Confronted with heavy opposition from shareholders, the directors of General Kinetics Inc. decided yesterday to reexamine their plan to block hostile takeovers.
Board Chairman Thomas L. Herb, presiding over a small but angry annual meeting, said the directors had decided to adjourn until Jan. 15 to reconsider its anti-takeover plan. He said the board would send shareholders a revised plan to be voted on at the January session.
In asking for the adjournment, Herb said the company had been "trying to do things to protect itself" but had encountered "serious concerns" from major shareholders and thus was "going back to the drawing board."
General Kinetics, formed in 1954, is a Rockville metal cabinet manufacturing company that found new profits in its Cryptek division, which makes fax machines that are secure from electronic eavesdropping. Cryptek machines are used in the White House and by federal defense agencies.
During its 1990 fiscal year, General Kinetics earned $898,000 ($1.03 a share) on sales of $18.4 million.
The board proposal that raised the hackles of major shareholders would have permitted the directors at any time to create and sell 500,000 shares of a new preferred stock, worth 10 votes each, or a total of 5 million votes. The buyers of the new preferred issue thus would be able to outvote the holders of the 963,000 shares of common stock, worth only one vote per share.
Opponents of the preferred stock plan complained that it would give directors the power to sell the company to themselves or to company executives without shareholder approval. Shareholder Steve Newby of Newby & Co. in Rockville, who noted that insiders already own 41 percent of the stock, told the directors, "You have paranoid delusions that someone is out to steal your company."
Shareholder Calvin S. Koonce of Koonce Securities of Rockville said the directors were acting at the expense of shareholders in proposing the preferred stock plan.
Company officials, claiming their purpose was misunderstood, said that the preferred stock plan was intended purely to protect the company from hostile takeovers.
It appears the preferred stock plan would have been defeated if the meeting had not been adjourned. A two-thirds vote of all 963,000 shares outstanding was required for its approval. But it appeared that only about 59 percent of shareholders responded to other issues on a ballot mailed to shareholders before the annual meeting.
The stock plan was recommended to the company by Richard F. Waid, former head of investment banking at Johnston, Lemon & Co. of Washington, and by Peter L. Bower, who now holds that job, according to Bower.