<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:
[ ] 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 sec. 240.14a-11(c) or sec. 240.14a-12
The GNI Group, 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)(l) 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
THE GNI GROUP, INC.
2525 BATTLEGROUND ROAD
DEER PARK, TEXAS 77536
September 24, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of The GNI Group, Inc. ("Company") to be held on Tuesday, October
28, 1997, at 8:00 a.m., Houston time, at the Four Seasons Hotel, 1300 Lamar
Street, Houston, Texas.
The accompanying Notice of 1997 Annual Meeting of Stockholders and
Proxy Statement describe the formal matters to be acted upon at the meeting.
In addition, we will discuss current matters concerning the future of the
Company and review the Company's operations during the past year. At the
conclusion of the meeting, an opportunity will be provided for questions and
discussion by the stockholders. A record of the Company's activities for the
fiscal year ended June 30, 1997, is contained in the Annual Report to
Stockholders that accompanies this proxy material.
The meeting will be held for the following purposes:
(1) to elect as directors the following five nominees to
serve on the Company's Board of Directors until the next annual
meeting of stockholders or until their successors have been duly
elected and qualified: Newton E. Dudney, M.D., Titus H. Harris, Jr.,
John W. Lyons, Jr., Carl V Rush, Jr., and G. Stacy Smith;
(2) to ratify the appointment of KPMG Peat Marwick, LLP
as the Company's independent auditor for the fiscal year ending June
30, 1998; and
(3) to transact such other business as may properly come
before the meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on September
10, 1997, as the record date for determination of stockholders who are entitled
to receive notice of, and to vote, either in person or by proxy, at the annual
meeting and any adjournment thereof.
It is important that your shares be represented at the annual meeting
regardless of the number of shares you hold. Please take a moment to complete,
sign and mail the enclosed proxy card in the accompanying return envelope
promptly, regardless of whether you intend to be present at the annual meeting.
Your proxy is revocable at any time prior to its use. If you have multiple
accounts and receive more than one set of these materials, please be sure to
vote each proxy received. WE LOOK FORWARD TO SEEING YOU AT THE ANNUAL MEETING.
Sincerely,
THE GNI GROUP, INC.
Carl V Rush, Jr.
President
<PAGE> 3
THE GNI GROUP, INC.
2525 BATTLEGROUND ROAD
DEER PARK, TEXAS 77536
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, OCTOBER 28, 1997
To the Stockholders of The GNI Group, Inc.:
Notice is hereby given that the 1997 Annual Meeting of Stockholders of
The GNI Group, Inc. ("Company") will be held at the time and place listed below
for the purposes listed below:
Time . . . . . . . . . . . . . . 8:00 a.m., Tuesday, October 28, 1997
Place . . . . . . . . . . . . . . Four Seasons Hotel
1300 Lamar Street
Houston, Texas, 77010
Items of Business . . . . . . . . (1) to elect as directors the five
nominees to serve on the Company's
Board of Directors until the next
annual meeting of stockholders or
until their successors have been
duly elected and qualified: Newton
E. Dudney, M.D., Titus H. Harris,
Jr., John W. Lyons, Jr., Carl V
Rush, Jr., and G. Stacy Smith;
(2) to ratify the appointment of KPMG
Peat Marwick, LLP as the Company's
independent auditor for the fiscal
year ending June 30, 1998; and
(3) to transact such other business as
may properly come before the
meeting and any adjournment
thereof.
Record Date . . . . . . . . . . . Holders of the Company's common stock,
$.01 par value per share, of record at
the close of business on September 10,
1997, are entitled to notice of and to
vote at the annual meeting and any
adjournment thereof.
Important . . . . . . . . . . . . So that we may be sure your vote will
be included, PLEASE SIGN, DATE AND MAIL
YOUR PROXY PROMPTLY in the return
envelope provided, regardless of
whether you plan to attend the annual
meeting. For your convenience, there is
enclosed a return envelope requiring no
postage that is for your use in
returning your proxy. If you attend the
meeting, you may revoke your proxy and
vote in person. Additionally, your
proxy is revocable at any time prior to
its use. A list of stockholders
entitled to notice of and to vote at
the meeting will be available for
examination at the office of the
Company's transfer agent, American
Stock Transfer & Trust Company, 40 Wall
Street, New York, New York, 10005 for
the ten days preceding the meeting.
By Order of the Board of Directors,
Houston, Texas Titus H. Harris, III
September 24, 1997 Secretary
<PAGE> 4
THE GNI GROUP, INC.
2525 BATTLEGROUND ROAD
DEER PARK, TEXAS 77536
PROXY STATEMENT FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 28, 1997
GENERAL
This Proxy Statement is furnished to the stockholders of The GNI
Group, Inc., a Delaware corporation ("Company"), IN CONNECTION WITH THE
SOLICITATION BY AND ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY OF
PROXIES FOR USE AT THE 1997 ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY to be
held on Tuesday, October 28, 1997 ("Annual Meeting"), at 8:00 a.m., Houston
time, at the Four Seasons Hotel, 1300 Lamar Street, Houston, Texas, 77010 and
any adjournment thereof, for the purposes set forth herein. This definitive
Proxy Statement and the accompanying proxy card are being mailed to
stockholders on or about September 24, 1997.
The execution and return of the enclosed proxy will not in any way
affect a stockholder's right to attend the Annual Meeting and vote in person.
Furthermore, a stockholder has the right to revoke his proxy at any time before
it is exercised (a) by filing with the Secretary of the Company a written
revocation or a duly executed proxy bearing a later date, or (b) by appearing
and voting in person at the Annual Meeting. UNLESS OTHERWISE MARKED, PROXIES
IN THE FORM OF THE ACCOMPANYING PROXY CARD THAT ARE PROPERLY EXECUTED AND
RETURNED WILL BE VOTED FOR (1) the Board of Directors' slate of five nominees
for positions on the Board of Directors of the Company; and (2) the
ratification of the appointment of KPMG Peat Marwick, LLP as the independent
auditor for the Company for the fiscal year ending June 30, 1998. The Board of
Directors is not presently aware of any other proposal that will be brought
before the Annual Meeting. However, should any additional matters be properly
brought before the Annual Meeting, the persons named in the proxy card will
vote such proxies in accordance with their best judgment and what they consider
to be the best interest of the Company and its stockholders.
The Company's summary annual report for the fiscal year ended June 30,
1997, and Annual Report on Form 10-K for the fiscal year ended June 30, 1997,
are being mailed herewith to all stockholders entitled to vote at the Annual
Meeting. The summary annual report and the Annual Report on Form 10-K do not
constitute a part of the proxy soliciting material.
The cost of soliciting proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by the directors,
officers and employees of the Company, without additional compensation, by
personal interview, telephone, telegram or otherwise. Arrangements also have
been made with brokerage firms and other custodians, nominees and fiduciaries
who hold the voting securities of record for the forwarding of solicitation
materials to the beneficial owners thereof. The Company will reimburse such
brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket
expenses incurred by them in connection therewith. The Company expects that
the aggregate expense of these services will be less than $10,000.
QUORUM, RECORD DATE AND OTHER VOTING MATTERS
The Board of Directors of the Company has fixed the close of business
on September 10, 1997, as the record date ("Record Date") for the determination
of stockholders entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof. On the Record Date, the outstanding voting securities of
the Company consisted of 6,634,525 shares of common stock, $.01 par value per
share ("Common Stock"), with each share of Common Stock being entitled to one
vote. No shares of Common Stock are entitled to cumulative voting rights in
the election of directors. The presence at the Annual Meeting, in person or by
proxy, of the holders of a majority of the shares of Common Stock outstanding
on the Record Date will be necessary to constitute a quorum at the Annual
Meeting. Shares represented by a properly signed and returned proxy will be
counted as present at the Annual Meeting for purposes of determining a quorum,
without regard to whether the proxy is marked as casting a vote or abstaining.
Shares held by nominees that are voted on at least one matter coming before the
Annual Meeting will also be counted as present for purposes of determining a
quorum, even if the beneficial owner's discretion has been withheld (a
"non-vote") for voting on some or all other matters.
<PAGE> 5
The affirmative vote of the holders of a majority of the shares of
Common Stock outstanding on the Record Date that are present in person or
represented by proxy and entitled to vote at the Annual Meeting is required for
the election of directors (Proposal 1), and the ratification of the appointment
of KPMG Peat Marwick, LLP as the Company's independent auditor for the fiscal
year ending June 30, 1998 (Proposal 2). With respect to each matter submitted
to a vote of security holders, the following shall apply: under Delaware law
and the Company's Certificate of Incorporation and Bylaws, as amended,
abstentions are entitled to vote and broker non-votes are not entitled to vote.
Therefore, abstentions will have the same effect as votes against the proposals
on such matters. Broker non-votes, however, will be deemed shares not entitled
to vote on such matters, and therefore will not count as votes for or against
the proposals, and will not be included in calculating the number of votes
necessary for approval of such matters.
VOTING SECURITIES, PRINCIPAL STOCKHOLDERS AND MANAGEMENT INTERESTS
The following table sets forth, as of August 31, 1997, the shares of
Common Stock beneficially owned by (i) each person known to the Company to be
the beneficial owner of more than five percent of the outstanding shares of
Common Stock, (ii) each director and nominee for director, (iii) each executive
officer of the Company named in the Summary Compensation Table, and (iv) the
directors and all executive officers as a group. This information is based on
public filings made with the SEC as of July 31, 1997, and certain information
supplied to the Company by the persons listed below:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND BENEFICIAL PERCENT OF
ADDRESS OF OWNERSHIP OF OUTSTANDING
BENEFICIAL OWNER COMMON STOCK (1) COMMON STOCK (2)
---------------- ----------------- ----------------
<S> <C> <C>
Heartland Advisors, Inc. 1,163,000 15.1%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Robert Fleming Inc. 681,041 8.87%
320 Park Avenue, 11th Floor
New York, New York 10022
Titus H. Harris, Jr 269,555(3) 3.5%
5599 San Felipe, Suite 301
Houston, Texas 77056
Newton E. Dudney, M.D 44,959(4) 0.6%
445 Medical Center Blvd., Suite 100
Webster, Texas 77598
John W. Lyons, Jr 250,000 3.3%
P. O. Drawer 2789
Texas City, Texas 77590
G. Stacy Smith 45,000(5) 0.6%
300 Crescent Court, Suite 830
Dallas, Texas 75201
Carl V Rush, Jr 245,000(6) 3.2%
2525 Battleground Road
Deer Park, Texas 77536
Dawn S. Born 18,166(7) 0.2%
2525 Battleground Road
Deer Park, Texas 77536
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C> <C>
Richard M. Cochrane 23,200(8) 0.3%
2525 Battleground Road
Deer Park, Texas 77536
Titus H. Harris, III 199,870(9) 2.6%
2525 Battleground Road
Deer Park, Texas 77536
Donna L. Ratliff 25,000 0.3%
2525 Battleground Road
Deer Park, Texas 77536
David A. Swallow 3,000 *
2525 Battleground Road
Deer Park, Texas 77536
All Officers and Directors 1,205,850(11) 15.7%
as a Group (11 persons)
</TABLE>
- ----------------
(1) Except as otherwise indicated, each person possesses sole voting and
dispositive power with respect to the shares set forth beside his, her
or its name, subject to community property laws.
(2) The percentages are based on there being (a) 6,634,525 outstanding
shares of Common Stock as of August 31, 1997 (b) warrants to purchase
a total of 428,400 shares of Common Stock; and (c) options to purchase
a total of 617,316 shares of Common Stock granted under the Company's
stock option plans that are currently exercisable or will be so within
60 days after August 31, 1997.
(3) Includes 106,500 shares of Common Stock (1.4%) owned by a family
member as to which Mr. Harris disclaims any beneficial interest.
(4) Dr. Dudney's shares are pledged to a commercial bank.
(5) These shares are beneficially owned by Walker Smith Capital, L.P. Mr.
Smith is a 50% owner of WS Capital, L.L.C., which is the sole general
partner of Walker Smith Capital, L.P. Mr. Smith disclaims beneficial
ownership of the shares of Common Stock owned by Walker Smith Capital,
L.P. except to the extent of his pecuniary interest in WS Capital,
L.L.C., which interest is equal to approximately 3,942 shares of
Common Stock.
(6) Includes 240,000 shares of Common Stock (3.1%) with respect to which
Mr. Rush has the right to acquire upon the exercise of options granted
under the Company's stock option plans.
(7) Includes 16,666 shares of Common Stock (0.2%) with respect to which
Ms. Born has the right to acquire upon the exercise of options granted
under the Company's stock option plans.
(8) Includes 22,200 shares of Common Stock (0.3%) with respect to which
Mr. Cochrane has the right to acquire upon the exercise of options
granted under the Company's stock option plans.
(9) Includes 142,500 shares of Common Stock (1.9%) with respect to which
Mr. Harris has the right to acquire upon the exercise of options
granted under the Company's stock option plans.
(10) Ms. Ratliff has the right to acquire all 25,000 shares (0.3%) upon the
exercise of options granted under the Company's stock option plans.
(11) Includes an aggregate of 508,066 shares of Common Stock (6.6%) with
respect to which various officers and directors of the Company have
the right to acquire within 60 days upon the exercise of options
granted under the Company's stock option plans.
Under the credit agreement with its commercial bank, the Company
granted a security interest in all of the outstanding capital stock of its
subsidiaries to secure its obligations. In the event of a default by the
Company under the credit agreement with the bank, the bank could foreclose on
the pledged stock. Because the Company is organized in a holding company
structure with the principal operating assets at the subsidiary level, the
transfer of ownership of the pledged stock resulting from the foreclosure would
effectively cause a change of control of the Company.
3
<PAGE> 7
PROPOSAL 1 - ELECTION OF DIRECTORS
Pursuant to the Company's Bylaws (as amended), the Board of Directors
has fixed the number of positions on the Company's Board of Directors at five.
Accordingly, five persons are proposed to be elected and qualified as members
of the Company's Board of Directors at the Annual Meeting. Each director
elected will hold office until the next annual meeting of stockholders or until
his successor has been elected and qualified. The persons named in the
accompanying proxy have been nominated by the Board of Directors.
Directors will be elected by the vote of the holders of a majority of
the shares of Common Stock outstanding on the Record Date which are present in
person or represented by proxy and entitled to vote at the Annual Meeting. It
is the intention of the persons named as proxies in the enclosed proxy to vote
in favor of the persons listed below unless otherwise indicated on the proxy.
Each of the nominees has consented to be named in this Proxy Statement and to
serve as a director if elected. All five of the nominees are currently
directors of the Company. Although the Board of Directors has no reason to
believe that any of the nominees will be unable or unwilling to serve if
elected, should any of the nominees become unable or unwilling to serve as a
director if elected, the shares of Common Stock represented by the proxies will
be voted for the election of such other persons as may be nominated by the
Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
SLATE OF DIRECTORS NAMED ON THE ENCLOSED PROXY AND, UNLESS OTHERWISE MARKED TO
THE CONTRARY, DULY EXECUTED PROXIES RECEIVED FROM STOCKHOLDERS WILL BE VOTED
FOR THE SLATE OF DIRECTORS NAMED ON THE ENCLOSED PROXY.
INFORMATION ABOUT DIRECTOR NOMINEES
Set forth below is certain information regarding each of the five
nominees for election as a director. Each director elected will serve until
the next annual meeting of stockholders or until his successor has been duly
elected and qualified:
<TABLE>
<CAPTION>
POSITIONS WITH DIRECTOR
NAME AGE THE COMPANY SINCE
- ---- --- -------------- --------
<S> <C> <C> <C>
Newton E. Dudney, M.D. 71 Director; Member of Compensation and 1972
Nominating Committees
Titus H. Harris, Jr. 66 Director; Chairman of the Board; Member 1979
of Executive, Audit, Compensation, and
Nominating Committees
John W. Lyons, Jr. 59 Director; Member of Executive, Audit, 1979
and Compensation Committees
Carl V Rush, Jr. 42 Director; Member of Executive 1987
Committee; President and Chief
Executive Officer
G. Stacy Smith 29 Director 1997
</TABLE>
NEWTON E. DUDNEY, M.D.
Newton E. Dudney, M.D., has been a director of the Company since 1972.
He also has been a physician engaged in private practice in League City, Texas,
since 1954.
4
<PAGE> 8
TITUS H. HARRIS, JR.
Titus H. Harris, Jr. has been a director of the Company since 1979 and
Chairman of the Board since 1987. He is currently Chairman of the investment
banking firm of Harris Webb & Garrison, Inc., a position he has held since
1994. From 1991 to 1994, Mr. Harris was a registered representative at Cowen &
Co., an investment banking firm. From 1983 to 1991, Mr. Harris was Senior Vice
President of the investment banking firm of Lovett Underwood Neuhaus & Webb,
Inc., and its predecessor, Lovett Mitchell Webb & Garrison, Inc. Mr. Harris is
the father of Titus H. Harris, III, the Executive Vice President, Chief
Financial Officer and Secretary of the Company.
JOHN W. LYONS, JR.
John W. Lyons, Jr. has been a director of the Company since 1979. He
is an attorney engaged in private practice since 1970, most recently as a
partner in the firm of Lyons & Plackemeier of Texas City, Texas.
CARL V RUSH, JR.
Carl V Rush, Jr. has been a director and President since 1987 and
Chief Executive Officer since 1989. From 1985 to 1987, he was Vice President
- -- Finance and Administration of the Company. Mr. Rush was self-employed as a
financial and management consultant from 1983 to 1985. From 1980 to 1983, he
served in various management positions with Booker Oil Services, a petroleum
services company. Mr. Rush earned his BBA in 1977 and his MBA in Finance in
1978, each from Texas Christian University.
G. STACY SMITH
G. Stacy Smith has been a director of the Company since July, 1997.
Mr. Smith is a founder and general partner of Walker Smith Capital, a private
investment partnership. From 1994 to 1996, Mr. Smith was a co-founder and
manager of Gryphon Partners, a private investment partnership. From 1991 to
1993, Mr. Smith was an investment banker with Wasserstein Perella & Co., an
international mergers and acquisitions firm. Mr. Smith was appointed, and is
nominated, as a director at the request of Heartland Advisors, Inc.
MEETINGS OF THE COMPANY'S BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company held eight (8) meetings in
fiscal 1997. In fiscal 1997, no incumbent director attended fewer than 75% of
the aggregate of (i) the total number of meetings of the Board of Directors and
(ii) the total number of meetings held by all committees on which such director
served. The Board of Directors has four standing committees -- Executive,
Audit, Compensation, and Nominating -- which perform delegable functions on
behalf of the entire Board of Directors. F. Oliver Nicklin was a member of
the Board of Directors until May 29, 1997, and hence served on committees until
such time.
Executive Committee
During fiscal 1997, the Executive Committee consisted of one inside
director, Carl V Rush, Jr., and three outside directors, Titus H. Harris, Jr.,
John W. Lyons, Jr. and F. Oliver Nicklin. No meetings were held in fiscal
1997. The Executive Committee is authorized to act for the Board of Directors
to the full extent allowed by Delaware law.
Audit Committee
During fiscal 1997, the Audit Committee consisted of three outside
directors: Titus H. Harris, Jr., and John W. Lyons, Jr. and F. Oliver Nicklin.
One meeting was held in fiscal 1997. The Audit Committee annually reviews and
recommends to the full Board of Directors the firm to be engaged to audit the
accounts of the Company and its subsidiaries. Additionally, the Audit
Committee reviews with such independent auditors the plan and results of the
auditing engagement and the scope and results of the Company's procedures for
internal auditing, inquires as to the adequacy of internal accounting controls,
and considers the independence of the auditing firm.
5
<PAGE> 9
Compensation Committee
During fiscal 1997, the Compensation Committee consisted of four
outside directors: Newton E. Dudney, M.D., Titus H. Harris, Jr., John W.
Lyons, Jr. and F. Oliver Nicklin. One meeting was held in fiscal 1997. The
Compensation Committee's responsibility is to discuss and approve (i) the
recommendations of management with regard to the granting of stock options to
employees and (ii) the compensation to be paid to executive officers.
Nominating Committee
During fiscal 1997, the Nominating Committee consisted of three
outside directors: Newton E. Dudney, M.D., Titus H. Harris, Jr., and F. Oliver
Nicklin. One meeting was held in fiscal 1997. Activities of the Nominating
Committee include nominating candidates to serve on the Board of Directors and
selecting directors to serve on committees for the coming fiscal year. The
Nominating Committee will consider stockholder recommendations for nominations
to the Board of Directors, provided that written notice is received by the
Company at its principal executive offices in conformity with all applicable
legal provisions, including Rule 14a-8 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended. These recommendations
must be accompanied by a full statement of qualifications and an indication of
the candidate's willingness to serve.
INFORMATION ABOUT EXECUTIVE OFFICERS
Set forth below is certain information regarding the Company's
executive officers. All officers are elected to serve until their successors
are duly elected and qualified:
<TABLE>
<CAPTION>
POSITION(S) WITH OFFICER
NAME AGE THE COMPANY SINCE
---- --- ----------- -----
<S> <C> <C> <C>
Carl V Rush, Jr. 42 Director; President and 1985
Chief Executive Officer
Dawn S. Born 41 Vice President and General Counsel 1996
Richard M. Cochrane 37 Vice President and General Manager, 1997
GNI Chemicals Corporation
Robert W. Griffith 46 Vice President and General Manager, 1997
Disposal Systems, Inc.
Titus H. Harris, III 37 Executive Vice President, Chief 1985
Financial Officer and Secretary
Donna L. Ratliff 50 Treasurer and Assistant Secretary 1985
W. R. Reeves, Jr. 49 Vice President - Environmental 1990
and Regulatory Affairs
</TABLE>
CARL V RUSH, JR.
See "Information about Director Nominees" above.
DAWN S. BORN
Ms. Born has been Vice President and General Counsel of the Company
since January, 1996. From October, 1994 to December, 1995, Ms. Born was
Director of Corporate Development and Contract Restructuring for Enron Capital
& Trade Resources, Inc., a subsidiary of Enron Corporation, a global energy
company. For more than thirteen years prior to October, 1994, Ms. Born
practiced law at the Houston-based law firm of Bracewell & Patterson, L.L.P.,
focusing on corporate finance and mergers and acquisitions, the final seven
years as a partner. She earned a BA in Public Justice from the State
University of New York in 1977 and her JD from the University of Houston Law
Center in 1981.
6
<PAGE> 10
RICHARD M. COCHRANE
Mr. Cochrane has been with the Company since July, 1990 and Vice
President and General Manager of GNI Chemicals Corporation since April, 1997.
Between July, 1990 and April, 1997, he held various marketing and operations
positions in the Company's subsidiaries, GNI Chemicals Corporation and Disposal
Systems, Inc. Prior to joining the Company, Mr. Cochrane held various
engineering and management positions with ChemLink Petroleum Company and Kaiser
Aluminum and Chemical Company. Mr. Cochrane earned a Bachelor in Engineering
in Chemical Engineering from Vanderbilt University in 1982.
ROBERT W. GRIFFITH
Mr. Griffith has been Vice President and General Manager of Disposal
Systems, Inc. since April, 1997. From November, 1989 until April, 1997, Mr.
Griffith was Director of Operation for Disposal Systems, Inc. From 1977 to
1989, he held various management positions with ChemLink Company, Inc., KMCO,
Inc. and PPG Industries, Inc. Mr. Griffith earned a BS in Chemistry from the
University of Alabama in Huntsville in 1977.
TITUS H. HARRIS, III
Mr. Harris has been Chief Financial Officer of the Company since 1990,
Executive Vice President since 1989 and Secretary since 1987. From 1985 to
1989, he was Vice President of the Company. From 1984 to 1985, Mr. Harris was
a financial consultant to CRB Investments, Inc., a leveraged buy-out firm.
From 1982 to 1984, he attended the Graduate School of Business of the
University of Chicago, from which he received an MBA. He earned his BA in
Economics from Washington & Lee University in 1982. Mr. Harris is the son of
Titus H. Harris, Jr., a director and the Chairman of the Board of the Company.
DONNA L. RATLIFF
Ms. Ratliff has been Treasurer of the Company since 1985 and Assistant
Secretary since 1987. From 1984 to 1985, she was Controller of Santa Fe Supply
Co., a wholesale picture framing supply and distribution company. From 1979 to
1984, Ms. Ratliff was Secretary and Treasurer of Gill Services, Inc., a
petroleum services company.
W. R. REEVES, JR.
Mr. Reeves has been Vice President -- Environmental and Regulatory
Affairs of the Company since 1990. Prior to assuming his current position, he
was Vice President -- Sales and Marketing of Disposal Systems, Inc. from 1985
to 1990. From 1983 to 1985, Mr. Reeves was employed by Disposal Systems, Inc.
as a Sales Representative. From 1981 to 1983, Mr. Reeves was Manager of
Cleanup Operations for CECOS International, Inc., a subsidiary of
Browning-Ferris Industries, Inc. He earned is BS in Biology in 1971 from
McNeese State University and his MS in Environmental Sciences in 1973 from
McNeese State University.
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
directors and officers of the Company, and persons who own beneficially more
than 10% of a registered class of the equity securities of the Company, to file
reports of ownership and changes of ownership with the SEC and the NASDAQ/NMS,
and to furnish to the Company copies of all Section 16(a) reports that they
file. Based solely on a review of the copies of such Section 16(a) reports
received by it, and written representations from certain reporting persons that
no Forms 5 were required for those persons, to the knowledge of the Company,
during fiscal 1997, its officers, directors and greater than 10% stockholders
complied with all applicable filing requirements.
7
<PAGE> 11
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS COMPENSATION
Directors are reimbursed by the Company for all out-of-pocket expenses
incurred in attending meetings of the Board of Directors. Outside directors,
other than the Chairman of the Board, are paid a fee for attending meetings of
the Board of Directors of $300 per board meeting. The Chairman of the Board of
the Company is paid $5,000 per quarter in lieu of any other compensation for
services to the Company.
EXECUTIVE COMPENSATION
REPORT OF COMPENSATION COMMITTEE
The Company's Executive Compensation Program is administered and
reviewed annually by the Compensation Committee, which is a committee of the
board of directors (the "Committee"). In fiscal 1997, the Compensation
Committee was composed of the following non-employee, outside directors:
Newton E. Dudney, M.D., Titus H. Harris, Jr., John W. Lyons, Jr. and F. Oliver
Nicklin. For fiscal 1998, the Compensation Committee is comprised of the
following non- employee, outside directors: Newton E. Dudney, M.D., Titus H.
Harris, Jr. and John W. Lyons, Jr. None of the past or present members of the
Committee have interlocking or other relationships with the Company that would
jeopardize their independence as Committee members. The Committee's
responsibility is to discuss and approve (i) the compensation (including cash
and non-cash compensation) to be paid to executive officers of the Company and
(ii) the recommendations of management with regard to the granting of stock
options to employees. This report sets forth the Company's compensation policy
and guidelines and the major elements of executive compensation and the basis
by which fiscal year 1997 compensation determinations were made by the
Committee with respect to the executive officers of the Company, including the
executive officers who are named in the compensation tables.
Compensation Policy and Guidelines. The Committee believes that the
goals of executive compensation should be to attract and retain high-quality
executive officers who will contribute to the long-term success of the Company
and to align executive compensation with the Company's long-term business
objectives and performance. The Committee believes that its goals are best met
by providing the executive officers with compensation that combines (i) a base
salary at competitive levels with (ii) annual cash incentives and stock options
tied to the Company's long-term business objectives. The Committee's decisions
are predominately subjective in nature, in that the Committee considers the
following factors in making its decisions: (a) the financial performance of
the Company, (b) the Company's progress toward achieving long-term strategic
objectives, (c) an analysis of the strengths and weaknesses of the individual
executive officers, (d) the Committee's perception of such individual's
historical performance and expected future contributions to the success of the
Company, and (e) the general competitiveness of the Company's executive
compensation program compared with a group of companies that includes companies
engaged in the same business as the Company and growth companies of similar
size as the Company (collectively, the "Comparison Group"). None of the
companies in the Comparison Group are included in the Peer Group used in the
Performance Graph because the companies in the Peer Group are greater in size
and have a longer operating history than the Company. The Committee believes
that its overall executive compensation program is in the median range of the
Comparison Group.
Compensation Program Elements. The particular elements of the
compensation programs for the Company's executive officers are explained in
more detail below.
Base Salary. Base salary levels are primarily determined by the
Committee in consideration of the financial performance of the Company
and compensation of executive officers of companies in the Comparison
Group. Based in part on the findings contained in a compensation
study conducted near the beginning of fiscal 1995 by an outside
consultant that included a portion of the Comparison Group of
companies, the Committee believed that base salary levels for most of
the Company's executive officers was considered to be reasonable in
relation to companies in the Comparison Group. In fiscal 1997, the
Compensation Committee increased slightly the base salary of one
executive officer of the Company in lieu of a bonus. Otherwise, the
base salaries of the executive officers remained unchanged from fiscal
1996.
8
<PAGE> 12
Bonus and Other Annual Compensation. Beginning with fiscal 1995, the
Company adopted a formula-based annual incentive program for the
Company's Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO") (the "Formula Program") that is tied solely and directly to
annual, calendar-year fully-diluted earnings per share ("EPS"). The
Company does not pay a bonus to the CEO and CFO under the Formula
Program until a pre- determined EPS target has been achieved. Upon
the achievement of such target, the CEO and the CFO receive a bonus,
the amount of which is determined based on the amount by which EPS
exceeds the pre-determined target. The Company's CEO and CFO each
received a cash bonus during fiscal year 1997 pursuant to this
incentive program as a result of the pre-determined target for
calendar 1996 having been exceeded.
Generally, at the discretion of the Committee, other annual
compensation is provided to the Company's other executive officers in
the form of cash bonuses. The Committee's decision to award an annual
bonus to such other executive officers is based primarily upon an
analysis of the financial performance and operational achievements of
the Company, as well as the particular executive officer's job
performance and the specific accomplishments of the executive officer
during the preceding twelve-month period. In fiscal 1997, the
Committee authorized the payment of a cash bonus to one of the
executive officers named in the Summary Compensation Table. Moreover,
in previous fiscal years, a discretionary bonus has been paid to
executive officers and may be paid in future years.
In addition to the foregoing, the Committee may elect to provide to
the executive officers other forms of cash and non-cash compensation
when the Committee deems it in the best interest of the Company to do
so based upon the factors recited above. In fiscal 1997, the
Committee determined it in the best interest of the Company to make
loans to its CEO and its CFO for the purpose of repaying loans made by
a commercial bank in 1993 that were guaranteed by the Company ("Bank
Loans"). In 1993, the Board of Directors requested that the CEO and
CFO exercise their options and not sell the Common Stock so acquired
to offset the exercise price. The Bank Loans were made in connection
with the exercise of options (which were expiring) to purchase shares
of Common Stock of the Company. In February 1997, the Company loaned
the CEO $350,000 and the CFO $300,000 to repay the Bank Loans
(collectively referred to as "Officer Loans"). Principal and
interest, at the rate of 7% per annum, are due on February 7, 1998.
The principal amounts of the Officer Loans outstanding as of August
31, 1997 are $350,000 and $300,000, and accrued interest as of such
date was $13,827 and $11,852, for the CEO and the CFO, respectively.
Additionally, in January 1997, the Committee determined that it was in
the best interest of the Company to forgive the principal and interest
due and owing by the CEO and CFO on loans made by the Company to them
in May 1996 in the original principal amounts of $34,616 and $29,671,
respectively ("1996 Loans"). The 1996 Loans bore interest at the rate
of 8% per annum and were due in full on May 31, 1997. The proceeds of
the 1996 Loans were used to repay interest due and owing on the Bank
Loans. The Committee forgave the repayment of principal and interest
on the 1996 Loans, resulting in additional compensation in fiscal 1997
to the CEO of $37,386 and to the CFO of $32,045.
Stock Option Program. Currently, the Committee utilizes stock option
grants to provide an incentive for the executive officers to manage
the Company for the long-term benefit of its owners as opposed to the
short-term benefit of the executive officers. Accordingly, the
Committee grants stock options at or above fair market value, thus
tying the value of the grant to the future performance of the
Company's Common Stock.
Under the Formula Program, based on an internal estimate of EPS, each
year the Committee grants to the CEO and the CFO a number of incentive
stock options determined by subtracting a threshold amount from the
estimated EPS, by subtracting therefrom an amount equal to the
difference between the preceding calendar year's actual EPS and the
estimated EPS for such year, and by multiplying the result thereof by
a pre-determined base number. Pursuant to the provisions of the
Formula Program, the Committee made grants in fiscal 1997 of incentive
stock options to the CEO and the CFO of the Company, and may make
additional grants in future years of incentive stock options to the
CEO and the CFO of the Company under the Formula Program.
9
<PAGE> 13
The Committee's decision to grant stock options to such other executive
officers is based primarily upon an analysis of the financial performance and
operational achievements of the Company, as well as the particular executive
officer's job performance and the Committee's perception of the potential
long-term contribution of such officer. The Committee granted stock options in
fiscal 1997 to certain of the other executive officers named in the "Summary
Compensation Table" to recognize such officers' job performance and their
potential long-term contribution to the Company.
Discussion of Fiscal 1997 Compensation for the Chief Executive
Officer. The Committee believes that the vision and leadership of the CEO is
important in achieving the Company's long-term strategic business objectives.
Based in part on the findings contained in a compensation study conducted near
the beginning of fiscal 1995 by an outside consultant that included a portion
of the Comparison Group of companies, the Committee believed that the base
salary level for the Company's CEO was considered to be reasonable in relation
to companies in the Comparison Group. Therefore, the Committee did not adjust
the base salary paid to the CEO in fiscal 1997. Other than pursuant to the
Formula Program and in connection with the Officer Loans described above in
Compensation Program Elements -- Bonus and Other Annual Compensation, the
Committee did not pay an annual cash bonus or other cash compensation to the
CEO in fiscal 1997. Likewise, other than pursuant to the Formula Program,
grants of incentive stock options to the CEO were not made by the Committee
during fiscal 1997.
Summary. The main elements of the program: base salary, annual bonus,
and stock option plans, are typical of executive compensation programs in other
public companies and serve to provide appropriate reward for ongoing as well as
strategic efforts of the Company's executives. The Committee is continually
evaluating the compensation of the CEO and other executive officers. The
Committee believes that competitive executive officer compensation programs are
necessary for the ongoing retention of the executive employees who are
essential to the future development of the Company and growth in stockholder
value.
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Titus H. Harris, Jr., Chairman John W. Lyons, Jr.
Newton E. Dudney, M.D. F. Oliver Nicklin
Notwithstanding Securities and Exchange Commission ("SEC") filings by the
Company that have incorporated or that may incorporate by reference other SEC
filings (including this Proxy Statement) in their entirety, the Report of
Compensation Committee on Executive Compensation shall not be incorporated by
reference into such filings and shall not be deemed to be "filed" with the SEC
except as specifically provided otherwise or to the extent required by Item 402
of Regulation S-K.
10
<PAGE> 14
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid by the Company for the
three fiscal years ended June 30, 1997 to its Chief Executive Officer and to
the other executive officers of the Company whose annual cash compensation
received from the Company for services rendered during fiscal 1997 exceeded
$100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION(1)
---------------------------------- ----------------------------------------
AWARDS PAYOUTS
----------------------- --------
RESTRICTED STOCK ALL OTHER
NAME AND OTHER ANNUAL STOCK UNDERLYING LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARD(S)($) OPTIONS(#) PAYOUTS($) SATION($)(2)
- ------------------------------ ---- --------- -------- --------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carl V Rush, Jr 1997 183,250 13,200 -0- -0- 16,000 -0- 37,896(3)
President and Chief 1996 183,250 20,400 -0- -0- 17,000 -0- 465
Executive Officer 1995 183,250 -0- -0- -0- 165,000 -0- 919
Dawn S. Born (4) 1997 135,000 -0- -0- -0- 25,000 -0- 1,867
Vice President and 1996 67,500 50,000 1,876 -0- 50,000 -0- 131
General Counsel 1995 -0- -0- -0- -0- -0- -0- -0-
Richard M. Cochrane 1997 108,967 -0- -0- -0- 50,000 -0- 2,115
Vice President and General 1996 100,000 -0- -0- -0- -0- -0- 1,724
Manager, GNI Chemicals Corp 1995 91,667 -0- -0- -0- -0- -0- 1,268
Titus H. Harris, III 1997 148,500 6,600 -0- -0- 8,000 -0- 35,012(5)
Exec. Vice President, Chief 1996 148,500 10,200 -0- -0- 8,500 -0- 2,753
Financial Officer & Secretary 1995 148,500 -0- -0- -0- 82,500 -0- 2,474
Donna L. Ratliff 1997 90,000 15,000 -0- -0- -0- -0- 2,540
Treasurer 1996 90,000 -0- -0- -0- -0- -0- 2,286
1995 90,000 -0- -0- -0- -0- -0- 1,943
David A. Swallow (6) 1997 108,750 -0- -0- -0- -0- -0- 39,833(6)
Exec. Vice Pres. & General 1996 139,000 -0- -0- -0- -0- -0- 1,073
Manager, GNI Chemicals 1995 42,253 10,000 -0- -0- -0- -0- -0-
</TABLE>
- -----------------
(1) The Company has a 1991 Stock Option Plan, as amended (the "1991
Plan"), for the benefit of the Company's employees, including its
executive officers. The 1991 Plan authorizes the Company, upon the
recommendation of the Compensation Committee, to grant options to
purchase a total of 600,000 shares of Common Stock to selected
employees of the Company. The 1991 Plan provides for the granting of
"incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code. The 1991 Plan also provides for the granting
of options that do not comply with Section 422. The options granted
under the 1991 Plan have tandem tax withholding rights. The Company
also has a 1995 Management Equity Incentive/Stock Option Plan (the
"1995 Plan") for the benefit of the Company's executive officers. The
1995 Plan authorizes the Company, upon the recommendation of the
Compensation Committee, to grant options to purchase a total of
500,000 shares of Common Stock to selected executive officers of the
Company. The 1995 Plan provides for the granting of "incentive stock
options" within the meaning of Section 422 of the Internal Revenue
Code. The 1995 Plan also provides for the granting of options that do
not comply with Section 422. The options granted under the 1995 Plan
have tandem tax withholding rights.
(2) No Named Executive Officer had "perquisites and other personal
benefits" with a value greater than the lesser of $50,000 or 10% of
reported salary and bonus. The Company maintains a 401(k) plan. For
fiscal years 1995, 1996 and 1997, the All Other Compensation column
includes amounts paid by the Company pursuant to the Company's 401(k)
plan. Each participant is able to direct the Company to contribute to
the plan a minimum of 2% and a maximum of 12% of the participant's
eligible earnings, subject to certain limitations set forth in the
plan and the Internal Revenue Code of 1986, as amended. Subject to
certain restrictions, the Company is required to make mandatory
contributions and also is permitted to make discretionary
contributions to the plan, at rates determined by the Compensation
Committee, which are allocated to each participant based on the
participant's contributions to the plan. Additionally, the Company
purchases term life insurance policies for its Named Executive
Officers.
(3) Mr Rush received certain other compensation of $37,386 as described in
the Compensation Committee Report.
(4) Ms. Born joined the Company in January, 1996. Therefore, Ms. Born's
compensation for fiscal 1996 reflects only the partial period that Ms.
Born had been employed by the Company during such year In 1996, Ms.
Born received a one-time non-recurring payment of $50,000, plus
reimbursement of $1,876 for certain payroll taxes, when she joined the
Company.
(5) Mr. Harris received certain other compensation of $32,045 as described
in the Compensation Committee Report .
(6) Mr. Swallow joined the Company in February, 1995 and left the Company
in April, 1997. Therefore, Mr. Swallow's compensation for fiscal
years 1995 and 1997 reflect only the partial periods that he had been
employed by the Company during such years. The amounts set forth
under "All Other Compensation" include post-employment payments made
to Mr. Swallow of $37,189.
11
<PAGE> 15
The Company has agreed to make payments to Mr. Swallow until March 31, 1998
equal to his base salary when he was employed by the Company, plus benefits and
reimbursement for certain incidental expenses. Additionally, until March 31,
1998, Mr. Swallow has the right to contribute to the Company's 401(k) Plan and
receive matching contributions from the Company. See the "Summary Compensation
Table" above.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal
1997 to the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ------- ------------ ------------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Carl V Rush, Jr ................... 16,000(1) 11.9% 5.75 02/05/07 57,858 146,624
Dawn S. Born ...................... 25,000(2) 18.7% 5.75 02/05/07 90,404 229,100
Richard M. Cochrane ............... 50,000(1) 37.3% 5.75 02/05/07 180,807 458,201
Titus H. Harris, III .............. 8,000(1) 6.0% 5.75 02/05/07 28,929 73,312
Donna L. Ratliff .................. -0- 0% N/A N/A N/A N/A
David A. Swallow .................. -0- 0% N/A N/A N/A N/A
</TABLE>
- ----------------
(1) Stock options granted on February 5, 1997 under the Company's 1995
Plan. Of Mr. Rush's option grants, all 16,000 options will be fully
exercisable on February 5, 1999. Of Mr. Cochrane's option grants,
16,666 options will be fully exercisable on February 5, 1998, 16,666
options will be fully exercisable on February 5, 1999, and 16,667
options will be fully exercisable on February 5, 2000. Of Mr.
Harris's option grants, all 8,000 options will be fully exercisable on
February 5, 1999. See also footnote 1 to the "Summary Compensation
Table" above.
(2) Stock options granted on February 5, 1997 under the Company's 1991
Plan. Of Ms. Born's option grants, 8,333 options will be fully
exercisable on February 5, 1998, 8,333 options will be fully
exercisable on February 5, 1999, and 8,334 options will be fully
exercisable on February 5, 2000. See also footnote No. 1 to the
"Summary Compensation Table" above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal
1997 by the Named Executive Officers and the value of such officers'
unexercised options at June 30, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
SHARES VALUE OPTIONS AT FISCAL YEAR-END(#) FISCAL YEAR-END($)
ACQUIRED ON REALIZED ---------------------------- -----------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl V Rush, Jr ............ -0- -0- 240,000 33,000 447,500 25,125
Dawn S. Born ............... -0- -0- 16,666 58,334 1,042 11,458
Richard M. Cochrane ........ 3,500 7,875 22,200 50,000 43,776 18,750
Titus H. Harris, III ....... -0- -0- 142,500 16,500 252,813 12,563
Donna L. Ratliff ........... -0- -0- 25,000 -0- 53,125 -0-
David A. Swallow ........... 42,000 16,000 16,333 41,667 4,000 12,500
</TABLE>
12
<PAGE> 16
COMPARATIVE STOCK PERFORMANCE
The performance graph shown below was prepared by Research Data Group,
for use in this proxy statement. As required by applicable rules of the SEC,
the graph was prepared based upon the following two assumptions: (i) $100 was
invested in the Company's Common Stock, the S&P 500 and the Dow Jones
Industrial & Commercial Services - Pollution Control & Waste Management Index
("Industry Index") on July 1, 1992, the first day of the Company's fiscal year
ended June 30, 1993; and (ii) the Industry Index assumes dividend reinvestment.
<TABLE>
<CAPTION>
6/92 6/93 6/94 6/95 6/96 6/97
<S> <C> <C> <C> <C> <C> <C>
GNI GROUP, INC. ............. 100 138 51 128 89 102
S & P 500 ................... 100 114 115 145 183 247
DOW JONES POLLUTION CONTROL/
WASTE MANAGEMENT........... 100 103 92 105 108 118
</TABLE>
13
<PAGE> 17
PROPOSAL 2 - SELECTION OF AUDITOR
The second proposal for consideration and action by the stockholders
at the Annual Meeting is the ratification of the appointment of KPMG Peat
Marwick, LLP as the independent auditor of the Company for the fiscal year
ended June 30, 1998. KPMG Peat Marwick, LLP served the Company as independent
auditor for the fiscal year ended June 30, 1997. Although the Company is not
required to solicit the consent of the stockholders to the ratification of the
appointment of the independent auditor of the Company for fiscal year ended
June 30, 1998, the Company elects to do so. Representatives of KPMG Peat
Marwick, LLP have been invited to the Annual Meeting and the Company expects
them to be present. They will have the opportunity to make a statement, if
they desire to do so, and to respond to appropriate questions. The
ratification of the appointment of KPMG Peat Marwick, LLP requires the
affirmative vote of the holders of a majority of the shares of Common Stock
outstanding on the Record Date which are present in person or represented by
proxy and entitled to vote at the Annual Meeting. In the event that the
stockholders do not ratify the appointment of KPMG Peat Marwick, LLP as the
independent auditor of the Company, the Board of Directors will consider
retaining other independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK, LLP AS THE INDEPENDENT AUDITOR OF THE COMPANY
FOR THE FISCAL YEAR ENDING JUNE 30, 1998, AND, UNLESS MARKED TO THE CONTRARY,
DULY EXECUTED PROXIES RECEIVED FROM STOCKHOLDERS WILL BE VOTED FOR THE
RATIFICATION OF SUCH APPOINTMENT.
STOCKHOLDERS' PROPOSALS FOR THE 1998 ANNUAL MEETING
Proposals of stockholders to be considered by the Company for
inclusion in the proxy material for the 1998 Annual Meeting of Stockholders
must be received by the Secretary of the Company no later than May 27, 1998.
Such proposals must be in conformity with all applicable legal provisions,
including Rule 14a-8 of the General Rules and Regulations under the Securities
Exchange Act of 1934.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before
the Annual Meeting. However, if other matters should properly come before the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote such proxy in accordance with their judgment on such matters.
FORM 10-K
A copy of the 1997 Annual Report on Form 10-K filed with the SEC may
be obtained, without charge, by writing the Secretary, The GNI Group, Inc.,
2525 Battleground Road, P.O. Box 220, Deer Park, Texas 77536-0220.
By order of the Board of Directors
Titus H. Harris, III
Secretary
14
<PAGE> 18
- --------------------------------------------------------------------------------
PROXY THE GNI GROUP, INC. PROXY
2525 BATTLEGROUND ROAD, DEER PARK, TX 77536-0220
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Titus H. Harris, Jr. and John W.
Lyons, Jr. as Proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated
below, all of the shares of Common Stock of The GNI Group, Inc. held
of record by the undersigned on September 10, 1997 at the 1997 Annual
Meeting of Stockholders to be held on Tuesday, October 28, 1997 at
8:00 a.m., Houston time, at the Four Seasons Hotel, 1300 Lamar Street,
Houston, Texas, 77010 or any adjournment thereof.
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR all Nominees listed Below [ ] WITHHOLD AUTHORITY
(except as to the contrary below) to vote for all nominees listed below
</TABLE>
N. E. Dudney, M.D., T. H. Harris, Jr., J. W. Lyons, Jr., C. V
Rush, Jr., and G. Stacy Smith
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE
PROVIDED BELOW.)
--------------------------------------------------------------
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP as
the Company's independent auditor for the fiscal year ending
June 30, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(To be signed on reverse side)
- --------------------------------------------------------------------------------
<PAGE> 19
- --------------------------------------------------------------------------------
3. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting and any
adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
[ ] I plan to attend the Annual Meeting. PLEASE SIGN EXACTLY AS NAME
APPEARS BELOW. WHEN SHARES
ARE HELD BY JOINT TENANTS,
BOTH SHOULD SIGN. WHEN
SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN
FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP
NAME BY AUTHORIZED PERSON.
DATED: , 1997
-----------------
-----------------------------
(STOCKHOLDER'S SIGNATURE)
-----------------------------
(STOCKHOLDER'S SIGNATURE)
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
