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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
GENERAL KINETICS INCORPORATED
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-(6)(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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PRELIMINARY PROXY
GENERAL KINETICS INCORPORATED
14130-C SULLYFIELD CIRCLE
CHANTILLY, VIRGINIA 22021
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 14, 1995 AT 9:00 A.M., LOCAL TIME
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Notice is hereby given that the 1995 Annual Meeting of Shareholders
of General Kinetics Incorporated (the "Company") will be held at Marriott
Suites, Washington Dulles, 13101 Worldgate Drive, Herndon, Virginia 22070,
on Friday, November 14, 1995 at 9:00 a.m., local time, for the following
purposes:
1. To elect one director, in Class I, for a term expiring in 1998.
2. To approve an amendment to the Company's Restated Articles of
Incorporation and authorize management to implement a
one-for-three reverse stock split of the Company's common stock.
3. To consider and take action upon a proposal to ratify the
selection of BDO Seidman, independent certified public
accountants, as auditors for the Company for the fiscal year
1995.
4. To transact such other business as may properly come before the
meeting, or any adjournment or adjournments thereof.
Holders of common stock of the Company are entitled to vote on each
of the matters set forth above.
The stock transfer books of the Company will not be closed. The
Board of Directors has fixed the close of business on October 6, 1995 as
the record date for the determination of shareholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournments thereof.
You are cordially invited to be present. Shareholders who do not
expect to attend in person are requested to sign and return the enclosed
form of Proxy in the envelope provided. At any time prior to their being
voted, proxies are revocable by written notice to the Secretary of the
Company or by voting at the meeting in person.
By Order of the Board of Directors
Sandy B. Sewitch, Secretary
October 11, 1995
GENERAL KINETICS INCORPORATED
14130-C SULLYFIELD CIRCLE
CHANTILLY, VIRGINIA 22021
PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 11, 1995
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This statement is furnished in connection with the solicitation of
proxies by the Board of Directors of General Kinetics Incorporated (the
"Company") from holders of the Company's outstanding shares of common
stock ("Common Stock") entitled to vote at the 1995 Annual Meeting of
Shareholders of the Company (and at any and all adjournments thereof) for
the purposes referred to below and set forth in the accompanying Notice of
Annual Meeting of Shareholders.
A proxy card ("Proxy") for use at the Meeting is enclosed. Any
shareholder who executes and delivers a Proxy retains the right to revoke
it at any time prior to the voting thereof by giving notice to the
Secretary of the Company in writing or by duly executing a Proxy bearing a
later date. A Proxy may also be revoked by attendance at the Meeting and
election to vote thereat. Unless so revoked, the shares represented by
such Proxy will be voted, in the manner specified therein, at the Meeting
and any adjournment thereof.
The record date for shareholders entitled to notice of and to vote at
the Meeting was the close of business on October 6, 1995. As of the
record date, the Company had 6,508,925 shares of Common Stock, $.25 par
value per share, outstanding (except as otherwise indicated, all share
amounts set forth in this proxy statement shall be calculated before
giving effect to the one-for-three reverse stock split proposed herein).
Each holder of Common Stock will be entitled to one vote, in person or by
Proxy, for each share of Common Stock of the Company standing in such
holder's name on the books of the Company as of the record date for the
Meeting on any matter submitted to the vote of the shareholders.
This Proxy Statement and Proxy are being furnished to shareholders of
the Company on or before October 11, 1995. This solicitation is made by
the Board of Directors, and the Company will bear the costs of
solicitation. It is contemplated that the proxies will be solicited
through the mail, but directors, officers and regular employees of the
Company may solicit proxies personally or by telephone. Although there is
no formal agreement to do so, the Company may reimburse banks, brokerage
houses, and other custodians, nominees, and fiduciaries for their
reasonable expenses in forwarding these proxy materials to their
principals. In addition, although it has no current plans to do so, the
Company may pay for and utilize the services of individuals or companies
not regularly employed by the Company in connection with the solicitation
of Proxies if the Board of Directors considers that this is advisable.
PROPOSAL 1.
ELECTION OF DIRECTOR
Pursuant to the Company's Certificate of Incorporation, the Board of
Directors is divided into three separate classes of directors, Class I,
Class II and Class III, which are required, in all respects, to be as
nearly equal as practicable. At each annual meeting of shareholders, one
class of directors is elected to a term of three years. This year
represents the beginning of a new three-year term for Class I directors;
however, in May of 1995 Carl R. Sax, who had previously served as the sole
Class I director, resigned as a director and officer of the Company
leaving a vacancy in Class I of the directors. In order to accommodate
this change and in an effort to best afford the shareholders an
opportunity to have an impact on the management of the Company, the Board
has elected to restructure the current Board by nominating Mr.
Heimendinger to serve as a Class I director so as to have Board
representation within each Class, including Class I.
Larry M. Heimendinger and Robert K. Gardner presently serve as Class
III directors for the Company and Mr. Gardner's term will continue until
the 1997 Annual Meeting of Shareholders. Effective upon the shareholder
vote with respect to his election as a Class I director, Mr. Heimendinger
intends to resign as a Class III director. Marc E. Cotnoir and Richard J.
McConnell presently serve as Class II directors which term will continue
until the 1996 Annual Meeting of Shareholders. Each of Messrs.
Heimendinger, Gardner, McConnell and Cotnoir were elected to the Board of
Directors by Board action in March of 1994 and their election was ratified
at the 1994 annual meeting of shareholders.
At the Meeting, holders of Common Stock shall be entitled to elect
one (1) director. Unless otherwise directed, Proxies received will be
voted in favor of the election of Larry Heimendinger to serve as director
as provided in the Amended and Restated Bylaws of the Company (the
"Bylaws"). If elected, he shall serve in Class I and for a term of three
years or until his successor shall be elected and qualified.
The Bylaws currently provide that the number of directors of the
Company shall be not fewer than three nor more than eleven and that the
Board of Directors may determine the size of the Board from time to time
within these limits. The Bylaws further provide that the Board of
Directors may, by majority vote, increase the size of the Board within
this range by up to two directors between annual meetings of shareholders,
and may fill the vacancies thus created; however, under the Virginia Stock
Corporation Act, the Board is further limited to only increase or decrease
by 30% or less the number of directors last elected by the shareholders.
The size of the Board of Directors is currently fixed at five members and
the Board presently expects to maintain it at that size pending the
ultimate resolution of whether, and the extent to which, new directors may
be appointed to fill the current vacancy or any potential newly created
director position.
Proxies in the enclosed form received from holders of Common Stock
will be voted for the election of Mr. Heimendinger as the Class I nominee
as a director of the Company unless shareholders indicate otherwise. If
the nominee is unable to serve for any reason (which event is not
anticipated), the shares represented by the enclosed Proxy may be voted
for such other person or persons as may be determined by the holders of
such Proxy unless shareholders indicate otherwise.
The Board of Directors recommends a vote FOR the election of Mr.
Heimendinger. Proxies solicited by the Board of Directors will be so
voted unless shareholders specify a contrary vote. This resolution may be
adopted by a plurality of the votes entitled to be cast with respect
thereto. The following information includes the name of the nominee of
the Board of Directors for the office of Class I director, and other
individuals who will continue service as Class II and Class III directors,
together with certain additional information concerning each individual.
If the nominee should be unable or unwilling to serve (which event is not
anticipated), the persons authorized by the Proxy to vote shall, pursuant
to the authority granted to them by the Board of Directors, have the
discretion to select and vote for a substituted nominee (unless
shareholders indicate otherwise, as noted above). The Board of Directors
has no reason to believe that the nominee will be unable or unwilling to
serve.
DIRECTORS (AND NOMINEE)
Name and Positions Business Experience Director
with the Company Age During the Last Five Years Since
------------------ --- -------------------------- --------
Robert K. Gardner 47 Mr. Gardner has been the principal of Robert March, 1994
Vice Chairman of the Board K. Gardner & Associates for sixteen years.
Robert K. Gardner & Associates is a
consulting business that provides planning
and marketing services for development stage
technology companies serving industrial and
government markets. Mr. Gardner also served
as Vice President and General Manager of the
Secure Communications Division of the
Company through May 1995. Mr. Gardner is a
member of Class III of the Board of
Directors.
Larry M. Heimendinger 49 Mr. Heimendinger has acted as the Chairman March, 1994
Chairman of the Board of the Board of Directors of the Company
(Nominee for Class I) since he was elected to that position in
March of 1994. In accordance with the
Amended and Restated Bylaws of the Company,
Mr. Heimendinger has been performing the
duties of the President and chief executive
officer through his position as Chairman of
the Board and will continue to do so until
such time as a replacement for President and
chief executive officer is elected and
qualified. From 1989 through 1992, Mr.
Heimendinger was President and chief
operating officer of Nantucket Corp., a
privately held software company which was
purchased in 1992 by Computer Associates
International, a company also involved in
software development. After that
acquisition and until sustaining a serious
accident in September, 1992, Mr.
Heimendinger was associated with Computer
Associates International, most recently as
its Director of Product Strategy. For
several years through 1988, Mr. Heimendinger
was the President and CEO of Origin, Inc., a
company that produced and marketed personal
computer software for the banking industry.
Mr. Heimendinger is the author of dBase IV
and Clipper, books published by Brady Books,
and is a computer industry conference and
seminar speaker worldwide. Mr. Heimendinger
is currently a member of Class III of the
Board of Directors, and has been nominated
for election as a Class I director. He
intends to resign his position as a Class III
director effective upon the Shareholder vote
at the annual meeting
Marc E. Cotnoir 46 Mr. Cotnoir has been an independent March, 1994
consultant, providing business and strategic
planning support and systems engineering
consulting, for a wide range of clients
since 1988. Prior to 1988, Mr. Cotnoir had
extensive experience, both within private
industry and in the U.S. Air Force, with
computer and communications technology. Mr.
Cotnoir is a member of Class II of the Board
of Directors.
Richard J. McConnell 31 Mr. McConnell has been the President of March, 1994
Present Square Systems, Inc., a research and
development firm specializing in advanced
software systems, since 1986. Mr. McConnell
has been involved in research and
development in the computer software
industry since 1981. Mr. McConnell is a
member of Class II of the Board of
Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE ELECTION OF THE CLASS I NOMINEE.
Six meetings of the Board of Directors were held during the year ended
May 31, 1995 ("fiscal year 1995"). The Board of Directors has established
a standing Audit and Compensation Committee, as well as a Strategic
Planning and a Financial Operations Committee. The Audit Committee, which
met twice in fiscal year 1995, consisted of Messrs. Larry Heimendinger,
Marc Cotnoir and Richard McConnell. The Audit Committee reviews all
financial matters related to the Company's operations, recommends to the
Board of Directors independent auditors for selection by the Company,
discusses with the Company's independent auditors the scope and results of
audits and approves and reviews any non-audit services performed by such
independent auditors.
The Compensation Committee, which met three times in fiscal year 1995,
consisted of Messrs. Larry Heimendinger and Marc Cotnoir. The Compensation
Committee reviews and establishes compensation for the officers of the
Company and administers the compensation and benefits plans of the Company
for officers of the Company.
The Board had also had a Strategic Planning Committee consisting of
Messrs. Robert Gardner, Larry Heimendinger and Richard McConnell and a
Financial Operations Committee consisting of Messrs. Larry Heimendinger and
Robert Gardner. Neither the Strategic Planning nor the Financial
Operations committee had formal meetings during the last fiscal year, and
their functions have been undertaken by the full Board at present.
All present directors attended at least 75 percent of the meetings of
the Board of Directors and Committees on which they served during fiscal
year 1995.
The following table sets forth the beneficial ownership of Common
Stock as of October 11, 1995 of each of the current directors and other
directors who served during the past fiscal year and each of the executive
officers named in the Summary Compensation Table below.
Shares of Percentage of
Common Stock Outstanding
Name Beneficially Owned(1)(2) Common Stock
---- ------------------------ -------------
Mark E. Cotnoir 37,500 *
Robert K. Gardner 32,500 *
Larry H. Heimendinger 46,875 *
Richard J. McConnell 37,500 *
Carl R. Sax 10,110 *
All Directors and named
Executive Officers as a
group (eight persons) 215,933 3.2%
(1) Beneficial ownership also includes shares of Common Stock which may be
acquired within 60 days of October 11, 1995, through the exercise of
warrants, options, or otherwise, as follows: Mr. Cotnoir, 37,500
shares; Mr. Gardner, 32,500 shares; Mr. Heimendinger, 46,875 shares;
Mr. McConnell, 37,500 shares; and all Directors and Officers as a
group, 202,797 shares. Does not include currently unallocated shares
held by the ESOP of which Mr. Heimendinger is a trustee.
Additionally, each of Messrs. Cotnoir and McConnell were granted
options to purchase 100,000 shares, Mr. Heimendinger was granted an
option to purchase 125,000 shares and Mr. Gardner was granted an
option to purchase 33,333 shares, each of which options will only vest
if the stock price reaches certain stipulated multiples of base price
of $1.0026 (for ten consecutive trading days).
(2) Includes shares of common stock beneficially owned by Carl R. Sax who
resigned as a director and officer of the Company effective May 1,
1995.
* Indicates less than 1 percent.
COMPENSATION OF DIRECTORS
Each nonemployee Director has received a monthly retainer of $1,500
since November 1994. Mr. Gardner received a monthly retainer of $500 while
he was an officer of the Company through May 1995.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
During the course of the last fiscal year, Present Square Systems,
Inc., provided consulting services to the Company with respect to the
Company's software systems and received an aggregate of $20,000 in fees for
such services. Richard J. McConnell, a director of the Company, is
President of Present Square Systems, Inc.
EXECUTIVE OFFICERS AND CERTAIN
SIGNIFICANT EMPLOYEES OF THE COMPANY
The names, ages, and positions of the executive officers of the
Company are listed below.
Name Age Position
---- --- --------
Larry M. Heimendinger 49 Chairman of the Board (performing
duties of President)
Robert Gardner 47 Vice Chairman of the Board
Shirl Lakeway, Jr. 38 Vice President and General Manager of
Food Technology Corporation, a
subsidiary of the Company
Richard E. Munczenski 53 Vice President and General Manager
Sandy B. Sewitch 38 Chief Financial Officer
Larry M. Heimendinger has acted as the Chairman of the Board of
Directors since March of 1994 and, in accordance with the Amended and
Restated Bylaws of the Company, he has been performing the duties of the
President and chief executive officer through his position as Chairman of
the Board and will continue to do so until a replacement for President and
chief executive officer is elected and qualified.
Robert Gardner joined the Company in May of 1994. He was Vice
President and General Manager of the Secure Communications Division of the
Company through May 1995, and currently is a consultant to the Company for
VSLAN technology sales activities and government customer relations
activities.
Shirl Lakeway, Jr., Vice President and General Manager of Food
Technology Corporation, a wholly owned subsidiary of the Company, joined
the Company in 1986.
Richard E. Munczenski, Vice President and General Manager, joined the
Company in August of 1969.
Sandy B. Sewitch, Chief Financial Officer, joined the Company in April
1993.
The officers of the Company hold office at the discretion of the Board
of Directors of the Company.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers, and persons who beneficially
own more than 10% of its Common Stock, to file with the Securities and
Exchange Commission and the American Stock Exchange reports of ownership
and changes in ownership of the Company's equity securities. Officers,
directors and greater than 10% shareholders are also required to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of such reports
furnished to the Company, during the fiscal year ended May 31, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% shareholders were complied with, except as set forth
below:
Messrs. Shirl Lakeway and Richard Munczenski did not timely make
reports on Form 3 with respect to their ascension to reporting officer
status. Under Rule 16a-3(f) every person who at any time during the fiscal
year was subject to Section 16 is required to file a Form 5 within 45 days
after fiscal year end, unless all transactions otherwise required to be
reported on Form 5 have been reported before the due date of such form.
Messrs. Lakeway, Munczenski and Sewitch did not timely make reports with
respect to stock options which were granted to them during the last fiscal
year under the Company's 1994 Stock Option Plan. Mr. Gardner did not
timely make reports with respect to certain stock options which were
granted to him in respect of his services as a director and general manager
of the Company under the Company's 1994 Stock Option Plan and 1994 Non-
employee and Directors Stock Option Plan. During fiscal year 1995, Messrs.
Heimendinger, Cotnoir, McConnell and Sax did not timely report the
respective stock options granted to them under the Company's 1994
Nonemployee and Directors Stock Option Plan in the last fiscal year. As of
the date of this Proxy Statement, these Section 16(a) reporting
delinquencies have now been corrected and the Company is currently
undertaking steps to assist its directors and officers in meeting their
Section 16(a) reporting responsibilities.
EXECUTIVE COMPENSATION
The information under this heading relates to the chief executive
officer. The information is presented in compliance with the rules and
regulations of the Securities and Exchange Commission applicable to those
companies, such as General Kinetics Incorporated, that meet the definition
of a "small business issuer".
Executive officers are appointed each year by the Board of Directors
at its annual meeting following the annual meeting of shareholders and
serve for one year or until their successors are chosen and qualify in
their stead. There are no family relationships among the executive
officers, or any arrangement or understanding between any officer and any
person pursuant to which the officer was elected.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
---------------------------- -----------------------
Name and Principal Other Annual Number of All Other
Position(1) Year Salary Bonus Compensation Options Compensation
------------------ ---- ------ ----- ------------ --------- ------------
Larry H. Heimendinger(2) 1995 $ 0 $ 0 $ 0 187,500 $ 0
Chairman of the Board 1994 0 0 0 0 0
1993 -- -- -- -- --
Robert T. Gardner(3) 1995 120,000 0 3,500 71,666 0
Vice Chairman of the 1994 29,000 0 62,500 0 0
Board 1993 -- -- -- -- --
(1) No executive officer of the Company, other than Mr. Gardner, serving
at the end of fiscal year 1995 received compensation in excess of
$100,000 in value for fiscal year 1995.
(2) Larry Heimendinger serves as the Company's Chairman of the Board, for
which he has received no salary compensation since being elected to
that position in March 1994. Since the resignation of the Company's
former President, in March, 1994, the Company has no current
President. In accordance with the Company's Bylaws, until a new
President is elected and qualified, the Company's Chairman performs
the duties of that office.
(3) Mr. Gardner serves as the Company's Vice Chairman of the board for
which he received a monthly retainer of $500 during fiscal 1995. He
was Vice President and General Manager of the Secure Communications of
the Company through May 1995 for which he received $120,000 in salary,
and currently is a consultant to the Company for VSLAN Technology
sales activities and Government customer relations activities. During
fiscal 1994 he received an aggregate of $62,500 in consulting fees
prior to becoming a director in March, and $29,000 subsequent to that
date.
INDIVIDUAL OPTION GRANTS TO EXECUTIVE OFFICERS
DURING FISCAL YEAR 1995
Potential of Realizable
Percent Value at assumed annual
of Total rates of stock price
Options appreciation for
Number of Granted to options term
Options Employees Exercise Expiration -----------------------
Name of Executive Officer Granted in FY 1995 Price Date 5% 10%
------------------------- --------- ---------- -------- ---------- ---------- -----------
Larry H. Heimendinger 62,500 (1) 21.6% (3) .6875 8/28/04 27,023 68,481
125,000 (2) 43.2% (3) .6875 8/28/04 -0- -0-
Robert Gardner 8,333 (1) 8.2% .6875 8/28/04 12,992 32,924
15,000 (1) 14.8% .375 8/28/04 3,538 8,965
33,333 (2) 32.8% .6875 8/28/04 -0- -0-
15,000 14.8% .375 8/28/04 3,538 8,965
(1) 50% of such options have vested and are currently exercisable. An
additional 25% will vest on November 30, 1995 and the remaining 25% on
May 31, 1996.
(2) Incentive stock options which only vest if stock prices reach
stipulated multiples of base price of $1.0026 (for ten consecutive
trading days) as follows: upon 300% increase in price, 25% vest; upon
400% increase in price, 50% vest; upon 500% increase in price, 75%
vest; upon 600% increase in price, 100% vest.
(3) Larry Heimendinger is not an employee of the Company. For purposes of
the calculation of Mr. Heimendinger's percentages only, his options
have been included in the aggregate total employee options granted.
FY-1995 OPTIONS EXERCISE AND FY-1995 YEAR-END VALUE TABLE
Value of Unexercised
Number of Number of Options In-The-Money Options
Shares At End-FY 1995 At End-FY 1995
----------------------- -----------------------
Acquired Unexercis- Unexercis-
Name of Executive Officer On Exercise Exercisable able Exercisable able
------------------------- ----------- ----------- ---------- ----------- ----------
Larry H. Heimendinger 0 31,250 94,250 -- --
Robert Gardner 0 15,767 55,899 -- --
PRINCIPAL SHAREHOLDERS
As of October 10, 1995, approximately 52.5% percent of the Company's
outstanding Common Stock was believed to be beneficially owned by
Gutzwiller & Partners, A.G. ("Gutzwiller"). The following table sets forth
the beneficial ownership of Common Stock as of October 10, 1995 of
Gutzwiller, the only person or entity believed by the Company to be the
beneficial owners of more than 5 percent of such class of securities.
Percent of
Name and Address of Shares of Common Stock Outstanding
Beneficial Owner Beneficially Owned* Common Stock
------------------- ---------------------- ------------
Gutzwiller & Partner AG 3,418,100 52.5%
Schindlerstrasse 26
CH-8035 Zurich/Switzerland
-------------
* Based on information provided by Gutzwiller, a Swiss investment
advisory firm. As of September 20, 1995, Gutzwiller has reported that
it has the power to vote, and discretionary power to dispose of,
3,418,100 shares of Common Stock issued and outstanding as of the
record date. It is the Company's understanding that Gutzwiller has
discretionary authority to dispose of or convert Convertible
Debentures of the Company which are convertible into 18,370,000 shares
of Common Stock, and would have the power to vote or dispose of the
18,370,000 shares of Common Stock issuable upon conversion thereof.
After such a conversion, Gutzwiller would hold 21,788,100 shares which
would represent 73.8% of the then outstanding Common Stock. This
calculation does not include 100,000 shares held of record by BAB
General Consultants for the benefit of Dr. August Schubiger, a
director of and attorney for Gutzwiller, or 100,000 shares held of
record by Gutzwiller for the benefit of an unaffiliated third party.
PROPOSAL NO. 2
AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
GENERAL
On September , 1995, the Board of Directors of the Company approved,
--
subject to the shareholder approval solicited hereby, a single proposal
("Reverse Stock Split Proposal") to amend the Company's Amended and
Restated Articles of Incorporation (the "Certificate") to effect a one-for-
three reverse Common Stock split ("Reverse Stock Split"). A reverse stock
split is effected under Virginia law by amending the Articles of
Incorporation, which requires the approval of the Company's shareholders.
If the amendment of the Company's Articles of Incorporation (the
"Amendment") is approved by the requisite vote of the Company's
shareholders, the Reverse Stock Split will be effective upon filing of the
Amendment with the Virginia State Corporation Commission (the "Effective
Time" and the date of the Effective Time, the "Effective Date"). Each
stock certificate representing a number of shares of Common Stock
outstanding immediately prior to the Effective Time will be deemed
automatically, without any action on the part of the shareholders, to
represent one-third that number of shares after the Effective Time. A form
of the amended text to the Articles of Incorporation is attached hereto as
Appendix A.
Although the Company's Board of Directors believes as of the date of
this Proxy Statement that a one-for-three Reverse Stock Split is advisable,
the Reverse Stock Split Proposal may be abandoned by the Board of Directors
at any time before, during or after the Annual Meeting and prior to filing
the amendment to the Articles of Incorporation with the State Corporation
Commission of the Commonwealth of Virginia.
PURPOSES OF REVERSE STOCK SPLIT
In light of the relatively low price per share at which the Common
Stock has traded in the recent past, the American Stock Exchange has
recommended that a combination or reverse split of the shares of Common
Stock be submitted to the Company's shareholders. The Board of Directors
also believes, among other things, that the per share price of the Common
Stock has affected the marketability of the existing shares, the amount and
percentage of transaction costs paid by individual shareholders and the
potential ability of the Company to raise capital by issuing additional
shares. The Board of Directors further believes that the decrease in the
number of shares of Common Stock outstanding as a consequence of the
proposed Reverse Stock Split may result in an increase in the quoted market
price of the Common Stock to a level which the Board believes is a more
readily accepted trading price in the capital markets. There can be no
assurance, however, that any such increase would be in proportion to the
one-for-three reverse stock split ratio, or that the per share price level
of the Common Stock immediately after the proposed Reverse Stock Split will
be maintained for any period of time.
In particular, the Board of Directors of the Company believes that a
relatively low per share market price for stock may impair the interest in
that stock on the part of certain members of the investing public. Certain
investors may view low-priced stock as less attractive or, as a matter of
policy, may not extend margin credit on stock trading at low prices,
although certain other investors may be attracted to low-priced stock
because of the greater trading volatility sometimes associated with such
securities. Some brokerage houses may be less inclined to recommend lower-
priced stock to their clients or to hold it in their own portfolios.
Further, a variety of brokerage house policies and practices may discourage
individual brokers within those firms from dealing in low-priced stock
because of the time-consuming procedures that make the handling of low-
priced stock less attractive to brokerage houses from an economic
standpoint.
In addition, since the broker's commissions on low-priced stock
generally represent a higher percentage of the stock price than commissions
on higher priced stock, a lower share price can result in individual
shareholders paying transaction costs (commissions, markups or markdowns)
which are a higher percentage of their total share value than would be the
case if the share price were substantially higher. However, if approved,
the Reverse Stock Split may result in some shareholders owning 'odd-lots'
of less than 100 shares of Common Stock. Brokerage commissions and other
costs of transactions in odd-lots may be higher, particularly on a per-
share basis, than the cost of transactions in even multiples of 100 shares.
EFFECTS OF REVERSE STOCK SPLIT
The Reverse Stock Split alone will not affect any shareholder's
proportionate equity interest in the Company, except for minor differences
resulting from the rounding of fractional shares, nor will it affect the
rights, preferences, privileges or priorities of the Common Stock. In
addition, the Reverse Stock Split will not affect the shareholders' equity
of the Company as reflected in the financial statements of the Company
except to change the number of the issued and outstanding shares of Common
Stock. After giving effect to the Reverse Stock Split, each shareholder
will own one share of new Common Stock for each three shares of Common
Stock held at the time of the Reverse Stock Split, and one additional share
in lieu of the issuance of fractional shares of new Common Stock. In
connection with the Reverse Stock Split, appropriate adjustments will be
made in the exercise or conversion price of, and number of shares issuable
under, the Company's outstanding stock options and outstanding warrants to
purchase Common Stock and convertible debentures.
If the Amendment is approved by the shareholders, the Company intends
to file the Certificate of Amendment shortly after the date of the Meeting.
If for any reason the Board of Directors deems it advisable to do so, the
Reverse Stock Split Proposal may be abandoned by the Board of Directors at
any time before, during or after the annual shareholders meeting and prior
to filing and effectiveness of the amendment to the Articles of
Incorporation, without further action by the shareholders of the Company.
The Reverse Stock Split will become effective on the Effective Time.
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Date, the Company will send
a letter of transmittal to each shareholder of record on the Effective Date
for use in transmitting certificates representing shares of Common Stock
("old certificates") to the Company's transfer agent, Chemical Bank, 450
West 33rd Street, 15th Floor, New York, New York 10001 (the "Exchange
Agent"). The letter of transmittal will contain instructions for the
surrender of old certificates to the Exchange Agent in exchange for
certificates representing the number of whole shares of new Common Stock.
No new certificates will be issued to a shareholder until such shareholder
has surrendered all old certificates together with a properly completed and
executed letter of transmittal to the Exchange Agent.
Upon proper completion and execution of the letter of transmittal and
return thereof to the Exchange Agent, together with all old certificates,
shareholders will receive a new certificate or certificates representing
the number of whole shares of new Common Stock into which their shares of
Common Stock represented by the old certificates have been converted as a
result of the Reverse Stock Split. Until surrendered, outstanding old
certificates held by shareholders will be deemed for all purposes to
represent the number of whole shares of Common Stock to which such
shareholders are entitled as a result of the Reverse Stock Split.
Shareholders should not send their old certificates to the Exchange Agent
until they have received the letter of transmittal. Old certificates not
presented for surrender as soon as is practicable after the letter of
transmittal is sent shall be exchanged for new certificates at the first
time they are otherwise presented for transfer.
No service charges will be payable by shareholders in connection with
the exchange of certificates, all expenses of which will be borne by the
Company.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated Federal income
tax consequences of the Reverse Stock Split to shareholders of the Company.
This summary is based on the Federal income tax laws now in effect and as
currently interpreted; it does not take into account possible changes in
such laws or interpretations, including amendments to applicable statutes,
regulations and proposed regulations or changes in judicial or
administrative rulings, some of which may have retroactive effect. This
summary is provided for general information only and does not purport to
address all aspects of the possible Federal income tax consequences of the
Reverse Stock Split and IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. In
particular, and without limiting the foregoing, this summary does not
consider the Federal income tax consequences to shareholders of the Company
in light of their individual investment circumstances or to holders subject
to special treatment under the Federal income tax laws (for example, life
insurance companies, regulated investment companies and foreign taxpayers).
The summary does not address any consequence of the Reverse Stock Split
under any state, local or foreign tax laws.
No ruling from the Internal Revenue Service ("Service") or opinion of
counsel will be obtained regarding the Federal income tax consequences to
the shareholders of the Company as a result of the Reverse Stock Split.
ACCORDINGLY, EACH SHAREHOLDER IS ENCOURAGED TO CONSULT HIS OR HER TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE PROPOSED TRANSACTION
TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL
AND FOREIGN INCOME AND OTHER TAX LAWS.
The Company believes that the Reverse Stock Split would be a tax-free
recapitalization to the Company and its shareholders. If the Reverse Stock
Split qualifies as a recapitalization under Section 368(a)(1)(E) of the
Internal Revenue Code of 1986, as amended, a stockholder of the Company who
exchanges his or her Common Stock solely for new Common Stock should
recognize no gain or loss for Federal income tax purposes. A stockholder's
aggregate tax basis in his or her shares of new Common Stock received from
the Company should be the same as his or her aggregate tax basis in the
Common Stock exchanged therefor. The holding period of the new Common
Stock received by such stockholder should include the period during which
the Common Stock surrendered in exchange therefor was held, provided all
such Common Stock was held as a capital asset on the date of the exchange.
VOTE REQUIRED
The affirmative vote of two-thirds of the Common Stock outstanding and
entitled to vote shall be required to approve the proposed amendment to the
Articles of Incorporation. The votes represented by the Proxies received
will be voted FOR approval of the adoption of the proposed amendment to the
Articles of Incorporation, unless a vote against such approval or to
abstain from voting is specifically indicated on the Proxy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE RESTATED ARTICLES OF
INCORPORATION
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected BDO Seidman, independent certified
public accountants, as independent auditors for the Company for fiscal year
1996. A resolution will be submitted to shareholders at the meeting for
ratification of such selection. Although ratification by shareholders is
not a prerequisite to the ability of the Board of Directors to select BDO
Seidman as the Company's independent auditors, the Company believes such
ratification to be desirable. If the shareholders do not ratify the
selection of BDO Seidman, the selection of independent auditors will be
reconsidered by the Board of Directors; however, the Board of Directors may
select BDO Seidman notwithstanding the absence of shareholder ratification
of its selection.
The Board of Directors recommends a vote FOR this resolution to
approve BDO Seidman as the independent auditors for the Company for fiscal
year 1996. Proxies solicited by the Board of Directors will be so voted
unless shareholders specify a contrary vote. The resolution may be adopted
by a majority of the votes cast with respect thereto.
It is expected that a representative of BDO Seidman will be present at
the meeting, will have an opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE RATIFICATION OF BDO SEIDMAN AS THE INDEPENDENT AUDITORS.
SHAREHOLDERS' PROPOSAL
Proposals of shareholders which are intended to be presented at the
1996 Annual Meeting must be received by the Company at its principal
executive offices no later than June 13, 1996 for inclusion in the
Company's proxy materials for that meeting.
OTHER MATTERS
The Proxy and Proxy Statement have been approved by the Board of
Directors and sent to shareholders by its authority. The matters referred
to in the Notice of Meeting and in the Proxy Statement are, to management's
knowledge, the only matters which will be presented for consideration at
the Meeting. If any other matters properly come before the Meeting, the
persons named in the enclosed Proxy intend to vote said Proxy on any such
matters in accordance with their best judgment.
This Proxy Statement incorporates certain Financial Statements and
other information from the Company's Annual Report delivered herewith which
contains the text of the Company's Annual Report on Form 10-K for the
fiscal year ending May 31, 1995.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ending May 31, 1995, as filed with the Securities and Exchange Commission,
will be furnished without charge upon the written request to the Company's
Secretary at the address shown on the first page.
SANDY B. SEWITCH
Secretary
APPENDIX A
PROPOSED AMENDMENT TO ARTICLE THIRD OF
THE COMPANY'S RESTATED ARTICLES OF INCORPORATION
THIRD: The maximum number of shares that the corporation has the
authority to issue is fifty million (50,000,000) shares of common stock
with a par value of twenty-five cents ($.25) each. Said shares may be
issued from time to time for such consideration as may be fixed from time
to time by the Board of Directors and as permitted by law. All issued
shares of common stock, including shares held in the treasury of the
corporation, shall be designated "Common Stock". Holders of the Common
Stock shall not be entitled to any preemptive rights to acquire unissued
shares of the corporation at such time as such shares may be issued. Each
three (3) shares of authorized Common Stock issued and outstanding or
standing in the name of the Corporation at the close of business on the
date of filing and recording (the "Effective Time") of this Certificate of
Amendment ("Amendment") in the Office of the State Corporation Commission
of the Commonwealth of Virginia, shall, upon the filing and recording of
this Amendment in the Office of the State Corporation Commission of the
Commonwealth of Virginia, thereupon automatically be reclassified and
changed into one (1) validly issued, fully paid and nonassessable share of
Common Stock. Each holder of record of shares of Common Stock to be so
reclassified and changed shall at the Effective Time become the record
owner of the number of shares of Common Stock as shall result from such
reclassification and change. Each such record holder shall be entitled to
receive, upon the surrender of the certificate or certificates representing
the shares of Common Stock to be so reclassified and changed at the office
of the transfer agent of the Corporation in such form and accompanied by
such documents, if any, as may be prescribed by the transfer agent of the
Corporation, a new certificate or certificates representing the number of
shares of Common Stock of which he or she is the record owner after giving
effect to the provisions of this Article Third. The Corporation shall not
issue fractional shares with respect to the reclassification and change,
and instead shall, in lieu of any fractional share of Common Stock which
would otherwise result, issue to the holder entitled thereto one (1) whole
share of Common Stock, which share shall be validly issued, fully paid and
nonassessable.
PRELIMINARY PROXY FORM (FRONT)
COMMON STOCK PROXY
GENERAL KINETICS INCORPORATED
14130-C Sullyfield Circle - Chantilly, VA 22021
REVOCABLE PROXY FOR ANNUAL MEETING ON NOVEMBER 14, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Larry Heimendinger and Sandy Sewitch,
and each of them jointly and severally, attorneys and proxies of the
undersigned, with full power of substitution, and hereby authorizes them to
represent and to vote, as designated below, all the shares of common stock
of General Kinetics Incorporated which the undersigned may be entitled to
vote at the Annual Meeting of Shareholders to be held at the Marriott
Suites Washington Dulles, 13101 Worldgate Drive, Herndon, Va. 22070, on
November 14, 1995, and at all adjournments thereof with all powers the
undersigned would possess if personally present and voting thereat.
The Board of Directors recommends a vote FOR:
1. The election of Larry Heimendinger as a Class I director
/ / FOR the above named / / WITHHOLD AUTHORITY to vote for
nominee the above named nominee
2. The proposal to approve the amendment to the Company's restated
Articles of Incorporation to effect a one-for-three reverse common
stock split.
/ / FOR / / AGAINST / / ABSTAIN
3. The proposal to ratify the appointment of BDO Seidman
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
Stockholders planning to attend the Annual Meeting are requested to
indicate the number of persons attending in the block. / /
Stockholders may attend the meeting whether or not the block is filled in.
IMPORTANT -- THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
PRELIMINARY PROXY FORM (BACK)
THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS IN THIS PROXY. IF INSTRUCTIONS ARE NOT INCLUDED HEREIN, THIS
PROXY WILL BE VOTED FOR ITEMS 1, 2, 3, and 4.
---
Date , 1995
--------------------
Number of Shares
---------------------------------------
(Signature)
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(Signature if held jointly)
(Please sign as name(s) appear(s) on
this proxy card. If joint account, each
joint owner should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporation name by
President or other authorized officer.
If a partnership, please sign in
partnership name by authorized person.)
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY IN THE ENVELOPE
ENCLOSED - NO POSTAGE IS REQUIRED