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GKI SIGNS $5 MILLION FUNDING AGREEMENT

 GKI SIGNS $5 MILLION FUNDING AGREEMENT
 HERNDON, Va., Oct. 9 /PRNewswire/ -- General Kinetics


Incorporated (GKI), a designer, producer and marketer of high-end, digital secure facsimile equipment, precision enclosures, plastic sorting and food testing equipment headquartered in Herndon, makes the following announcements:
 GKI has entered into a letter agreement with Chichester Foundation, as representative of a Swiss investor group, providing for the issuance of 2.6 million shares of GKI Common Stock at $1.375 per share, representing the closing price of the stock on the trading day preceding execution of the agreement, for an aggregate gross purchase price of $3,575,000. The proceeds to the company, net of fees and commissions, will be $3,000,000.
 In addition, GKI will issue a 10-year subordinated convertible debenture in the face amount of $2,750,000 to the investor group. The debenture will bear interest at 1 percent per year, and will be sold for $72.7 percent of its face amount, i.e., $2,000,000. The debenture will be convertible, at a conversion price of $1.375 per share, into 2 million shares. Furthermore, GKI will issue 300,000 shares as a finder's fee to a non-U.S. entity that assisted in locating the investor group.
 The investor group has indicated its intention to keep current management in place. Due to the foreign nationality of the group, in order to maintain GKI's facility security clearance, and in accordance with current Department of Defense regulations, restrictions, negotiated with and approved by the Department, will likely be placed on the investors' rights to vote their stock, as well as their access to company facilities. As part of these arrangements, it is likely that the investor group will be required to appoint three U.S. citizens to act as independent proxy holders to vote their stock with respect to the election of GKI's directors and on all but a limited category of corporate transactions.
 The transaction was unanimously approved by the GKI board, including its independent directors. This transaction supersedes the agreement in principle with Chichester Holdings previously announced by the company on Sept. 18, 1992. The transaction is subject to the negotiation of definitive documentation and the debenture must contain subordination provisions satisfactory to GKI's principal lender.
 The bank has temporarily allowed GKI to include certain otherwise ineligible receivables in the borrowing base of its primary credit line through Oct. 9, 1992. Unless this arrangement is extended, GKI's borrowing capacity will contract, and the bank would be entitled to accelerate the loan unless GKI reduces its borrowings or adjusts its borrowing base by approximately $240,000. The company anticipates using a portion of the proceeds of this offering to pay down the credit line so as to comply with the borrowing base restrictions. The investor group has indicated a willingness to provide GKI with an immediate cash infusion of up to $300,000 by way of an advance loan to avoid disruption of the company's operations while the closing arrangements are finalized. The inability to consummate this financing transaction with the Swiss investor group would have a severe adverse effect on the company and likely require curtailment of its operations.
 It is anticipated this $5 million investment will permit the company to reduce its bank debt, resume its normal production and shipping schedule and reduce its accounts payable to trade creditors on mutually acceptable terms.
 Due to its cash flow shortage, the company has been unable to complete its 1992 fiscal year audit and, consequently, has not timely filed its annual report on Form 10-K. Upon closing of this transaction, the company anticipates being in a position to complete the audit and thereafter to announce its results of operations for the 1992 fiscal year and file its Form 10-K. In the interim, based on unaudited results, the company anticipates a net loss for the 1992 fiscal year in excess of $3.5 million.
 -0- 10/9/92
 /CONTACT: David A. Shaw, president, General Kinetics Incorporated, 301-881-2044/ CO: General Kinetics Incorporated ST: Virginia IN: CPR SU:


KD -- DC017 -- 8448 10/09/92 15:20 EDT
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Publication:PR Newswire
Date:Oct 9, 1992
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