving as the investment manager of various
institutional accounts, but has authority to vote only 172,750 shares
of Gray class B common stock. The address of The Capital Group
Companies, Inc. and Capital Guardian Trust Company is 333 South Hope
Street, Los Angeles, California 90071.
(11) This information was furnished to Gray on a Schedule 13D filed by
Gabelli Funds, Inc. and also by Mario J. Gabelli and various entities
which he directly or indirectly controls or for which he acts as chief
investment officer. The Schedule 13D reports the beneficial ownership
of Gray class B common stock as follows: Gabelli Advisors, Inc. - 9,200
shares; Gabelli Funds, LLC - 538,300 shares; GAMCO Investors, Inc. -
643,049 shares; and Gabelli International Limited - 24,750 shares.
GAMCO Investors, Inc. only has the
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<PAGE> 9
authority to vote 619,799 of the shares beneficially held by it. The
address of Mr. Gabelli and Gabelli Funds, Inc. is One Corporate Center,
Rye, New York 10580.
(12) Mr. Nader's address is P.O. Box 271, 1011 Fifth Avenue, West Point,
Georgia 31833.
(13) This information was furnished to Gray on a Schedule 13G filed by
Shapiro Capital Management Company, Inc. The address of Shapiro Capital
Management Company, Inc. is 3060 Peachtree Road NW, Atlanta, Georgia
30306.
(14) This information was furnished to Gray on a Schedule 13G filed by LBJ
Co. Inc., Norwood Tower, 114 W. 7th St. #300, Austin, Texas 78701
EXECUTIVE COMPENSATION.
The following table sets forth a summary of the compensation of Gray's
President and Chief Executive Officer and the other executive officers whose
annual compensation exceeded $100,000 during the year ended December 31, 1999
(the "named executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
----------------------------
SECURITIES
RESTRICTED UNDERLYING
ANNUAL COMPENSATION STOCK OPTIONS
NAME AND ---------------------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) AWARDS SARS (#) (1) COMPENSATION ($)
- ------------------------ ----- --------- --------- ------ ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
J. Mack Robinson, (2) 1999 200,000 -0- -0- 50,000 (3) 21,520 (4)
President, Chief 1998 72,308 -0- -0- 125,000 (5) 13,000 (4)
Executive Officer 1997 -0- -0- -0- 75,000 (6) 14,620 (4)
and a Director
Robert A. Beizer, 1999 222,000 -0- -0- 10,500 (3) 17,270 (8)
Vice President-Law 1998 215,000 -0- -0- 21,000 (5) 13,080 (8)
& Development 1997 210,000 -0- -0- 10,500 (7) 6,619 (8)
James C. Ryan, (9) 1999 142,000 25,000 -0- -0- 3,915 (10)
Vice President 1998 34,269 5,000 -0- 22,500 (5) 15,603 (10)
and Chief
Financial Officer
Thomas J. Stultz, 1999 205,000 150,000 -0- -0- 7,655 (11)
Vice President, 1998 196,000 35,000 -0- 22,500 (5) 7,166 (11)
President-Publishing 1997 187,000 25,000 -0- 22,500 (6) 59,199 (11)
Division
Wayne M. Martin, (12) 1999 236,000 67,556 -0- -0- 11,512 (13)
Regional Vice 1998 219,326 170,454 -0- 11,250 (5) 8,829 (13)
President-Television
Ray M. Deaver, (14) 1999 53,077 35,000 -0- 15,000 (3) 1,349 (15)
Regional Vice
President - Texas
</TABLE>
(1) On August 20, 1998, Gray's Board of Directors declared a 50% stock
dividend, payable on September 30, 1998, to stockholders of record of
the Gray class A common stock and class B common stock on September 16,
1998. This stock dividend was effected by means of a three for two
stock split. All applicable share and per share data have been adjusted
to give effect to the stock split.
7
<PAGE> 10
(2) Mr. Robinson was appointed President and Chief Executive Officer of
Gray in September 1996, but received no salary for this position until
September 1998. In 1998, Mr. Robinson was compensated at an annual
salary of $200,000.
(3) Represents stock options to purchase Gray class B common stock under
Gray's 1992 Long Term Incentive Plan. These awards are set forth below
in detail in the table titled "Option/SAR Grants in 1999."
(4) Represents compensation paid for services rendered as a member of
Gray's Board of Directors.
(5) Represents stock options to purchase Gray class A common stock and
class B common stock pursuant to Gray's 1992 Long Term Incentive Plan.
Also includes options that were previously granted pursuant to this
plan that were repriced in 1998.
(6) Represents stock options to purchase Gray class B common stock pursuant
to Gray's 1992 Long Term Incentive Plan. This 1997 stock option grant
was replaced by a repricing grant, effective December 11, 1998. The
December 11, 1998 grant repriced the 1997 grant at a price which
approximated the market price of Gray's class B common stock on
December 11, 1998. The repriced grant was included in 1998 stock
options granted as a 1998 grant.
(7) Represents stock options to purchase Gray class B common stock under
Gray's 1992 Long Term Incentive Plan.
(8) $4,000, $8,775 and $4,495 represent payments or accruals by Gray in
1999 for matching contributions to Gray's 401(k) plan, term life
insurance premiums and long term disability premiums, respectively.
$4,000, $5,589 and $3,491 represent payments or accruals by Gray in
1998 for matching contributions to Gray's 401(k) plan, term life
insurance premiums and long term disability premiums, respectively.
$4,000 and $2,619 represent payments or accruals by Gray in 1997 for
matching contributions to Gray's 401(k) plan and long term disability
premiums, respectively.
(9) Mr. Ryan joined Gray on October 1, 1998. In 1998, he was compensated at
an annual salary of $135,000.
(10) $3,672 and $243 represent payments or accruals by Gray in 1999 for
matching contributions to Gray's 401(k) plan and long term disability
premiums, respectively. $15,603 represents payments or accruals by Gray
in 1998 for relocation costs.
(11) $4,000, $2,053 and $1,602 represent payments or accruals by Gray in
1999 for matching contributions to Gray's 401(k) plan, term life
insurance premiums and long term disability premiums, respectively.
$4,000, $1,963 and $1,203 represent payments or accruals by Gray in
1998 for matching contributions to Gray's 401(k) plan, term life
insurance premiums and long term disability premiums, respectively.
$54,700, $3,596 and $903 represent payments or accruals by Gray in 1997
for relocation costs, matching contributions to Gray's 401(k) plan and
long term disability premiums, respectively.
(12) Mr. Martin has served as Gray's Regional Vice President-Television
since July 1998. He was also appointed President of WVLT-TV, Gray's
subsidiary in Knoxville, Tennessee. Prior to his appointment as an
executive officer, Mr. Martin has served as President of Gray Kentucky
Television, Inc., a subsidiary of Gray, which operates WKYT-TV, in
Lexington, Kentucky and WYMT-TV, in Hazard, Kentucky.
(13) $4,000, $3,600 and $3,912 represent payments or accruals by Gray in
1999 for matching contributions to Gray's 401(k) plan, term life
insurance premiums and long term
8
<PAGE> 11
disability premiums, respectively. $4,000, $3,249 and $1,580 represent
payments or accruals by Gray in 1998 for matching contributions to
Gray's 401(k) plan, term life insurance premiums and long term
disability premiums, respectively.
(14) Mr. Deaver joined Gray as Regional Vice President - Texas on October 1,
1999. Since that date, he has also served as President of Gray
Communications of Texas, Inc., a subsidiary of Gray, which operates
KBTX-TV in Brazos, Texas and KWTX-TV in Waco, Texas. Also since October
1, 1999, Mr. Deaver has served as President of Gray Communications of
Texas - Sherman, Inc., a subsidiary of Gray, which operates KXII-TV in
Sherman, Texas. In 1999, he was compensated at an annual salary of
$230,000.
(15) Represent payments or accruals by Gray for matching contributions to
Gray's 401(k) plan.
STOCK OPTIONS GRANTED
The following table contains information on stock options granted during
the year ended December 31, 1999. Under Gray's 1992 Long Term Incentive Plan
(the "Incentive Plan"), all officers and key employees are eligible for grants
of stock options and other stock-based awards. Options granted are exercisable
over a three-year period beginning on the second anniversary of the grant date
and expire one month after termination of employment. The total number of shares
issuable under the Incentive Plan is not to exceed 1.9 million shares of which
300,000 are Gray class A common stock and 1.6 million are Gray class B common
stock, subject to adjustment in the event of any change in the outstanding
shares of such stock by reason of a stock dividend, stock split,
recapitalization, merger, consolidation or other similar changes generally
affecting shareholders of Gray.
The Incentive Plan is administered by the Incentive Plan Committee which
consists of members of the Management Personnel Committee of the Board of
Directors who are not eligible for selection as participants under the Incentive
Plan. The Incentive Plan is intended to provide additional incentives and
motivation for Gray's employees. The Incentive Plan Committee, by majority
action thereof, is authorized in its sole discretion to determine the
individuals to whom the benefits will be granted, the type and amount of such
benefits and the terms thereof; and to prescribe, amend and rescind rules and
regulations relating to the Incentive Plan, among other things.
On August 20, 1998, the Board of Directors declared a 50% stock dividend,
payable on September 30, 1998, to stockholders of record of the Gray class A
common stock and class B common stock on September 16, 1998. This stock dividend
was effected by means of a three for two stock split. All applicable share and
per share data have been adjusted to give effect to the stock split.
9
<PAGE> 12
OPTION/SAR GRANTS IN 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------ ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
CLASS OF UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM (1)
COMMON OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME STOCK GRANTED 1999 ($/SHARE) DATE 5% ($) 10% ($)
- --------------------- --------- ---------------- ----------------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Mack Robinson Class B 50,000 26.9 12.75 11/18/04 176,129 389,200
Robert A. Beizer Class B 10,500 5.6 14.19 2/12/04 41,157 90,947
James C. Ryan N/A N/A N/A N/A N/A N/A N/A
Thomas J. Stultz N/A N/A N/A N/A N/A N/A N/A
Wayne M. Martin N/A N/A N/A N/A N/A N/A N/A
Ray M. Deaver Class B 15,000 8.1 12.75 11/18/04 52,839 116,760
</TABLE>
(1) Amounts reported in these columns represent amounts that may be
realized upon exercise of options immediately prior to the expiration
of their term assuming the specified compounded rates of appreciation
(5% and 10%) on the Gray class B common stock over the term of the
options. These numbers are calculated based on rules promulgated by the
SEC and do not reflect Gray's estimate of future stock price growth.
Actual gains, if any, on stock option exercises and Gray class B common
stock holdings will be dependent on the timing of such exercise and the
future performance of the Gray class B common stock. There can be no
assurance that the rates of appreciation assumed in this table can be
achieved or that the amounts reflected will be received by the option
holder.
STOCK OPTIONS EXERCISED
The following table sets forth information about stock options that were
exercised during 1999 and the number of shares and the value of grants
outstanding as of December 31, 1999 for each named executive.
AGGREGATED OPTION EXERCISES IN 1999
AND DECEMBER 31, 1999 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
CLASS OF ACQUIRED OPTIONS AT 12/31/99 OPTIONS AT 12/31/99 ($) (1)
COMMON ON VALUE -------------------------- ---------------------------
NAME STOCK EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------ --------- ---------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Mack Robinson Class A -0- -0- -0- 10,000 -0- -0-
Class B -0- -0- 75,000 90,000 -0- 37,500
Robert A. Beizer Class B -0- -0- 33,000 21,000 76,126 -0-
James C. Ryan Class B -0- -0- -0- 11,250 -0- -0-
Thomas J. Stultz Class B -0- -0- 22,500 -0- -0- -0-
Wayne M. Martin Class B -0- -0- 11,250 -0- -0- -0-
Ray M. Deaver Class B -0- -0- -0- 15,000 -0- 11,250
</TABLE>
(1) Value is based on the closing price of Gray's class A common stock and
class B common stock of $17.69 and $13.50, respectively at December 31,
1999, less the exercise price.
10
<PAGE> 13
RETIREMENT PLAN
The Company sponsors a defined benefit pension plan, intended to be tax
qualified, for certain of its employees and the employees of any of its
subsidiaries which have been designated as participating companies under the
plan. A participating employee who retires on or after attaining age 65 and who
has completed five years of service upon retirement may be eligible to receive
during his lifetime, in the form of monthly payments, an annual pension equal to
(i) 22% of the employee's average earnings for the highest five consecutive
years during the employee's final 10 years of employment multiplied by a factor,
the numerator of which is the employee's years of service credited under the
plan before 1994 and the denominator of which is the greater of 25 or the years
of service credited under the plan, plus (ii) 0.9% of the employee's monthly
average earnings for the highest five consecutive years in the employee's final
10 years of employment added to 0.6% of monthly average earnings in excess of
Social Security covered compensation, multiplied by the employee's years of
service credited under the plan after 1993, with a maximum of 25 years minus
years of service credited under (i) above. For participants as of December 31,
1993, there is a minimum benefit equal to the projected benefit under (i) at
that time. For purposes of illustration, pensions estimated to be payable upon
retirement of participating employees in specified salary classifications are
shown in the following table:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------------------------------------------------
REMUNERATION (1) 10 15 20 25 30 35
- --------------------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 15,000 $ 1,338 $ 1,998 $ 2,658 $ 3,318 $ 3,300 $ 3,300
25,000 2,230 3,330 4,430 5,530 5,500 5,500
50,000 5,070 7,270 9,470 11,670 11,000 11,000
75,000 8,200 11,500 14,800 18,100 16,500 16,500
100,000 11,330 15,730 20,130 24,530 22,000 22,000
150,000 17,590 24,190 30,790 37,390 33,000 33,000
200,000 19,890 28,690 37,490 46,290 37,342 36,457
250,000 and above 20,567 30,213 39,858 49,504 40,725 39,961
</TABLE>
(1) Five-year average annual compensation.
Employees may become participants in the plan, provided that they have
attained age 21 and have completed one year of service. Average earnings are
based upon the pension compensation paid to a participating employee by a
participating company. Pension compensation for a particular year as used for
the calculation of retirement benefits includes salaries, overtime pay,
commissions and incentive payments received during the year and the employee's
contribution to the Capital Accumulation Plan (as defined herein). Pension
compensation for 1999 differs from compensation reported in the Summary
Compensation Table in that pension compensation includes any annual incentive
awards received in 1999 for services in 1998 rather than the incentive awards
paid in 2000 for services in 1999. The maximum annual compensation considered
for pension benefits under the plan in 1999 was $160,000.
Benefits are computed on a straight life annuity basis and are not subject
to any deduction for Social Security or other offset amounts.
11
<PAGE> 14
As of December 31, 1999, the named executive officers of Gray have the
following years of credited service:
<TABLE>
<CAPTION>
NAME YEARS OF CREDITED SERVICE
---------------- -------------------------
<S> <C>
J. Mack Robinson 1
Robert A. Beizer 3
James C. Ryan 1
Thomas J. Stultz 3
Wayne M. Martin 5
Ray M. Deaver 0
</TABLE>
CAPITAL ACCUMULATION PLAN
Effective October 1, 1994, Gray adopted the Gray Communications Systems,
Inc. Capital Accumulation Plan (the "Capital Accumulation Plan") for the purpose
of providing additional retirement benefits for substantially all employees. The
Capital Accumulation Plan is intended to meet the requirements of Section 401(k)
of the Internal Revenue Code of 1986, as amended.
Contributions to the Capital Accumulation Plan are made by the employees
of Gray. The Company matches a percentage of each employee's contribution which
does not exceed 6% of the employee's gross pay. The percentage match is declared
by the Board of Directors before the beginning of each calendar year and is made
with a contribution of the Gray class B common stock. The percentage match
declared for the year ended December 31, 1999 was 50%. The Company's matching
contributions vest based upon an employee's number of years of service, over a
period not to exceed five years.
COMPENSATION OF DIRECTORS
The standard arrangement for directors' fees is set forth in the table
below.
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
--------------------------------------------------------- -------
<S> <C>
Chairman of the Board annual retainer fee $18,000
Director's annual retainer fee 12,000
Director's fee per board of director's meeting 1,000
Chairman of the Board fee per board of director's meeting 1,200
Committee Chairman fee per committee meeting 1,200
Committee member fee per committee meeting 1,000
</TABLE>
Directors are paid 40% of the above fee arrangement for participation by
telephone in any meeting of the board of directors or any committee thereof.
In addition, Gray has a Non-Qualified Stock Option Plan for non-employee
directors that currently provides for the annual grant of options to purchase up
to 7,500 shares of Gray class B common stock at a price per share equal to the
market price at the time of grant. Such options are exercisable until the end of
the first month following the close of the fiscal year of the grant.
EMPLOYMENT AGREEMENTS
Robert A. Beizer and Gray entered into an employment agreement dated
February 12, 1996, for a two-year term which automatically extends for three
successive one-year periods, subject to certain termination provisions. The
agreement provides that Mr. Beizer shall be employed as Vice President for Law
and Development of Gray with an initial annual base salary of $200,000 and a
grant of options to purchase 22,500 shares of Gray class A common stock with an
exercise price of $12.917 per share under the Incentive Plan at the inception of
his employment. In December 1996, the Board of Directors approved an amendment
to Mr. Beizer's contract which
12
<PAGE> 15
replaced this option with the grant of an option to purchase 22,500 shares of
Gray class B common stock with an exercise price of $10.583 per share. The
amended Agreement provides that Mr. Beizer's base salary shall be increased
yearly based upon a cost of living index and he will receive non-qualified
options to purchase 10,500 shares of Gray class B common stock annually during
the term of the agreement at an exercise price per share equal to the fair
market value of the Gray class B common stock on the date of the grant.
Accordingly, on February 12, 1997, 1998, 1999 and 2000 , he was granted options
to purchase an additional 10,500 shares of Gray class B common stock at $12.50,
$14.50, $14.19 and $13.00 per share, respectively. All options granted are
exercisable over a three-year period beginning upon the second anniversary of
the grant date. If Mr. Beizer's employment is terminated without cause, as
defined in the agreement, he will be entitled to one year's salary as severance
pay. If there is a "change of control" of Gray, Mr. Beizer will be paid a lump
sum amount equal to his then current base salary for the remaining term of the
agreement and will be granted any remaining stock options to which he would have
been entitled. For purposes of the agreement, "change of control" is defined as
any change in the control of Gray that would be required to be reported in
response to Item 6(e) of Schedule 14A promulgated under the Securities Exchange
Act of 1934. Mr. Beizer has agreed that during the term of his agreement and for
two years thereafter, he will be subject to certain non-competition provisions.
Ray M. Deaver and Gray entered into an employment agreement dated October
1, 1999 for a three year period ending on December 31, 2002. The agreement
provides that Mr. Deaver shall be employed as Regional Vice President - Texas
with an initial annual base salary of $230,000 and a grant of options to
purchase 15,000 shares of Gray Class B Common Stock with an exercise price of
$12.75 per share. The Option is exercisable over a three year period beginning
upon the second anniversary of the grant date. The agreement provides that Mr.
Deaver shall be entitled to receive a bonus of $125,000 for each year of his
employment that television stations KWTX, KBTX, and KXII attain budget goals as
set annually by Gray. The budget goals will be calculated in the aggregate. In
addition, Mr. Deaver shall be entitled to receive 10% of any amount by which
those three stations in the aggregate exceed the budget goals. Mr. Deaver has
agreed that during the term of his agreement and for two years thereafter, he
will be subject to certain confidentiality - non-disclosure provisions of the
agreement. He has also agreed that the during the term of his agreement and for
a one year period thereafter, he will be subject to certain non-competition
provisions of the agreement. In addition, if Mr. Deaver's employment is
terminated without cause as defined in the agreement, he is entitled to one
year's salary as severance pay.
Wayne M. Martin has a written commitment with Gray that if control of Gray
changes while he is an officer and manager at Gray, he will be entitled to one
year severance pay if the new control group does not retain him with a similar
compensation and position.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Richard L. Boger, William E. Mayher, III, Robert S. Prather, Jr., Hugh
Norton and J. Mack Robinson are the members of the Management Personnel
Committee which serves as the Compensation Committee of Gray. Mr. Robinson is
President and Chief Executive Officer and Mr. Prather is Executive Vice
President-Acquisitions of Gray.
J. Mack Robinson, President and Chief Executive Officer of Gray serves on
the Compensation Committee of Bull Run Corporation, a principal stockholder of
Gray. Robert S. Prather, Jr., President of Bull Run Corporation and Executive
Vice President-Acquisitions of Gray serves on the Compensation Committee of
Gray.
Gray Kentucky Television, Inc., a subsidiary of Gray ("Gray Kentucky"), is
a party to a rights sharing agreement with Host Communications, Inc., a wholly
owned subsidiary of Bull Run ("Host"), and certain other parties not affiliated
with Gray. Pursuant to this agreement, the parties agreed to exploit Host's
rights to broadcast and market certain University of Kentucky
13
<PAGE> 16
football and basketball games and related activities. Pursuant to such
agreement, Gray Kentucky is licensed to broadcast certain University of Kentucky
football and basketball games and related activities. Under this agreement, Gray
Kentucky also provides Host with production and certain marketing services and
Host provides accounting and various marketing services. During the year ended
December 31, 1999, Gray received approximately $150,000 from this joint venture.
See "Certain Relationships and Related Transactions" for a description of
certain relationships between Messrs. Prather and Robinson and Gray, Bull Run
and Host.
Bull Run currently owns all of the outstanding common and preferred stock
of Host. Robert S. Prather, Jr., Executive Vice President-Acquisitions and a
member of Gray's Board of Directors, is President, Chief Executive Officer and a
member of the Board of Directors of Bull Run and is a member of the board of
directors of Host and J. Mack Robinson, President and Chief Executive Officer
and a member of the board of directors of Gray is Chairman of the Board of
Directors of Bull Run.
On March 1, 1999, Gray acquired substantially all of the assets of The
Goshen News. The Company paid Bull Run a fee of $167,000 for services rendered
in connection with the Goshen Acquisition.
On October 1, 1999, Gray completed its acquisition of all the outstanding
capital stock of KWTX Broadcasting Company and Brazos Broadcasting Company, as
well as the assets of KXII Broadcasters Ltd. These transactions are referred to
herein as the "Texas Acquisitions." The Company paid Bull Run a fee of $1.39
million for advisory services performed for Gray in connection with the Texas
Acquisitions. The Company also paid Bull Run a $300,000 advisory fee in
connection with Gray's financing arrangements for the Texas Acquisitions.
REPORT OF MANAGEMENT PERSONNEL COMMITTEE
Gray's executive compensation program is administered by the Management
Personnel Committee of the board of directors.
The goals of Gray's executive compensation program for 1999 were to
attract, retain, motivate and reward qualified persons serving as executive
officers. To achieve such goals Gray relies primarily on salaries, bonuses,
options and other compensation for each of Gray's executive officers, except
that the salary of Messrs. Beizer and Deaver are specified in their employment
agreements with Gray. Under current policy, the chief executive officer of Gray
determines the recommended annual compensation level, including bonuses, for all
other officers of Gray and its subsidiaries, and then submits these
recommendations to the Management Personnel Committee for its review and
approval. Such determinations of the Management Personnel Committee are reported
to the full board, which then has the opportunity to consider and amend such
determinations concerning the compensation payable to executive officers. In
1999, the full board approved the determinations of the Management Personnel
Committee with respect to compensation without making any changes thereto. The
Management Personnel Committee's policy for determining an executive's salary,
bonus and stock option grants is based on the responsibility of such executive,
his or her impact on the operations and profitability of Gray or the business
unit for which such executive has operating responsibility and the knowledge and
experience of such executive.
In 1999, the Management Personnel Committee utilized the foregoing
criteria to determine executive salaries, bonuses and option grants and such
salaries, bonuses and option grants are consistent with the foregoing policy. An
executive's annual bonus is based on a percentage of his or her annual base
salary. These considerations are subjective in nature and the Management
Personnel Committee does not assign relative weights thereto. For 1999, bonuses
ranged from 0% to 73% of an executive's base salary. Whether or not a bonus is
in fact earned by an executive is linked to the attainment, by Gray or the
business unit for which such executive has operating responsibility, of
predetermined operating profit targets based on budgeted operating
14
<PAGE> 17
revenues (which is an objective analysis) and the individual's contribution to
Gray or the business unit (which is a subjective analysis). The operating profit
targets are approved annually by the Management Personnel Committee. When
measuring an executive's individual contribution and performance, the Management
Personnel Committee examines the factors, as well as qualitative factors that
necessarily involve a subjective judgment by the Management Personnel Committee.
In making such subjective determination, the Management Personnel Committee does
not base its determination on any single performance factor nor does it assign
relative weights to factors, but considers a mix of factors, including
evaluations of superiors, and evaluates an individual's performance against such
mix in absolute terms in relation to other executives at Gray. In deciding
whether or not to grant an option to an individual and in determining the number
of shares subject to an option so granted, the Management Personnel Committee
takes into account subjective considerations, including the level of such
executive's position and the individual's contribution to Gray. Although the
Management Personnel Committee believes that its compensation structure is
similar to that of other comparable communications companies, it did not
specifically compare such structure with that of other companies in 1999.
Mr. Robinson's annual compensation was set by the Management Personnel
Committee at $200,000 per annum. In addition, in 1999, he was awarded options
for the purchase of up to 50,000 shares of Gray class B common stock in
recognition of Gray's overall performance, success in meeting strategic
objectives and the Chief Executive Officer's personal leadership and
accomplishments.
Submitted by Management Personnel Committee of the board of directors
Richard L. Boger, Chairman
William E. Mayher, III
Robert S. Prather, Jr.
Hugh Norton
J. Mack Robinson
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
J. Mack Robinson, President, Chief Executive Officer and a director of
Gray, is Chairman of the Board of Bull Run Corporation and the beneficial owner
of approximately 20.3% of the outstanding shares of common stock, par value $.01
per share ("Bull Run Common Stock"), of Bull Run Corporation (including certain
shares as to which such beneficial ownership is disclaimed by Mr. Robinson).
Robert S. Prather, Jr., Executive Vice President-Acquisitions and a director of
Gray, is President, Chief Executive Officer and a director of Bull Run
Corporation and the beneficial owner of approximately 9.1% of the outstanding
shares of Bull Run Common Stock (including certain shares as to which such
beneficial ownership is disclaimed by Mr. Prather). Bull Run Corporation is the
owner of 13.1% of the total outstanding common stocks of Gray and 100% of the
total outstanding common and preferred stocks of Host. Mr. Prather is also a
member of the Board of Directors of Host. Hilton H. Howell, Jr., a director of
Gray, is Vice President, Secretary and a director of Bull Run Corporation. See
"Compensation Committee Interlocks and Insider Participation" for a description
of certain business relationships between Gray and Messrs. Prather and Robinson,
Host and Bull Run Corporation.
On January 28, 1999, Bull Run Corporation acquired 301,119 shares of the
outstanding common stock of Sarkes Tarzian, Inc. ("Tarzian") from the Estate of
Mary Tarzian (the "Estate") for $10.0 million. The acquired shares (the "Tarzian
Shares") represent 33.5% of the total outstanding common stock of Tarzian (both
in terms of the number of shares of common stock outstanding and in terms of
voting rights), but such investment represents 73% of the equity of Tarzian for
purposes of dividends as well as distributions in the event of any liquidation,
dissolution or other termination of Tarzian. A single shareholder controls a
majority of the voting rights of the Tarzian common stock.
15
<PAGE> 18
Tarzian owns and operates two television stations and four radio stations:
WRCB-TV Channel 3 in Chattanooga, Tennessee, an NBC affiliate; KTVN-TV Channel 2
in Reno, Nevada, a CBS affiliate; WGCL-AM and WTTS-FM in Bloomington, Indiana;
and WAJI-FM and WLDE-FM in Fort Wayne, Indiana. The Chattanooga and Reno markets
rank as the 84th and the 111th largest television markets in the United States,
respectively, as ranked by Nielsen.
On February 12, 1999, Tarzian filed a complaint against Bull Run
Corporation and U.S. Trust Company of Florida Savings bank as Personal
Representative of the Estate in the United States District Court for the
Southern District of Indiana. Tarzian claims that it had a binding and
enforceable contract to purchase the Tarzian Shares from the Estate prior to
Bull Run Corporation's purchase of the shares, and requested judgment providing
that the contract be enforced. On May 3, 1999, the action was dismissed without
prejudice against Bull Run Corporation, leaving the Estate as the sole
defendant.
Gray has an agreement with Bull Run Corporation, whereby Gray has the
option of acquiring the Tarzian Shares from Bull Run Corporation for $10.0
million plus related costs. Gray has the ability to extend the option period in
30 day increments at a fee of $66,700 per extension and has extended this option
period through June 30, 2000. In connection with the option agreement, Gray
granted warrants to Bull Run Corporation to purchase up to 100,000 shares of
Gray's class B Common Stock at $13.625 per share. The warrants vest immediately
upon Gray's exercise of its option to purchase the Tarzian Shares. The warrants
expire 10 years following the date at which Gray exercises its option.
PERFORMANCE GRAPH
The following graph compares the cumulative total return of Gray class A
common stock from December 1994 and Gray class B common stock from September
1996 (when the Gray class B common stock first became publicly traded) to
December 31, 1999 as compared to the stock market total return indexes for (1)
The New York Stock Exchange Market Index and (2) The New York Stock Exchange
Industry Index based upon the Television Broadcasting Stations Index on December
31, 1994 and September 1996, respectively.
The graph assumes the investment of $100 in the Gray class A common stock
and class B common stock in the New York Stock Exchange Market Area Index and
the NYSE Television Broadcasting Stations Index on December 31, 1994 and
September 1996, respectively. Dividends are assumed to have been reinvested as
paid.
COMPARISON OF CUMULATIVE TOTAL RETURN OF GRAY CLASS A COMMON
STOCK, NYSE MARKET INDEX AND SIC CODE INDEX
<TABLE>
<CAPTION>
12/30/94 12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Gray Communication 100.00 165.48 175.42 244.89 256.94 249.31
TV Broadcasting Stations 100.00 119.01 132.37 172.78 123.86 216.83
NYSE Market Index 100.00 129.66 156.20 205.49 244.52 267.75
</TABLE>
16
<PAGE> 19
COMPARISON OF CUMULATIVE TOTAL RETURN OF GRAY CLASS B COMMON
STOCK, NYSE MARKET INDEX AND SIC CODE INDEX
<TABLE>
<CAPTION>
9/24/96 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Gray Communication 100.00 87.29 132.74 106.16 105.31
TV Broadcasting Stations 100.00 97.87 127.75 91.58 160.32
NYSE Market Index 100.00 106.91 140.66 167.37 183.27
</TABLE>
PROPOSAL 2: CONFIRMATION OF APPOINTMENT OF AUDITORS
The Gray board of directors recommends that the shareholders confirm the
appointment of Ernst & Young LLP to audit the books and accounts of Gray for the
year ending December 31, 2000.
Representatives of Ernst & Young LLP are expected to be available at the
meeting to respond to appropriate questions and will be given the opportunity to
make a statement if they so desire.
SHAREHOLDER PROPOSALS
If a Gray shareholder notifies Gray after February 14, 2001 of an intent
to present a proposal at Gray's 2001 Annual Meeting, the Board of Directors of
Gray will have the right to exercise its discretionary voting authority with
respect to such proposal, if presented at the meeting, without including
information regarding such proposal in its proxy materials. Shareholder
proposals to be presented at the 2001 Annual Meeting must be received by Gray on
or before December 2, 2000 for inclusion in the proxy statement and proxy card
relating to that meeting. Such proposals must also meet the other requirements
of the rules of the Securities and Exchange Commission relating to shareholders'
proposals.
17
<PAGE> 20
PROXY - GRAY COMMUNICATIONS SYSTEMS, INC.
Annual Meeting of Shareholders - May 25, 2000
The undersigned hereby appoints William E. Mayher III and J. Mack
Robinson, and each of them, with full power to appoint his substitute, attorneys
and proxies to represent the undersigned shareholder and to vote and act with
respect to all shares that the undersigned shareholder is entitled to vote on
all matters which come before the annual meeting of shareholders of Gray
Communications Systems, Inc. referred to above and at any adjournment of that
meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, IF THIS
PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
AS SPECIFIED. IF NO SPECIFICATIONS ARE MADE, THE SHARES WILL BE VOTED FOR EACH
OF THE PROPOSALS ON THIS PROXY. THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED IN THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTER, INCLUDING
SUBSTITUTION OF DIRECTOR NOMINEES, WHICH MAY COME BEFORE THE MEETING.
(CONTINUED AND TO BE SIGNED, ON THE REVERSE SIDE)
- FOLD AND DETACH HERE -
Dear Shareholder:
Gray Communications Systems, Inc. encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your shares
electronically through the Internet or the telephone. This eliminates the need
to return the proxy card.
To vote your shares electronically you must use the control number. The control
number is the series of numbers printed in the box on the bottom right corner
of the other side of this card. This control number must be used to access the
system.
1. To vote over the Internet:
- Log on to the Internet and go to the website
http://www.eproxy.com/gcs
2. To vote over the telephone:
- On a touch-tone telephone call 1-800-840-1208, 24 hours a day, 7
days a week.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.
<PAGE> 21
Please mark
your vote as
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING. indicated in
this example
1. Election of Directors
Nominees: FOR WITHHELD
01. Richard L. Boger 02. Milton H. Howell 03. William E. Mayher, III
04. Zell Miller 05. Howell W. Newton 06. Hugh Norton
07. Robert S. Prather, Jr. 08. Harriett J. Robinson 09. J. Mack Robinson
To withhold authority to vote for any individual nominee(s) write his or their
names in the following space:_______________
2. To confirm the appointment
of Ernst & Young LLP as FOR AGAINST ABSTAIN
independent auditors of
Gray for the year ending
December 31, 2000.
By checking the box to the right, I consent to future access of the Annual
Report, Proxy Statements, Prospectuses and other communications
electronically via the Internet. I understand that the Company may no
longer distribute printed materials to me for any future shareholder
meeting until such consent is revoked. I understand that I may revoke my
consent at any time by contacting the Company's transfer agent, ChaseMellon
Shareholder Services, L.L.C., Ridgefield Park, NJ. I also understand that
costs normally associated with electronic access, such as usage and
telephone charges, will be my responsibility.
Signature(s)______________________ Signature(s)_____________________ Date_______
NOTE: Please sign exactly as your name appears on this proxy. If signed for
estates, trusts or corporations, title or capacity should be stated. If shares
are held jointly, each holder should sign.
-FOLD AND DETACH HERE-
VOTE BY TELEPHONE OR INTERNET
QUICK --- EASY --- IMMEDIATE
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE: CALL TOLL-FREE ON A TOUCH-TONE TELEPHONE 1-800-840-1208 ANYTIME.
THERE IS NO CHARGE TO YOU FOR THIS CALL.
You will be asked to enter the Control Number located in the
lower right of this form.
OPTION A: To vote as the Board of Directors recommends on ALL items,
press 1.
OPTION B: If you choose to vote on each item separately, press 0. You will
hear these instructions:
ITEM 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9. To WITHHOLD FOR AN INDIVIDUAL nominee, press
0 and listen to the instructions.
ITEM 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN press 0.
The instructions are the same for all remaining items to
be voted.
WHEN ASKED, YOU MUST CONFIRM YOUR VOTE BY PRESSING 1.
THANK YOU FOR VOTING.
VOTE BY INTERNET: THE WEB ADDRESS IS http://www.eproxy.com/gcs
Call Toll Free On A Touch-Tone Telephone
1-800-840-1208 - ANYTIME
