ARMOR HOLDINGS INC, S-3, 1999-03-25

ARMOR HOLDINGS INC
S-3, 1999-03-25
ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES

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<PAGE>
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 25, 1999
REGISTRATION NO. -
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
ARMOR HOLDINGS, INC.
(Exact name of registrant as specified in charter)

<TABLE>
<CAPTION>
<S> <C>
DELAWARE 59-3392443
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

ARMOR HOLDINGS, INC. JONATHAN M. SPILLER
13386 INTERNATIONAL PARKWAY PRESIDENT AND CHIEF EXECUTIVE OFFICER
JACKSONVILLE, FL 32218 ARMOR HOLDINGS, INC.
(904) 741-5400 13386 INTERNATIONAL PARKWAY
(Address, including zip code, and telephone JACKSONVILLE, FL 32218
number, including area code, of registrant's (904) 741-5400
principal executive offices) (Address, including zip code, and telephone
number, including area code, of registrant's agent
for service)
--------------------
WITH COPIES TO:

ROBERT L. LAWRENCE, ESQ. JOSHUA N. KORFF, ESQ.
KANE KESSLER, P.C. KIRKLAND & ELLIS
1350 AVENUE OF THE AMERICAS 153 EAST 53RD STREET
NEW YORK, NY 10019 NEW YORK, NY 10022
(212) 541-6222 (212) 446-4800
</TABLE>

APPROXIMATEDATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]

--------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED (1) PER SHARE (2) PRICE (2) REGISTRATION FEE (1)
- ----------------------------------- ---------------- ------------------ -------------------- ---------------------
<S> <C> <C> <C> <C>
Common Stock
$.01 par value.................... 8,337,500 $ 13.5625 $ 113,077,343.70 $ 31,435.50
- ------------------------------------ --------- --------- ---------------- -----------
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes 1,087,500 shares which may be purchased by the Underwriters
pursuant to an over-allotment option. See "Underwriting."

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based upon the average of the high and low sale
prices for the common stock on the American Stock Exchange on March 19,
1999.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

===============================================================================
<PAGE>

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES NOR A SOLICITATION OF AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER AND SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, MARCH 25, 1999

PROSPECTUS
7,250,000 SHARES

[ARMOR HOLDINGS, INC. GRAPHIC OMITTED]

COMMON STOCK

- --------------------------------------------------------------------------------

Armor Holdings, Inc. is offering 6,125,000 shares. Selling stockholders are
offering 1,125,000 shares. Of the 7,250,000 shares being offered, 5,800,000
shares are initially being offered in the United States and Canada and
1,450,000 shares are initially being offered outside the United States and
Canada.

The shares are listed on the American Stock Exchange under the symbol "ABE."
The last reported sales price of our shares on the American Stock Exchange on
March 23, 1999 was $13.875 per share. We intend to list our common stock on the
New York Stock Exchange under the symbol "AH" simultaneously with the
consummation of this offering.

Investing in the shares involves risks. Risk Factors begin on page 6.

<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- -----------
<S> <C> <C>
Public Offering Price ..................... $ $
Underwriting Discount ..................... $ $
Proceeds to Armor Holdings. ............... $ $
Proceeds to Selling Stockholders .......... $ $
</TABLE>

Armor Holdings and the selling stockholders have also granted the underwriters
the right to purchase up to an additional 1,087,500 shares within 30 days to
cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

Lehman Brothers expects to deliver the shares on or about , 1999.

- --------------------------------------------------------------------------------
LEHMAN BROTHERS BEAR, STEARNS & CO. INC.

SUNTRUST EQUITABLE SECURITIES

WARBURG DILLON READ LLC

, 1999
<PAGE>

TABLE OF CONTENTS

PAGE
-----
Available Information .................... i
Incorporation by Reference ............... ii
Forward Looking Statements ............... ii
Prospectus Summary ....................... 1
Risk Factors ............................. 6
Use of Proceeds .......................... 12
Price Range of Common Stock .............. 13
Dividend Policy .......................... 13
Capitalization ........................... 14
Selected Financial Information ........... 15
Unaudited Pro Forma Consolidated Financial
Information ........................... 16

PAGE
-----
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .............................. 21
Business ................................... 29
Management ................................. 43
Principal and Selling Stockholders ......... 45
Description of the Credit Facility ......... 48
Shares Eligible for Future Sale ............ 49
Certain United States Federal Income Tax
Consequences to Non-United States
Holders of Common Stock ................. 51
Underwriting ............................... 53
Legal Matters .............................. 57
Experts .................................... 57

Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the common stock,
including stabilizing bids, syndicate covering transactions or the imposition
of penalty bids. For a discussion of these activities, see "Underwriting."

Until , 1999 (25 days after the date of this prospectus) all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.

AVAILABLE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act of 1933 with respect to the
shares of common stock offered by this prospectus. This prospectus, which is a
part of the registration statement, does not contain all of the information
included in the registration statement. For further information about us and
our common stock, you should refer to the registration statement. This
prospectus summarizes material provisions of contracts and other documents to
which we refer you. Since the prospectus may not contain all of the information
that you may find important, you should review the full text of these
documents. We have included copies of these documents as exhibits to our
registration statement.

We are subject to the informational requirements of the Securities
Exchange Act of 1934 and as a consequence we file reports and other information
with the Commission. The registration statement and our other SEC filings can
be inspected and copied at the Public Reference Section of the Commission
located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C.
20549 and at regional public reference facilities maintained by the Commission
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 50551 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of these materials, including copies of all or any portion of the
registration statement, can be obtained from the Public Reference Section of
the Commission at prescribed rates. These materials are also available on the
Commission's home page on the Internet (http://www.sec.gov). In addition our
public filings are also available for inspection at the office of the American
Stock Exchange, 86 Trinity Place, New York, New York 10006.

We will provide, without charge, to each person who receives a prospectus,
upon the written or oral request of such person, a copy of any of the
aforementioned documents, and all exhibits and amendments thereto, including
the financial statements and schedules, as filed with the Commission. Requests
for such copies should be directed to our Corporate Secretary at c/o Armor
Holdings, Inc., 13386 International Parkway, Jacksonville, Florida 32218, or
via telephone at (904) 741-5400.

i
<PAGE>

INCORPORATION BY REFERENCE

We incorporate into this prospectus by reference the following documents
and the exhibits to those documents previously filed with the Securities and
Exchange Commission pursuant to the Securities Act and the Exchange Act:

1. Our description of the common stock contained in our registration
statement on Form 8-A (Reg. No. 1-11667) pursuant to Section 12 of the
Exchange Act, including any amendment or report filed for the purpose of
updating such description;

2. Annual Report on Form 10-K for the fiscal year ended December 31, 1998;
and

3. Current Report on Form 8-K, dated March 10, 1999.

In addition, all reports and other documents filed by us pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this prospectus and prior to the termination of the offering of the shares
shall be deemed to be incorporated herein by reference and to be a part hereof
from the date of filing of such reports and documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified, or superseded, to
constitute a part of this prospectus.

FORWARD LOOKING STATEMENTS

We believe that it is important to communicate our expectations to our
investors. Accordingly, this prospectus contains discussion of events or
results that have not yet occurred or been realized. Certain of the matters
discussed concerning our operations, economic performance, financial condition,
including in particular the execution of acquisition strategies, the completion
by us of the acquisition of Safariland Ltd., Inc. or The Parvus Company,
expansion of product lines and increase of distribution networks or product
sales, are areas, among others, which include forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Statements that are predictive in nature, that depend upon or
refer to future events or conditions, or that include words such as, "expects",
"anticipates", "intends", "plans", "believes", "estimates" and similar
expressions are forward-looking statements. You should read forward-looking
statements carefully because they discuss our future expectations, contain
projections of our future results of operations or of our financial position,
or state other expectations of future performance. The actions of current and
potential new competitors, changes in technology, seasonality, business cycles
and new regulatory requirements are factors that impact greatly upon strategies
and expectations and are outside our direct control. There may be events in the
future that we are not able accurately to predict or to control. The factors
listed in the section captioned "Risk Factors", as well as any cautionary
language in this prospectus, provide examples of risks, uncertainties and
events that may cause our actual results to differ from the expectations we
express in our forward-looking statements. Before you invest in our common
stock, you should be aware that the occurrence of the events described in the
section caption "Risk Factors" and elsewhere in this prospectus could
materially adversely affect our business, financial condition and results of
operations.

---------------------

We own the following trademarks: Armitron (Registered Trademark), Series
2000 (Registered Trademark), Armadillo (Design Mark) (Registered Trademark),
Gold Series GSX (Registered Trademark), Xtreme (Registered Trademark), Series
229 (Registered Trademark), American Body Armor (Trade Mark), Defense
Technology (Trade Mark), Best Defense (Registered Trademark), Def-Tec
Products (Registered Trademark) and Flag Design (Registered Trademark), Eagle
Design (Registered Trademark), Eagle and Shield Design (Registered
Trademark), First Defense (Registered Trademark), Stinger (Registered
Trademark), The Riot Extinguisher (Registered Trademark), Distraction Device
(Registered Trademark), Identidrug (Registered Trademark), Tamper Guard
(Registered Trademark), NIK (Registered Trademark) and Design (Registered
Trademark), Porta-Pac (Registered Trademark), Sanatape-Sealtite (Registered
Trademark), Secure-a-Seal (Registered Trademark), and Federal Laboratories
(Registered Trademark). Registered Trademarks acquired in the Safariland
transaction include: Duty Gear (Registered Trademark), Nylok (Registered
Trademark), Hyper-Lite (Registered Trademark), Body Armor You Can Live With
(Registered Trademark), Multi-Flex (Registered Trademark), Sub One
(Registered Trademark), and Vest Express (Registered Trademark). Other

ii
<PAGE>

trademarks acquired in the Safariland transaction, for which registration is
pending, are: Safari Armor (Trade Mark), Impala (Trade Mark), Armor Wear
(Trade Mark), Gold Standard (Trade Mark), Safari Gear (Trade Mark),
Safariland Armor Wear (Trade Mark), Smart Armor (Trade Mark), Stab Pro (Trade
Mark) and Zero-G (Trade Mark). We license the trademark MACE (Registered
Trademark) from Mace Security International, Inc. on an exclusive basis for
use in the law enforcement market.

The Flex-Cuf (Registered Trademark) and Key-Cuff (Trade Mark) trademarks
included in this prospectus are owned by Thomas & Betts Corporation and Vizions
Ltd., respectively. The Gallett (Registered Trademark) trademark included in
this prospectus is owned by CGF-Gallet S.A. The Kevlar (Registered Trademark)
and Nomex (Registered Trademark) trademarks included in this prospectus are
owned by E.I. du Pont de Nemours & Co., Inc. The Twaron (Registered Trademark)
and SpectraShield (Registered Trademark) trademarks included in this
prospectus are owned by Akzo-Nobel Fibers B.V. and Allied Signal, Inc.,
respectively.

iii
<PAGE>

PROSPECTUS SUMMARY

This summary highlights selected information from this document and does
not contain all of the information you need to consider before investing in our
common stock. You should carefully read this entire prospectus. Unless
otherwise indicated, the information in this prospectus assumes that the
underwriters' over-allotment option will not be exercised. In this prospectus,
"we", "us" and "our" refer to Armor Holdings and its subsidiaries. Unless
otherwise indicated, all information relating to us in this prospectus gives
effect to the acquisition by us of Safariland but not Parvus, and the
historical financial data do not give effect to the Safariland or Parvus
acquisitions. References to pro forma statement of operations data reflect our
acquisition of Safariland as if it had occurred at the beginning of our 1998
fiscal year.

THE COMPANY

We are a leading global provider of security risk management services and
products to multi-national corporations, governmental agencies and law
enforcement personnel through our two operating divisions -- Armor Group
Services and Armor Holdings Products. Our Armor Group Services division
provides sophisticated security planning and risk management, electronic
security systems integration, consulting and training services, as well as
intellectual property asset protection, business intelligence and investigative
services. We provide these services to multi-national corporations and
governmental and non-governmental agencies through our 22 offices in 18
countries. Our Armor Holdings Products division manufactures and sells a broad
range of high quality branded law enforcement equipment and has leading market
positions in several of the product categories in which we compete. Such
products include ballistic resistant vests and tactical armor, police duty
gear, less-than-lethal munitions, anti-riot products and narcotics
identification kits. These products are sold primarily to law enforcement
agencies through a worldwide network of over 500 distributors and sales agents
including approximately 350 in the United States. We believe significant
opportunities exist to grow our company and extend our global infrastructure
through geographic expansion and strategic acquisitions of related businesses
in the fragmented security risk management services and products industry. For
fiscal 1998, we generated total pro forma revenues of $142.5 million.

KEY STRENGTHS

We believe that the following key strengths will enable us to continue to
increase sales to existing and new customers, expand our service and product
offerings, enter new markets, increase our profitability and capitalize on
industry trends:

o Broad Portfolio of Services and Products. We offer a broad portfolio of
security services and products, enabling us to provide comprehensive
solutions to our customers' security needs. Through strategic
acquisitions and internal growth, we expect to continue to expand our
service and product offerings.

o Strong Client Base and Extensive Distribution Network. Armor Group
Services serves a client base representing governmental agencies and
approximately 500 multi-national corporations worldwide. Armor Holdings
Products has a broad, full service network of approximately 350 domestic
distributors and 150 international agents.

o Strong Brands with Leading Market Positions. Our product lines are
marketed under brand names widely recognized in law enforcement, such as
American Body Armor, Safariland, Defense Technology, Federal Laboratories
and MACE. The strength of our brand names has contributed to our leading
market positions in several of the product categories in which we
compete, including body armor (Xtreme), police duty gear (Duty Gear),
aerosol defense sprays (MACE), and less-than-lethal munitions (Defense
Technology).

o Proven Track Record of Identifying, Completing and Integrating
Acquisitions. Since January 1996, we have completed 11 acquisitions in
the security services and products industry. We

1
<PAGE>

believe that these acquisitions have strengthened our market position,
leveraged our distribution network and expanded our service and product
offerings.

GROWTH STRATEGY

o Pursue Strategic Acquisitions. We selectively pursue acquisitions that
complement and expand our service and product offerings and provide
access to new geographic markets, additional distribution channels and
new client relationships.

o Broaden Service Offerings to Existing Client Base. We broaden our
existing service offerings through strategic acquisitions and develop a
comprehensive range of security risk management offerings with a global
network of service providers.

o Expand Client Base. We expand our client base by offering a complete
array of security risk management services to our service clients. In
addition, we market our expanded offerings to new clients referred to us
by our existing clients. Client referrals have historically provided
significant growth opportunities for us with minimal incremental
marketing expenses.

o Expand Distribution Network and Product Offering. We leverage our
distribution network by expanding our range of branded law enforcement
equipment through the acquisition of niche defensive security products
manufacturers and by investing in new and enhanced products which
complement our existing offerings. A broader product line enables us to
strengthen our relationship with distributors and enhance our brand
appeal with end users.

o Continue Global Expansion. We expand the scope of our service and
product offerings by serving existing customers who are expanding
geographically, acquiring complementary assets and capabilities and
extending our distribution network into new territories.

ACQUISITIONS

o broadens the scope of the services or products we offer or the
geographic areas we serve,

o offers attractive margins,

o is accretive to earnings, and

o offers the opportunity to enhance profitability by improving the
efficiency of our operations.

Since January 1996, we have consummated 11 acquisitions and announced our
intention to acquire two additional companies including Safariland, a leading
manufacturer of law enforcement equipment.

----------------
Our executive offices are located at 13386 International Parkway,
Jacksonville, Florida 32218. Our telephone number is (904) 741-5400.

2
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THE OFFERING

Armor Holdings and the selling stockholders are offering 5,800,000 shares
for sale in the United States and Canada and 1,450,000 shares for sale outside
the United States and Canada.

<TABLE>
<S> <C>
Common stock offered by Armor:
in the United States and Canada .............. 4,900,000 shares
outside the United States and Canada ......... 1,225,000 shares
----------------
Total ...................................... 6,125,000 shares
Common stock offered by the selling
stockholders:
in the United States and Canada .............. 900,000 shares
outside the United States and Canada ......... 225,000 shares
----------------
Total ...................................... 1,125,000 shares
Common stock outstanding after this
offering(1) .................................. 22,683,848 shares
Use of proceeds ............................... We intend to use our net proceeds from this offering
to repay indebtedness under our credit facility
(including indebtedness incurred to finance the
Safariland acquisition), to finance future acquisitions
and the expansion of service and product offerings,
for working capital and for general corporate
purposes. We will not receive any of the proceeds
from the shares being sold by the selling
stockholders. See "Use of Proceeds."
AMEX symbol ................................... ABE
Proposed NYSE symbol .......................... AH
Risk Factors .................................. You should carefully consider the information set
forth in "Risk Factors" and all other information set
forth in this prospectus before investing in our
common stock.
</TABLE>

- ----------
(1) Assumes no exercise of the over-allotment option by the underwriters and
excludes an aggregate of 2,077,201 shares of common stock reserved for
issuance under our various stock option plans at a weighted average price
per share of $6.46.

3
<PAGE>

SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA

The summary historical consolidated financial data for fiscal years 1996,
1997 and 1998 have been derived from the audited financial statements for the
respective periods. In the opinion of our management, the unaudited financial
statements reflect all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of the results of operations and
financial position as of the date of and for the period presented.

The summary unaudited pro forma data as of December 31, 1998, have been
derived from, and should be read in conjunction with, the unaudited pro forma
consolidated financial statements included elsewhere in this prospectus. The
unaudited pro forma balance sheet data reflect the Safariland acquisition as if
it had occurred at December 31, 1998. The unaudited pro forma statement of
operations data reflect the Safariland acquisition as if it had occurred at the
beginning of our 1998 fiscal year. The unaudited pro forma condensed financial
information may not be indicative of the financial position and results of
operations of Armor Holdings that actually would have occurred had the
Safariland acquisition been in effect on the dates indicated or the financial
position and results of operations that may be obtained in the future.

You should read this along with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our Consolidated Financial
Statements and the unaudited pro forma consolidated financial information
included elsewhere in this prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------------
PRO FORMA
1996 1997 1998 1998
------------- ------------- ----------- ------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Services ........................................ $ 12,956 $ 48,445 $ 51,563 $ 51,563
Products ........................................ 18,011 29,869 45,644 90,927
---------- --------- --------- ---------
Total revenues .................................... 30,967 78,314 97,207 142,490
Interest expense (income), net .................... 515 195 (625) 2,794
Operating income .................................. 2,141 5,285 13,645 15,637
Provision for income taxes ........................ 1,215 2,376 5,077 6,252
Net income applicable to common
stockholders .................................... 689 3,158 8,596 9,886
Earnings per common share
Basic ........................................... $ 0.09 $ 0.23 $ 0.53 $ 0.60
Diluted ......................................... $ 0.08 $ 0.21 $ 0.50 $ 0.56
Weighted average common shares
Basic ........................................... 7,966 13,638 16,165 16,459
Diluted ......................................... 8,876 14,712 17,354 17,648
OTHER DATA:
EBITDA(1) ....................................... $ 3,476 $ 7,848 $ 15,702 $ 22,247
Depreciation & amortization(2) .................. 818 1,976 2,654 3,315
Net cash from (used in) operating activities..... 1,639 (1,556) 3,379 7,194
Net cash used in investing activities ........... (16,428) (7,877) (20,701) (58,603)
Net cash from financing activities .............. 23,848 20,812 5,032 40,610
Capital expenditures ............................ 1,860 5,153 3,301 4,041
</TABLE>

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<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED (4)
---------- ----------- ----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(3) ........... $22,618 $ 29,056 $ 29,056
Total assets ................. 94,353 146,612 179,512
Total debt ................... 5,818 48,289 1,155
Stockholders' equity ......... 75,102 79,102 159,136
</TABLE>

- ----------
(1) EBITDA is defined as net income applicable to common stockholders plus
dividends on preference shares, interest, taxes, depreciation and
amortization. EBITDA is not a substitute for operating income, net income
and cash flow from operating activities as determined in accordance with
generally accepted accounting principles as a measure of profitability or
liquidity. EBITDA is presented because we believe some investors may find
it useful in evaluating an investment in our common stock.

(2) For the Company, for fiscal 1996 depreciation and amortization includes
$381 of depreciation, which is included in cost of sales and operating
expenses, and $437 of amortization; for fiscal 1997 depreciation and
amortization includes $1,134 of depreciation, which is included in cost of
sales and operating expenses, and $842 of amortization; and for
fiscal 1998 depreciation and amortization includes $1,409 of
depreciation, which is included in cost of sales and operating expenses,
and $1,245 of amortization.

(3) Working capital is defined as current assets minus current liabilities
excluding cash and short term interest-bearing indebtedness.

(4) Gives effect to the sale of 6,125,000 shares of common stock offered by
us in this prospectus and assumes no exercise of the over-allotment
option by the underwriters.

5
<PAGE>

RISK FACTORS

You should consider carefully the following risk factors and other
information and financial data set forth in this prospectus, prior to investing
in shares of common stock.

THE SERVICES WE PROVIDE ARE INHERENTLY RISKY

We provide security risk management services through our Armor Group
Services division. These services are most in demand in areas of the world
encountering high levels of violence, unstable or chaotic political
environments and little or no effective local law enforcement authorities. As a
result, our management and employees are often located in hostile and high risk
environments characterized by rapid economic growth, political instability,
emerging market conditions and/or significant natural resources such as Africa,
South America, Central Asia, Russia and the Balkans. We sometimes supplement
our own personnel with local police or military who are not legally under our
control and supervision. This lack of direct control may limit our
effectiveness without insulating us from liability claims based on the actions
of these personnel. In addition, we operate in locations where murders,
kidnappings and attacks on facilities and installations are endemic. We cannot
be certain whether parties will bring lawsuits in the future alleging
negligence in the provision of security services and seeking substantial
amounts in damages. We believe that the insurance coverage that we maintain is
adequate under the circumstances. However, the success of such a lawsuit could
have a material adverse effect on our business, financial condition and results
of operations. See "Business -- Growth Strategy."

THE PRODUCTS WE SELL ARE INHERENTLY RISKY

The products we manufacture are used in applications where the failure to
use such products for their intended purposes, or the failure to use them
properly, could result in serious bodily injury or death. Our products include:

o body armor designed to protect against ballistic and sharp instrument
penetration,

o less-than-lethal and anti-riot products such as less-than-lethal
munitions, pepper sprays, distraction devices and flameless expulsion
grenades,

o vehicle and hard armoring systems, and

o police duty gear.

We are aware of claims against one of our subsidiaries, of permanent
physical injury and death caused by self-defense sprays and other munitions
intended to be less-than-lethal. We are also aware that the U.S. Department of
Justice is studying the role that self-defense pepper sprays may have had in
the deaths of suspects sprayed by law enforcement personnel. In addition, the
manufacture and sale of certain less-than-lethal products may be the subject of
product liability claims in the event that these products do not perform in the
manner in which they are intended to perform. See "Business -- Litigation."

THE FAILURE OF OUR PRODUCTS COULD GIVE RISE TO PRODUCT LIABILITY CLAIMS

Our products are used in applications where their failure could result in
serious personal injuries and death. We believe that the insurance coverage
that we maintain is adequate under the circumstances. However, we cannot assure
that this coverage would be sufficient to cover the payment of any potential
claim. In addition, we cannot assure that this or any other insurance coverage
will continue to be available or, if available, that we will be able to obtain
it at a reasonable cost. Any substantial uninsured loss could have a material
adverse effect on our business, financial condition and results of operations.
In addition, the inability to obtain product liability coverage would prohibit
us from bidding for orders from certain municipal customers since, at present,
many municipal bids require such coverage, and any such inability would have a
material adverse effect on our business, financial condition and results of
operations.

6
<PAGE>

WE HAVE SIGNIFICANT INTERNATIONAL OPERATIONS AND ASSETS

We have operations and assets in many parts of Africa, South America,
Southeast Asia, Central Asia, the Balkans and Russia. In addition, we sell our
services and products in other foreign countries and seek to increase our level
of international business activity. Accordingly, we are subject to various
risks, including:

o U.S.-imposed embargoes of sales to specific countries,

o foreign import controls (which may be arbitrarily imposed and
enforced),

o exchange rate fluctuations,

o dividend remittance restrictions,

o expropriation of assets,

o war, civil uprisings and riots,

o government instability,

o the necessity of obtaining government approvals for both new and
continuing operations, and

o legal systems of decrees, laws, regulations, interpretations and court
decisions that are not always fully developed and that may be
retroactively or arbitrarily applied.

We may also be subject to unanticipated income taxes, excise duties,
import taxes, export taxes or other governmental assessments. In addition,
payments to us in our international markets are often in local currencies.
Although most of these currencies are presently convertible into U.S. dollars,
we cannot be sure that convertibility will continue. Even if currencies are
convertible, the rate at which they convert is subject to substantial
fluctuation. Our ability to transfer currencies into or out of local currencies
may be restricted or limited. Any of these events could result in a loss of
business or other unexpected costs which could reduce revenue or profits and
have a material adverse effect on our business, financial condition and results
of operations.

On January 16, 1998, our Armor Group Services division ceased operations
in the country of Angola. The cessation of operations in Angola was dictated by
that government's decision to deport all of our expatriate management and
supervisors. Angolan operations represented approximately $12.0 million of our
revenues during fiscal 1997. See "Business -- Litigation."

Our Armor Group Services division routinely operates in areas where local
government policies regarding foreign entities and the local tax and legal
regimes are often uncertain, poorly administered and in a state of flux. We
cannot, therefore, be certain that we are in compliance with or will be
protected by all relevant local laws and taxes at any given point in time. A
subsequent determination that we failed to comply with relevant local laws and
taxes could have a material adverse effect on our business, financial condition
and results of operations. See "Business -- Services and Products."

WE MAY BE UNABLE TO COMPLETE AND INTEGRATE ACQUISITIONS

We intend to grow through the acquisition of businesses and assets that
will complement our current businesses. We cannot be certain that we will be
able to complete attractive acquisitions, including the acquisition of
Safariland, obtain financing for acquisitions on satisfactory terms or
successfully acquire identified targets. We may not be successful in
integrating acquired businesses into our existing operations. This integration
may result in unanticipated liabilities or unforeseen operational difficulties,
which may be material, or require a disproportionate amount of management's
attention. These acquisitions may result in our incurring additional
indebtedness or issuing preferred stock or additional common stock. Competition
for acquisition opportunities in the industry may rise, thereby increasing our
cost of making acquisitions or causing us to refrain from making further
acquisitions. In addition, the terms and conditions of our five-year credit
facility with a syndicate of four banks led by Canadian Imperial Bank of
Commerce and NationsBank, N.A. impose, and the terms and conditions of future
debt instruments may impose, restrictions on us that, among other things, may
restrict our ability to make acquisitions. See "Business -- Acquisitions."

7
<PAGE>

WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH

We have rapidly expanded our operations, and this growth has placed
significant demands on our management, administrative, operating and financial
resources. The continued growth of our customer base, the types of services and
products offered and the geographic markets served can be expected to continue
to place a significant strain on our resources. In addition, we cannot easily
identify and hire personnel qualified both in the provision and marketing of
our security services and products. Our future performance and profitability
will depend in large part on:

o our ability to attract and retain additional management and other key
personnel,

o our ability to implement successful enhancements to our management
systems, and

o our ability to adapt those systems, as necessary, to respond to
growth in our business.

THE SECTORS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE

The sectors in which we operate are highly competitive in all product and
service lines. Some of the competitors in certain segments of our business have
significantly greater financial resources, larger facilities and operations and
depth and experience of personnel as well as more recognizable trademarks for
products similar to those sold by us. In addition, our competitors may develop
or improve their products, which could render our products obsolete or less
marketable. The security industry is extremely competitive and highly
fragmented. We expect that the level of competition will increase in the
future. We cannot assure you that we will be able to continue to compete
successfully. The British Petroleum Company, plc, a client of our Armor Group
Services division, accounted for approximately 10.2% of net sales in fiscal
1998 (without giving effect to the acquisition of Safariland) under a contract
which expires March 31, 1999. This contract has been renewed for each of the
previous eight years and is currently being renegotiated for renewal. The loss
of, or significant reduction in, this business could have a material adverse
effect on our financial condition, results of operations and cash flows. See
"Business -- Competition."

THERE ARE LIMITED SOURCES FOR SOME OF OUR RAW MATERIALS

The primary raw materials that we use in manufacturing ballistic-resistant
garments are:

o Kevlar, a patented product of E.I. du Pont de Nemours Co., Inc. ("Du
Pont"),

o Spectrashield, a patented product of Allied Signal, Inc., and

o Twaron, an aramid fiber product of Akzo-Nobel Fibers, B.V.

Du Pont and its European licensee are currently the only producers of
Kevlar. We purchase these materials in the form of woven cloth from five
independent weaving companies. In the event Du Pont or its licensee in Europe
cease, for any reason, to produce and sell Kevlar, we would utilize these other
ballistic resistant materials as a substitute. Neither Spectrashield nor Twaron
is expected to become a complete substitute for Kevlar in the near future. We
enjoy a good relationship with our suppliers of Kevlar, Spectrashield and
Twaron. However, if our supply of their materials was cut off or if there was a
material increase in the prices of these materials, our manufacturing
operations could be severely curtailed and our business, financial condition
and results of operations would be materially adversely affected. See "Business
- -- Product Manufacturing and Raw Materials."

MANY OF OUR CUSTOMERS HAVE FLUCTUATING BUDGETS

Customers for our products include law enforcement and governmental
agencies. Government tax revenues and budgetary constraints, which fluctuate
from time to time, can affect budgetary allocations for law enforcement. Many
domestic and foreign government agencies have experienced budget deficits that
have led to decreased spending in certain areas. Our results of operations may
be subject to substantial period-to-period fluctuations as a result of these
and other factors affecting capital spending. A reduction of funding for law
enforcement could have a material adverse effect on our business, financial
condition and results of operations.

8
<PAGE>

WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION

Like other companies operating internationally, we are subject to the
Foreign Corrupt Practices Act and other laws which prohibit improper payments
to foreign governments and their officials by U.S. and other business entities.
Our Armor Group Services division operates in countries known to experience
endemic corruption. Our extensive operations in such countries creates the risk
of an unauthorized payment by an employee or agent of ours which would be in
violation of various laws including the Foreign Corrupt Practices Act.
Violations of the Foreign Corrupt Practices Act may result in severe criminal
penalties which could have a material adverse effect on our business, financial
condition and results of operations.

WE MAY BE ADVERSELY AFFECTED BY APPLICABLE ENVIRONMENTAL LAWS

We are subject to federal, state, and local laws and regulations governing
the protection of the environment, including those regulating discharges to the
air and water, the management of wastes, and the control of noise and odors. We
cannot assure you that we are at all times in complete compliance with all such
requirements. Like all companies, we are subject to potentially significant
fines or penalties if we fail to comply with environmental requirements. We
have made and will continue to make capital expenditures in order to comply
with environmental requirements. Environmental requirements are complex, change
frequently, and could become more stringent in the future. Accordingly, we
cannot assure you that these requirements will not change in a manner that will
require material capital or operating expenditures or will otherwise have a
material adverse effect on us in the future.

We are also subject to environmental laws requiring the investigation and
clean-up of environmental contamination. We may be subject to liability,
including liability for clean-up costs, if contamination is discovered at one
of our current or former facilities or at a landfill or other location where we
have disposed wastes. The amount of such liability could be material.
We use Orthochlorabenzalmalononitrile ("CS") and Chloroacetophenone ("CN")
chemical agents in connection with our production of tear gas. These chemicals
are hazardous, and could cause environmental damage if not handled and
disposed of properly. See "Business -- Environmental Matters."

OUR FAILURE, OR THE FAILURE OF OUR THIRD PARTY SUPPLIERS, DISTRIBUTORS OR
CLIENTS, TO ACHIEVE YEAR 2000 COMPLIANCE COULD SIGNIFICANTLY HARM OUR OPERATING
STRATEGY

We are evaluating the extent to which our computer operating systems will
be disrupted upon the turn of the century as a result of the inability of many
operating systems to distinguish between the years 1900 and 2000. We cannot
assure you that our operating systems will not be disrupted upon the turn of
the century or that such modifications will not require unanticipated capital
expenditures. In addition, the systems of any other acquired entities, if any,
or any of our key suppliers or customers may not be Year 2000 compliant. Any
disruption, whether caused by our systems or those of any of our suppliers,
customers or other vendors, could have a material adverse effect on our
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Year 2000 Compliance."

9
<PAGE>

ONE STOCKHOLDER HAS THE ABILITY TO SIGNIFICANTLY INFLUENCE THE ELECTION OF OUR
DIRECTORS AND THE OUTCOME OF CORPORATE ACTION REQUIRING STOCKHOLDER APPROVAL

Warren B. Kanders is the sole stockholder of Kanders Florida Holdings,
Inc. Immediately following this offering, Kanders Florida Holdings will be the
beneficial owner of approximately 14.3% of the outstanding shares of our common
stock. In addition, immediately following this offering, our officers and
directors, including Mr. Kanders, will beneficially own an aggregate of
approximately 4,530,277 shares, or 19.1%, of the common stock. Consequently,
Mr. Kanders, as chairman of the board of directors and as the sole stockholder
of Kanders Florida Holdings, together with our other officers and directors,
will have the ability to significantly influence the election of our directors
and the outcome of corporate actions requiring stockholder approval, including
a change in control. See "Principal and Selling Stockholders."

WE DEPEND SIGNIFICANTLY UPON OUR SENIOR MANAGEMENT TEAM

Our success depends in large part on the services of our senior management
team, particularly Warren B. Kanders and Jonathan M. Spiller. While we maintain
key man life insurance for each of them, the loss of any of our key executives
could materially adversely affect our company and seriously impair our ability
to implement our strategy.

DELAWARE LAW MAY LIMIT POSSIBLE TAKEOVERS

Our certificate of incorporation makes us subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law. In general,
Section 203 prohibits publicly-held Delaware corporations to which it applies
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved
in a prescribed manner. This provision could discourage others from bidding for
our shares and could, as a result, reduce the likelihood of an increase in our
stock price that would otherwise occur if a bidder sought to buy our stock.

THE MARKET PRICE FOR OUR COMMON STOCK IS VOLATILE

The market price for our common stock may be highly volatile. We believe
that a variety of factors, including announcements by us or our competitors,
quarterly variations in financial results, trading volume, general market
trends and other factors, could cause the market price of our common stock to
fluctuate substantially. Due to our relatively modest size, our winning or
losing a large contract may have the effect of distorting our overall financial
results.

THERE IS A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK ELIGIBLE FOR FUTURE SALE AND
THE SALE OF THOSE SHARES COULD ADVERSELY AFFECT OUR STOCK PRICE

Immediately following this offering 22,683,848 shares of our common stock
will be outstanding. Of these shares, 17,763,468 shares (including those sold
in this offering), will be freely tradeable under the Securities Act by persons
who are not our "affiliates" (in general, an affiliate is any person who is in
control or who has a control relationship with our corporation). The remaining
4,164,534 outstanding shares of common stock are deemed to be "restricted
securities", as that term is defined in Rule 144, all of which will become
qualified for sale in the public market in compliance with Rule 144. See
"Shares Eligible for Future Sale."

We cannot predict the effect, if any, that market sales of shares of
common stock that are restricted securities, or the availability of these
shares for sale, will have on the market price of our common stock prevailing
from time to time. Sales of substantial amounts of common stock, or the
perception that sales could occur, could adversely affect prevailing market
prices for our common stock and could impair our future ability to raise
capital through an offering of equity securities.

10
<PAGE>

As part of our acquisition strategy, we anticipate issuing additional
shares of our common stock. To the extent that we are able to grow through
acquisitions for stock, the number of outstanding shares of common stock that
will be eligible for sale in the future is likely to increase substantially. In
addition, the potential issuance of additional shares in connection with
anticipated acquisitions could lessen demand for our common stock and result in
a lower price than would otherwise be obtained.

OUR STOCK PRICE MAY BE AFFECTED WHEN ADDITIONAL SHARES ARE SOLD

If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. These sales might make it more difficult for us to sell equity or
equity-related securities in the future at a time and price that we deem
appropriate. Additional shares sold to finance acquisitions may dilute our
earnings per share if new operations' earnings are disappointing.

WE CURRENTLY DO NOT INTEND TO PAY DIVIDENDS

We currently do not intend to pay any cash dividends on our common stock.
We currently intend to retain any earnings for working capital, repayment of
indebtedness, capital expenditures and general corporate purposes. Our credit
facility contains restrictions on our ability to pay dividends or make other
distributions. See "Dividend Policy."

11
<PAGE>

USE OF PROCEEDS

We estimate that the net proceeds we will receive from the sale of our
common stock in this offering, assuming a public offering price of $13.875 per
share and after deducting the underwriting discounts and commissions and
estimated related expenses, will be approximately $79.3 million ($88.8 if the
underwriters' over-allotment option is exercised in full). We expect to use
approximately $47.1 million of such net proceeds to repay indebtedness
outstanding under the credit facility (including indebtedness incurred to
finance the Safariland acquisition) and the remainder will be used to fund
growth through potential acquisitions and expansion of service and product
offerings, as well as for working capital and for other general corporate
purposes. We may invest the net proceeds of this offering in short term
interest-bearing investment grade securities, pending the intended repayment of
indebtedness outstanding under the credit facility and the other uses described
above. We will not receive any of the proceeds of the shares sold by the
selling stockholders.

The indebtedness which will be reduced with the net proceeds of this
offering was incurred under the credit facility principally to finance the
acquisition of Safariland. This indebtedness bears interest at variable rates
(7.875% per year at March 19, 1999) and matures on February 12, 2004. Although
application of the net proceeds from this offering will repay amounts
outstanding under the credit facility, it will not reduce the amounts available
to us under the credit facility in the future. See "Description of the Credit
Facility" and Note 19 to the Consolidated Financial Statements.

We regularly review opportunities to further our business strategy through
strategic acquisitions of businesses that we believe are complementary to our
current and planned operations. We, however, have no present commitments or
agreements with respect to any particular acquisition other than nonbinding
commitments with respect to the acquisitions of Safariland and Parvus, a
business intelligence company. A portion of the net proceeds of this offering
may be used to fund potential acquisitions. See "Business -- Growth Strategy."

The foregoing information represents our best belief of our use of the
proceeds of this offering based upon our current plans. Actual expenditures may
vary substantially from the intended uses referred to above. We may find it
necessary or advisable to use portions of this offering for other purposes.

12
<PAGE>

PRICE RANGE OF COMMON STOCK

Our common stock, par value $.01 per share, is traded under the symbol
"ABE" on the American Stock Exchange (the "AMEX"). The following table sets
forth the range of high and low sales prices for the common stock on the AMEX
for fiscal years 1998 and 1997 and for the first quarter of fiscal year 1999
(through March 23, 1999). We intend to list our common stock on the New York
Stock Exchange simultaneously with the consummation of this offering under the
symbol "AH."

<TABLE>
<CAPTION>
1999 HIGH LOW
---- --------- -------
<S> <C> <C>
1st Quarter through March 23, 1999 .......... 14 5/8 11 5/16

1998
-----
1st Quarter ................................. 11 1/2 9 3/4
2nd Quarter ................................. 12 1/2 10 5/8
3rd Quarter ................................. 11 11/16 8 7/8
4th Quarter ................................. 11 9/16 9

1997
----
1st Quarter ................................. 9 1/2 7 1/2
2nd Quarter ................................. 10 7/8 8 3/4
3rd Quarter ................................. 12 3/4 10 1/2
4th Quarter ................................. 13 3/8 10 1/8

</TABLE>

On March 23, 1999, the last reported sales price of the common stock on
the AMEX was $13.875 per share. As of March 8, 1999, we had approximately 1,783
stockholders of record. Holders of shares held in "nominee" or street names are
included in this number.

DIVIDEND POLICY

We have not paid any cash dividends on our common stock for the last two
fiscal years, and do not intend to pay any for the foreseeable future. We
expect to continue to retain any earnings for working capital, repayment of
indebtedness, capital expenditures and general corporate purposes. In addition,
our credit facility restricts the payment of dividends on our common stock. See
"Description of the Credit Facility" and Note 19 to the Consolidated Financial
Statements.

13
<PAGE>

CAPITALIZATION

The following table sets forth our consolidated capitalization as reported
in the Consolidated Financial Statements at December 31, 1998 on an actual
basis, on a pro forma basis to reflect the Safariland acquisition, and as
adjusted to give effect to the issuance and sale of the 6,125,000 shares of
common stock offered by us hereby and the application of the net proceeds
therefrom. You should read this table in conjunction with the Consolidated
Financial Statements, the Notes thereto and the Unaudited Pro Forma Financial
Information included elsewhere in this prospectus. See "Description of the
Credit Facility."

<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
---------- ----------- ------------
<S> <C> <C> <C>
Cash and cash equivalents ...................................... $ 6,789 $ 6,789 $ 39,689
======== ======== ========
Short-term debt ................................................ 5,041 44,791 --
Current portion of long-term debt and capitalized lease
obligations ................................................... 433 811 811
-------- -------- --------
Total short-term debt ......................................... $ 5,474 $ 45,602 $ 811
======== ======== ========
Long-term debt and capitalized lease obligations, net current
portion ....................................................... 344 2,687 344
Minority interest .............................................. 108 108 108
Stockholders' equity:
Preferred stock, par value $0.01 per share;
5,000,000 shares authorized, no shares issued
and outstanding ............................................. -- -- --
Common stock, par value $0.01 per share;(1)
50,000,000 shares authorized, 16,497,808 shares issued and
16,227,080 shares outstanding, 16,791,710 shares issued pro
forma and 16,520,982 shares outstanding pro forma and
22,916,710 shares issued pro forma as adjusted and
22,645,982 shares outstanding pro forma as adjusted ......... 165 168 229
Additional paid-in capital .................................... 65,408 69,405 149,378
Cumulative comprehensive income, net of tax ................... (574) (574) (574)
Retained earnings ............................................. 13,419 13,419 13,419
Treasury stock ................................................ (3,316) (3,316) (3,316)
-------- -------- --------
Total stockholders' equity ............................... 75,102 79,102 159,136
-------- -------- --------
Total capitalization ..................................... $ 75,554 $ 81,897 $159,588
======== ======== ========
</TABLE>

14
<PAGE>

SELECTED FINANCIAL INFORMATION

The selected financial data set forth below for the fiscal years 1996,
1997 and 1998 are derived from our audited Consolidated Financial Statements
appearing elsewhere in this prospectus. The selected financial data set forth
below for the fiscal years 1994 and 1995 are derived from our audited financial
statements not included herein. This following selected financial data should
be read in conjunction with our "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our Consolidated Financial
Statements and Notes thereto appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------------------------------------------
1994 1995 1996 1997 1998
----------- ----------- ------------ ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Services ............................................ $ -- $ -- $ 12,956 $ 48,445 $ 51,563
Products ............................................ 11,355 11,741 18,011 29,869 45,644
--------- --------- --------- -------- ---------
Total revenues ....................................... 11,355 11,741 30,967 78,314 97,207
Cost of sales ........................................ 7,741 7,443 21,172 57,438 66,451
Operating expenses ................................... 2,696 3,421 7,022 12,758 17,204
Amortization ......................................... -- -- 437 842 1,245
Merger, integration and other non-recurring
charges ............................................. -- -- -- 2,542 --
Interest expense (income), net ....................... 216 281 515 195 (625)
Equity in earnings of unconsolidated subsidiary -- -- (320) (746) (713)
--------- --------- --------- -------- ---------
Operating income ..................................... 702 596 2,141 5,285 13,645
Non-operating income ................................. -- 228 2 392 28
Dividends on preference shares ....................... -- -- 239 143 --
Provision for income taxes ........................... 279 304 1,215 2,376 5,077
--------- --------- --------- -------- ---------
Net income applicable to common stockholders $ 423 $ 520 $ 689 $ 3,158 $ 8,596
========= ========= ========= ======== =========
Earnings (loss) per common share
Basic ............................................... $ 0.09 $ 0.11 $ 0.09 $ 0.23 $ 0.53
Diluted ............................................. $ 0.07 $ 0.08 $ 0.08 $ 0.21 $ 0.50
Weighted average common shares outstanding
Basic ............................................... 4,625 4,754 7,966 13,638 16,165
Diluted ............................................. 5,802 6,370 8,876 14,712 17,354
OTHER DATA:
EBITDA(1) ............................................ $ 1,036 $ 1,253 $ 3,476 $ 7,848 $ 15,702
Depreciation and amortization(2) ..................... 118 148 818 1,976 2,654
Net cash from (used in) operating activities ......... (127) (247) 1,639 (1,556) 3,379
Net cash used in investing activities ................ (118) (119) (16,428) (7,877) (20,701)
Net cash from financing activities ................... 540 324 23,848 20,812 5,032
Capital expenditures ................................. 118 119 1,860 5,153 3,301

BALANCE SHEET DATA (AT PERIOD END): 1994 1995 1996 1997 1998
--------- --------- ---------- --------- ----------
Working capital(3) ................................... $ 40 $ 2,605 $ 8,668 $ 12,824 $ 23,051
Total assets ......................................... 7,470 8,161 49,530 75,487 94,353
Total debt ........................................... 1,743 2,110 8,203 201 5,818
Stockholders' equity ................................. 4,427 4,947 24,875 64,598 75,102
</TABLE>

(2) For fiscal 1994 depreciation and amortization includes $118 of
depreciation, which is included in cost of sales and operating expenses,
and no amortization; for fiscal 1995 depreciation and amortization
includes $148 of depreciation, which is included in cost of sales and
operating expenses, and no amortization; for fiscal 1996 depreciation and
amortization includes $381 of depreciation, which is included in cost of
sales and operating expenses, and $437 of amortization; for fiscal 1997
depreciation and amortization includes $1,134 of depreciation, which is
included in cost of sales and operating expenses, and $842 of
amortization; and for fiscal 1998 depreciation and amortization includes
$1,409 of depreciation, which is included in cost of sales and operating
expenses, and $1,245 of amortization.

(3) Working capital is defined as current assets minus current liabilities
excluding cash and short term interest-bearing indebtedness.

15
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The following historical and unaudited pro forma consolidated financial
information has been derived from our audited consolidated historical financial
statements as of and for the year ended December 31, 1998, and of Safariland as
of and for the year ended September 30, 1998, each appearing elsewhere in this
prospectus. The unaudited pro forma consolidated statement of operations for
fiscal 1998 gives effect to the acquisition of Safariland and this offering as
if they had occurred at the beginning of our 1998 fiscal year. The unaudited pro
forma consolidated balance sheet as of December 31, 1998 gives effect to the
acquisition of Safariland and this offering as if they had occurred as of
December 31, 1998. The acquisition of Safariland was accounted for using the
purchase method. Additionally, the pro forma results do not give effect to any
of our other acquisitions that occurred during 1998.

The unaudited pro forma consolidated financial statements are presented
for informational purposes only and are not necessarily indicative of actual
results that would have been achieved had such transactions been consummated on
the dates or for the periods indicated and do not purport to indicated results
of operations as of any future period. The pro forma consolidated statement of
operations only reflects anticipated cost savings directly attributable to the
acquisition of Safariland which we believe would have resulted had the
acquisition occurred at the beginning of our fiscal 1998. The unaudited pro
forma consolidated financial statements should be read in conjunction with
Consolidated Financial Statements and the related notes thereto, the
Consolidated Financial Statements of Safariland included elsewhere in this
prospectus, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

16
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
HISTORICAL
----------------------------
COMPANY SAFARILAND(1)
----------- ----------------
<S> <C> <C>
Revenues:
Services .............................. $51,563 $ --
Products .............................. 45,644 45,283
------- --------
Total revenues ......................... 97,207 45,283
Cost of sales .......................... 66,451 26,209
Operating expenses ..................... 17,204 18,715
Amortization ........................... 1,245 --
Interest expense (income), net ......... (625) 482
------- --------
Equity in earnings of unconsolidated
subsidiaries .......................... (713) 16
Operating income ....................... 13,645 (139)
Non-operating income ................... 28 473
Provision for taxes .................... 5,077 (166)
------- --------
Net income ............................. $ 8,596 $ 500
Earnings per common share
Basic ................................. $ 0.53
Diluted ............................... $ 0.50
Weighted average common shares
outstanding
Basic ................................. 16,165
Diluted ............................... 17,354
Other Data:
EBITDA* ............................... 15,702 1,477
Depreciation & amortization** ......... 2,654 661

</TABLE>

<TABLE>
<CAPTION>
PRO FORMA OFFERING PRO FORMA
ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
----------------- ----------- ----------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Services .............................. $ 51,563 $ 51,563
Products .............................. 90,927 90,927
-------- --------
Total revenues ......................... 142,490 142,490
Cost of sales .......................... (1,320)(2) 91,340 91,340
Operating expenses ..................... (5,193)(3) 30,726 30,726
Amortization ........................... 1,445 (4) 2,690 2,690
Interest expense (income), net ......... 2,937 (5) 2,794 (3,550)(8) (756)
------ -------- ------ --------
Equity in earnings of unconsolidated
subsidiaries .......................... (697) (697)
Operating income ....................... 2,131 15,637 3,550 19,187
Non-operating income ................... 501 501
Provision for taxes .................... 1,341 (6) 6,252 1,331 (6) 7,583
------ -------- ------ --------
Net income stockholders ................ $ 790 $ 9,886 $ 2,219 $ 12,106
Earnings per common share
Basic ................................. $ 0.60 $ 0.54
Diluted ............................... $ 0.56 $ 0.51
Weighted average common shares
outstanding
Basic ................................. 294 (7) 16,459 6,125 (9) 22,584
Diluted ............................... 294 17,648 6,125 23,773
Other Data:
EBITDA* ............................... 22,247 22,247
Depreciation & amortization** ......... 3,315 3,315
</TABLE>

- ----------
* EBITDA is defined as net income plus interest, taxes, depreciation and
amortization. EBITDA is not a substitute for operating income, net income
and cash flow from operating activities as determined in accordance with
generally accepted accounting principles as a measure of profitability or
liquidity. EBITDA is presented because we believe some investors may find
it useful in evaluating an investment in our common stock.

** For the Company, fiscal 1998 depreciation and amortization includes $1,409
of depreciation, which is included in cost of sales and operating expenses,
and $1,245 of amortization.

17
<PAGE>

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)

(1) Safariland's consolidated results of operations are presented for the
fiscal year ended September 30, 1998.

(2) Reflects an annual rent reduction of $230 negotiated with the sellers in
connection with the acquisition of Safariland and reduction of labor
costs of $1,090 to reflect headcount reductions achieved from the
combination of body armor manufacturing operations with Safariland.

(3) Represents an adjustment to operating expenses to reflect the following:

Reduced compensation expense ............... $ 3,962 (a)
Eliminated airplane costs .................. 125 (b)
Reduced professional fees .................. 743 (c)
Reduction in banking fees .................. 75 (d)
Net reduction in executive auto leases ..... 43
Reduction in other non-recurring expenses .. 245 (e)
--------
$ 5,193

(a) Reflects headcount reductions ($2,247), termination of certain
employment agreements ($1,098) and elimination of non-recurring
expenses ($617) incurred by Safariland in the fiscal year ended
September 30, 1998.

(b) Reflects the elimination of costs incurred to operate an airplane
which is not being purchased in the acquisition of Safariland.

(c) Reflects the extraordinary professional fees incurred by Safariland
in contemplation of the sale of the company which would not
otherwise have been incurred.

(d) Reflects the net elimination of bank fees paid to maintain
Safariland's banking and credit functions.

(e) Reflects the reduction in other non-recurring expenses that would
have otherwise been capitalized by the Company.

(4) Reflects the amortization of an estimated $36,115 of goodwill generated
by the Safariland acquisition over a 25 year period.

(5) Represents the interest expense to be incurred to finance the purchase of
Safariland and is calculated using a rate of 7.875% on borrowings of
$37,300. The interest rate used reflects the interest rate that the
Company would expect to pay under its existing credit facility.

(6) Reflects the adjustment to the provision for taxes by applying the
Company's effective tax rate of 37.5% to the above pro forma and
offering adjustments. Amortization of goodwill is not tax deductible.

(7) Reflects the shares issued in the acquisition of Safariland.

(8) Represents the elimination of interest expense associated with borrowings
outstanding under our credit facility and Safariland's credit facility,
both of which will be repaid in full with proceeds from this offering.
Does not reflect the anticipated $1,645 in interest income anticipated
to be generated from the investment of the excess proceeds of this
offering in interest bearing securities at an assumed interest rate of
5% per annum.

(9) Reflects the shares issued as a result of this offering.

18
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL
----------------------------
PRO FORMA OFFERING PRO FORMA
COMPANY SAFARILAND (1) ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
----------- ---------------- ----------------- ----------- --------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...... $ 6,789 $ -- $ 6,789 $ 32,900(9) $ 39,689
Accounts receivable, net ....... 21,363 6,202 27,565 27,565
Inventories .................... 9,103 3,555 12,658 12,658
Prepaid expenses and other
current assets ............... 5,910 2,847 8,757 8,757
-------- ------- -------- --------
Total current assets ........... 43,165 12,604 55,769 32,900 88,669
Property, plant and
equipment, net ................. 12,173 3,733 (2,200)(2) 13,706 13,706
Intangible assets, net .......... 34,562 36,115 (3) 70,677 70,677
Investment in unconsolidated
subsidiary ..................... 483 1,459 1,942 1,942
Other assets .................... 3,970 548 4,518 4,518
-------- ------- --------- -------- ------------- --------
TOTAL ASSETS .................... $ 94,353 $18,344 $ 33,915 $146,612 $ 32,900 $179,512
======== ======= ========= ======== ============= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Short-term debt ................ $ 5,041 $ 2,450 $ 37,300(4) $ 44,791 $ (44,791)(10) $ --
Current portion of
long-term debt and
capitalized lease
obligations .................. 433 378 811 811
Accounts payable, accrued
expenses and other ........... 13,325 3,788 2,000 (5) 19,113 19,113
-------- ------- ----------- -------- ------------- --------
Total current liabilities ....... 18,799 6,616 39,300 64,715 (44,791) 19,924
-------- ------- ----------- -------- ------------- --------
Minority interest ............... 108 108 108
Long-term debt and
capitalized lease obligations
and other long term
liabilities .................... 344 2,343 2,687 (2,343)(10) 344
-------- ------- ----------- -------- ------------- --------
Total liabilities ............... 19,251 8,959 39,300 67,510 (47,134) 20,376
Stockholders' equity:
Common stock ................... 165 272 (269)(6) 168 61 (11) 229
Preferred stock ................ 1,200 (1,200)(6)
Additional paid in capital ..... 65,408 100 3,897 (7) 69,405 79,973 (11) 149,378
Cumulative comprehensive
income, net of tax ........... (574) (574) (574)
Notes receivable from
stockholders.................. (215) 215 (2)
Retained earnings .............. 13,419 8,028 (8,028)(8) 13,419 13,419
Treasury stock ................. (3,316) (3,316) (3,316)
-------- ------- ----------- -------- ------------ --------
Total stockholders'
equity ...................... 75,102 9,385 (5,385) 79,102 80,034 159,136
-------- ------- ----------- -------- ------------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ........... $ 94,353 $18,344 $ 33,915 $146,612 $ 32,900 $179,512
======== ======= =========== ======== ============= ========
</TABLE>

19
<PAGE>

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(1) Safariland's consolidated balance sheet as of September 30, 1998.

(2) Reflects the elimination of assets that will not be purchased by the
Company, pursuant to the stock purchase agreement.

(3) Reflects the excess of purchase price over the fair value of the net
assets acquired.

(4) Short term debt reflects borrowings necessary to consummate the Safariland
acquisition.

(5) The adjustment to accounts payable, accrued expenses and other liabilities
represents the accrual of direct costs and other non-recurring charges we
expect to incur related to the acquisition.

(6) Reflects the acquisition of all of the issued and outstanding common and
preferred shares of Safariland, and the issuance of 293,983 shares of our
common stock with $0.01 par value per share.

(7) Represents additional paid in capital associated with the issuance of
293,983 shares of our common stock at an assumed price of $13.61 per
share and the elimination of $100 of Safariland additional paid in
capital.

(8) Represents the elimination of Safariland retained earnings.

(9) Represents the anticipated excess cash proceeds from this offering.

(10) Represents the repayment in full of borrowings under our credit facility
and Safariland's credit facility.

(11) Represents the issuance of 6,125,000 shares in this offering and the
additional paid in capital associated with the 6,125,000 shares being
issued in this offering.

20
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act.
Statements that are predictive in nature, that depend upon or refer to future
events or conditions or that include the words such as "expects",
"anticipates", "intends", "plans", "believes", "estimates", and similar
expressions are forward looking statements. Although we believe that these
statements are based upon reasonable assumptions, we can give no assurance that
their goals will be achieved. See "Forward Looking Statements."

COMPANY OVERVIEW

We are a leading global provider of security risk management services and
products to multi-national corporations, governmental agencies and law
enforcement personnel through our two operating divisions -- Armor Group
Services and Armor Holdings Products. Our Armor Group Services division
provides sophisticated security planning and risk management, electronic
security systems integration, consulting and training services, as well as
intellectual property asset protection, business intelligence and investigative
services. We provide these services to multi-national corporations and
governmental and non-governmental agencies through our 22 offices in 18
countries. Our Armor Holdings Products division manufactures and sells a broad
range of high quality branded law enforcement equipment and has a leading
market position in several of the product categories in which we compete. Such
products include ballistic resistant vests and tactical armor, police duty
gear, less-than-lethal munitions, anti-riot products and narcotics
identification kits. These products are sold primarily to law enforcement
agencies through a worldwide network of over 500 distributors and sales agents
including approximately 350 in the United States. We believe significant
opportunities exist to grow our company and extend our global infrastructure
through geographic expansion and strategic acquisitions of related businesses
in the fragmented security risk management services and products industry. For
fiscal 1998, we generated total pro forma revenues of $142.5 million.

ACQUISITIONS

We have pursued a strategy of growth through acquisition of businesses and
assets that complement our existing operations. We use several criteria to
evaluate prospective acquisitions including whether the business to be
acquired:

o broadens the scope of the services or products we offer or the
geographic areas we serve,

o offers attractive margins,

o is accretive to earnings, and

o offers the opportunity to enhance profitability by improving the
efficiency of our operations.

Since January 1996, we have consummated 11 acquisitions and announced our
intention to acquire two additional companies, including Safariland, a leading
manufacturer of equipment for the law enforcement, military and sporting goods
markets worldwide. The aggregate purchase price for these acquisitions,
including assumed debt and subject to certain post closing adjustments, was
approximately $96 million, with aggregate sales of approximately $125 million.

RESULTS OF OPERATIONS

The following table sets forth selected statement of operations data for
us as a percentage of total revenues for the periods indicated:

21
<PAGE>

<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------
1996 1997 1998
-------- -------- -----------
<S> <C> <C> <C>
Revenues:
Services ........................................... 42% 62% 53%
Products ........................................... 58% 38% 47%
Total revenues ....................................... 100% 100% 100%
Interest (income) expense, net ....................... 2% 0% (1)%
Operating income ..................................... 7% 7% 14%
Provision of income taxes ............................ 4% 3% 5%
Net income applicable to common stockholders ......... 2% 4% 9%
EBITDA ............................................... 11% 10% 16%
</TABLE>

FISCAL 1998 AS COMPARED TO FISCAL 1997

Service revenues. Service revenues increased by $3.1 million, or 6.4%, to
$51.6 million in fiscal 1998 compared to $48.4 million in fiscal 1997. This
increase was primarily due to the award of new contracts to our Armor Group
Services division and the integration of acquisitions completed during 1998.
This increase was partially offset by the reduction of $12.0 million in revenue
associated with the termination of our Angolan operation in early 1998.

Product revenues. Product revenues increased by $15.8 million, or 52.8%,
to $45.6 million in fiscal 1998 compared to $29.9 million in fiscal 1997. This
increase was primarily due to internal growth of approximately 25% over fiscal
1997 for acquired companies owned by us for more than one year and the increase
resulting from the integration of acquisitions completed during 1998.

Cost of sales. Cost of sales increased by $9.0 million, or 15.7%, to $66.5
million in fiscal 1998 compared to $57.4 million in fiscal 1997. This increase
was primarily due to increased revenues in fiscal 1998 compared to fiscal 1997.
As a percentage of total revenues, cost of sales decreased to 68.4% in fiscal
1998 from 73.3% in fiscal 1997 reflecting a greater proportion of total revenue
generated by our Armor Holdings Products division in fiscal 1998, which has
higher gross margins than our Armor Group Services division.

Operating expenses. Operating expenses increased by $4.6 million, or
37.1%, to $17.2 million (17.6% of total revenues) in fiscal 1998 compared to
$12.5 million (15.9% of total revenues) in fiscal 1997. This increase was
primarily due to the increased revenues from our Armor Holdings Products
division which has higher sales and marketing expenses than the revenues from
the Armor Group Services division.

Depreciation and amortization. Depreciation and amortization expense
increased by $200,000, or 18.2%, to $1.3 million in fiscal 1998 compared to
$1.1 million in fiscal 1997. This increase excludes depreciation expense
included in cost of sales. This increase was primarily due to additional
amortization of intangible assets acquired during fiscal 1998 which would not
have been reflected in fiscal 1997.

Merger, integration and other non-recurring charges. The fees and expenses
associated with the acquisition of DSL, a component of our Armor Group Services
division, which was accounted for as a pooling of interests and had
non-recurring expenses relating to the financial and administrative
restructuring and integration of DSL into our Armor Group Services division,
totaled approximately $2.5 million in fiscal 1997. No such non-recurring
charges were incurred in fiscal 1998.

Equity in earnings of investees. Equity in earnings of investees decreased
by $33,000, or 4.4%, to $713,000 in fiscal 1998 compared to $746,000 in fiscal
1997. The equity in earnings of investees in fiscal 1998 is comprised of a 20%
investment in Jardine Securicor Gurkha Services Limited ("JSGS"), a Hong Kong
joint venture company. The equity in earnings of investees in fiscal 1997
related to the investment in JSGS, as well as DSL's original 50% investment in
Gorandel Trading Limited until June 9, 1997, when the 100% investment was
consolidated into our results of operations.

Interest (income) expense, net. Interest (income) was $(625) in fiscal
1998 compared to interest expense of $195 in fiscal 1997. This increase was
primarily due to interest income earned on the

22
<PAGE>

proceeds from our 1997 public offering and the repayment of the balance of
approximately $18.6 million that was outstanding on the credit facility at the
time the offering was completed.

Operating income. Operating income increased by $8.4 million, or 158.2%,
to $13.6 million in fiscal 1998 compared to $5.3 million in fiscal 1997
primarily due to the factors discussed above.

Non-operating income. Non-operating income decreased by $364,000, or
92.9%, to $28,000 in fiscal 1998 compared to $392,000 in fiscal 1997. This
decrease was primarily due to fees paid to us by a former employee in fiscal
1997 in connection with our role as agent for the sale of our common stock.

Income taxes. Income taxes increased by $2.7 million, or 113.7%, in fiscal
1998, compared to $2.4 million in fiscal 1997, based on a provision of 37%.
This provision is comprised of our U.S. federal and state statutory rates of
approximately 36% for our U.S.-based companies and a 38% blended effective tax
rate for our foreign operations.

Dividends on preference shares. In connection with our acquisition of DSL,
a unit of our Armor Group Services division, we incurred $143,000 in preference
share dividends in fiscal 1997. We acquired the shares underlying the dividends
on April 16, 1997, and therefore, did not incur any dividends on these shares
during fiscal 1998.

Net income applicable to common stockholders. Net income applicable to
common stockholders increased approximately $5.4 million or 172.2%, to $8.6
million in fiscal 1998 compared to $3.2 million in fiscal 1997. This increase
was primarily due to the factors discussed above.

FISCAL 1997 AS COMPARED TO FISCAL 1996

Service revenues. Service revenues increased by $35.5 million, or 273.9%,
to $48.4 million in fiscal 1997 compared to $13.0 million in fiscal 1996. This
increase was primarily due to the reflection of only five months of operations
in fiscal 1996, as results of DSL operations have only been included from
August 1, 1996, as previously stated. In addition, Armor Group Services
generated substantial internal growth during fiscal 1997. Fiscal 1997 revenues
also included approximately $12.0 million related to Angolan operations which
ceased on January 16, 1998. See Note 17 to Consolidated Financial Statements.

Product revenues. Product revenues increased by $11.9 million, or 65.8%,
to $29.9 million in fiscal 1997 compared to $18.0 million in fiscal 1996. This
increase was primarily due to sales generated from the DTC and NIK operations
in fiscal 1997, as well as sales generated by Supercraft from the date of
acquisition, April 7, 1997, until December 27, 1997 and internal growth in the
body armor business.

Cost of sales. Cost of sales increased $36.3 million, or 171.3%, to $57.4
million in fiscal 1997 compared to $21.1 million in fiscal 1996. This increase
was primarily due to the combination with DSL, which had a $28.8 million impact
on direct operating costs in fiscal 1997. The remaining $7.5 million increase
in cost of sales is attributed to the increased costs of the Armor Holdings
Products business (associated with a 65.8% increase in revenues). As a
percentage of total revenues, cost of sales increased to 73.3% in fiscal 1997
compared to 68.4% in fiscal 1996, reflecting the higher cost of sales
associated with the security services business. In fiscal 1997, we also
recorded reserves of approximately $500,000 related to the cessation of
operations in Angola. See Note 17 to the Consolidated Financial Statements.

Operating expenses. Operating expenses increased $5.6 million, or 80.6%,
to $12.5 million (15.9% of total revenues) in fiscal 1997 compared to $6.9
million (22.3% of total revenues) during fiscal 1996. This increase in the
actual dollar amount of operating expenses between the periods was primarily
due to overhead costs associated with DSL, DTC and NIK and approximately
$800,000 of selling, general and administrative costs at our headquarters in
Jacksonville, Florida, primarily for the development of our infrastructure as a
holding company.

Depreciation and amortization. Depreciation and amortization expense
increased to $1.1 million, or 103.4% in fiscal 1997 compared to $554,000 in
fiscal 1996. Of this $573,000 increase, approximately

23
<PAGE>

$260,000 was due to amortization of intangible assets acquired during 1996,
another approximate $250,000 was due to amortization of acquired goodwill in
the DSL acquisition, with the remaining increase due to the amortization of
goodwill acquired with the Supercraft and GTL acquisitions.

Merger, integration and other non-recurring charges. Fees and expenses
associated with completing the DSL acquisition were expended in fiscal 1997.
These non-recurring expenses, in combination with certain other charges
relating to the financial and administrative restructuring and consolidation of
DSL into Armor Holdings, totaled approximately $2.5 million.

Equity in earnings of investees. Equity in earnings of investees amounted
to approximately $746,000 in fiscal 1997 compared to $320,000 in 1996. The
equity in earnings of investees in fiscal 1997 relates to DSL's original 50%
investment in GTL until June 9, 1997, the date we acquired the remaining 50%
interest not owned by DSL, at which point the 100% investment was consolidated
into our results. The equity also relates to DSL's 20% investment in JSGS. The
1996 period reflected only five months of equity earnings, as results of DSL
operations were only included from August 1, 1996, as previously stated.

Interest expense, net. Interest expense, net decreased $320,000, or 62.1%,
to $195,000 in fiscal 1997 compared to $515,000 in fiscal 1996. The decrease in
interest expense was primarily due to interest income earned on the proceeds
realized from our 1997 public offering, after the repayment of the balance of
approximately $18.6 million that was outstanding on the credit facility at the
time.

Operating income. Operating income increased $3.1 million, or 146.8%, to
$5.3 million in fiscal 1997 compared to $2.1 million in fiscal 1996. Management
believes that an additional measurement, "operating income before merger,
integration and other non-recurring charges," is useful and meaningful to an
understanding of our operating performance. However, operating income before
merger, integration and other non-recurring charges should not be considered as
an alternative either to operating income or net income nor as an indicator of
our operating performance, cash flow or as a measurement of liquidity.
Operating income before the merger, integration and other non-recurring charges
of $2.5 million increased $5.7 million, or 265.6%, to $7.8 million in fiscal
1997 compared to $2.1 million in fiscal 1996. This increase is due to the
combination with DSL and the acquisitions of Supercraft, the DTCoA Assets and
the NIK Assets, as well as internal growth within DSL and American Body Armor &
Equipment, Inc., a Delaware corporation ("ABA").

Non-operating income. Non-operating income increased $390,000 to $392,000
in fiscal 1997 compared to $2,000 in fiscal 1996. This increase resulted
primarily due to fees paid to us by a former employee in fiscal 1997 in
connection with our role as agent for the sale of our common stock.

Income taxes. As of January 1, 1996, we had an income tax net operating
loss carryforward ("NOL") of approximately $4.4 million. Effective with our
change in control by Kanders Florida Holdings, Inc. on January 18, 1996, the
utilization of this NOL became restricted in the United States to approximately
$300,000 per year. However, as of December 27, 1997, our net operating losses
increased to approximately $7.8 million and expire in varying amounts in fiscal
years 2006 to 2010. The increase in the net operating losses is a result of the
recording of DSL deferred tax assets that related to fiscal 1997 losses
generated in the United Kingdom which will be offset against future income.

Income taxes totaled $2.4 million in fiscal 1997 compared to $1.2 million
in fiscal 1996. The provision of 41.9% was based on our U.S. federal and state
statutory rates of approximately 35% for its U.S.-based companies and a 38%
blended effective tax rate for our foreign operations, and was increased by
approximately $750,000 for certain items, primarily merger-related,
non-recurring charges which were not tax deductible.

In accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"), we have recorded a deferred tax
asset, representing our cumulative net operating loss carryforward and
deductible temporary differences, subject to applicable limits and an asset
valuation allowance. As of December 27, 1997, the gross amount of this deferred
tax asset was $3.1 million, of which $1.8 million has been offset by a
valuation allowance.

24
<PAGE>

Dividends on preference shares. In connection with our acquisition of DSL,
a unit of our Armor Group Services division, we incurred $143,000 and $239,000
in fiscal 1997 and fiscal 1996, respectively, in preference share dividends.
These accrued dividends as well as the shares underlying the dividends were
acquired by us on April 16, 1997 in the DSL transaction.

Net income applicable to common stockholders. Net income applicable to
common stockholders increased $2.5 million or 358.3%, to $3.2 million in fiscal
1997 compared to $689,000 in fiscal 1996. This increase was due to the effect
of acquisitions made during fiscal 1997 together with growth in the core
businesses, being partially offset by the non-recurring charge incurred by us
in fiscal 1997. Excluding the merger, integration and other non-recurring
charges discussed above, we would have earned $0.33 per diluted share as
compared to actual diluted earnings per share of $0.21.

25
<PAGE>

QUARTERLY RESULTS

Set forth below is certain unaudited quarterly financial data for each of
our last eight quarters and such data expressed as a percentage of our revenue
for the respective quarters. The information has been derived from unaudited
financial statements that, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary to
fairly present such quarterly information in accordance with generally accepted
accounting principles. The operating results for any quarter are not
necessarily indicative of the results to be expected for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
MAR 29, JUNE 28, SEPT. 27, DEC. 27, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- ---------- ----------- ---------- ---------- ---------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Services .................... $ 8,328 $10,315 $14,344 $15,458 $11,800 $11,905 $13,860 $13,998
Products .................... 6,422 7,748 7,780 7,919 7,835 10,928 12,584 14,297
------- ------- ------- ------- ------- ------- ------- -------
Total revenue ................ 14,750 18,063 22,124 23,377 19,635 22,833 26,444 28,295
Operating income (loss) ...... 1,306 (486) 2,543 2,117 2,507 2,759 3,667 4,087
Interest expense (income),
net ......................... 69 342 (20) (196) (242) (198) (104) (81)
Provision (benefit) for income
taxes ....................... 554 (132) 945 1,009 975 1,122 1,445 1,535
Net income (loss) applicable to
common stockholders ......... 540 (696) 1,618 1,696 1,774 1,835 2,326 2,661
Earnings (loss) per
common share
Basic ....................... $ 0.05 $ (0.06) $ 0.10 $ 0.11 $ 0.11 $ 0.11 $ 0.14 $ 0.16
Diluted ..................... $ 0.04 $ (0.05) $ 0.10 $ 0.10 $ 0.10 $ 0.11 $ 0.14 $ 0.15
Weighted average common
shares outstanding
Basic ....................... 11,827 11,892 15,940 16,024 16,037 16,144 16,224 16,227
Diluted ..................... 12,797 12,965 16,025 17,209 17,154 17,034 17,022 17,471
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
MAR 29, JUNE 28, SEPT. 27, DEC. 27, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- ---------- ----------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Services ..................... 56% 57% 65% 66% 60% 52% 52% 49%
Products ..................... 44% 43% 35% 34% 40% 48% 48% 51%
------ ----- ----- ----- ----- ----- ----- -----
Total revenue ................. 100% 100% 100% 100% 100% 100% 100% 100%
Operating income (loss)........ 9% (3)% 11% 9% 13% 12% 14% 14%
Interest expense (income),
net ......................... 0% 2% 0% (1)% (1)% (1)% 0% 0%
Provision (benefit) for income
taxes......................... 4% (1)% 4% 4% 5% 5% 5% 5%
Net income (loss) applicable to
common stockholders .......... 4% (4)% 7% 7% 9% 8% 9% 9%
</TABLE>

26
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Historically, we have funded operations through cash flow from operations
and debt and equity financing, including an April 1996 private placement of
$11.5 million of convertible notes, a November 1996 $10 million revolving
credit facility with Barnett Bank, which was increased to $20 million in March
1997, and a July 1997 public offering of 4,000,000 shares of common stock. On
February 12, 1999, we established a five-year $60 million line of credit. As of
March 19, 1999, we had $5,757,951 outstanding and $54,211,749 available under
the credit facility.

We entered into the credit facility with CIBC, Inc., NationsBank, N.A.,
First Union National Bank and SunTrust Bank, North Florida, N.A., as lenders,
NationsBank, N.A., as Documentation Agent and Canadian Imperial Bank of
Commerce, as Administrative Agent. All borrowings under the credit facility
bear interest at either (i) the base rate, plus an applicable margin ranging
from .125% to .375% depending on certain conditions, or (ii) the Eurodollar
rate, plus an applicable margin ranging from 1.375% to 1.625% depending on
certain conditions. In addition, the credit facility provides that NationsBank,
N.A. will make swing-line loans of up to $5,000,000 available to us to be used
for working capital purposes. CIBC, Inc. and NationsBank, N.A. will also issue
letters of credit to us of up to $5,000,000. See "Description of the Credit
Facility."

We anticipate that cash generated from this offering, internal operations
and borrowings under the credit facility will enable us to meet our liquidity,
working capital and capital expenditure requirements during the next 12 months.
However, we may require additional financing to pursue our strategy of growth
through acquisitions. If such financing is required, there are no assurances
that it will be available, or if available, that it can be obtained on terms
favorable to us or on a basis that is not dilutive to stockholders.

As of December 27, 1997, we had working capital of $31.9 million, which
reflected the net proceeds of $19.4 million (after paying down our then
existing credit facility to zero) from the issuance of common stock in our 1997
public offering as well as cash flow from operations. As of December 31, 1998,
we had working capital of $24.4 million.

We expect spending for fiscal 1999 capital expenditures will be
approximately $2.4 million, of which we have already spent approximately
$426,577. Such expenditures include, among other things, leasehold
improvements, computer equipment and software, and manufacturing machinery and
equipment.

INFORMATION CONCERNING BUSINESS SEGMENTS AND GEOGRAPHICAL SALES

For information relating to our business segments please refer to Note 15
to our Consolidated Financial Statements included elsewhere in this prospectus.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounts Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). Comprehensive income includes net income and several other items that
current accounting standards require to be recognized outside of net income.
This standard requires enterprises to display comprehensive income and its
components in financial statements, to classify items of comprehensive income
by their nature in financial statements, and to display the accumulated
balances of other comprehensive income in stockholders' equity separately from
retained earnings and additional paid-in capital. SFAS 130 was effective for
fiscal years beginning after December 31, 1997. We adopted this standard for
our fiscal year beginning December 28, 1997.

INFLATION

We believe that the relatively moderate rates of inflation in recent years
have not had a significant impact on our revenue or profitability.
Historically, we have been able to offset any inflationary effects by either
increasing prices or improving cost efficiencies.

YEAR 2000 COMPLIANCE

Many older computer software programs refer to years in terms of their
final two digits only. Such programs may interpret the Year 2000 to mean the
year 1900 instead. If not corrected, those programs could cause date-related
transaction failures.

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<PAGE>

We have developed a Year 2000 initiative to address this concern. A
project team has performed a detailed assessment of all internal computer
systems and, as discussed below, is developing and implementing plans to
correct problems that may arise as a result of Year 2000. We expect these
projects to be successfully completed during 1999.

A Year 2000 status failure could affect many of our research and
development, production, financial, administrative and communication
operations. Systems critical to our business which have been identified as
non-Year 2000 compliant are either being replaced or corrected through
programming modifications. In addition, a separate team is looking at Year 2000
readiness from other aspects of our business, including customer order-taking,
manufacturing, raw materials supply and plant process equipment. Our goal is to
have the remedied and replaced systems operational by the second quarter of
1999 to allow time for testing and verification.

We are in the process of communicating with all of our significant
vendors, major customers, suppliers, communications providers and banks whose
systems failures potentially could have a significant impact on our operations
to determine the extent to which we are vulnerable to those third parties'
failure to remediate their own Year 2000 issues or to verify their Year 2000
readiness. We are testing such systems where appropriate and possible.

As part of the Year 2000 initiative, we are developing business continuity
plans for those areas that are critical to our business. These business
continuity plans will be designed to mitigate serious disruptions to our
business flow beyond the end of 1999, and will operate independent of the
external providers' Year 2000 compliance. The major drive for contingency
planning will be in the first half of 1999, with the expectation that our
business groups will have plans in place by the end of the second quarter of
1999. Based on our current plans and efforts to date, we do not anticipate that
Year 2000 problems will have a material adverse effect on our business,
financial condition and results of operations.

We have not yet developed any contingency plans in the event our Year 2000
remediation efforts are unsuccessful, but plan to do so in 1999. While we have
not identified a reasonably likely worst case scenario in the event we do not
become Year 2000 compliant, we continue to evaluate the Year 2000 issue and are
attempting to address any Year 2000 deficiencies.

External and internal costs specifically associated with modifying
internal use software for Year 2000 compliance are expensed as incurred. To
date, we have spent $19,300 on this project. Costs to be incurred for the
remainder of 1999 to remedy the Year 2000 problems are estimated at
approximately $30,700. These costs do not include normal system upgrades and
replacements. We do not expect the costs relating to our Year 2000 remediation
efforts to have a material adverse effect on our business, financial condition
and results of operations.

The above expectations are subject to uncertainties. For example, if we
are unsuccessful in identifying or remedying all Year 2000 problems in critical
operations, or if we are affected by the inability of our suppliers or major
customers to continue operations due to such a problem, our business, financial
condition and results of operations could be materially adversely effected.

The total costs that we incur in connection with Year 2000 problems will
be influenced by the ability to successfully identify Year 2000 system flaws,
the nature and amount of programming required to fix the affected programs, the
related labor and/or consulting costs for such remediation, and the ability of
third parties with whom we have business relationships to successfully address
their own Year 2000 concerns. These and other unforeseen factors could have a
material adverse effect on our business, financial condition and results of
operations.

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<PAGE>

BUSINESS

COMPANY OVERVIEW

We are a leading global provider of security risk management services and
products to multi-national corporations, governmental agencies and law
enforcement personnel through our two operating divisions -- Armor Group
Services and Armor Holdings Products. Our Armor Group Services division
provides sophisticated security planning and risk management, electronic
security systems integration, consulting and training services, as well as
intellectual property asset protection, business intelligence and investigative
services. We provide these services to multi-national corporations and
governmental and non-governmental agencies through our 22 offices in 18
countries. Our Armor Holdings Products division manufactures and sells a broad
range of high quality branded law enforcement equipment and has leading market
positions in several of the product categories in which we compete. Such
products include ballistic resistant vests and tactical armor, police duty
gear, less-than-lethal munitions, anti-riot products and narcotics
identification kits. These products are sold primarily to law enforcement
agencies through a worldwide network of over 500 distributors and sales agents,
including approximately 350 in the United States. We believe significant
opportunities exist to grow our company and extend our global infrastructure
through geographic expansion and strategic acquisitions of related businesses
in the fragmented security risk management services and products industry. For
fiscal 1998, we generated total pro forma revenues of $142.5 million.

Armor Group Services Division. Our Armor Group Services division provides
a broad range of sophisticated security risk management solutions to
multi-national corporations in diverse industries such as natural resources,
financial services and consumer products, and to governmental and
non-governmental agencies such as the U.S. Department of State, the United
Nations and the World Bank. Our clients typically have personnel and other
investments in unstable and often violent areas of the world. Through our
offices on five continents, we provide our multi-national clients with a
diversified portfolio of security solutions to assist them to mitigate risks in
their operations around the world. Our highly trained, multi-lingual and
experienced security personnel work closely with our clients to create and
implement solutions to complex security problems. These services include the
design and implementation of risk management plans and security systems,
provision of security specialists and training of security personnel. We also
provide our multi-national clients with specialized investigative services
enhanced by its global network. These services include intellectual property
asset protection and related investigative services ranging from protecting
companies against counterfeiting, patent infringements, product tampering and
extortion to identifying unethical supplier activities. In addition, we provide
business intelligence, fraud investigation and asset tracing and recovery
services to financial services companies, law firms and other entities
worldwide. We believe that many of our security services, while often
representing a small portion of our clients' overall cost of doing business,
are critical to our clients' success. We believe this creates a consistent
demand for our premium services at attractive margins. For fiscal 1998, our
Armor Group Services division generated pro forma revenues of $51.6 million.

Armor Holdings Products Division. Our Armor Holdings Products division
manufactures and sells a broad range of high quality branded law enforcement
equipment, such as ballistic resistant vests and tactical armor, police duty
gear including synthetic leather and nylon belts and holsters, bomb disposal
equipment, less-than-lethal munitions, anti-riot products including tear gas
and distraction grenades, narcotics identification kits and custom-built
armored vehicles. Our products are marketed under brand names which are
well-known and respected in the law enforcement community such as American Body
Armor, Safariland, Defense Technology, First Defense, MACE, Pro-Tech and NIK.
We sell our manufactured products primarily to law enforcement agencies through
a worldwide network of over 500 distributors and sales agents including
approximately 350 in the United States. Our extensive distribution capabilities
and commitment to customer service and training have enabled us to become a
leading provider of security equipment to law enforcement agencies. We believe
there are significant opportunities to grow our manufacturing business through
the acquisition and development of new product lines, expansion into new
territories and further development of sales to specialized government and
military agencies. In addition, management believes that consistent

29
<PAGE>

demand for our premium products at attractive margins will continue because our
products are critical to the safety and effectiveness of our customers. For
fiscal 1998, our Armor Holdings Products division generated pro forma revenues
of $90.9 million.

INDUSTRY OVERVIEW

We participate in the global security risk management industry by
providing specialized security services to multi-national corporations and
governmental agencies and through the manufacture of security products marketed
to law enforcement and correctional personnel. Increasingly, governments,
businesses, and individuals have recognized the need for our services and
products to protect them from the risks associated with white-collar crime,
fraud, physical attacks and threats of violence. In general, the need for
protection against these risks is confirmed by a variety of statistics. For
example, according to the American Society for Industrial Security, damages
from intellectual property thefts result in estimated losses of $250 billion
annually for U.S.-based companies. In addition, fraud costs U.S. organizations
over $400 billion annually according to a recent estimate by the Association of
Certified Fraud Examiners. The number of casualties resulting from terrorist
incidents increased from 317 in 1991 to 2,963 in 1996, and in 1997, 73% of all
international terrorist incidents targeted businesses compared to 53% in 1992.

Specialized Security Services Market. In response to these security
problems, corporations are increasingly contracting experienced private
companies to perform their security services. Industry studies demonstrate that
the worldwide security services market is expected to grow at a rate of 8.0%
annually from 1995 to 2000. Total revenues for the worldwide market are
expected to grow to $61.8 billion by 2000 and continue to grow to $87.9 billion
by 2005. Management believes that demand by multi-national corporations and
governmental agencies operating in lesser-developed nations for specialized
security services, such as risk assessment, crisis management, guard force
management, security force organization and executive protection, is likely to
increase as these entities continue to establish operations and manufacturing
facilities in foreign and developing countries.

In recent months, the U.S. has been the target of several deadly
terrorists attacks directed toward U.S. Department of State personnel and
facilities across the world. In 1998, U.S. embassies in Nairobi and Dar Es
Salaam were bombed, resulting in over 235 deaths and over 5,000 injuries. The
U.S. government's response to these threats also supports the increased
emphasis on protection against security risks. A Senate panel was appointed to
investigate the causes for the lapses in security. The findings of the panel
report, like those of similar studies, pointed to the strong need for increased
security-related spending at U.S. embassies and other diplomatic facilities
worldwide. The panel recently recommended that the government spend $1.4
billion per year for the next ten years to improve embassy security, an
increase of $11 billion over the administration's current budget for that
period. With our global network of overseas offices and our broad portfolio of
security services and products, we believe that we are well-positioned to
participate in expected increases in security-related spending at U.S.
diplomatic facilities around the world.

Manufactured Security Products Market. Certain industry studies estimate
that worldwide expenditures for security products will grow at a compounded
annual rate of 7.9% from approximately $14 billion in 1990 to approximately $60
billion in 2010. Although these statistics do not correlate directly to our
product lines, we believe that the increasing spending in the private security
sector is indicative of a greater demand for our products in the law
enforcement, correctional and governmental sectors.

In response to an increased emphasis on safety and protection, the number
of police officers has increased significantly over the past several years. By
1996 there were approximately 738,000 full-time sworn law enforcement officers
in the U.S. In 1993, a U.S. Department of Justice survey of local police
departments indicated that 65% of such organizations have purchased body armor
for all of their officers, 60% supply their officers with pepper spray, 35%
supply their officers with tear gas and 10% maintain inventories of stun
grenades and less-than-lethal projectiles. In addition, the U.S. prison
population has doubled since 1985 to approximately 1.8 million inmates in 1998.
We believe this rise in the prison population has spurred demand from
institutional correctional facilities for manufactured security products.

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<PAGE>

KEY STRENGTHS

Broad Portfolio of Services and Products. We offer a broad portfolio of
security services and products, enabling us to provide comprehensive solutions
to our customers' security needs. We strive to enhance our position as a single
source provider of global security services to our clients and believe that our
worldwide infrastructure enables us to follow our governmental and
multi-national corporate clients to new geographical markets as well as
cross-sell additional services to these customers. Similarly, our extensive
product distribution network allows us to provide our customers a broad array
of complementary manufactured law enforcement equipment. Through strategic
acquisitions and internal growth, we expect to continue to expand our service
and product offerings.

Strong Client Base and Extensive Distribution Network. Armor Group
Services serves a client base representing governmental agencies and
approximately 500 multi-national corporations worldwide, including The British
Petroleum Company, plc, British American Tobacco, Continental Airlines, Inc.
and Credit Suisse Group. Armor Holdings Products has a broad, full service
network of approximately 350 domestic distributors and 150 international agents
to sell our portfolio of manufactured law enforcement equipment. The quality
and scope of our products and the strength of our brand names has enabled us to
establish one of the largest distribution networks in the industry and
engendered the loyalty of our distributors. We work closely with our
distributors and agents to respond to and anticipate the needs of end-users,
which we believe allows us to maintain our market leadership position. We
believe that the diversity of our clients' end-markets, the continued
globalization of our clients and the strength of our distribution relationships
minimize our dependence on any particular product, market, or customer.

Strong Brands with Leading Market Positions. Our product lines are
marketed under brand names widely recognized in law enforcement, such as
American Body Armor, Safariland, Defense Technology, Federal Laboratories and
MACE. Due to the life-protecting nature of the products in the markets that we
serve, end-users prefer to purchase premium products with brand names that have
solid reputations for quality and which provide high levels of performance. The
strength of our brand names has contributed to our leading market positions in
several of the product categories in which we compete, including body armor
(Xtreme), police duty gear (Duty Gear), aerosol defense sprays (MACE), and
less-than-lethal munitions (Defense Technology).

Proven Track Record of Identifying, Completing and Integrating
Acquisitions. Since January 1996, we have completed 11 acquisitions in the
security services and products industry. We employ a disciplined approach to
evaluating acquisition opportunities and integrating the operations of acquired
businesses. We believe that these acquisitions have strengthened our market
position, leveraged our distribution network and expanded our service and
product offerings. Further, we believe that our performance-based compensation
plan enables us to retain strong managers of acquired businesses and provides
for timely and efficient integration of acquired operations.

GROWTH STRATEGY

Our strategic objective is to be the leading global provider of security
risk management services and products to multi-national corporations,
governmental agencies and law enforcement personnel. We expect the demand for
security risk management services and products to continue to grow and we seek
to capitalize on this growth by offering a comprehensive array of premium
security risk management services and law enforcement equipment throughout the
world. We intend to enhance our leadership position through strategic
acquisitions by creating a broad portfolio of services and products to satisfy
all of our customers' increasingly complex security needs. By establishing a
critical mass of services and a broad base of customers, we have built in the
capacity to perform all aspects of our clients' threat analyses and security
provision on a comprehensive basis. We plan to continue to execute this growth
strategy primarily through internal expansion of our existing businesses and

31
<PAGE>

through strategic acquisitions of businesses offering complementary services,
markets, and customer bases. The following elements define our growth strategy:

Pursue Strategic Acquisitions. The security risk management services and
products industry is highly fragmented and characterized primarily by smaller
single service or product providers. We believe, however, that many clients in
the industry would prefer to deal with a consolidated entity that can provide a
broad spectrum of services and/or products in the security risk management
industry. As a result, we selectively pursue acquisitions that complement and
expand our service and product offerings and provide access to new geographic
markets, additional distribution channels and new client relationships.

Broaden Service Offerings to Existing Client Base. We broaden our existing
service offerings through strategic acquisitions and develop a comprehensive
range of security risk management offerings with a global network of service
providers. We intend to continue to market our expanded offerings by increasing
penetration of our existing client base with sales of additional services.

Expand Client Base. We expand our client base by offering a complete array
of security risk management services to our service clients, particularly those
involved in the petrochemical and mineral extraction industries, branded
product industries, and financial services industries as they expand their
commercial activities throughout the world. In addition, we market our expanded
offerings to new clients referred to us by our existing clients. Client
referrals have historically provided significant growth opportunities for us
with minimal incremental marketing expense.

Expand Distribution Network and Product Offering. We leverage our
distribution network by expanding our range of branded law enforcement
equipment through the acquisition of niche defensive security products
manufacturers and by investing in the development of new and enhanced products
which complement our existing offerings. A broader product line enables us to
strengthen our relationship with distributors and enhance our brand appeal with
military, law enforcement and other end users.

Continue Global Expansion. We expand the scope of our service and product
offerings by serving existing customers who are expanding geographically,
acquiring complementary assets and capabilities and extending our distribution
network into new territories. We target those regions where emerging market
conditions or political instability create demand for our services or where
increased regulation, political instability or growth of prison populations
create a demand for our products. Many existing clients are pursuing rapid
global expansion strategies which may also provide access to new territories
and prospective new client relationships.

ACQUISITIONS

We have pursued a strategy of growth by acquiring businesses and assets
that complement our existing operations. We use several criteria to evaluate
prospective acquisitions including whether the business to be acquired (1)
broadens the scope of the services or products we offer or the geographic areas
we serve, (2) offers attractive margins, (3) is accretive to earnings, and (4)
offers the opportunity to enhance profitability by improving the efficiency of
our operations. Since January 1996, we have consummated 11 and announced two
additional acquisitions including Safariland, a leading manufacturer of law
enforcement equipment.

Safariland. On February 24, 1999, we signed a letter of intent to acquire
all of the outstanding capital stock of Safariland, a leading manufacturer of
equipment for the law enforcement, military and sporting goods markets
worldwide, based in Ontario, California. The purchase price is $41 million,
subject to adjustments, consisting of $37 million in cash and the balance in
our common stock, plus the assumption of $5.2 million of indebtedness. The
transaction is subject to entering into a definitive agreement and customary
closing conditions, and is expected to close on or around March 31, 1999.
Safariland manufactures and distributes a variety of products including
ballistic resistant vests and duty gear.

Parvus. On December 2, 1998, we signed a letter of intent to acquire The
Parvus Company, a Washington, D.C. consulting firm specializing in
international investigations, corporate intelligence and security services. The
transaction is subject to entering into a definitive agreement and customary
closing conditions.

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<PAGE>

Acquisition History. The following table summarizes certain information
concerning the acquisitions we have announced or closed.

ARMOR GROUP SERVICES

<TABLE>
<CAPTION>
APPROXIMATE ANNUAL
YEAR REVENUES PRIOR TO
COMPANY ACQUIRED SERVICES ACQUISITION
- --------------------------------- ---------- ------------------------------- ----------------------
(IN MILLIONS)
<S> <C> <C> <C>
DSL Group Limited 1997 Security risk management $31.1
and consulting services
worldwide
Gorandel Trading Limited 1997 Security risk management $ 6.4
and consulting services in
Russia
Low Voltage Systems Technology, 1998 Electronic security systems $ 2.0
Inc. integration
Asmara Limited 1998 Investigation, asset tracing, $ 1.8
due diligence
CDR International Limited 1998 Intellectual property asset $ 3.8
protection
Alarm Protection Services, Inc. 1998 Alarm monitoring, systems $ 2.5
integration, and physical
security in Uganda
The Parvus Company* 1999 Global business $ 1.5
intelligence
</TABLE>

ARMOR HOLDINGS PRODUCTS

<TABLE>
<CAPTION>
APPROXIMATE ANNUAL
YEAR REVENUES PRIOR TO
COMPANY ACQUIRED PRODUCTS ACQUISITION
- ------------------------------------ ---------- --------------------------- ----------------------
(IN MILLIONS)
<S> <C> <C> <C>
NIK Public Safety Product Line 1996 Portable narcotic $ 2.2
identification kits under
the NIK brand name
Defense Technology Corporation 1996 Less-than-lethal and $ 8.9
of America anti-riot products under
the brand names Defense
Technology, Def-Tech,
Distraction Device
Supercraft (Europe) Limited 1997 High visibility garments $ 5.7
Law Enforcement Division of 1998 Tear gas and pepper $ 7.0
Mace Security International, Inc. sprays under the brand
name MACE
Pro-Tech Armored Products of 1998 Hard armor, vehicle armor $ 5.0
Massachusetts, Inc. under the brand name
Pro-Tech
Safariland Ltd., Inc.* 1999 Law enforcement products $47.0
under the brand names
Safariland, Safari Armor,
Duty Gear, Safari Gear,
Zero-G, Nylok
</TABLE>

- ----------
* Pending

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<PAGE>

SERVICES AND PRODUCTS

Armor Group Services

Our Armor Group Services division provides a broad range of sophisticated
security risk management services to multi-national corporations and to
governmental and non-governmental agencies, including the following services:

Security Planning, Advisory and Management. We believe we are the world's
leading provider of specialized security risk management services. We operate
in high risk and hostile environments characterized by rapid economic growth,
political instability, emerging market conditions and/or significant natural
resources, such as Africa, South America, Central Asia, Russia and the Balkans.
The core of our service business is the creation and implementation of risk
management plans and solutions to complex security problems in high risk areas
through detailed and targeted analysis of potential threats to security,
assistance in the secure design of facilities, the provision of highly
qualified specialists with extensive international experience in practical
security applications and on-going training of security personnel and client
personnel with respect to preventive security measures. We also provide
humanitarian mine clearance and ordnance disposal and maintenance of secure
lines of communication.

We offer security solutions that involve law enforcement training,
security consultation services and experienced security personnel who act as
planners, trainers, managers, advisors, instructors and liaison personnel. We
also provide teams of supervisors, many of whom are British Special Air
Services veterans, who frequently are employed as senior expatriate managers of
guards for government embassies. We provide security services including risk
assessment, project organization and management, equipping, training and
management of existing guard forces, system design, procurement and
installation, crisis management, VIP protection, specialist training and
evacuation planning. In connection with our security services, we utilize the
services of approximately 290 expatriates and 2,900 locally recruited guards.
These guards are supervised, managed and trained by our professional security
staff, while approximately 625 are employed by local companies that subcontract
their manpower to us. Our clients are multi-national corporations in industries
including petrochemical and natural resource extraction, manufacturing, travel
and financial services. Additionally, we serve governmental and
non-governmental agencies such as the U.S. Department of State, U.S. Navy, the
European Union, and the United Nations.

Intellectual Property Asset Protection. We provide a full range of
consulting and investigative services specializing in worldwide intellectual
property asset protection for multi-national corporations with products that
have valuable brand name recognition. Our services range from protecting
companies against counterfeiting, patent infringements, product tampering, gray
market distribution, and extortion to identifying unethical supplier activities
such as the use of child labor. These services are provided by professionals
with extensive backgrounds in related areas, including trade and customs law.
We offer brand protection and often work with our clients during product
development to establish trademark and patent protection strategies and work to
protect the brand throughout its lifecycle. Our clients include multi-national
branded product companies involved in tobacco, sportswear, spirits, and
pharmaceuticals, as well as financial services and insurance companies.

Investigation and Due Diligence. We provide fraud investigation, asset
tracing, due diligence, litigation research, political risk analysis and other
business intelligence services to multi-national and financial services
companies worldwide. We rely on our network of business intelligence contacts,
many proprietary and public databases, and our experience in gathering and
deciphering hard to find information. We are enhancing our capabilities in this
area through acquisition. Our professionals have various backgrounds including
experience in financial, due diligence and foreign intelligence services. Our
clients include investment and commercial banks, insurance companies, law firms
and other multi-national companies.

Security Systems Integration. We are a provider of security systems
specializing in the design, integration, maintenance and technical support of
sophisticated electronic and computer-driven

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<PAGE>

security and fire alarm systems. We specialize in high-speed analog and digital
transmission designs for life safety, communication, alarm, closed circuit
television, access control, television and security systems. These systems are
installed in airports, banks, government buildings, hospitals, prisons,
universities, stores, office buildings, telecommunication centers, radio and
television stations, and similar locations. Our clients include multi-national
companies, embassies and high commissions and military entities worldwide.

Armor Holdings Products

Body Armor. We manufacture and sell a wide array of armor products under
the leading brand names American Body Armor and Safariland which are designed
to protect against bodily injury caused by bullets, knives and explosive
shrapnel. Our principal armor products are ballistic resistant vests, sharp
instrument penetration armor, hard armor such as anti-riot gear, helmets,
shields and upgrade armor plates, and bomb protective gear. Our line of
ballistic protective vests provides varying levels of protection depending upon
the configuration of ballistic materials and the standards (domestic or
international) to which the armor is built. In addition, we recently introduced
an advanced ballistic resistant vest under the brand name Xtreme and a lighter,
more comfortable and flexible ballistic resistant vest, under the brand name
Zero-G. Our body armor products that are manufactured in the United States are
certified under guidelines established by the National Institute of Justice.

We offer two types of ballistic resistant armor, concealable armor and
tactical armor. Concealable armor, which generally is worn beneath the user's
clothing, is our basic line of body armor. These vests are often sold with a
shock plate, which is an insert designed to improve the protection of vital
organs from sharp instrument attack and to provide enhanced blunt trauma
protection. Tactical armor is worn externally and is designed to provide
protection over a wider area of a user's body and defeat higher levels of
ballistic threats. These vests, which are usually manufactured with hard armor
ballistic plates that provide additional protection against rifle fire, are
designed to afford the user maximum protection. Tactical armor may also provide
enhanced protection against neck, shoulder and kidney injuries. Tactical armor
is offered in a variety of styles, including tactical assault vests, tactical
police jackets, floatation vests, high-coverage armor and flak jackets.

Our sharp instrument penetration armor is designed primarily for use by
personnel in correctional facilities and by other law enforcement employees who
are primarily exposed to threats from knives and other sharp instruments. These
vests are constructed with special metallic blends and are available in both
concealable and tactical models. In addition, these vests can be combined with
ballistic armor configurations to provide both ballistic and sharp instrument
penetration resistant protection.

We manufacture several hard armor products under the Pro-Tech brand name.
Pro-Tech products include ballistic shields, helmets, visors and other personal
protection accessories and armor products for helicopters, automobiles, riot
control vehicles, as well as "up-armoring" for the Tank Armored Command
division of the United States Army.

We also manufacture a variety of hard armor ballistic shields primarily
for use in tactical clearance applications. These shields are manufactured
using Spectra ballistic fibers, polyethylene ballistic materials, ballistic
steel, ceramic tiles, ballistic glass or a combination of any one or more of
these materials. Other hard armor products include tactical face masks and
helmets, ballistic shields, barrier shields and blankets. These products allow
tactical police officers to enter high threat environments with maximum
ballistic protection.

Other specialty products that we manufacture include armored press vests,
executive vests, raincoats and fireman turnout coats. These specialty products
can be custom designed to provide various levels of ballistic protection. We
have the exclusive rights in the United States to distribute Gallet (Registered
Trademark) helmets to the law enforcement community. We also distribute a
variety of items manufactured by others, including gas masks, batons and
holsters.

Duty Gear. Through the acquisition of Safariland, we will become a
leading supplier of duty gear to law enforcement personnel in the United
States. Uniformed police officers require a wide

35
<PAGE>

assortment of duty gear, which typically includes items such as belts,
holsters, handcuff and flashlight holders and related accessories. We
manufacture and sell under the widely recognized Safariland and Duty Gear
brands synthetic leather and nylon duty gear and accessories. Duty gear
represents a very attractive market and one in which brand appeal and quality
dictate demand. Replacement sales represent significant recurring demand for
duty gear.

Less-Than-Lethal Products. Under the Defense Technology, First Defense,
Federal Laboratories and MACE brands, we manufacture and sell a complete line
of less-than-lethal, anti-riot and crowd control products designed to assist
law enforcement and military personnel in handling situations that do not
require the use of deadly force. These products, which generally are available
for use only by authorized public safety agencies, include pepper sprays, tear
gas, specialty impact munitions and distraction devices.

Through the acquisition of the assets of the law enforcement division of
Mace Security International, Inc., we acquired the exclusive license to use the
MACE brand in connection with the manufacturing and sale of MACE aerosol sprays
to law enforcement entities worldwide. We also manufacture pepper sprays
containing the active ingredient oleoresin capsicum, a cayenne pepper extract.
Our pepper spray formula is patented and carries the trademark name of First
Defense. The products range from small "key-ring" and hand-held units to large
volume canisters for anti-riot and crowd control applications.

Our tear gases are manufactured using CS and CN. These products are
packaged in hand-held or launchable grenades, both pyrotechnic and
non-pyrotechnic, as well as in 37 mm, 40 mm and 12 gauge munitions. The
munitions include barricade rounds, blast dispersions and pyrotechnic
canisters. We hold a patented design covering two of our non-pyrotechnic
grenades.

We manufacture a wide range of specialty impact munitions that can be used
against either individual targets or in anti-riot and crowd control situations.
These products, which range from single projectiles, such as bean bags, rubber
balls, wood and rubber batons, to multiple projectile products containing
rubber pellets, rubber balls or foam, can be fired from standard 12 gauge
shotguns, 37 mm gas guns and 40 mm launchers.

We also manufacture a patented and trademarked device that is used for
dynamic entries by specially trained forces where it is necessary to divert the
attention of individuals away from an entry area. This product, which carries
the trademark name of Distraction Device, emits a loud bang and brilliant flash
of light when used.

Narcotic Identification and Evidence Equipment. We assemble and market
portable narcotic identification kits under the NIK brand name which are used
in the field by law enforcement personnel to identify a variety of controlled
substances, including cocaine, marijuana, heroin and LSD. We also assemble and
market evidence collection kits and evidence tape, and have the exclusive
rights to distribute Flex-Cuf and Key-Cuff disposable restraints.

Other Products. Through the acquisition of Safariland, we are a
manufacturer of synthetic leather and stitched products for the automotive
industry used as original equipment ("OEMs") by customers including Toyota
Motor Corporation, Chrysler Corporation, Ford Motor Company, General Motors
Corporation, Honda Motor Co., Ltd., Mitsubishi Corporation and Nissan Motor
Company, Ltd. We manufacture and sell stitched leather and nylon products and
accessories such as car bras and wheel covers.

CUSTOMERS

Armor Group Services. Our principal security services clients, include
large multi-national corporations that have significant investments in remote
and hostile areas of the world. We currently serve clients in over 15
industries including petrochemical, mining, branded products, financial
services, insurance and legal. Other significant clients include the United
Nations, governmental

36
<PAGE>

embassies, including those belonging to the United States, projects funded by
the World Bank and the European Commission and a variety of banking, finance,
aid and humanitarian organizations and companies engaged in international trade
and commerce.

The following table sets forth certain information regarding selected
clients, the nature of the security services provided to such clients, and the
countries in which such services are being or have been performed:

<TABLE>
<CAPTION>
CLIENT REGION FACILITY SERVICES PROVIDED
- --------------------------------- ---------------- ---------------- -----------------------------------
<S> <C> <C> <C>
Bechtel Group, Inc. North Africa All facilities Expatriate security managers and
supervisors (1994 to date)
BAT Africa All facilities Expatriate security managers and
supervisors (1994 to date)
Continental Airlines, Inc. Colombia Airports Passenger/baggage search; aircraft
guarding (1993 to date)
U.S. Department of State Uganda, Congo, Embassies Expatriate-managed guard forces
Ecuador (1985 to date)
U.S. Navy Bahrain Administrative Expatriate security managers and
Support Unit supervisors (1998 to date)
</TABLE>

Armor Holdings Products. In 1998, we sold approximately 82% of our
products in the U.S., with the balance sold internationally. The primary
end-users of our products are law enforcement agencies, local police
departments, state correctional facilities, highway patrols and sheriffs'
departments.

The British Petroleum Company, plc, a client of our Armor Group Services
division, accounted for approximately 10.2% of our net sales in fiscal 1998
(without giving effect to the acquisition of Safariland) under a contract which
expires March 31, 1999. This contract has been renewed for each of the previous
eight years and is currently being renegotiated for renewal. No other clients
or customers of the Armor Group Services division or the Armor Holdings
Products division accounts for more than 10% of our total sales for the 1998
fiscal year and our ten largest clients account for approximately 25% of total
sales for the 1998 fiscal year.

MARKETING AND DISTRIBUTION

Armor Group Services. As we have expanded our service offerings, we have
better exploited efficiencies and more active marketing has become an integral
part of our growth efforts. In addition to sourcing new business from client
referrals, we continue to follow our clients into new geographic areas where
there exist significant security risks. We rarely enter a country without a
substantial contract for services already in place. Once established in a
country, we seek to expand our service offerings and our customer base through
active marketing. As we have integrated new services our professionals have
increasingly relied on active marketing to generate new business. We have
fostered the cross selling of our services by physically locating our
professionals in common space and educating our professionals about all of our
service business lines. Further, a rebranding effort is underway to market our
services under the brand Armor Group. We are focusing on clients in high growth
industries where the need for investigation, brand protection and other
security services are critical to success. The industries we are targeting
include financial services, software and publishing, insurance, natural
resource extraction, and global consumer brands.

Armor Holdings Products. As a result of our history of providing
high-quality and reliable armor, less-than-lethal products and narcotic
identification and evidence equipment, we enjoy excellent

37
<PAGE>

name recognition and a strong reputation in the law enforcement equipment
industry. The central element of our marketing strategy is to capitalize our
name recognition and reputation amongst our customers by positioning ourselves
as a global provider of many of the premier security risk management services
and law enforcement equipment that our customers may need. By positioning
ourselves in this manner, we can capitalize on our existing customer base and
our extensive global distribution network, maximize the benefits of our long
history of supplying security-related products around the world and leverage
our leadership position in the security risk management services and products
markets. When entering a foreign market, we penetrate the market by offering
the most comprehensive range of products and services available in the security
industry. We tailor our marketing strategy to each geographic area of the world
and will often tailor our product offering by country. There are opportunities
for cross-marketing of military and law enforcement products which could
strengthen the image of each product group. We believe that our ability to
cross-market our security risk management services and products will enhance
our position as an integrated provider of an extensive assortment of such
services and products.

In addition, we have designed comprehensive training programs to provide
initial and continuing training to our customers in the proper use of our
various product lines. These training programs are typically conducted by
trained law enforcement and military personnel we hire for such purpose.
Training is essential for our customers to use our products properly and to
avoid injury. Certain of our training programs also contribute to revenues.
Training programs are an integral part of our customer service. In addition to
enhancing customer satisfaction, we believe that they also help breed customer
loyalty and brand awareness, so that we may sell additional products to the
same customer. Our marketing efforts are further augmented by our involvement
with and support of several important law enforcement associations, including
the National Tactical Officer's Association, the International Law Enforcement
Firearms Instructors, the American Society of Law Enforcement Trainers and the
International Association of Chiefs of Police.

Our distribution strategy involves the utilization of a worldwide
distribution network of approximately 350 domestic distributors and 150
international agents, as well as 15 regional domestic sales managers who
promote our products but refer customers to a local distributor for purchasing.
We further reinforce distributor loyalty by offering price discounts to high
volume distributors. We believe that relationships with our distributors are
strong. The distributors benefit from their association with us due to the
quality our manufactured products, the scope of our product line, the high
degree of service we provide and the distributor's opportunity to participate
profitably in the sale of our products.

We seek to expand our distribution network. As we identify and acquire
businesses that fit strategically into our existing product and service
portfolio, we maximize our distribution network by offering additional products
and services. Recent acquisitions have opened new channels of global
distribution to parts of the world not previously penetrated and have enabled
us to more fully exploit our extensive access to multi-national corporations,
whose security service needs in unstable countries may in the future require
security products that complement the services provided. The addition of these
new distribution channels will allow us to take advantage of our various units'
distribution networks by offering a wider variety of products, thereby
increasing operating efficiencies.

PRODUCT MANUFACTURING AND RAW MATERIALS

The primary raw materials used in manufacturing ballistic resistance
garments are various ballistic fibers, including Kevlar, Twaron and
SpectraShield. Kevlar, an aramid fiber, is a patented product of Du Pont and is
only available from Du Pont and its European licensee. We have begun to use
SpectraShield, a high strength polyethylene product of Allied Signal, Inc., as
an alternative ballistic resistant fabric to reduce our dependence on Kevlar.
SpectraShield is not, however, expected to become a complete substitute for
Kevlar in the near future due to the fabric's physical characteristics. We also
use Twaron, an aramid fiber product of Akzo-Nobel Fibers B.V. We do not
purchase these fibers directly from the manufacturers, but rather purchase
fiber from weaving companies who convert the raw fibers into cloth. We believe
that we enjoy a good relationship with these weaving companies.

38
<PAGE>

However, if necessary, we believe that we could readily find replacement
weavers. We also use Spectrashield and Kevlar in our hard and vehicle armor
products. Additionally, we use polycarbonates, acrylics, ballistic quality
steel, ceramics, and ballistic glass. We are aware of multiple suppliers for
these materials and would not anticipate a significant impact if we were to
lose any suppliers. We do not manufacture equipment used in our security
systems integration business.

The primary raw material used by Safariland in the manufacture of police
duty gear is Porvair, a synthetic leather substitute derived from
petrochemicals. Although we have traditionally relied upon one supplier of
Porvair, multiple sources of supply exist. Other materials used in the
production of duty gear are glues, nylon and stitching fabrics all of which are
readily available from multiple suppliers.

We obtain from several sources the raw materials we used in the production
of chemical agents. The raw chemicals used in the production of CS tear gas are
readily obtainable with the exception of Malononitrile, for which sources are
limited. If we were unable to obtain Malononitrile, or if there were a material
increase in the price of Malononitrile, our production of CS tear gas could be
severely curtailed. The remainder of the chemicals and piece parts used by us
are readily available from other suppliers. Although we manufacture armor on a
built-to-order basis, we do maintain reasonable inventories of our
less-than-lethal and anti-riot products.

We purchase other raw materials used in the manufacture of our various
products from a variety of sources and additional sources of supply of these
materials are readily available. We also own several molds which are used
throughout our less-than-lethal product line.

We adhere to strict quality control standards and conduct extensive
product testing throughout our manufacturing process. Raw materials are also
tested to ensure quality. We have obtained ISO 9001 certification for our
Jacksonville manufacturing operation for body armor and narcotic identification
kits, our Wyoming manufacturing facility for less-than-lethal products and
Safariland's Ontario California manufacturing facility for body armor and duty
gear. We have obtained ISO 9002 certification for our Westhoughton, England
manufacturing facility for body armor and high visibility garments. ISO
standards are promulgated by the International Organization of Standardization
and have been adopted by more than 100 countries worldwide. We obtain ISO
certification by successfully completing an audit certifying our compliance
with a comprehensive series of quality management and quality control
standards.

BACKLOG

At December 31, 1998, we had unfilled customer orders, excluding
Safariland, of approximately $2.5 million compared with approximately $1.9
million of such orders at December 27, 1997. These orders are expected to be
shipped by March 31, 1999, however, there can be no assurance that such backlog
will become revenues in any particular period or at all.

COMPETITION

The security services industry is highly competitive, and we compete in a
variety of fields with competitors ranging from small business to
multi-national corporations. Within the security services industry we compete
on the basis of the quality of services provided, ability to provide national
and international services and range of services offered, as well as price and
reputation. Our security services also face a wide variety of competition in
different areas, although there is no single organization that competes
directly with us globally. Our principal competitors in this market include The
Kroll-O'Gara Company, The Wackenhut Corporation, Securitas AB, Pinkerton's,
Inc., Control Risk, Electronic One and Tyco International, Ltd. and its
subsidiary ADT. Our primary competitors in supplying security services to the
petrochemical and mining industries are local security companies, in-house
security programs and small consultancy companies. Our primary competitors in
the embassy and international agency protection business are local companies
and large manned guarding companies including The Wackenhut Corporation,
Pinkerton's, Inc., Group 4 Securitas (International) B.V. and ICTS
International, N.V. As the countries within which we operate become more mature
and stable, competition is likely to increase.

39
<PAGE>

The market for our products is highly competitive and we compete in a
variety of fields with competitors ranging from small businesses to
multi-national corporations. In the body armor business, we compete by
providing superior design, engineering and production expertise in our line of
fully-integrated ballistic and blast protective wear. Our principal competitors
in this market include Point Blank Body Armor, Inc., Second Chance Body Armor,
Inc. and Rabin-Tex. In the less-than-lethal product industry we compete by
providing a broad variety of less-than-lethal products with unique features and
formulations which we believe afford us a competitive advantage over our
competitors. Although many of our competitors have larger facilities and
operations and greater financial resources, the principal competitive factors
for all of our products are quality of engineering and design, reputation in
the industry, production capability and capacity, price and ability to meet
delivery schedules.

PROPERTIES

Our principal facilities consist of the following:

<TABLE>
<CAPTION>
PRODUCTS
LOCATION PRINCIPAL USE OWNED/LEASED APPROXIMATE SIZE MANUFACTURED
- --------------------------- --------------------------- -------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Jacksonville, Florida Manufacturing, Owned 14 acres Body armor
distribution, corporate 70,000 sq. ft.(1) Narcotic ID kits
headquarters
Casper, Wyoming Manufacturing, warehouse, Owned(2) 60 acres Tear gas
office 61,700 sq. ft. Pepper spray
Less-than-lethal
munitions
Westhoughton, England Sales, manufacturing Owned 44,000 sq. ft. High visibility
garments
London, England Sales, office Leased(3) 6,500 sq. ft. Armor Group
Services
Ontario, California Manufacturing, Leased(4) 126,000 sq. ft. Body armor
distribution office Duty gear
Pittsfield, Massachusetts Manufacturing, Leased(5) 22,000 sq. ft. Hard armor
distribution Vehicle armor
Tijuana, Mexico Manufacturing Leased(6) 12,000 sq. ft. Duty gear
Body armor
</TABLE>

- ----------
(1) We have the capacity to expand the building to 250,000 sq. ft.

(2) We own four properties at this location.

(3) We pay an annual rent of (pounds sterling)96,000. The lease for this
property expires in March 2002.

(4) We pay an annual rent of approximately $400,000, under a lease expiring
December 31, 2000.

(5) We lease two facilities in Pittsfield, Massachusetts, one for 16,000 sq.
ft. at an annual rental of $46,800, the lease for which expires in April
2003, and one for 6,000 sq. ft. at an annual rental of $15,288 on a
month-to-month basis. We have given notice that the 6,000 sq. ft.
facility will be vacated. On April 1, 1999, we will lease an additional
20,000 sq. ft. for an additional annual rental of $39,360 under a lease
expiring on March 31, 2002.

(6) We pay an annual rent of $48,240, under a lease expiring June 30, 1999.

In addition, we lease a 50,000 square foot facility in Yulee, Florida, at
one of our former manufacturing facilities, which is sublet at full rental
value until April 30, 1999, the expiration of the lease. The annual rent for
this property is $130,960 plus annual increases. Armor Group Services also
leases an aggregate of 22,000 square feet at our 21 worldwide locations, at an
aggregate annual rental of $550,000, having terms expiring from 1 to 10 years.

Our manufacturing, warehouse and office facilities are suitable, adequate
and afford sufficient manufacturing capacity for our current and anticipated
requirements. We believe we have adequate insurance coverage for our properties
and their contents.

40
<PAGE>

EMPLOYEES

As of March 2, 1999, including Safariland, we have a total of
approximately 3,284 employees, of which approximately 831 were employed at
Armor Holdings Products and approximately 2,653 were employed at Armor Group.
Additionally, we subcontract 625 employees from local companies. Approximately
31 employees employed by our Supercraft subsidiary are represented by the
General Municipal Boilermaker and Allied Trade Union. The collective bargaining
agreement currently in effect for these employees expires on December 31, 1999.
Also our Low Voltage Systems subsidiary has 3 employees covered under a
collective bargaining agreement and are represented by the International
Brotherhood of Electrical Workers. None of our remaining employees are
represented by unions or covered by any collective bargaining agreements. We
have not experienced any work stoppages or employee related slowdowns and
believe that the relationship with our employees is good.

PATENTS AND TRADEMARKS

We currently own numerous issued U.S. and foreign patents and pending
patent applications relating to our product lines as well as several registered
and unregistered trademarks relating to our products. The trademarks include
Gold Series GSX, Xtreme, Def-Tec Products, Distraction Device, NIK, Safariland,
Duty Gear, Zero-G, Nylok, Identidrug, Federal Laboratories and First Defense.
We also have an exclusive license to use the MACE trademarks in the law
enforcement market. Although we do not believe that our ability to compete in
any of our product markets is dependent solely on our patents and trademarks,
we do believe that the protection afforded by our intellectual property
provides us with important technological and marketing advantages over our
competitors. Although we have protected our technologies to the extent that we
believe appropriate, the measures taken to protect our proprietary rights may
not deter or prevent unauthorized use of our technologies. In other countries,
our proprietary rights may not be protected to the same extent as in the United
States.

GOVERNMENT REGULATION

We are subject to federal licensing requirements with respect to the sale
in foreign countries of certain of our products. In addition, we are obligated
to comply with a variety of federal, state and local regulations governing
certain aspects of our operations and the workplace. We are also regulated by
the U.S. Bureau of Alcohol, Tobacco, and Firearms as a result of our
manufacturing of certain destructive devices and by the use of ethyl alcohol in
certain products. We also ship hazardous goods, and in doing so, must comply
with the regulations of the U.S. Department of Transportation for packaging and
labeling. We are also subject to certain regulations promulgated by, among
others, the U.S. Departments of Commerce and State and the U.S. Environmental
Protection Agency.

ENVIRONMENTAL MATTERS

We are subject to federal, state, and local laws and regulations governing
the protection of the environment, including those regulating discharges to the
air and water, the management of wastes, and the control of noise and odors.
While we always strive to operate in compliance with these requirements, we
cannot assure you that we are at all times in complete compliance with all such
requirements. Like all companies, we are subject to potentially significant
fines or penalties if we fail to comply with environmental requirements.
Although we have made and will continue to make capital expenditures in order
to comply with environmental requirements, we do not expect material capital
expenditures for environmental controls in 1999 or 2000. However, environmental
requirements are complex, change frequently, and could become more stringent in
the future. Accordingly, we cannot assure you that these requirements will not
change in a manner that will require material capital or operating expenditures
or will otherwise have a material adverse effect on us in the future.

We are also subject to environmental laws requiring the investigation and
cleanup of environmental contamination. We may be subject to liability,
including liability for cleanup costs, if contamination is discovered at one of
our current or former facilities or at a landfill or other location

41
<PAGE>

where we have disposed wastes. The amount of such liability could be material.
We use CS and CN chemical agents in connection with our production of tear gas.
These chemicals are hazardous, and could cause environmental damage if not
handled and disposed of properly.

LITIGATION

On January 16, 1998, our Armor Group Services division ceased operations in
the country of Angola. The cessation of operations in Angola was dictated by
that government's decision to deport all of our expatriate management and
supervisors. As a result of the cessation of operations in Angola, our Armor
Group Services division is involved in various disputes with SHRM S.A., its
minority joint venture partner relating to the Angolan business. SHRM has
alleged that, as a result of the cessation of operations, it has suffered
damages of $5 million from lost business. The Company believes that the
likelihood of loss is possible and the maximum exposure is approximately
$500,000. In March 1999, we filed a claim of $16.1 million in the Commercial
Court Nanterre in France against SHRM for actual and punitive damages from
SHRM's violation of its obligations to us resulting from its agreement with us.

In addition to the above, we are, in the normal course of our business,
subject to claims and litigation in the areas of product and general liability.
We believe that we have adequate insurance coverage for most claims that are
incurred in the normal course of business. In such cases, the effect on our
financial statements does not exceed the amount of insurance deductibles. We do
not believe at this time that any such claims will have a material adverse
effect on our business, financial condition and results of operations.

42
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the name, age and position of each of our
directors and executive officers as of March 1, 1999. Each director will hold
office until the next annual meeting of our stockholders or until his or her
successor has been elected and qualified. Our executive officers are appointed
by and serve at the discretion of, the board of directors.

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- ----- --------------------------------------------------------------
<S> <C> <C>
Warren B. Kanders .............. 41 Chairman of the Board of Directors
Jonathan M. Spiller ............ 47 President, Chief Executive Officer and Director
Robert R. Schiller ............. 36 Executive Vice President and Director of Corporate
Development
Nicholas B. Winiewicz .......... 50 Vice President -- Finance, Chief Financial Officer, Secretary
and Treasurer
Stephen E. Croskrey ............ 39 President and Chief Executive Officer -- Armor Holdings
Products Division
Richard C. Bartlett ............ 64 Director
Burtt R. Ehrlich ............... 59 Director
Nicholas Sokolow. .............. 49 Director
Thomas W. Strauss .............. 57 Director
Alair A. Townsend .............. 57 Director
</TABLE>

Warren B. Kanders has served as the Chairman of our board since January
1996. From October 1992 to May 1996, Mr. Kanders served as Vice Chairman of the
board of Benson Eyecare Corporation, an eyewear manufacturer. From June 1992 to
March 1993, Mr. Kanders was the President and a director of Pembridge Holdings,
Inc.

Jonathan M. Spiller has served as our Chief Executive Officer since
September 1993 and as our President and as a director since June 1991. From
June 1991 to September 1993, Mr. Spiller served as our Chief Operating Officer.
From 1989 to 1991 Mr. Spiller served as a partner with Deloitte & Touche LLP,
an international accounting firm, where he worked for 18 years. From 1988 to
1991 Mr. Spiller served as Senior Vice President and Chief Financial Officer of
Hunter Environmental Services Inc., an environmental services company. Mr.
Spiller is a chartered accountant and a certified public accountant.

Robert R. Schiller has served as Executive Vice President and Director of
Corporate Development since January 1, 1999, and as Vice President of Corporate
Development from July 1996 to December 1998. From January 1995 to September
1995, Mr. Schiller served as Chief Financial Officer of Troma, Inc., an
independent film studio. From 1994 to July 1996, Mr. Schiller was a principal
in the merchant banking firm of Circadian Capital Corporation and from 1993 to
1995 he was a director of corporate finance for Jonathan Foster & Co. L.P., an
investment banking and financial advisory firm.

Nicholas B. Winiewicz joined us as Vice President -- Finance, Chief
Financial Officer, Secretary and Treasurer in February 1999. Since 1994 and
prior to joining us, Mr. Winiewicz served as Vice President and Chief Financial
Officer for Aladdin Industries, Inc., a consumer branded appliance company.
From 1984 to 1994 Mr. Winiewicz served as Vice President -- Finance of Bentler
Industries, Inc., an auto parts manufacturer.

Stephen E. Croskrey joined us as President and Chief Executive Officer --
Armor Holdings Products division in February 1999. From 1998 to February 1999,
Mr. Croskrey served as Director of

43
<PAGE>

Sales for Allied Signal, Inc.'s global fibers business. From 1988 to 1998, Mr.
Croskrey served in various positions for Mobil Oil, most recently as its
Central Regional Manager for its Industrial Lubricant division.

Richard C. Bartlett has served as one of our directors since May 1996. Mr.
Bartlett has also served as Vice Chairman of Mary Kay Holding Corporation, a
consumer branded products company, since January 1993 and as President, Chief
Operating Officer, and director of Mary Kay Inc. from 1987 through 1992. Mr.
Bartlett has also served as Chairman of the board of directors (from 1995 to
1999) and Chief Executive Officer (from 1994 to 1995) of Richmont Group, Inc.,
an affiliate of Richmont Capital Partners I, L.P. Richmont Group, Inc. and its
affiliates own and operate portfolio businesses in industries such as financial
services, apparel, sports products, and food services. On March 1, 1999, Mr.
Bartlett resigned from his positions with Richmont Group, Inc., but he
continues to serve as Vice Chairman of Mary Kay Holding Corporation.

Burtt R. Ehrlich has served as one of our directors since January 1996.
Mr. Ehrlich served as Chairman and Chief Operating Officer of Ehrlich Bober
Financial Corp. (the predecessor of Benson Eyecare Corporation) from December
1986 until October 1992 and as a director of Benson Eyecare Corporation from
October 1992 until November 1995.

Nicholas Sokolow has served as one of our directors since January 1996.
Mr. Sokolow has been a partner in the law firm of Sokolow, Dunaud, Mercadier &
Carreras since October 1994. From June 1973 until October 1994, Mr. Sokolow was
an associate and partner in the law firm of Coudert Brothers.

Thomas W. Strauss has served as one of our directors since May 1996. Since
1995, Mr. Strauss has been a principal with Ramius Capital Group, a privately
held investment management firm. From June 1993 until July 1995, Mr. Strauss
was Co-Chairman of Granite Capital International Group, an investment banking
firm. From 1963 to 1991, Mr. Strauss served in various capacities with Salomon
Brothers Inc., an investment banking and brokerage firm, including President
and Vice-Chairman.

Alair A. Townsend has served as one of our directors since December 1996.
Since February 1989, Ms. Townsend has been publisher of Crain's New York
Business, a business periodical. Ms. Townsend was a former governor of the
American Stock Exchange. Ms. Townsend served as New York City's Deputy Mayor
for Finance and Economic Development from February 1985 to January 1989.

COMMITTEES OF THE BOARD OF DIRECTORS

During fiscal 1998, the board of directors held 10 meetings. The board of
directors has standing Audit, Compensation, Nominating and Option Committees.
During fiscal 1998, the Audit Committee consisted of Ms. Townsend (Chairwoman),
and Messrs. Kanders and Strauss. The Audit Committee met twice during fiscal
1998. During fiscal 1998, the Compensation Committee consisted of Messrs.
Sokolow (Chairman), Kanders and Ehrlich. The Compensation Committee met twice
during fiscal 1998. During fiscal 1998, the Nominating Committee consisted of
Messrs. Kanders (Chairman), Bartlett and Sokolow. The Nominating Committee did
not meet during fiscal 1998. During fiscal 1998, the Option Committee consisted
of Messrs. Ehrlich (Chairman) and Kanders. The Option Committee met twice
during fiscal 1998. During fiscal 1998, all of the directors then in office
attended at least 60% of the total number of meetings of the board of directors
and the Committees of the board of directors on which they served. The Audit,
Compensation, Nominating and Option Committees do not meet on a regular basis,
but only as circumstances require.

CONSULTING SERVICES

Kanders & Company Inc., of which Warren B. Kanders is the sole
stockholder, is rendering investment banking and financial advisory services to
us in connection with this offering. Kanders & Company Inc. will be paid a fee
of $300,000 out of the proceeds of this offering for such services.

44
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

PRINCIPAL STOCKHOLDERS

As of March 23, 1999, there were 16,558,848 shares of our common stock
outstanding. The following table sets forth as of March 23, 1999 certain
information regarding the beneficial ownership of the common stock outstanding
(but without giving effect to the underwriters' exercise of the over-allotment
option) by (i) each person who is known to us to own 5% or more of our common
stock, (ii) each of our directors, (iii) certain of our executive officers and
(iv) all of our executive officers and directors as a group. Unless otherwise
indicated, each of the stockholders shown in the table below has sole voting
and investment power with respect to the shares beneficially owned. Unless
otherwise indicated, the address of each person named in the table below is c/o
Armor Holdings, Inc., 13386 International Parkway, Jacksonville, Florida 32218.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING(1) AFTER THE OFFERING(2)
-------------------------- -------------------------
NAME OF EXECUTIVE OFFICERS,
DIRECTORS OR 5% STOCKHOLDERS NUMBER PERCENTAGE NUMBER PERCENTAGE
- ----------------------------------------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Warren B. Kanders and Kanders
Florida Holdings, Inc.(3) .................... 4,022,578 24.0% 3,266,732 14.3%
Lord Abbett & Co.(4) .......................... 1,913,665 11.6 1,913,665 8.5
Nevis Capital Management, Inc.(5) ............. 1,621,800 9.8 1,621,800 7.2
FS Partners, LLC (6) .......................... 1,277,024 7.7 1,277,024 5.7
Jonathan M. Spiller(7) ........................ 783,083 4.6 612,229 2.6
Richmont Capital Partners I, L.P.(8) .......... 625,000 3.7 550,000 2.4
Burtt R. Ehrlich(9) ........................... 289,100 1.7 240,800 1.1
Nicholas Sokolow(10) .......................... 205,000 1.2 186,250 *
Thomas W. Strauss(11) ......................... 125,000 * 125,000 *
Robert R. Schiller(12) ........................ 100,000 * 43,750 *
Alair A. Townsend(13) ......................... 55,516 * 55,516 *
Richard C. Bartlett(14) ....................... 0 * 0 *
Stephen E. Croskrey ........................... 0 * 0 *
Nicholas B. Winiewicz ......................... 0 * 0 *
All executive officers and directors as a group
(10 persons)(15) ............................. 5,580,277 31.6% 4,530,277 19.1%
</TABLE>

- ----------
* Less than 1%

(1) As used in this table, a beneficial owner of a security includes any
person who, directly or indirectly, through contract, arrangement,
understanding, relationship or otherwise has or shares (a) the power to
vote, or direct the voting of, such security or (b) investment power
which includes the power to dispose, or to direct the disposition of,
such security. In addition, a person is deemed to be the beneficial owner
of a security if that person has the right to acquire beneficial
ownership of such security within 60 days.

(2) Amounts indicated reflect actual number of shares offered and assumes no
exercise of the underwriters' over-allotment option. In the event such
option is exercised in full (i) Warren B. Kanders and Kanders Florida
Holdings, Inc. will sell an additional 244,154 shares and will
beneficially own 3,022,578 shares, or 12.8% of the common stock
outstanding after this offering, (ii) Jonathan M. Spiller will sell an
additional 56,951 shares and will beneficially own 555,278 shares or 2.3%
of the common stock outstanding after this offering, (iii) Robert R.
Schiller will sell an additional 18,750 shares and will beneficially own
25,000 shares or less than 1% of the common stock outstanding after this
offering, (iv) Richmont Capital Partners I, L.P. will sell an additional
25,000 shares and will beneficially own 525,000 shares, 2.2% of the
common stock after this offering, (v) Nicholas Sokolow will sell an
additional 6,250 shares and will beneficially own 180,000 shares, or less
than 1% of the common stock after this offering, and (vi) Burtt R.
Ehrlich will sell an additional 16,100

45
<PAGE>

shares and will beneficially own 224,700 shares, or less than 1% of the
common stock after this offering. With respect to Mr. Ehrlich, the 48,300
shares being sold in the offering include 13,400 shares owned by Mr.
Ehrlich's children and 9,900 shares held in trust for the benefit of Mr.
Ehrlich's children, of which Mr. Ehrlich's spouse is trustee, and the
16,100 shares which will be sold by Mr. Ehrlich if the underwriters'
over-allotment option is exercised in full include 15,700 shares held in
trust for the benefit of Mr. Ehrlich's children, of which Mr. Ehrlich's
spouse is trustee and 400 shares owned by Mr. Ehrlich's spouse's
individual retirement account.

(3) Of such shares, Kanders Florida Holdings, Inc., of which Mr. Kanders is
the sole stockholder and sole director, owns 3,637,178 shares; and
Kanders Florida Holdings, Inc. 1996 Charitable Remainder Unitrust, of
which Mr. Kanders is trustee, owns 185,400 shares. Mr. Kanders disclaims
beneficial ownership of the shares owned by the trust. Includes options
to purchase 200,000 shares of common stock.

(4) The address of Lord Abbett & Co. is 767 Fifth Avenue, New York, New York
10153.

(5) Snowden Limited Partnership, of which Nevis Capital Management, Inc. is
the general partner, owns all such shares. The address of Nevis Capital
Management, Inc. is 1119 St. Paul Street, Baltimore, Maryland 21202.

(6) The address of FS Partners, LLC is 767 Fifth Avenue, New York, New York
10153.

(7) Includes options to purchase 523,418 shares of common stock. Also
includes 43,541 shares owned by Mr. Spiller's children, of which legal
rules may attribute to Mr. Spiller beneficial ownership. Does not include
91,823 shares which legal rules may attribute to Mr. Spiller a beneficial
ownership interest pursuant to an agreement with Kanders.

(8) Includes options to purchase 300,000 shares of common stock. The address
of Richmont Capital Partners I, L.P. is 4300 Westgrove Drive, Dallas,
Texas 75248.

(9) Includes options to purchase 75,000 shares of common stock. Also includes
13,400 shares owned by Mr. Ehrlich's children and 25,600 shares held in
trust for the benefit of his children, of which Mr. Ehrlich's spouse is
trustee, of which he disclaims beneficial ownership. Also includes 400
shares owned by Mr. Ehrlich's spouse's individual retirement account, of
which Mr. Ehrlich disclaims beneficial ownership.

(10) Includes options to purchase 75,000 shares of common stock. Also includes
100,000 shares owned by S.T. Investors Fund, LLC, a limited liability
company of which Mr. Sokolow is a member, and 20,000 shares owned by Mr.
Sokolow's children, of which he disclaims beneficial ownership. Also
includes 10,000 shares owned by Mr. Sokolow's profit sharing plan.

(11) Includes options to purchase 75,000 shares of common stock.

(12) Includes options to purchase 150,000 shares of common stock at $6.06 per
share, of which 100,000 are currently exercisable and the remainder of
which will become exercisable on July 24, 1999.

(13) Includes 5,516 shares of common stock and options to purchase 50,000
shares of common stock.

(14) Does not include 625,000 shares beneficially owned by Richmont Capital
Partners I L.P., of which Mr. Bartlett may be deemed to be an affiliate.
Mr. Bartlett disclaims ownership of such shares.

(15) See footnotes (3), (7) and (9-14).

46
<PAGE>

SELLING STOCKHOLDERS

The following table sets forth as of March 23, 1999 certain information
regarding the beneficial ownership of the common stock outstanding (but without
giving effect to the underwriters' exercise of the over-allotment option) by
each selling stockholder.

<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING(1)
------------------------ SHARES BEING SOLD -----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE IN THE OFFERING NUMBER PERCENTAGE
- ----------------------------------------- ----------- ------------ ------------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Warren B. Kanders and Kanders Florida
Holdings, Inc. ......................... 4,022,578 24.0% 755,846 3,266,732 14.3%
Jonathan M. Spiller ..................... 783,083 4.6 170,854 612,229 2.6
Richmont Capital Partners I, LP ......... 625,000 3.7 75,000 550,000 2.4
Burtt R. Ehrlich ........................ 289,100 1.7 48,300 240,800 1.1
Nicholas Sokolow ........................ 205,000 1.2 18,750 186,250 *
Robert R. Schiller ...................... 100,000 * 56,250 43,750 *
</TABLE>

- ----------
* Less than 1%

(1) Amounts indicated reflect actual number of shares offered and assumes no
exercise of the underwriters' over-allotment option. In the event such
option is exercised in full (i) Warren B. Kanders and Kanders Florida
Holdings, Inc. will sell an additional 244,154 shares and will
beneficially own 3,022,578 shares, or 12.8% of the common stock
outstanding after this offering, (ii) Jonathan M. Spiller will sell an
additional 56,951 shares and will beneficially own 555,278 shares, or
2.3% of the common stock outstanding after this offering, (iii) Richmont
Capital Partners I, L.P. will sell an additional 25,000 shares and will
beneficially own 525,000 shares, or 2.2% of the common stock after this
offering, (iv) Burtt R. Ehrlich will sell an additional 16,100 shares and
will beneficially own 224,700 shares, or less than 1% of the common
stock after this offering, (v) Nicholas Sokolow will sell an additional
6,250 shares and will beneficially own 180,000 shares, or less than 1% of
the common stock after this offering, and (vi) Robert R. Schiller will
sell an additional 18,750 shares and will beneficially own 25,000 shares,
or less than 1% of the common stock outstanding after this offering. With
respect to Mr. Ehrlich, the 48,300 shares being sold in the offering
include 13,400 shares owned by Mr. Ehrlich's children and 9,900 shares
held in trust for the benefit of Mr. Ehrlich's children, of which Mr.
Ehrlich's spouse is trustee, and the 16,100 shares which will be sold by
Mr. Ehrlich if the underwriters' over-allotment option is exercised in
full include 15,700 shares held in trust for the benefit of Mr. Ehrlich's
children, of which Mr. Ehrlich's spouse is trustee and 400 shares owned
by Mr. Ehrlich's spouse's individual retirement account.

47
<PAGE>

DESCRIPTION OF THE CREDIT FACILITY

On February 12, 1999, we entered into a credit agreement with CIBC, Inc.,
NationsBank, N.A., First Union National Bank and SunTrust Bank, North Florida,
N.A. as lenders, NationsBank, N.A., as documentation agent and Canadian
Imperial Bank of Commerce, as administrative agent. According to the terms of
the credit facility, several lenders established a five-year $60,000,000 line
of credit for our benefit. Our indebtedness under the credit agreement is
evidenced by (1) Five Year Revolving Credit Notes of up to $40,000,000 and (2)
364-Day Revolving Credit Notes of up to $20,000,000, convertible at our option
at the end of 364 days into four-year term notes. All borrowings under the
credit facility will bear interest at either (1) the base rate, plus an
applicable margin ranging from .125% to .375% depending on certain conditions,
or (2) the eurodollar rate, plus an applicable margin ranging from 1.375% to
1.625% depending on certain conditions. In addition, the credit agreement
provides that NationsBank, N.A. shall make swing-line loans of up to $5,000,000
available to us to be used for working capital purposes. CIBC, Inc. and
NationsBank, N.A. will also issue letters of credit of up to $5,000,000 to us.

As part of the credit facility, all of our direct and indirect domestic
subsidiaries agreed to guarantee our obligations under the credit facility
pursuant to a Subsidiaries Guarantee. The credit facility is secured by (1) a
pledge by us of all of the issued and outstanding shares of stock of the Direct
Domestic Subsidiaries pursuant to a Borrower Pledge Agreement and (2) a pledge
by us of 65% of the issued and outstanding shares of our foreign subsidiary,
Armor Holdings Limited, organized under the laws of England and Wales.

48
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

GENERAL

Upon the consummation of this offering, we will have 22,683,848 shares of
common stock issued and outstanding. All of the 7,250,000 shares of common
stock to be sold in this offering (and any shares sold upon exercise of the
underwriters' over-allotment option) will be freely tradable without
restrictions or further registration under the Securities Act, except for any
shares purchased by an "affiliate" of Armor Holdings (as that term is defined
in Rule 144 under the Securities Act ("Rule 144")), which will be subject to
the resale limitations of Rule 144. After the completion of this offering, we
will have 4,164,534 shares of common stock outstanding which are "restricted
securities" as that term is defined in Rule 144 and are also subject to certain
restrictions on disposition. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rule 144 or Rule 701 under the Securities Act. Sales of restricted
securities in the public market, or the availability of such shares for sale,
could have an adverse effect on the price of the common stock. See "Risk
Factors -- Our stock price may be affected when additional shares are sold" and
"Risk Factors -- There is a substantial amount of our common stock eligible for
future sale and the sale of those shares could adversely affect our stock
price."

RULE 144

In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated) who has beneficially owned shares
of common stock for at least one year, including a person who may be deemed an
"affiliate" of Armor Holdings, is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of 1% of the total
number of shares of the class of stock sold or the average weekly reported
trading volume of the class of stock being sold during the four calendar weeks
preceding such sale. A person who is not deemed an "affiliate" of Armor
Holdings at any time during the three months preceding a sale and who has
beneficially owned shares for at least two years is entitled to sell such
shares under Rule 144 without regard to the volume limitations described above.
As defined in Rule 144, an "affiliate" of an issuer is a person that directly
or indirectly through the use of one or more intermediaries controls, is
controlled by, or is under common control with, such issuer. The foregoing
summary of Rule 144 is not intended to be a complete description thereof.

Each of our directors, executive officers and 5% stockholders who, after
this offering, will hold in the aggregate 4,530,277 shares of common stock, for
a period of 90 days after the date of this prospectus, and Armor Holdings, for
a period of 90 days after the date of this prospectus, will agree, pursuant to
lock-up agreements, that they will not, without the prior written consent of
Lehman Brothers Inc., offer, sell, contract to sell or otherwise dispose of any
shares of common stock or securities exercisable or exchangeable for common
stock or enter into any derivative transaction with similar effect as a sale of
common stock. If such stockholders were to default in their obligations and the
bank were to foreclose on such pledged shares, such shares could be subject to
sale during the 90 day period from the date of the prospectus. The restrictions
described in this paragraph do not apply to (1) the sale of common stock to the
underwriters in this offering, (2) the issuance by us of shares of common stock
upon the exercise of an option or a warrant or the conversion of a security
outstanding on the date of this prospectus, (3) the issuance by us of shares of
common stock in connection with acquisitions (including issuances of common
stock as contingent consideration for acquisitions), or (4) transactions by any
person other than Armor Holdings relating to shares of common stock or other
securities acquired in open market transactions after the completion of this
offering of the common stock.

The shares of common stock received by Richmont upon conversion of the
Convertible Notes have previously been registered. In addition, Richmont also
has certain piggyback registration rights with respect to such shares.

Shares held by certain of our executive officers and directors are subject
to a three year lock-up agreement (each a "Company Lockup") between such
executives and Armor Holdings including an aggregate of 1,472,101 shares owned
by our executive officers and directors, representing approximately 9% of our
presently outstanding shares (or approximately 6% upon consummation of this
offering), which are comprised of

49
<PAGE>

997,101, 200,000, 200,000 and 75,000 shares and options subject to a Company
Lockup, that are held by Messrs. Spiller, Schiller, Croskrey and Winiewicz,
respectively. Pursuant to their respective employment agreements, each of such
executives agreed that he or she will not sell, transfer, assign, pledge or
otherwise dispose of certain of his or her shares of common stock or securities
convertible into common stock for a period of three years from January 1, 1999,
except as provided in such agreement. In addition an aggregate of 400,747 shares
issued in connection with our acquisition of various companies are subject to
lock-ups expiring between July 1999 and July 2001. In total, an aggregate of
1,872,848 shares are subject to lock-up restrictions, representing approximately
11% of the presently outstanding shares (or approximately 8% upon consummation
of this offering).

No prediction can be made as to the effect, if any, that market sales of
shares of common stock that are restricted securities, or the availability of
such shares, will have on the market price of the common stock prevailing from
time to time. Sales of substantial amounts of common stock, or the perception
that such sales could occur, could adversely affect prevailing market prices
for the common stock and could impair our future ability to raise capital
through an offering of equity securities.

50
<PAGE>

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK

The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of common stock by a
beneficial owner thereof that is a "Non-U.S. Holder." A "Non-U.S. Holder" is a
person or entity other than (i) a citizen or resident of the U.S., (ii) a
corporation, partnership, limited liability company or other business entity
created or organized in the U.S. or under the laws of the U.S. or of any state
(other than any partnership treated as foreign under U.S. Treasury
Regulations), (iii) an estate whose income is includable in gross income for
U.S. federal income tax purposes regardless of source, or (iv) a trust if (a) a
court within the U.S. is able to exercise primary supervision over the
administration of the trust and (b) one or more U.S. persons have the authority
to control all substantial decisions of the trust.

This discussion is based on our understanding of the Internal Revenue Code
of 1986, as amended (the "Code") and administrative interpretations as of the
date hereof, all of which are subject to change, including changes with
retroactive effect. This discussion does not address all aspects of U.S.
federal income and estate taxation that may be relevant to Non-U.S. Holders in
light of their particular circumstances and does not address any tax
consequences arising under the laws of any state, local or foreign
jurisdiction. Prospective holders should consult their tax advisors with
respect to the particular tax consequences to them of owning and disposing of
common stock, including the consequences under the laws of any state, local or
foreign jurisdiction.

DIVIDENDS

Subject to the discussion below, dividends, if any, paid to a Non-U.S.
Holder of common stock will be subject to withholding tax at a rate of 30% of
the gross amount of the dividend or such lower rate as may be specified by an
applicable income tax treaty. For purposes of determining whether tax is to be
withheld, in accordance with currently applicable U.S. Treasury regulations, we
will presume that dividends paid to an address in a foreign country are paid to
a resident of such country absent actual knowledge to the contrary. Under
recently finalized U.S. Treasury regulations generally effective for payments
made after December 31, 1999 (the "Final Regulations"), however, a Non U.S.
Holder of common stock who wishes to claim the benefit of an applicable treaty
rate generally will be required to satisfy applicable certification and other
requirements. In addition, under the Final Regulations, in the case of common
stock held by a foreign partnership, (x) the certification requirement will
generally be applied to the partners of the partnership and (y) the partnership
will be required to provide certain information, including a U.S. taxpayer
identification number. The Final Regulations also provide look-through rules
for tiered partnerships.

Generally, there will be no withholding tax on dividends paid to a
Non-U.S. Holder if such dividends are effectively connected with the Non-U.S.
Holder's conduct of a trade or business within the U.S. or, if an income tax
treaty applies, attributable to a permanent establishment in the U.S. ("U.S.
trade or business income"), if the Non-U.S. Holder files the appropriate U.S.
Internal Revenue Service ("IRS") form with the payor (which form, under the
Final Regulations, will require the Non-U.S. Holder to provide a U.S. taxpayer
identification number). Instead, the effectively connected dividends will be
subject to regular U.S. net income tax at graduated rates, in the same manner
as if the Non-U.S. Holder were a U.S. resident. In addition to the graduated
tax described above, a non-U.S. corporation receiving effectively connected
dividends may be subject to a "branch profits tax" which is imposed, under
certain circumstances, at a rate of 30% (or such lower rate as may be specified
by an applicable treaty) of such corporation's effectively connected earnings
and profits, subject to certain adjustments.

A Non-U.S. Holder of common stock that is eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amount withheld by filing an appropriate claim for a refund with the
IRS.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to U.S. federal income tax
(and no tax will generally be withheld) with respect to gain realized on a sale
or other disposition of common stock

51
<PAGE>

unless (i) the gain is U.S. trade or business income (in which case, the branch
profits tax described above may also apply to a corporate Non-U.S. Holder),
(ii) in the case of certain Non-U.S. Holders who are non-resident alien
individuals and hold the common stock as a capital asset, such individuals are
present in the U.S. for 183 or more days in the taxable year of the disposition
and certain other conditions are met, (iii) the Non-U.S. Holder is subject to
tax pursuant to the provisions of the Code regarding the taxation of U.S.
expatriates, or (iv) we are or have been a "U.S. real property holding
corporation" for federal income tax purposes and the Non-U.S. Holder owned
directly or indirectly more than 5% of our common stock (assuming the common
stock is regularly traded on an established securities market) at any time
within the shorter of the five-year period preceding such disposition or such
holder's holding period. Generally, a corporation is a "U.S. real property
holding corporation" if the fair market value of its "U.S. real property
interest" equals or exceeds 50% of the sum of the fair market value of its
worldwide real property interests plus its other assets used or held for use in
a trade or business. We are not, and do not anticipate becoming, a "U.S. real
property holding corporation" for U.S. federal income tax purposes.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING ON DISPOSITION OF
COMMON STOCK

Generally, we must report to the IRS the amount of dividends paid, the
name and address of the recipient, and the amount, if any, of tax withheld. A
similar report is sent to the holder. Pursuant to tax treaties or certain other
agreements, the IRS may make its reports available to tax authorities in the
recipient's country of residence.

Under currently effective U.S. Treasury regulations, dividends paid to a
Non-U.S. Holder at an address within the U.S. may be subject to backup
withholding imposed at a rate of 31% if the Non-U.S. Holder fails to establish
that it is entitled to an exemption or to provide a correct taxpayer
identification number and certain other information to us or our paying agent.
Under the Final Regulations, a Non-U.S. Holder of common stock that fails to
certify its Non-U.S. Holder status in accordance with the requirements of the
Final Regulations may be subject to U.S. backup withholding at a rate of 31% on
payment of dividends.

Under current U.S. Federal income tax law, information reporting and
backup withholding imposed at a rate of 31% will apply to the proceeds of a
disposition of common stock paid to or through a U.S. office of a broker unless
the disposing holder certifies as to its non-U.S. status or otherwise
establishes an exemption. Generally, U.S. information reporting and backup
withholding will not apply to a payment of disposition proceeds if the payment
is made outside the U.S. through a non-U.S. office of a non-U.S. broker.
However, U.S. information reporting requirements (but not backup withholding)
will apply to a payment of disposition proceeds outside the U.S. if the payment
is made through an office outside the U.S. of a broker that is (i) a U.S.
Person, (ii) a foreign person which derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the U.S. or (iii) a
"controlled foreign corporation" for U.S. federal income tax purposes, unless
the broker maintains documentary evidence that the holder is a Non-U.S. Holder
and that certain conditions are met, or that the holder otherwise is entitled
to an exemption.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the IRS.

FEDERAL ESTATE TAX

An individual Non-U.S. Holder who is treated at the time of death as the
owner of, or has made certain lifetime transfers of, an interest in the common
stock at the time of death will be required to include the value thereof in his
gross estate for U.S. Federal estate tax purposes, unless an applicable estate
tax treaty provides otherwise. Such individual's estate will be subject to U.S.
Federal estate tax on the property includable in the gross estate for U.S.
Federal estate tax purposes, but generally will be allowed a statutory credit
which has the effect of offsetting the U.S. Federal estate tax imposed on the
first $60,000 of the taxable estate.

52
<PAGE>

UNDERWRITING

Under the terms and subject to the conditions set forth in the
Underwriting Agreement dated the date of this prospectus (the "Underwriting
Agreement"), the underwriters of the offering in the United States and Canada
named below (the "U.S. Underwriters"), for whom Lehman Brothers Inc., Bear,
Stearns & Co. Inc., SunTrust Equitable Securities Corporation and Warburg
Dillon Read LLC, a subsidiary of UBS AG are acting as representatives (the
"U.S. Representatives") and the underwriters of the concurrent offering outside
the United States and Canada named below (the "International Managers," and
together with the U.S. Underwriters, the "Underwriters"), for whom Lehman
Brothers International (Europe), Bear, Stearns International Limited, SunTrust
Equitable Securities Corporation and Warburg Dillon Read, a division of UBS AG
are acting as representatives (the "Lead Managers," and together with the U.S.
Representatives, the "Representatives"), have severally agreed to purchase from
us and the selling stockholders, and we and the selling stockholders have
agreed to sell to each of them, the number of shares of common stock set forth
opposite each underwriter's names below:

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---- -----------------
<S> <C>
U.S. Underwriters:
Lehman Brothers Inc. ....................................
Bear, Stearns & Co. Inc. ................................
SunTrust Equitable Securities Corporation ...............
Warburg Dillon Read LLC, a subsidiary of UBS AG .........

Subtotal .............................................
</TABLE>

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---- -----------------
<S> <C>
International Managers:
Lehman Brothers International (Europe) ............
Bear, Stearns International Limited ...............
SunTrust Equitable Securities Corporation .........
Warburg Dillon Read, a division of UBS AG .........

Subtotal .......................................
Total ........................................
=================

</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of common stock are subject to certain
conditions. The Underwriters are obligated to take and pay for all of the
shares of our common stock offered by this prospectus (other than those covered
by the U.S. Underwriters' over-allotment option described below) if any shares
are taken. The offering price and underwriting discounts and commissions per
share for the U.S. offering and the international offering are identical. The
closing of the U.S. offering is a condition to the closing of the international
offering and the closing of the international offering is a condition to the
closing of the U.S. offering.

The Representatives have advised us and the selling stockholders that the
Underwriters propose to offer the shares of common stock directly to the public
at the public offering price set forth on the cover page of this prospectus,
and to selected dealers (who may include the Underwriters) at the public
offering price less a selling concession not in excess of $ per share. The
selected dealers may reallow a concession not in excess of $ per share to
certain brokers and dealers. After this offering, the Representatives may
change the public offering price, the concession to selected dealers and the
reallowance.

53
<PAGE>

We and the selling stockholders have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act,
under certain circumstances, and to contribute, under certain circumstances, to
payments that the Underwriters may be required to make in respect thereof.

We and the selling stockholders have granted to the U.S. Underwriters an
option to purchase up to an aggregate 870,000 additional shares of common stock
and have granted to the International Managers an option to purchase up to
217,500 additional shares of common stock, in each case, exercisable solely to
cover over-allotments, at the public offering price less the underwriting
discounts and commissions shown on the cover page of this prospectus. Such
options may be exercised at any time until 30 days after the date of the
Underwriting Agreement. To the extent that the over-allotment option is
exercised, each U.S. Underwriter or International Manager, as the case may be,
will be committed, subject to certain conditions, to purchase a number of
additional shares of common stock proportionate to such U.S. Underwriter's or
International Manager's initial commitment as indicated in the preceding
tables. If the over-allotment option is exercised in full, the total price to
public, underwriting discounts and commissions, and proceeds to us and the
selling stockholders will be $ , $ , $ and $ , respectively.

We, and each of our executive officers, directors and certain of our five
percent or greater stockholders for a period of 90 days from the date of this
prospectus, have agreed not to, subject to certain limited exceptions,

o offer, sell, pledge, contract to sell, file a registration statement
pursuant to the Securities Act (except for certain registration
statements relating to the issuance of stock and stock options to
employees) or otherwise dispose of any shares of common stock or
securities convertible into or exchangeable for common stock, or sell or
grant options, rights or warrants with respect to any shares of common
stock or securities convertible into or exchangeable for common stock
except for common stock and options with respect to common stock issued
or granted to our officers, directors, or employees, or

o enter into any swap of other derivatives transaction that transfers to
another, in whole or in part, any of the economic benefits or risks of
ownership of shares of common stock, whether any such transaction
described in either this clause or the above clause is to be settled by
delivery of common stock or other securities, in cash or otherwise, in
each case without the prior written consent of Lehman Brothers Inc. on
behalf of the Underwriters.

The restrictions described in this paragraph do not apply to (a) the sale
of common stock to the Underwriters in this offering, (b) the issuance by us of
shares of common stock upon the exercise of an option or a warrant of the
conversion of a security outstanding on the date of this prospectus, (c) the
issuance by us of shares of common stock in connection with acquisitions
(including issuances of common stock as contingent consideration for
acquisitions), and (d) transactions by any person other than us relating to
shares of common stock or other securities acquired in open market transactions
after the completion of this offering.

The U.S. Underwriters and the International Managers have entered into an
agreement among U.S. Underwriters and International Managers, pursuant to which
each U.S. Underwriter has agreed that, as part of the distribution of the
shares of common stock offered in the U.S. offering,

o it is not purchasing any of these shares for the account of anyone other
than a U.S. Person (as defined below), and

o it has not offered or sold, will not offer, sell, resell or deliver,
directly or indirectly, any of these shares or distribute any prospectus
relating to the U.S. offering to anyone other than a U.S. Person.

In addition, pursuant to the agreement, each International Manager has
agreed that, as part of the distribution of the shares of common stock offered
in the international offering,

o it is not purchasing any such shares for the account of a U.S. Person,
and

54
<PAGE>

o it has not offered or sold, and will not offer, sell, resell, or
deliver, directly of indirectly, any of these shares or distribute any
prospectus relating to the international offering to any U.S. Person.

The limitations described above do not apply to stabilization transactions
or to certain other transactions specified in the Underwriting Agreement and
the agreement among U.S. Underwriters and International Managers, including

o certain purchases and sales between U.S. Underwriters and the
International Managers,

o certain offers, sales, resales, deliveries or distributions to or
through investment advisors or other persons exercising investment
discretion,

o purchases, offers or sales by a U.S. Underwriter who is also acting as
an International Manager or by an International Manager who is also
acting as a U.S. Underwriter and

o other transactions specifically approved by the U.S. Representatives and
the Lead Managers.

As used in this section, the term "U.S. Person" means any resident or national
of the United States or Canada, any corporation, partnership or other entity
created or organized in or under the laws of the United States or Canada, or
any estate or trust the income of which is subject to United States or Canadian
federal income taxation regardless of the source, the term "United States"
means the United States of America (including the District of Columbia) and its
territories, its possessions and other areas subject to its jurisdiction, and
the term "Canada" means Canada, its provinces, it territories, its possessions
and other areas subject to its jurisdiction.

Pursuant to the agreement among the U.S. Underwriters and International
Managers, sales may be made between the U.S. Underwriters and the International
Managers of the number of shares of common stock as may be mutually agreed. The
price of any shares so sold shall be the public offering prices as then in
effect for the shares of common stock being sold by the U.S. Underwriters and
the International Managers less an amount equal to the selling concession
allocable to those shares of common stock, unless otherwise determined by
mutual agreement. To the extent that there are sales between the U.S.
Underwriters and the International Managers pursuant to the agreement among the
U.S. Underwriters and the International Managers, the number of shares of
common stock available for sale by the U.S. Underwriters or by the
International Managers may be more or less than the amount specified on the
cover page of this prospectus.

Until the distribution of the common stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase shares of common stock. As an exception to
these rules, the Representatives are permitted to engage in certain
transactions that stabilize the prices of the common stock. These transactions
may consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the common stock.

If the Underwriters create a short position in the common stock in
connection with this offering (i.e., if they sell more shares of common stock
than are set forth on the cover page of this prospectus), the Representatives
may reduce that short position by purchasing common stock in the open market.
The Representatives also may elect to reduce any short position by exercising
all or part of the over-allotment option described here.

The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of common stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the commons stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group
members who sold those shares as part of this offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of those purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
this offering.

55
<PAGE>

Neither we nor any of the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the Underwriters make any representation that the Representatives
will engage in any such transaction or that any such transaction, once
commenced, will not be discontinued without notice.

Each International Manager has represented and agreed that:

o it has not offered or sold and, prior to the date six months after the
date of issue of the shares of common stock, will not offer to sell any
shares of common stock to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995;

o it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 and the Regulation with respect to anything
done by it in relation to the shares of common stock in, from or
otherwise involving the United Kingdom; and

o it has only issued or passed on, and will only issue or pass on, to any
person in the United Kingdom any document received by it in connection
with the issue of the shares of common stock if that person is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise be issued or passed upon.

Under the agreement between the U.S. Underwriters and the International
Managers, each International Manager has further represented that it has not
offered or sold, and has agreed not to offer or sell, directly or indirectly,
in Japan or to or for the account of any resident of Japan, any of the shares
of common stock in connection with the distribution contemplated by this
prospectus, except for offers and sales to Japanese international underwriters
or dealers and except pursuant to any exemption from the registration
requirements of the Securities and Exchange Law and otherwise in compliance
with applicable provisions of Japanese law. Each International Manager has
further agreed to send to any dealer who purchases from it any of the shares of
common stock a notice stating in substance that, by purchasing these shares,
the dealer represents and agrees that it has not offered or sold, and will not
offer or sell, any of such shares, directly or indirectly, in Japan or to or
for the account of any resident of Japan except for offers or sales to Japanese
international underwriters or dealers and except pursuant to any exemption from
the registration requirements of the Securities and Exchange Law and otherwise
in compliance with applicable provisions of Japanese law, and that the dealer
will send to any other dealers to whom it sells any of these shares a notice
containing substantially the same statements as set forth in this sentence.

The common stock is listed on the American Stock Exchange under the symbol
"ABE." Simultaneous with the consummation of this offering, we intend to list
our common stock on the New York Stock Exchange under the symbol "AH."

Any offer of the shares of common stock in Canada will be made only
pursuant to an exemption from the prospectus filing requirement and an
exemption from the dealer registration requirement (where such an exemption is
not available, offers shall be made only by a registered dealer) in the
relevant Canadian jurisdiction where any such offer is made.

Purchasers of the shares of common stock offered in this prospectus may be
required to pay stamp taxes and other charges in accordance with the laws and
practices of the country of purchase, in addition to the offering price set
forth on the cover of this prospectus.

The U.S. Underwriters and the International Managers have informed us and
the selling stockholders that they do not intend to sell to, and therefore will
not confirm the sales of shares of common stock offered in this prospectus to,
any accounts over which they exercise discretionary authority without prior
written approval of the customer.

56
<PAGE>

The Representatives and certain of their respective affiliates provided
investment banking services to us in connection with this offering and each
received customary fees and compensation for these services.

SunTrust Bank, North Florida, N.A., an affiliate of SunTrust Equitable
Securities Corporation is a lender to Armor Holdings under the credit facility.
Because amounts to be repaid under the credit facility exceed 10% of the
proceeds of this offering, the NASD may view this offering as a participation
by SunTrust Equitable Securities Corporation in the distribution in a public
offering of securities issued by a company with which SunTrust Equitable
Securities Corporation has a conflict of interest. As a result, this offering
is being made pursuant to the provisions of Rule 2720 of the NASD's Conduct
Rules. Such provisions require, among other things, that the initial public
offering price be no higher than that recommended by a "qualified independent
underwriter," who must participate in the preparation of the registration
statement and the prospectus and who must exercise the usual standards of "due
diligence" with respect thereto. Lehman Brothers Inc. is acting as a qualified
independent underwriter in this offering, and the initial public offering price
of the shares will not be higher than the price recommended by Lehman Brothers
Inc.

LEGAL MATTERS

The validity of the shares of common stock offered hereby has been passed
upon for us by Kane Kessler, P.C., New York, New York. Robert L. Lawrence, a
member of Kane Kessler, P.C., owns 5,000 shares of our common stock. Kirkland &
Ellis, New York, New York will pass upon certain legal matters in connection
with this offering for the underwriters.

EXPERTS

Our consolidated balance sheet as of December 31, 1998 and our
consolidated statements of income, stockholders' equity, and cash flows for the
year ended December 31, 1998, included in this prospectus, have been included
herein in reliance on the reports of PricewaterhouseCoopers LLP and Deloitte &
Touche, independent accountants, given on the authority of those firms as
experts in accounting and auditing.

Our consolidated financial statements as of December 27, 1997 and for each
of the years ended December 28, 1996 and December 27, 1997 included in this
prospectus, have been included herein in reliance on the reports of Deloitte &
Touche LLP, independent accountants, given on the authority of that firm as
experts in accounting and auditing.

KPMG, independent chartered accountants, have audited the consolidated
profit and loss account, consolidated statement of total recognized gains and
losses, reconciliation of movements in shareholders' funds and consolidated cash
flow statement of DSL Group Limited and subsidiaries for the period from June 3,
1996 (date of incorporation) to December 31, 1996 (none of which aforementioned
financial statements are separately presented herein).

Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of Safariland Ltd., Inc. at September 30, 1997 and 1998,
and for the years then ended, as set forth in their report. These financial
statements have been included in this prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.

57
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
ARMOR HOLDINGS, INC.
Report of Independent Accountants ............................ F-2
Statutory Auditors' Report ................................... F-3
Independent Auditor's Report ................................. F-4
Independent Auditors' Report ................................. F-5
Consolidated Balance Sheets .................................. F-6 - F-7
Consolidated Income Statements ............................... F-8
Consolidated Statement of Stockholders' Equity ............... F-9
Consolidated Statements of Cash Flow ......................... F-10
Notes to Consolidated Financial Statements ................... F-12 - F-31
SAFARILAND LTD., INC.
Audited Consolidated Financial Statements
Report of Independent Auditors ............................... F-32
Consolidated Balance Sheets .................................. F-33
Consolidated Statements of Income and Retained Earnings ...... F-34
Consolidated Statements of Cash Flows ........................ F-35
Notes to Consolidated Financial Statements ................... F-36 - F-42
Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1998
and December 31, 1998 (Unaudited) .......................... F-43
Consolidated Statements of Operations and Retained
Earnings (Unaudited) for the three months ended
December 31, 1997 and 1998 ................................. F-44
Consolidated Statements of Cash Flows (Unaudited) for the
three months ended December 31, 1997 and 1998 ............... F-45
Notes to Consolidated Financial Statements (Unaudited) ....... F-46
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and the
Board of Directors of
Armor Holdings, Inc.

In our opinion, based upon our audit and the report of other auditors, the
accompanying consolidated balance sheet and the related consolidated statements
of income, stockholders' equity and cash flows present fairly, in all material
respects, the financial position of Armor Holdings, Inc. and its subsidiaries
(the "Company") at December 31, 1998, and the results of their operations and
their cash flows for the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These consolidated financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. We did not audit the financial statements of
Defense Systems Colombia S.A., a wholly owned subsidiary, which statements
reflect total assets of $4,974,000 at December 31, 1998 and total revenues of
$13,266,000 for the year ended December 31, 1998. Those statements were audited
by other auditors whose report thereon has been furnished to us, and our
opinion expressed herein, insofar as it relates to the amounts included for
Defense Systems Colombia S.A. is based solely on the report of the other
auditors. We conducted our audit of the consolidated financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit and the report of other
auditors provide a reasonable basis for the opinion expressed above. The
consolidated financial statements of the Company for the years ended December
28, 1996 and December 27, 1997, were audited by other independent accountants,
whose report dated March 19, 1998, expressed an unqualified opinion on those
consolidated financial statements.

PricewaterhouseCoopers LLP
March 5, 1999

F-2
<PAGE>

[LOGO]

Statutory Auditor's Report

Messrs.
Shareholders of:
DEFENCE SYSTEMS COLOMBIA S.A.

I have audited the balance sheet of Defence Systems Colombia S.A. as of December
31, 1998 and the related statements of income, changes in shareholders' equity,
changes in financial position and cash flows for the year then ended. These
financial statements are the responsibility of the Management of the Company,
since they reflect the result of its efforts. Among my duties of surveillance of
the Company there is the one of auditing them and expressing an opinion thereon.
The financial statements for the year ended as of December 31, 1997 were
examined by another Statutory Auditor, who in his report of March 5, 1998
expressed an unqualified opinion on same, such statements are included herewith
for comparative purposes only.

I obtained the information required to comply with my duties and carry out my
audit in accordance with generally accepted auditing standards. Such standards
require that I plan and perform the audit to obtain reasonable assurance on
whether the financial statements reasonably reflect, in all material respects,
the financial position and results of operations. An audit includes, among other
procedures, examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used, of the significant accounting estimates made by the
management of the Company and the presentation of the financial statements as a
whole. I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above, that have been taken
from the books and attached to this report, present fairly, in all material
respects, the financial position of Defence Systems Colombia S.A. as of December
31, 1998, the results of its operations, the changes in shareholders' equity,
the changes in financial position and the cash flows for the year then ended, in
conformity with accounting principles generally accepted in Colombia.

I also inform that during said year the Company has carried out its accounting
books in conformity with the legal regulations and accounting techniques, the
management report on operations is in agreement with the attached basic
financial statements; the transactions recorded in books and the acts of the
administration conform to the statutes and the decisions of the General Assembly
of Shareholders and of the Board of Directors; the correspondence, accounting
vouchers, minutes books and shareholders register are properly kept and
maintained; the Company has followed adequate measures of internal control, for
the preservation and custody of its assets and assets of third parties held by
the Company.

/s/ LUIS JAVIER ORTIZ
LUIS JAVIER ORTIZ
Statutory Auditor
T.P. No. 40014-T

February 8, 1999

F-3
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Armor Holdings, Inc.
Jacksonville, Florida

We have audited the consolidated balance sheet of Armor Holdings, Inc.
(the "Company") as of December 27, 1997 and the related consolidated statements
of income, stockholders' equity, and cash flows for the two years ended
December 27, 1997 and December 28, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. These consolidated
financial statements give retroactive effect to the merger with DSL Group
Limited ("DSL") on April 16, 1997, which has been accounted for as a pooling of
interests as described in Note 1. We did not audit the financial statements of
Defense Systems Colombia ("DSC") (a consolidated subsidiary), which statements
reflect total assets of $3,771,000 at December 27, 1997 and total revenues of
$10,766,000 for the year then ended. Also, we did not audit the financial
statements of DSL included in the December 28, 1996 consolidated financial
statements of the Company, which statements reflect total assets of $20,798,000
as of December 28, 1996 and total revenues of $12,956,000 for the year then
ended. Those statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts included
for DSC in the December 27, 1997 financial statements and DSL in the December
28, 1996 financial statements, is based solely upon the reports of such other
auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of the other
auditors provide a reasonable basis for our opinion.

In our opinion, based upon our audits and the reports of the other
auditors, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Armor Holdings,
Inc. as of December 27, 1997 and the results of their operations and their cash
flows for the two years ended December 27, 1997 and December 28, 1996 in
conformity with generally accepted accounting principles.

Deloitte & Touche, LLP
New York, New York
March 19, 1998

F-4

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and
Shareholders of
DSL Group Limited

We have audited the consolidated profit and loss account, consolidated
statement of total recognised gains and losses, reconciliation of movements in
shareholders' funds and consolidated cash flow statement of DSL Group Limited
and subsidiaries for the period from 3 June 1996 (date of incorporation) to 31
December 1996 (none of which aforementioned financial statements are separately
presented herein). These consolidated financial statements are the
responsibility of the management of DSL Group Limited. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United Kingdom and in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of the operations of DSL
Group Limited and subsidiaries and their cash flows for the period from 3 June
1996 to 31 December 1996, in conformity with generally accepted accounting
principles in the United Kingdom.

Accounting principles generally accepted in the United Kingdom vary in
certain significant respects from accounting principles generally accepted in
the United States of America. Application of accounting principles generally
accepted in the United States would have affected profit attributable to
shareholders for the period from 3 June 1996 to 31 December 1996, to the extent
summarised in Note 24 to the consolidated financial statements.

KPMG
Chartered Accountants
Registered Auditors
London, England
15 April 1997

F-5
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 27, 1997 AND DECEMBER 31, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 31,
1997 1998
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................... $19,300 $ 6,789
Accounts receivable (net of allowance for doubtful accounts of
$845 and $1,380) .................................................. 15,752 21,363
Inventories ......................................................... 5,731 9,103
Prepaid expenses and other current assets ........................... 1,816 5,910
------- -------
Total current assets ............................................. 42,599 43,165
Property, plant and equipment, net ................................... 10,041 12,173
Goodwill (net of accumulated amortization of $659 and $1,577) ........ 13,701 25,820
Reorganization value in excess of amounts
allocable to indentifiable assets (net of
accumulated amortization of $757 and $2,513) ........................ 3,318 1,562
Patents, licenses and trademarks (net of accumulated amortization of
$403 and $728)....................................................... 3,978 7,180
Investment in unconsolidated subsidiaries ............................ 329 483
Other assets ......................................................... 1,521 3,970
------- -------
Total assets ......................................................... $75,487 $94,353
======= =======
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 27, 1997 AND DECEMBER 31, 1998 -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 31,
1997 1998
-------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capitalized lease obligations .... $ 190 $ 433
Short-term debt ........................................................ -- 5,041
Accounts payable, accrued expenses and other current liabilities ....... 8,743 11,294
Income taxes payable ................................................... 1,732 2,031
-------- --------
Total current liabilities ........................................... 10,665 18,799
Minority interest ....................................................... 213 108
Long-term debt and capitalized lease obligations, less current portion .. 11 344
-------- --------
Total liabilities ................................................... 10,889 19,251
Commitments and contingencies (Notes 6, 10 and 11) ......................
Preference shares ....................................................... -- --
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares
issued and outstanding ............................................... -- --
Common stock, $.01 par value; 50,000,000 shares authorized; 16,023,740
and 16,497,808 issued and 15,837,717 and 16,227,080 outstanding at
December 27, 1997 and December 31, 1998 respectively ................. 160 165
Additional paid-in capital ........................................... 61,496 65,408
Cumulative comprehensive income excluded from net income,
net of tax .......................................................... (353) (574)
Retained earnings .................................................... 4,823 13,419
Treasury stock ....................................................... (1,528) (3,316)
-------- --------
Total stockholders' equity .......................................... 64,598 75,102
-------- --------
Total liabilities and stockholders' equity .............................. $ 75,487 $ 94,353
======== ========
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS
YEARS ENDED DECEMBER 28, 1996, DECEMBER 27, 1997 AND DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------
DECEMBER 28, DECEMBER 27, DECEMBER 31,
1996 1997 1998
-------------- -------------- -------------
<S> <C> <C> <C>
Revenues:
Services .................................................... $12,956 $48,445 $51,563
Products .................................................... 18,011 29,869 45,644
------- ------- -------
Total revenues ............................................... 30,967 78,314 97,207
------- ------- -------
Costs and expenses:
Cost of sales ............................................... 21,172 57,438 66,451
Operating expenses . ........................................ 6,905 12,473 17,102
Depreciation and amortization ............................... 554 1,127 1,347
Merger, integration and other non-recurring charges ......... -- 2,542 --
Equity in earnings of investees ............................. (320) (746) (713)
Interest (income) expense, net .............................. 515 195 (625)
------- ------- -------
Total costs and expenses ..................................... 28,826 73,029 83,562
Operating income ............................................ 2,141 5,285 13,645
Other income ................................................ 2 392 28
------- ------- -------
Income before provision for income taxes ..................... 2,143 5,677 13,673
Provision for income taxes .................................. 1,215 2,376 5,077
Dividends on preference shares .............................. 239 143 --
------- ------- -------
Net income applicable to common shareholders . .............. $ 689 $ 3,158 $ 8,596
======= ======= =======
Basic earnings per share .................................... $ 0.09 $ 0.23 $ 0.53
======= ======= =======
Diluted earnings per share .................................. $ 0.08 $ 0.21 $ 0.50
======= ======= =======
</TABLE>

See notes to consolidated financial statements.

F-8
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 28, 1996, DECEMBER 27, 1997 AND DECEMBER 31, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
----------------------- ------------------
STATED PAR
SHARES VALUE SHARES VALUE
----------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Balance, December 31,
1995 .......................... 1,214 $ 1,214 5,091 $ 152
Change in par value of
common stock .................. (102)
Dividends on preferred
stock .........................
Conversion of preferred
stock ......................... (1,214) (1,214) 1,735 17
Exercise of stock options ...... 26 1
Exercise of stock grants ....... 72 1
Issuance of stock in lieu of
Directors fees ................ 3
Conversion of convertible
notes, net of related
debt issuance costs ........... 2,300 23
Issuance of stock for
acquisitions .................. 2,214 22
Issuance of common stock 250 3
Comprehensive income
excluded from net
income, net of tax ............
Dividends on preference
shares ........................
Net income .....................
----------- ----------- -------- ---------
Balance, December 28,
1996 .......................... -- $ -- 11,691 $117
Exercise of stock
options ...................... 217 2
Issuance of stock for
acquisitions ................. 115 1
Recovery of acquisition
escrow shares .................
Issuance of common stock 4,000 40
Comprehensive income
excluded from net
income, net of tax ............
Dividends on preference
shares ........................
Net income .....................
----------- ----------- -------- ---------
Balance, December 27,
1997 .......................... -- $ -- 16,023 $ 160
Exercise of stock
options ...................... 149 2
Issuance of stock for
acquisitions ................. 326 3
Recovery of acquisition
escrow shares due to
settlement of lawsuit ........
Comprehensive income
excluded from net
income, net of tax ...........
Net income ....................
----------- ----------- -------- ---------
Balance, December 31,
1998 .......................... -- $ -- 16,498 $ 165
====== ========= ====== =======

<CAPTION>
CUMULATIVE
COMPREHENSIVE
INCOME
ADDITIONAL EXCLUDED
PAID-IN RETAINED FROM NET TREASURY
CAPITAL EARNINGS INCOME STOCK TOTAL
------------ ---------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1995 .......................... $ 2,594 $ 987 $ - - $ $ 4,947
--
Change in par value of
common stock .................. 102 --
Dividends on preferred
stock ......................... (11) (11)
Conversion of preferred
stock ......................... 1,197 --
Exercise of stock options ...... 62 63
Exercise of stock grants ....... 54 55
Issuance of stock in lieu of
Directors fees ................ 15 15
Conversion of convertible
notes, net of related
debt issuance costs ........... 10,610 10,633
Issuance of stock for
acquisitions .................. 7,121 7,143
Issuance of common stock 1,567 1,570
Comprehensive income
excluded from net
income, net of tax ............ (229) (229)
Dividends on preference
shares ........................ (239) (239)
Net income ..................... 928 928
------------ ---------- -------------- ----------- -----------
Balance, December 28,
1996 .......................... $23,322 $ 1,665 $ (229) -- $24,875
Exercise of stock
options ...................... 539 541
Issuance of stock for
acquisitions ................. 1,200 1,201
Recovery of acquisition
escrow shares ................. (1,528) (1,528)
Issuance of common stock 36,435 36,475
Comprehensive income
excluded from net
income, net of tax ............ (124) (124)
Dividends on preference
shares ........................ (143) (143)
Net income ..................... 3,301 3,301
------------ ---------- -------------- ----------- -----------
Balance, December 27,
1997 .......................... $61,496 $ 4,823 $ (353) $ (1,528) $ 64,598
Exercise of stock
options ...................... 170 172
Issuance of stock for
acquisitions ................. 3,742 3,745
Recovery of acquisition
escrow shares due to
settlement of lawsuit ........ (1,788) (1,788)
Comprehensive income
excluded from net
income, net of tax ........... (221) (221)
Net income .................... 8,596 8,596
------------ ---------- -------------- ----------- -----------
Balance, December 31,
1998 .......................... $65,408 $13,419 $ (574) $ (3,316) $ 75,102
======= ======= ========= ========= ========
</TABLE>

See notes to consolidated financial statements.

F-9
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 28, 1996, DECEMBER 27, 1997 AND DECEMBER 31, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------
DECEMBER 28, DECEMBER 27, DECEMBER 31,
1996 1997 1998
-------------- -------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income .......................................................... $ 928 $ 3,301 $ 8,596
Adjustments to reconcile net income to
cash provided by (used in) operating
activities, net of effects of acquisitions:
Preference stock dividends .......................................... (239) (143) --
Depreciation and amortization . ..................................... 818 1,976 2,654
Loss on sale of equipment . ......................................... -- 166 --
Deferred income taxes ............................................... 2 1,203 1,842
Directors' fees ..................................................... 15 -- --
Increase in accounts receivable ..................................... (2,115) (3,468) (2,848)
Increase in inventories ............................................. (423) (1,001) (786)
Decrease (increase) in prepaid expenses and other assets ............ 870 (1,129) (5,450)
(Decrease) increase in accounts payable, accrued liabilities
and other current liabilities ..................................... 1,783 (3,715) (686)
Increase in income taxes payable .................................... -- 1,072 162
Increase (decrease) in minority interests ........................... -- 182 (105)
--------- -------- ---------
Net cash provided by (used in) operating activities ................. 1,639 (1,556) 3,379
--------- -------- ---------
INVESTING ACTIVITIES:
Purchase of property and equipment .................................. (1,860) (5,153) (3,301)
Purchase of licenses, patents and trademarks . ...................... (2,828) (76) (3,448)
Purchase of businesses, net of assets acquired . .................... (11,740) (3,607) (12,068)
Dividends received from equity investees ............................ -- 939 478
Proceeds from the sale of equipment ................................. 20 --
Other fees paid related to acquisitions ............................. -- -- (685)
Advances to stockholders ............................................ -- -- (1,677)
--------- -------- ---------
Net cash used in investing activities ............................... (16,428) (7,877) (20,701)
--------- -------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock and preference shares ........ 8,886 36,475 --
Repurchase of preference shares . ................................... -- (7,480) --
Preferred stock dividends ........................................... (11) (382) --
Proceeds from the exercise of stock options ......................... 26 201 172
Net repayments of long-term debt .................................... (500) (8,002) (181)
Net borrowings under lines of credit . .............................. (1,997) 5,041
Net repayments under capital
expenditure facility .............................................. (52) -- --
Net proceeds from issuance of other debt . .......................... 6,863 -- --
Net proceeds from issuance of 5% convertible subordinated notes ..... 10,633 -- --
--------- -------- ---------
Net cash provided by financing activities ........................... 23,848 20,812 5,032
--------- -------- ---------
Cumulative comprehensive income excluded from net
income, net of tax ................................................ (184) (124) (221)
--------- -------- ---------
Net increase (decrease) in cash and cash
equivalents ....................................................... 8,875 11,255 (12,511)
Cash and cash equivalents, beginning of period ...................... (830) 8,045 19,300
--------- -------- ---------
Cash and cash equivalents, end of period ............................ $ 8,045 $ 19,300 $ 6,789
========= ======== =========
</TABLE>

See notes to consolidated financial statements.

F-10
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY AND NATURE OF BUSINESS -- Armor Holdings, Inc. (the "Company"
or "Armor") is a leading global provider of security risk management services
and products to multi-national corporations, governmental agencies and law
enforcement personnel through two operating divisions -- Armor Group Services
and Armor Holdings Products. Armor Group Services division provides
sophisticated security planning and risk management, electronic security
systems integration, consulting and training services, as well as intellectual
property asset protection, business intelligence and investigative services.
Armor provides these services to multi-national corporations and governmental
and non-governmental agencies through 22 offices in 18 countries. Armor
Holdings Products division manufactures and sells a broad range of high quality
branded law enforcement equipment and has leading market positions in several
of the product categories in which Armor competes. Such products include
ballistic resistant vests and tactical armor, less-than-lethal munitions,
anti-riot products and narcotics identification kits. These products are sold
primarily to law enforcement agencies through a worldwide network of over 500
distributors and sales agents including approximately 350 in the United States.
Armor believes significant opportunities exist to grow the Company and extend
its global infrastructure through geographic expansion and strategic
acquisitions of related businesses in the fragmented security risk management
services and products industries.

Armor Group Services Division. Armor Group Services division provides a
broad range of sophisticated security risk management solutions to
multi-national corporations in diverse industries such as natural resources,
financial services and consumer products, and to governmental and
non-governmental agencies such as the U.S. Department of State, the United
Nations and the World Bank. Clients typically have personnel and other
investments in unstable and often violent areas of the world. Through Armor
Group Services offices on five continents, Armor Group Services provides its
multi-national clients with a diversified portfolio of security solutions to
assist them to mitigate risks in their operations around the world. Armor Group
Services' highly trained, multi-lingual and experienced security personnel work
closely with clients to create and implement solutions to complex security
problems. These services include the design and implementation of risk
management plans and security systems, provision of security specialists and
training of security personnel. Armor Group Services provides its
multi-national clients with specialized investigative services enhanced by its
global network. These services include intellectual property asset protection
and related investigative services ranging from protecting companies against
counterfeiting, patent infringements, product tampering and extortion to
identifying unethical supplier activities. In addition, Armor Group Services
provides business intelligence, fraud investigation and asset tracing and
recovery services to financial services companies, law firms and other entities
worldwide.

Armor Holdings Products Division. Armor Holdings Products division
manufactures and sells a broad range of high quality branded law enforcement
equipment, such as ballistic resistant vests and tactical armor, bomb disposal
equipment, less-than-lethal munitions, anti-riot products including tear gas
and distraction grenades, narcotics identification kits and custom-built
armored vehicles. These products are marketed under brand names which are
well-known and respected in the law enforcement community such as American Body
Armor, Defense Technology, First Defense, MACE, Pro-Tech and NIK. Armor Holdings
Products division sells manufactured products primarily to law enforcement
agencies through a worldwide network of over 500 distributors and sales agents
including approximately 350 in the United States. Extensive distribution
capabilities and commitment to customer service and training have enabled Armor
Holdings Products division to become a leading provider of security equipment to
law enforcement agencies.

F-11
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In April 1997, the Company combined with DSL Group Limited ("DSL"). DSL is
in the business of planning and implementing solutions to complex security
problems in high risk areas. DSL's services encompass the provision of detailed
threat assessments, security planning, security training, the provision,
training and supervision of specialist manpower and other services up to the
implementation and management of fully integrated security systems. The
Company's combination with DSL provided the Company with the cornerstone of its
security services business. Through recent acquisitions, the Company has
expanded the portfolio of services the Company can offer its customers to
include business intelligence and investigative due diligence, intellectual
property asset protection, alarm monitoring, executive protection and the
engineering, integration, maintenance and technical support of sophisticated
electronic and computer driven security and fire alarm systems.

BASIS OF PRESENTATION -- The accompanying consolidated financial
statements give effect to the combination with DSL. The combination with DSL
was accounted for under the pooling-of-interests method of accounting (see Note
2), and accordingly, the accompanying consolidated financial statements were
retroactively restated as if the Company and DSL had operated as one entity
since inception.

PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. In
consolidation, all material intercompany balances and transactions have been
eliminated. Results of operations of companies acquired in transactions
accounted for under their purchase method of accounting are included in the
financial statements from the dates of the acquisition. Accounting principles
generally accepted in Colombia vary in certain respects from accounting
principles generally accepted in the United States of America. The major
variance in the two methods affecting the Company is the accounting for the
effects of inflation for which the Company periodically makes adjustments.
There are no other material differences.

CASH EQUIVALENTS -- The Company considers all highly liquid investments
purchased with original maturities of three months or less to be cash
equivalents.

CONCENTRATION OF CREDIT RISK -- The Company's accounts receivable consist
of amounts due from customers and distributors located throughout the world.
International product sales generally require cash in advance or confirmed
letters of credit on U.S. banks.

INVENTORIES -- Inventories are stated at the lower of cost or market
determined on the first-in, first-out ("FIFO") method.

FAIR VALUE OF FINANCIAL INSTRUMENTS -- The carrying values of the
Company's various financial instruments reflected in the accompanying
statements of financial position approximate their estimated fair values at
December 27, 1997 and December 31, 1998.

PROPERTY AND EQUIPMENT -- Property and equipment are carried at cost less
accumulated depreciation. Property and equipment acquired prior to September
21, 1993 were recorded at their estimated fair values as the result of the
emergence from bankruptcy. Depreciation is computed using the straight-line
method over the estimated lives of the related assets as follows:

<TABLE>
<S> <C>
Buildings and improvements ......... 5 -- 39 years
Machinery and equipment ............ 3 -- 7 years
</TABLE>

GOODWILL -- Goodwill arises from the excess of the purchase price of an
acquired company over the fair value of the net assets acquired in a purchase
business combination. Amortization is recorded on a straight-line basis over
periods up to twenty-five years.

F-12
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

IMPAIRMENT -- The Company periodically reviews the carrying value of these
assets and other long-lived assets and impairments are recognized when the
expected undiscounted future cash flows are less than the carrying amount of
the asset.

REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS
- -- This intangible asset is amortized or otherwise reduced in amounts not less
than those which would be recognized on a straight-line basis over twenty-five
years.

PATENTS, LICENSES AND TRADEMARKS -- Patents, licenses and trademarks were
acquired through acquisitions accounted for by the purchase method of
accounting. Such assets are amortized on a straight line basis over their
remaining lives of 10 to 40 years.

RESEARCH AND DEVELOPMENT -- Research and development costs are expensed as
incurred. The Company incurred approximately $514,000, $605,000, $738,000 for
the years ended December 28, 1996, December 27, 1997 and December 31, 1998,
respectively, for research and development. These costs are included in the
operating expenses in the accompanying consolidated financial statements.

ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the financial statements
and accompanying notes. Actual results could differ from those estimates.

INCOME TAXES -- The Company accounts for income taxes pursuant to
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). Under the asset and liability method specified thereunder,
deferred taxes are determined based on the difference between the financial
reporting and tax bases of assets and liabilities. Deferred tax liabilities are
offset by deferred tax assets representing the tax-effected cumulative net
operating loss carryforwards and deductible temporary differences, subject to
applicable limits and an asset valuation allowance. Future benefits obtained
from utilization of net operating loss carryforwards or from the reduction in
the income tax asset valuation allowance existing on September 20, 1993 have
been and will be applied to reduce reorganization value in excess of amounts
allocable to identifiable assets. At December 31, 1998, the Company's
consolidated foreign subsidiaries have unremitted earnings of approximately $3
million on which the Company has not recorded a provision for United States
Federal income taxes since these earnings are considered to be permanently
invested. Such foreign earnings have been taxed according to the regulations
existing in the countries in which they were earned.

REVENUE RECOGNITION -- The Company records sales at gross amounts to be
received, including amounts to be paid to agents as commissions. The Company
records service revenue as the service is provided on a contract by contract
basis. Other income for 1997 includes amounts received as agent for a former
employee in selling shares of the Company's stock owned by the former employer.

EARNINGS PER SHARE -- In 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share." This Statement establishes
standards for computing and presenting earnings per share ("EPS") and applies
to all entities with publicly held common stock or potential common stock. This
Statement replaces the presentation of primary EPS and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution and is computed by dividing earnings available to common stockholders
by the weighted average number of common shares outstanding for the period.
Similar to fully diluted EPS, diluted EPS reflects the potential dilution of
securities that could share in the earnings.

NEW ACCOUNTING STANDARDS -- In June 1997, the FASB issued SFAS No. 130,
"Reporting Comprehensive Income." Comprehensive income includes net income and
several other

F-13
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

items that current accounting standards require to be recognized outside of net
income. This standard requires enterprises to display comprehensive income and
its components in financial statements, to classify items of comprehensive
income by their nature in financial statements, and to display the accumulated
balances of other comprehensive income in stockholders' equity separately from
retained earnings and additional paid-in capital. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. The Company has adopted the
standard for its fiscal year beginning December 28, 1997, and applied the
standard to all periods presented.

FOREIGN CURRENCY TRANSLATION -- In accordance with Statement of Financial
Accounting Standard No. 52, "Foreign Currency Translation", assets and
liabilities denominated in a foreign currency are translated into U.S. dollars
at the current rate of exchange existing at year-end and revenues and expenses
are translated at the average monthly exchange rates. The cumulative
translation adjustment, net of tax, which represents the effect of translating
assets and liabilities of the Company's foreign operations was approximately
$(353,000) and $(574,000) for the years ended December 27, 1997 and December
31, 1998. This is included in comprehensive income.

RECLASSIFICATIONS -- Certain reclassifications have been made to the 1996
and 1997 financial statements in order to conform to the presentation adopted
for 1998. These reclassifications had no effect on net income or retained
earnings.

2. BUSINESS COMBINATIONS

NIK PUBLIC SAFETY PRODUCT LINE

On July 15, 1996, the Company acquired, effective as of July 1, 1996,
certain assets of the NIK Public Safety Product Line from Ivers-Lee Corporation
(the "NIK Assets"). The purchase price of the acquisition was 310,931 shares
(the "NIK Shares") of the Company's common stock valued at $2,400,000, plus
$374,000 in costs incurred related to the purchase. The Company acquired
inventory, receivables and certain intangibles. The total purchase price was
assigned to the NIK Assets based on their fair values. The acquisition of the
NIK Assets has been accounted for under the purchase method. Accordingly, the
results of its operations are included in the consolidated financial statements
from the date of acquisition.

DEFENSE TECHNOLOGY CORPORATION OF AMERICA

On September 30, 1996, the Company acquired, through its newly formed
wholly-owned subsidiary, substantially all of the assets of Defense Technology
Corporation of America ("DTCoA"). The purchase price consisted of $838,025 paid
in cash, the issuance of 629,442 shares (the "Total Shares") of the Company's
common stock having a value of $4,650,000, the assumption of certain
liabilities totaling approximately $2,300,000 and costs of $1,115,000
associated with completing the transaction. The total purchase price was
assigned to the acquired assets based on their fair market values.

In order to secure the obligations of DTCoA and its seller in connection
with the transaction, 270,728 of the Total Shares were delivered to Union Bank
of Switzerland, New York Branch ("UBS"), as escrow agent pursuant to an escrow
agreement dated September 30, 1996. One half of the shares held in escrow were
subject to release March 15, 1998 and the remainder were subject to release
June 30, 1999. However, these shares were released to the Company upon
settlement of litigation (see Note 11).

Subject to a letter agreement dated August 16, 1996, (the "Key Bank Letter
Agreement") and in connection with the DTCoA transaction, 358,714 of the Total
Shares (the "Key Bank Shares"), having a value of $2,650,000 (the "Amount
Due"), were issued to Key Bank of Wyoming ("Key Bank") in

F-14
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. BUSINESS COMBINATIONS (CONTINUED)

consideration for the release by Key Bank of its security interest in
substantially all of the assets of DTCoA. Key Bank held such security interest
pursuant to certain financings previously made available to DTCoA. On the
closing date, the Company advanced to Key Bank $662,500 cash (the "Initial
Amount") as an advance against the Amount Due. Also on the closing date, the
Company deposited $1,987,500 in an interest bearing Certificate of Deposit
("CD") account at Key Bank (the "Deposit Account"). Subsequent to closing, any
amounts paid to Key Bank on account of the Amount Due, including the Initial
Amount, or advances from the Deposit Account would result in a reduction of the
then outstanding balance of the Amount Due by a like amount.

Pursuant to the Key Bank Letter Agreement, Key Bank agreed that upon the
registration of the Key Bank Shares, the Key Bank Shares would be sold,
provided that the Company would control, in its sole discretion, the timing,
manner and amount of Key Bank Shares to be sold; and in connection therewith,
the Company agreed to ensure that Key Bank realizes net proceeds from such
sales (the "Net Sale Proceeds"), which, together with any advances from the
Deposit Account and the Initial Amount will, in the aggregate, equal the Amount
Due, on or before September 30, 1997 (the "Maturity Date").

The acquisition of DTCoA has been accounted for under the purchase method.
Accordingly, the results of its operations are included in the consolidated
financial statements from the date of acquisition.

SUPERCRAFT (GARMENTS) LIMITED

On April 7, 1997, the Company acquired Supercraft (Garments) Limited.
Supercraft is a European manufacturer of military apparel, high visibility
garments and ballistic resistant vests, which it distributes to law enforcement
and military agencies throughout Europe, the Middle East and Asia. The Company
acquired Supercraft for a total purchase price of approximately $2.6 million.
The acquisition of Supercraft has been accounted for under the purchase method.
Accordingly, the results of its operations are included in the consolidated
financial statements from the date of acquisition.

DSL GROUP LIMITED

On April 16, 1997, Armor issued 1,274,217 shares of its common stock in
exchange for all of the outstanding ordinary shares of DSL Group Limited
("DSL"), a company incorporated on June 3, 1996, under the laws of England and
Wales. DSL provides specialized security services in high risk and volatile
environments. On July 31, 1996 DSL acquired all of the share capital of DSL
Holdings Limited ("DSL Holdings"). As a result, DSL recorded the net assets
acquired on July 31, 1996 at fair value of approximately $2,800,000 and also
recorded approximately $9,600,000 of goodwill. Armor's combination with DSL was
accounted for as a pooling of interests and the accompanying financial
statements have been restated to give effect to the combined results of Armor
and DSL since inception.

In connection with the DSL combination, Armor paid $6,850,000 in repayment
of DSL's outstanding credit facility and approximately $7,508,000 for all of
the outstanding preference shares of DSL. (See Notes 6 and 7).

GORANDEL TRADING LIMITED

On June 9, 1997, the Company acquired the remaining 50% of Gorandel
Trading Limited that it did not previously own. GTL provides specialized
security services throughout Russia and Central Asia. The aggregate purchase
price of the transaction was approximately $2.4 million, consisting of $570,000
in cash paid at closing, $300,000 in cash paid on September 30, 1997 and
$300,000 in cash payable subject to certain conditions, and 115,176 shares of
the Company's common stock valued at

F-15
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. BUSINESS COMBINATIONS (CONTINUED)

$1.2 million. As part of this transaction, the Company agreed to make a loan of
$200,000 to a former stockholder of GTL, subject to certain conditions which
was subsequently repaid. GTL's net revenues for 1996 were approximately $6.4
million. The acquisition of GTL has been accounted for under the purchase
method. Accordingly, the results of its operations are included in the
consolidated financial statements from the date of acquisition.

LOW VOLTAGE SYSTEMS TECHNOLOGY, INC.

On January 30, 1998, the Company acquired all of the issued and
outstanding stock of Low Voltage Systems Technology, Inc., a New Jersey
corporation ("LST"). LST is a leading engineered systems distributor
specializing in the supply, integration, maintenance and technical support of
sophisticated electronic and computer-driven security and fire alarm systems.
The aggregate purchase price of the transaction was approximately $750,000,
consisting of $562,500 in cash paid at closing and 18,519 unregistered shares
of the Company's common stock valued at the time at $187,500. The Company also
assumed and subsequently repaid approximately $200,000 to a stockholder of LST
in full satisfaction of loans previously made by such stockholder to LST. The
acquisition of LST has been accounted for under the purchase method.
Accordingly, the results of its operations are included in the consolidated
financial statements from the date of acquisition.

ASMARA LIMITED

On April 8, 1998, the Company acquired all of the issued and outstanding
stock of Asmara Limited, based in London, England (hereinafter "Asmara").
Asmara provides business intelligence and investigative due diligence services
to clients on a worldwide basis. Services include personnel investigations, due
diligence, asset tracing, and litigation intelligence. This acquisition has a
current aggregate purchase price of (pounds sterling)1.825 million. The
purchase price consists of (pounds sterling)1.575 million (approximately $2.6
million) in cash paid at closing and 36,846 unregistered shares of the
Company's common stock valued at closing at (pounds sterling)250,000
(approximately $415,000). All 36,846 shares are restricted from sale until
April 8, 2001. As part of the acquisition, additional purchase price contingent
upon meeting certain agreed targets during this period could be paid for the
fiscal years ending 1998, 1999 and 2000. The total aggregate contingent
purchase price could be (pounds sterling)1.5 million. Based upon the results
of operations for 1998, the Company will pay an additional purchase price of
approximately $825,000. This additional purchase price for fiscal 1998 is
reflected in the Company's balance sheet as of December 31, 1998. The
acquisition of Asmara has been accounted for under the purchase method.
Accordingly, the results of its operations are included in the consolidated
financial statements from the date of acquisition.

PRO-TECH ARMORED PRODUCTS OF MASSACHUSETTS, INC.

On April 14, 1998 the Company acquired all of the issued and outstanding
stock of Pro-Tech Armored Products of Massachusetts, Inc. of Pittsfield,
Massachusetts (hereinafter "Pro-Tech"). Pro-Tech is a leading manufacturer of
hard armor products including ballistic shields, bulletproof vests, visors, and
other personal accessories. Pro-Tech also manufactures protective armor
products for helicopters, automobiles, and riot control vehicles. This
acquisition has been accounted for as a purchase and has a current purchase
price of $1.6 million. The purchase price consists of $1.115 million in cash
and 42,592 unregistered shares of the Company's common stock valued at closing
at $485,000. As part of this transaction, additional purchase price could be
paid for the fiscal years ending 1998, 1999 and 2000 totaling an aggregate of
$4 million, with up to 50% payable in common stock and the remainder in cash.
The payment of additional purchase price is contingent upon operating
performance and meeting certain agreed targets during this period. This
additional purchase price for fiscal 1998 totaled approximately $401,000 and is
reflected in the Company's balance sheet as of December 31, 1998. All of the
shares issued for the purchase and to be issued for

F-16
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. BUSINESS COMBINATIONS (CONTINUED)

payment for the earn-out, if any, are restricted from sale until April 14,
2001. The acquisition of Pro-Tech has been accounted for under the purchase
method. Accordingly, the results of its operations are included in the
consolidated financial statements from the date of acquisition.

CDR INTERNATIONAL LTD.

On June 11, 1998 the Company acquired all of the issued and outstanding
stock of CDR International Ltd. ("CDR"), a London based investigation firm with
offices in London, Charlotte, Los Angeles and Moscow. CDR provides a full range
of consulting and investigative services specializing in worldwide intellectual
property asset protection for multinational corporations involved in the
manufacturing and distribution of, among other things, sportswear, tobacco,
spirits and pharmaceuticals. Its services range from protecting companies
against counterfeiting, patent infringements, product tampering and extortion
to identifying unethical supplier activity such as the use of child labor. CDR
also provides training services to law enforcement agencies in foreign
countries. This acquisition has been accounted for as a purchase and has a
current aggregate purchase price of (pounds sterling)1.5 million. The purchase
price consists of 210,460 registered shares the Company's common stock valued
at closing at (pounds sterling)1.5 million (approximately $2.5 million).
Additional purchase price could be paid for the fiscal years ending 1999, 2000
and 2001 totaling an aggregate of (pounds sterling)6.0 million (approximately
$10 million). The payment of additional purchase price is contingent upon
operating performance meeting certain agreed targets during the period. Any
additional purchase price will be paid entirely in common stock of the Company.
Of the total shares of the Company's common stock received at closing, 70,154
shares and 40% of the additional consideration will be restricted from sale for
a period of three years from the date of issue, and 50% of any additional
consideration in excess of (pounds sterling)4.25 million will be restricted
from sale for between 4.5 and 6 years. The acquisition of CDR has been
accounted for under the purchase method. Accordingly, the results of its
operations are included in the consolidated financial statements from the date
of acquisition.

ALARM PROTECTION SERVICES, INC.

On July 15, 1998 the Company acquired of all of the outstanding common
stock of Alarm Protection Services, Inc. ("APS") located in Kampala, Uganda.
APS is a fully licensed physical security and consulting company providing
alarm monitoring, physical asset and executive protection, quick response and
cash in transit capabilities. APS has approximately 900 employees and has been
in operation in Uganda since 1993. Since 1996, the Company has managed APS
through a management agreement. This acquisition has been accounted for as a
purchase and has a current aggregate purchase price of $1,215,166. The purchase
price consisted of $734,426 in cash paid at closing, 17,429 unregistered shares
of the Company's common stock valued at closing at approximately $200,000 and
an additional $280,740 to be paid in cash as the outstanding accounts
receivable at the time of closing is collected. Based on APS meeting certain
performance criteria, additional purchase price may be paid in fiscal years
1999 and 2000 totaling $235,000 in cash. The acquisition of APS has been
accounted for under the purchase method. Accordingly, the results of its
operations are included in the consolidated financial statements from the date
of acquisition.

LAW ENFORCEMENT DIVISION OF MACE SECURITY INTERNATIONAL

On July 16, 1998 the Company acquired certain assets of the Law
Enforcement Division of MACE Security International (hereinafter "MSI"). This
acquisition includes the assets of the Federal Laboratories ("Fed Labs")
division and an exclusive license to use the MACE (Registered Trademark)
trademark for the manufacture and sale of MACE (Registered Trademark) brand
aerosol defensive sprays to law enforcement markets worldwide. The purchase
price was approximately $4.6 million in cash. The Company is holding an
additional amount of $600,000 in escrow of which $480,000 is payable six months
after closing (paid in

F-17
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. BUSINESS COMBINATIONS (CONTINUED)

January 1999) and $120,000 is payable twelve months after closing. The
acquisition of Fed Labs has been accounted for under the purchase method.
Accordingly, the results of its operations are included in the consolidated
financial statements from the date of acquisition.

The following unaudited consolidated results of operations of the Company
are presented on a pro forma basis as if the acquisitions referenced above had
been consummated on December 29, 1996, for the years ended December 27, 1997
and December 31, 1998:

<TABLE>
<CAPTION>
1997 1998
----------- -----------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Revenues ..................................... $104,027 $106,992
Net income ................................... $ 7,059 $ 8,241
Basic and diluted earnings per share ......... $ 0.47 $ 0.47
Weighted average shares ...................... 15,090 17,618
</TABLE>

3. INVENTORIES

Inventories are summarized as follows for the years ended December 27,
1997 and December 31, 1998:

<TABLE>
<CAPTION>
1997 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials ........... $2,958 $4,863
Work-in-process ......... 770 1,348
Finished goods .......... 2,003 2,892
------ ------
$5,731 $9,103
====== ======
</TABLE>

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 27, 1997 and December 31, 1998
are summarized as follows:

<TABLE>
<CAPTION>
1997 1998
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Land ............................... $ 716 $ 1,248
Buildings and improvements ......... 6,106 6,352
Machinery and equipment ............ 5,386 8,287
Construction in progress ........... -- 458
-------- --------
Total .............................. 12,208 16,345
Accumulated depreciation ........... (2,167) (4,172)
-------- --------
$ 10,041 $ 12,173
======== ========
</TABLE>

Depreciation expense for 1996, 1997 and 1998 was approximately $388,000,
$994,000 and $1,409,000, respectively. In the statement of operations for
fiscal 1998, depreciation expense in the income statement has been reduced by
$131,000 for the amortization of the proceeds received under an economic
development grant received from the Department of Housing and Urban
Development.

F-18
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accounts payable, accrued expenses and other current liabilities are
summarized as follows for the years ended December 27, 1997 and December 31,
1998:

<TABLE>
<CAPTION>
1997 1998
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Trade and other payables ................................... $ 3,940 $ 3,681
Accrued expenses ........................................... 4,287 2,980
Additional purchase price for acquisition earnouts ......... -- 1,226
Deferred consideration for acquisitions .................... 300 835
Other current liabilities .................................. 216 2,572
------- --------
$ 8,743 $ 11,294
======= ========
</TABLE>

6. INDEBTEDNESS

<TABLE>
<CAPTION>
1997 1998
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Note to former shareholder payable every four months in installments of
$95 through April 2000 with an imputed rate of interest of 10% .............. $ -- $ 350
Bank overdraft facility, interest payable monthly, expiring April 1999 with
an interest rate of 7.05% ................................................... -- 1,151
Bank note payable in quarterly installments of $19 including interest at 9%
through March 2002 .......................................................... -- 241
Revolving working capital credit facility with NationsBank expiring
March 1, 1999 with an interest rate of 7.5% ................................. -- 3,890
---- --------
$ -- $ 5,632
Less current portion ......................................................... -- (5,378)
---- --------
$ -- $ 254
==== ========
</TABLE>

<TABLE>
<CAPTION>
1997 1998
--------- -------
(IN THOUSANDS)
<S> <C> <C>
Capitalized lease obligations:
Equipment lease for 48 months, expiring July 2001, collateralized by
Equipment with an amortized cost of approximately $73 at December 31,
1998 ...................................................................... $ -- $ 73
Equipment lease for 36 months expiring August 2000 collateralized by
equipment with an amortized cost of approximately $92 at December 31,
1998 ...................................................................... -- 92
Equipment lease for 60 months expiring January 2002 collateralized by
equipment with an amortized cost of approximately $9 at December 31,
1998 ...................................................................... -- 11
Equipment lease bearing interest at 10.88%, expiring November, 1999,
collateralized by equipment with an amortized cost of approximately $
10 at December 31, 1998 ................................................... 20 10
Equipment lease bearing interest at 12%, expiring June, 1998, collateralized
by equipment with an amortized cost of approximately $0 at
December 31, 1998 ......................................................... 181 --
------ -----
$ 201 $ 186
Less current portion ....................................................... (190) (96)
------ -----
$ 11 $ 90
====== =====
</TABLE>

F-19
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. INDEBTEDNESS (CONTINUED)

The Company entered into a revolving working capital credit facility and
Bankers Acceptance Facility (the "Credit Facility") on November 14, 1996 with
NationsBank, N.A. (f/n/a Barnett Bank, N.A.), which provides for total
borrowings up to $10,000,000 (the "Obligation"), with maximum availability
based upon 50% of eligible inventories (with a cap of $1,000,000 for work in
process inventory and $6,000,000 for inventory in total) and 85% of eligible
accounts receivable. The Credit Agreement was amended as of March 26, 1997 to
increase the revolving line of credit to $20,000,000. The Credit Facility has
various covenants which, among other things, require the Company to maintain
certain financial ratios, tangible net worth and working capital, as defined;
and limit the Company's ability to pay dividends on its common stock, encumber
and transfer assets, incur indebtedness or merge into another corporation. The
Company had approximately $3.9 million outstanding under the Credit Agreement
at December 31, 1998. The Credit Facility expires on March 1, 1999 (see Note
19).

The Company's weighted average borrowing rate on its Credit Facility with
NationsBank, N.A. was 8.08% for 1998. The Company had no borrowings under this
Credit Facility in 1997. The Company's weighted average borrowing rate on its
overdraft facility was 7.68% for 1997 and 7.74% for 1998 .

Aggregate principal maturities on long-term debt and capital lease
obligations at December 31, 1998 are as follows:

<TABLE>
<CAPTION>
UNDER
LONG-TERM CAPITALIZED
YEAR ENDING DEBT LEASE
- -------------------------------------------------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C>
1999 ......................................... $337 $ 106
2000 ......................................... 161 91
2001 ......................................... 74 30
2002 ......................................... 19 --
2003 ......................................... -- --
---- -----
$591 $ 227
==== =====
Less amount representing interest on
obligation under capitalized lease ......... -- (41)
---- -----
$591 $ 186
==== =====
</TABLE>

7. PREFERENCE SHARES

DSL has $7,480,000, (4,400,000 shares) of preference shares with a par
value of pounds sterling (pounds sterling)0.01. Such shares carry an 8%
dividend, are cumulative and redeemable and have a liquidation value of par.
The preference shares have no voting rights. The Company paid cash of
$7,508,000, including accrued interest of approximately $380,000, to purchase
such shares on April 16, 1997.

8. NON-RECURRING ITEMS

Approximately $2.5 million of fees and expenses associated with the DSL
pooling transaction were expensed in fiscal 1997. These expenses include
approximately $1.1 million in professional fees and approximately $1.4 million
in costs to consolidate the financial and administrative functions at the
Company's headquarters in Jacksonville. These costs had been substantially paid
as of December 27, 1997.

F-20
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. INCOME TAXES

Income tax expense (benefit) for the years ended December 28, 1996,
December 27, 1997, and December 31, 1998 consisted of the following components:

<TABLE>
<CAPTION>
1996 1997 1998
------ -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Domestic .................................... $ 480 $ 1,329 $ 2,638
Foreign ..................................... 734 2,250 2,641
------ -------- -------
Total Current ............................. $1,214 $ 3,579 $ 5,279
Deferred
Domestic .................................... $ 112 $ 68 $ 107
Foreign ..................................... (111) (1,271) (309)
------ -------- -------
Total Deferred ............................ $ 1 $ (1,203) $ (202)
------ -------- -------
Total Provision for Income Taxes ......... $1,215 $ 2,376 $ 5,077
====== ======== =======
</TABLE>

Significant components of the Company's net deferred tax asset as of
December 27, 1997 and December 31, 1998 are as follows:

<TABLE>
<CAPTION>
1997 1998
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Reserves not currently deductible ........... $ 289 $ 267
Operating loss carryforwards ................ 2,676 2,890
Other ....................................... 154 154
-------- -------
3,119 3,311
Deferred tax asset valuation allowance ....... (1,800) (150)
-------- -------
Net deferred tax asset ....................... $ 1,319 $ 3,161
======== =======
</TABLE>

In 1997, the Company maintained a valuation allowance of $1,800,000 against
deferred tax assets in view of, among other things, the expiration dates and
other limitations on usage of certain net operating loss carryforwards ("NOL").
At December 31, 1998, due to both internal growth of the Company and growth by
acquisition, the Company reevaluated the need for a valuation allowance. As a
result, the Company reduced the valuation allowance by $1,650,000 with a
corresponding reduction of the reorganization value in excess of amounts
allocable to identifiable assets since the deferred tax asset was initially
established in 1993, under "fresh start" reporting on its reorganization. These
deferred tax assets are included in other assets on the balance sheet for the
years ended December 27, 1997 and December 31, 1998.

F-21
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. INCOME TAXES (CONTINUED)

The following reconciles the income tax expense computed at the Federal
statutory income tax rate to the provision for income taxes recorded in the
income statement:

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
Provision for income taxes at statutory Federal rate .......... 34.0% 34.0% 34.0%
State and local income taxes, net of Federal benefit .......... 3.0% 0.4% 1.8%
Foreign income taxes .......................................... 32.0% 0.1% 1.5%
Other non-deductible items .................................... (5.0)% 7.4% (0.1)%
---------- ---------- -----------
64.0% 41.9% 37.2%
========== ========== ===========
</TABLE>

Effective with the change in control of the Company by Kanders Florida
Holdings, Inc. on January 18, 1996, the utilization of the United States
portion of the NOL became restricted to approximately $300,000 per year. As of
December 31, 1998, the Company had net a NOLs of approximately $8,100,000.
The U.S. portion of the net NOLs expires in varying amounts in fiscal years
2006 to 2008.

10. OPERATING LEASES

The Company leases its previous manufacturing facilities under a six year
operating lease expiring in 1999, with an option to renew. The Company is also
party to various other equipment and vehicle leases. DSL leases its London
office under an operating lease expiring in 2002. Approximate total future
minimum annual lease payments under all such arrangements are as follows:

<TABLE>
<CAPTION>
YEAR (IN THOUSANDS)
- --------------------------- --------------

<S> <C>
1999 .................... $ 827
2000 .................... 689
2001 .................... 597
2002 .................... 310
2003 .................... 201
Thereafter .............. 70
------
$2,694
======
</TABLE>

The Company incurred rent expense of approximately $161,000, $454,000 (net
of sublease income of $35,000), and $485,000 (net of sublease income of
$141,000) during the years ended December 28, 1996, December 27, 1997 and
December 31, 1998.

11. COMMITMENTS AND CONTINGENCIES

EMPLOYMENT CONTRACTS -- The Company is party to several employment
contracts with its management. Such contracts are for varying periods and
include restrictions on competition after termination. These agreements provide
for salaries, bonuses and other benefits and also specify and delineate the
granting of various stock options.

LEGAL/LITIGATION MATTERS -- On November 2, 1994, Armor entered into a
consent order voluntarily settling Federal Trade Commission (the "FTC") charges
that the Company engaged in false advertising. Under the consent order, the
Company admitted no violations of law but agreed to establish a body armor
replacement program under which persons who had purchased body armor between
1988 and 1990 would be identified and offered the chance to buy new replacement
body armor at a reduced price. The consent order sets forth many detailed
requirements governing the conduct of the replacement program, the retention of
records and the avoidance of false or misleading advertising. Failure to comply
with the requirements could make us liable for civil penalties. Armor continues
to administer the body armor replacement program established under the FTC
consent order.

F-22
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. COMMITMENTS AND CONTINGENCIES (CONTINUED)

ANGOLAN OPERATIONS -- On January 16, 1998, Armor Group Services division
ceased operations in the country of Angola. The cessation of operations in
Angola was dictated by that government's decision to deport all of Armor's
expatriate management and supervisors. As a result of the cessation of
operations in Angola, our Armor Group Services division is involved in various
disputes with SHRM S.A., its minority joint venture partner relating to the
Angolan business. The Company believes that the likelihood of loss related to
these disputes is possible and the maximum exposure to be approximately
$500,000. SHRM has alleged that as a result of the cessation of operations, it
has suffered damages of $5 million from lost business. In March 1999, Armor
filed a claim of $16.1 million in the Commercial Court Nanterre in France
against SHRM for actual and punitive damages from SHRM's violation of its
obligations resulting from its agreement with us.

SETTLEMENT -- During 1998 the Company settled a lawsuit with a previous
seller. As a result of the settlement, the Company received shares of common
stock that were previously issued to the seller and held in escrow pursuant to
the purchase and escrow agreements. Accordingly, the Company recorded
$1,788,000 of treasury stock based on the fair value of the Company's stock on
the settlement date.

OTHER -- In addition to the above, the Company, in the normal course of
business, is subjected to claims and litigation in the areas of product and
general liability. Management does not believe any of such claims will have a
material impact on the Company's financial statements.

12. STOCKHOLDERS' EQUITY AND PREFERRED STOCK

CONVERTIBLE PREFERRED STOCK -- In 1995 and 1996 the Company issued
1,700,000 shares of preferred stock. The Company elected to convert 242,851 and
1,214,292 shares, respectively, of preferred stock to common stock at $0.77 per
share under conversion provisions calling for the issuance of common stock, the
fair value of which represents 110% of the aggregate stated value of the
preferred stock then subject to redemption.

PREFERRED STOCK -- On July 16, 1996, the Company's shareholders authorized
a series of preferred stock with such rights, privileges and preferences as the
Board of Directors shall from time to time determine. The Company has not
issued any of this preferred stock.

ISSUANCE AND CONVERSION OF CONVERTIBLE DEBT -- On April 30, 1996, the
Company completed a private placement of its 5% Convertible Subordinated Notes
due April 30, 2001 (the "Notes") pursuant to which $11,500,000 aggregate
principal amounts of Notes were sold by the Company.

F-23
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCKHOLDERS' EQUITY AND PREFERRED STOCK (CONTINUED)

On December 18, 1996, the Notes were converted into 2,300,000 shares of
common stock at a conversion price of $5.00 per share.

STOCK OPTIONS AND GRANTS -- In 1994, the Company implemented an incentive
stock plan and an outside directors' stock plan, which plans collectively
provide for the granting to certain key employees of options to acquire the
Company's common stock as well as providing for the grant of common stock to
outside directors and to all full time employees. Pursuant to such plans,
1,050,000 shares of common stock were reserved and made available for
distribution. The option prices of stock which may be purchased under the
incentive stock plan are not less than the fair market value of common stock on
the dates of the grants.

Effective January 19, 1996, all stock grants awarded under the 1994
incentive stock plan were accelerated and considered fully vested.

During 1996, the Company implemented a new incentive stock plan and a new
outside directors' stock plan. Pursuant to the new plans and subsequent
amendments, 2,200,000 shares of common stock were reserved and made available
for distribution.

During 1998, the Company implemented a new non-qualified stock option
plan. Pursuant to the new plan, 725,000 shares of common stock were reserved
and made available for distribution.

Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"). SFAS 123 establishes a fair value
based method of accounting for stock-based employee compensation plans;
however, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees." Under the fair value based method, compensation cost is
measured at the grant date based on the value of the award and is recognized
over the service period, which is usually the vesting period. Under the
intrinsic value based method, compensation costs is the excess, if any, of the
quoted market price of the stock at the grant date or other measurement date
over the amount an employee must pay to acquire the stock. The Company has
elected to continue to account for its employee stock compensation plans under
APB Opinion No. 25 with pro forma disclosures of net earnings and earnings per
share, as if the fair value based method of accounting defined in SFAS No. 123
had been applied.

If compensation cost for stock option grants had been determined based on
the fair value on the grant dates for 1998, 1997 and 1996 consistent with the
method prescribed by SFAS No. 123, the Company's net earnings and earnings per
share would have been adjusted to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1996 1997 1998
-------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
Net earnings ....................... As reported $ 689 $3,518 $8,596
Pro forma $ 477 $2,653 $7,844
Diluted earnings per share ......... As reported $0.08 $ 0.21 $ 0.50
Pro forma $0.05 $ 0.18 $ 0.45
</TABLE>

Under SFAS 123, the fair value of each option grant is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1996, 1997 and 1998: dividend
yield of 0%, expected volatility of 33% in 1996 and 1997 and 31.9% for 1998,
risk-free interest rates of 5.93%, 6.00% and 5.50% for 1996, 1997 and 1998
respectively, and expected lives of 3 years.

F-24
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCKHOLDERS' EQUITY AND PREFERRED STOCK (CONTINUED)

Outstanding options, consisting of ten-year incentive and non-qualified
stock options, vest and become exercisable over a three year period from the
date of grant. The outstanding options expire ten years from the date of grant
or upon retirement from the Company, and are contingent upon continued
employment during the applicable ten-year period.

A summary of the status of stock option grants as of December 31, 1998
changes during the years ending on those dates is presented below:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
------------- -----------------
<S> <C> <C>
Outstanding at December 31, 1995 ................................... 783,500 $ 0.93
Granted ............................................................ 1,068,000 5.97
Forfeited .......................................................... (26,467) 0.97
----------
Outstanding at December 28, 1996 ................................... 1,825,033 3.88
Granted ............................................................ 485,000 10.36
Exercised .......................................................... (217,332) 0.97
Forfeited .......................................................... (51,701) 4.37
----------
Outstanding at December 27, 1997 ................................... 2,041,000 5.69
Granted ............................................................ 286,450 10.32
Exercised .......................................................... (148,582) 1.11
Forfeited .......................................................... (101,667) 10.12
----------
Outstanding at December 31, 1998 ................................... 2,077,201 6.46
Options exercisable at December 31, 1998 ........................... 1,262,751 7.54
Weighted-average fair value of options granted during 1998 ......... $ 347,685
</TABLE>

F-25
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCKHOLDERS' EQUITY AND PREFERRED STOCK (CONTINUED)

The following table summarizes information about stock options outstanding at
December 31, 1998:

<TABLE>
<CAPTION>
EXERCISE OPTIONS OPTIONS REMAINING
PRICE OUTSTANDING EXERCISABLE LIFE
- ---------------- ------------- ------------- ----------
<S> <C> <C> <C>
$0.79 .......... 99,418 99,418 5.50
0.97 .......... 175,666 175,666 5.70
1.00 .......... 24,000 24,000 7.06
1.05 .......... 206,000 206,000 6.50
3.75 .......... 150,000 100,000 7.05
6.06 .......... 150,000 -- 7.60
6.75 .......... 20,000 13,333 7.82
7.19 .......... 74,000 49,333 7.75
7.25 .......... 60,000 40,000 7.69
7.38 .......... 15,000 10,000 7.71
7.50 .......... 375,000 250,000 7.35
7.81 .......... 10,000 3,333 8.07
7.88 .......... 5,000 3,333 8.01
8.00 .......... 75,000 50,000 7.95
8.50 .......... 10,000 3,334 8.22
9.00 .......... 10,000 3,334 8.28
9.25 .......... 132,000 -- 9.60
9.88 .......... 16,667 6,667 9.36
9.94 .......... 3,000 -- 9.65
10.44 .......... 175,000 125,000 8.68
10.63 .......... 25,000 -- 9.92
11.00 .......... 100,000 100,000 8.68
11.19 .......... 74,000 9.93
11.88 .......... 20,000 -- 9.42
12.00 .......... 50,000 -- 8.68
12.25 .......... 22,450 -- 9.58
------- -------
Total ......... 2,077,201 1,262,751
========= =========
</TABLE>

Remaining non-exercisable options as of December 31, 1998 become
exercisable as follows:

1999 ................... 588,483
2000 ................... 130,485
2001 ................... 95,482
</TABLE>

F-26
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCKHOLDERS' EQUITY AND PREFERRED STOCK (CONTINUED)

EARNINGS PER SHARE -- The following is a reconciliation of the numerators
and denominators of the basic and diluted earnings per share computations for
net income and net income available to common stockholders:

<TABLE>
<CAPTION>
1996 1997 1998
-------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Net income available to common shareholders ......... $ 689 $ 3,158 $ 8,596
Denominator:
Denominator for basic earnings per share weighted
average shares .................................... 7,966 13,638 16,165
Effect of dilutive securities:
Effect of shares issuable under stock option and
stock grant plans, based on the treasury stock
method ............................................ 819 1,074 1,189
Effect of shares issuable under conversion of
preferred stock ................................... 91 -- --
------ ------- -------
Dilutive potential common shares .................... 910 1,074 1,189
------ ------- -------
Denominator for diluted earnings per share --
adjusted weighted-average shares .................. 8,876 14,712 17,354
------ ------- -------
Basic earnings per share ............................. $ 0.09 $ 0.23 $ 0.53
====== ======= =======
Diluted earnings per share ........................... $ 0.08 $ 0.21 $ 0.50
====== ======= =======
</TABLE>

13. SUPPLEMENTAL CASH FLOW INFORMATION:

<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid (received) during the year for:
Interest ............................................... $ 521 $ 673 $ 273
======== ======== =========
Income taxes . ......................................... $ (15) $ 1,506 $ 4,724
======== ======== =========
Noncash investing and financing activities:
Issuance of stock under stock plan ..................... $ 118 $ 201 $ 172
Conversion of preferred stock to common stock .......... 1,214 -- --
Conversion of convertible debt to common stock ......... 10,633 -- --
Acquisitions (businesses, patents and trademarks):
Fair value of assets acquired .......................... 25,573 5,294 10,578
Goodwill ............................................... -- 4,731 11,732
Liabilites assumed . ................................... (6,535) (5,218) (10,072)
Stock issued ........................................... (6,460) (1,200) (3,746)
-------- -------- ---------
Total cash paid ........................................ $ 12,578 $ 3,607 $ 8,492
======== ======== =========
</TABLE>

F-27
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES

At December 27, 1997 and December 31, 1998, the Company had a 20%
investment in Jardine Securicor Gurkha Services Limited for which the equity
method of accounting for investments is used. The following summarizes
significant financial information of these unconsolidated subsidiaries as of
and for the twelve months ended December 27, 1997 and December 31, 1998.

<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
Total assets ............... $3,303,000 $ 4,098,000
Retained earnings .......... $ 903,000 $ 1,212,000
Total revenues ............. $4,950,000 $24,731,000
Net income ................. $ 482,000 $ 3,157,000
</TABLE>

Total revenues and net income disclosed in the 1997 column represents the
Company's 20% share of total revenue and net income of the unconsolidated
subsidiary, whereas the 1998 amounts reflect total revenues and net income.

15. INFORMATION CONCERNING BUSINESS SEGMENTS AND GEOGRAPHICAL SALES

The Company is a leading global provider of security risk management
services and products to multi-national corporations, governmental agencies and
law enforcement personnel through two operating divisions--Armor Group Services
and Armor Holdings Products. The Armor Group Services division provides
sophisticated security planning and risk management, electronic security
systems integration, consulting and training services, as well as intellectual
property asset protection, business intelligence and investigative services.
The Armor Holdings Products division manufactures and sells a broad range of
high quality branded law enforcement equipment.

The Company has invested substantial resources outside of the United
States and plans to continue to do so in the future. Substantially all of the
operations of the services segment is conducted in emerging markets in Africa,
Asia and South America. These operations are subject to the risk of new and
different legal and regulatory requirements in local jurisdictions, tariffs and
trade barriers, potential difficulties in staffing and managing local
operations, potential imposition of restrictions on investments, potentially
adverse tax consequences, including imposition or increase of withholding and
other taxes on remittances and other payments by subsidiaries, and local
economic, political and social conditions. Governments of many developing
countries have exercised and continue to exercise substantial influence over
many aspects of the private sector. Government actions in the future could have
a significant adverse effect on economic conditions in a developing country or
may otherwise have a material adverse effect on the Company and its operating
companies. The Company does not have political risk insurance in the countries
in which it currently conducts business. Moreover, applicable agreements
relating to the Company's interests in it operating companies are frequently
governed by foreign law. As a result, in the event of a dispute, it may be
difficult for the Company to enforce its rights. Accordingly, the Company may
have little or no recourse upon the occurrence of any of these developments.

F-28
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. INFORMATION CONCERNING BUSINESS SEGMENTS AND GEOGRAPHICAL SALES (CONTINUED)

Revenues and income from continuing operations for the years ended
December 28, 1996, December 27, 1997 and December 31, 1998, were as follows:

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Services ............................... $12,956 $48,445 $51,563
Products ............................... 18,011 29,869 45,644
------- ------- -------
Total revenues ....................... $30,967 $78,314 $97,207
======= ======= =======
Income from operations:
Services ............................... $ 658 $ 4,581 $ 6,140
Products ............................... 1,680 3,651 8,223
------- ------- -------
Total income from operations ......... $ 2,338 $ 8,232 $14,363
======= ======= =======
Total assets:
Services ............................... $20,799 $29,363 $41,531
Products ............................... 21,669 29,418 45,470
Corporate .............................. 7,062 16,706 7,352
------- ------- -------
Total assets ......................... $49,530 $75,487 $94,353
======= ======= =======
</TABLE>

The following unaudited financial information with respect to sales to
principal geographic areas for the years ended December 28, 1996, December 27,
1997 and December 31, 1998 is as follows:

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales to unaffiliated customers:
North America ................. $15,838 $23,574 $ 36,596
South America ................. 4,197 12,082 16,484
Africa ........................ 8,587 25,499 18,932
Europe/Asia ................... 2,345 16,079 24,668
Other ......................... -- 1,080 527
------- ------- --------
Total revenues .............. $30,967 $78,314 $ 97,207
------- ------- --------
Operating profit:
North America ................. $ 1,223 $ 2,212 $ 7,358
South America ................. $ 67 $ 738 $ 2,747
Africa ........................ $ 605 $ 2,823 $ 4,683
Europe/Asia ................... $ (74) $ 1,206 $ 1,105
Other ......................... $ -- $ 101 $ 137
Total assets:
North America ................. $28,731 $40,964 $ 47,881
South America ................. $ 1,560 $ 2,847 $ 4,477
Africa ........................ $ 6,068 $ 7,944 $ 4,892
Europe/Asia ................... $13,171 $23,732 $ 37,103
</TABLE>

F-29
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. QUARTERLY RESULTS

The following table presents summarized unaudited quarterly results of
operations for the Company for fiscal 1997 and 1998. The Company believes all
necessary adjustments have been included in the amounts stated below to present
fairly the following selected information when read in conjunction with the
Consolidated Financial Statements and Notes thereto included elsewhere herein.
Future quarterly operating results may fluctuate depending on a number of
factors. Results of operations for any particular quarter are not necessarily
indicative of results of operations for a full year or any other quarter.

<TABLE>
<CAPTION>
FISCAL 1997
------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- ----------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue ............................ $14,750 $18,063 $22,124 $23,377
Gross profit ....................... $ 4,297 $ 4,834 $ 5,796 $ 5,949
Net income ......................... $ 540 $ (696) $ 1,618 $ 1,696
Basic earnings per share ........... $ 0.05 $ (0.05) $ 0.11 $ 0.11
Diluted earnings per share ......... $ 0.04 $ (0.05) $ 0.10 $ 0.10
</TABLE>

<TABLE>
<CAPTION>
FISCAL 1998
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue ............................ $19,635 $22,833 $26,444 $28,295
Gross profit ....................... $ 6,034 $ 7,007 $ 8,604 $ 9,111
Net income ......................... $ 1,774 $ 1,835 $ 2,326 $ 2,661
Basic earnings per share ........... $ 0.11 $ 0.11 $ 0.14 $ 0.16
Diluted earnings per share ......... $ 0.10 $ 0.11 $ 0.14 $ 0.15
</TABLE>

17. EMPLOYEE BENEFIT PLANS

In October 1997, the Company formed a 401(k) plan, (the "Plan") which
provides for voluntary contributions by employees and allows for a
discretionary contribution by the Company in the form of cash or stock. The
Company did not make a discretionary contribution to the Plan in 1997 or 1998.

18. RELATED PARTY TRANSACTIONS

The Company entered into the following transactions with related parties:

(a) Purchases and Sales -- The Company subcontracts for certain security
guard services with Alpha, Inc., wholly owned by a shareholder of the Company.
In fiscal 1997 and 1998, security guard service fees of approximately
$3,286,000 and $5,204,000 respectively, were paid to Alpha. At December 27,
1997 and December 31, 1998 the Company had outstanding payables to Alpha of
approximately $377,000 and $341,000 respectively. These liabilities are
included in accounts payable. At December 31, 1998, Alpha owed the Company
approximately $291,000, which is included in accounts receivable.

(b) Advances to Stockholders -- At December 31, 1998, the Company had an
outstanding advance to a stockholder of the Company with a balance of
approximately $1.7 million. This advance arose pursuant to the purchase
agreement for CDR whereby the Company advanced the stockholder funds against
the future sale of the underlying shares. This advance was non-interest bearing
and was collateralized by the assignment of the shares underlying the
agreement. This advance is shown on the balance sheet in prepaid expenses and
other current assets. The stock was subsequently sold in January 1999 with all
proceeds received by the Company.

F-30
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

18. RELATED PARTY TRANSACTIONS (CONTINUED)

(c) On January 1, 1999 the Company entered into an agreement with Kanders &
Company, Inc. to provide investment banking and financial advisory services to
the Company. The specific details of such services and compensation to be paid
to Kanders & Co. will be determined by the parties on a case by case basis.
Warren B. Kanders, Chairman of the Board of the Company, is the sole stockholder
of Kanders & Company, Inc.

(d) In March 1999, the Company loaned to Stephen E. Croskey, President of
the Company's Armor Holdings Products division, $111,000 in connection with his
relocation to Jacksonville, Florida. After an initial 90-day grace period, the
loan will bear interest at the prime rate as announced from time to time by
NationsBank, N.A.

19. SUBSEQUENT EVENTS

On February 12, 1999, the Company entered into a credit agreement
with CIBC, Inc., NationsBank, N.A., First Union National Bank and SunTrust
Bank, North Florida, N.A. as lenders, NationsBank, N.A., as documentation agent
and Canadian Imperial Bank of Commerce, as administrative agent. According to
the terms of the credit facility, several lenders established a five-year
$60,000,000 line of credit for the Company. Indebtedness under the credit
agreement is evidenced by (1) Five Year Revolving Credit Notes of up to
$40,000,000 and (2) 364-Day Revolving Credit Notes of up to $20,000,000,
convertible at the end of 364 days into four-year term notes. All borrowings
under the credit facility will bear interest at either (1) the base rate, plus
an applicable margin ranging from .125% to .375% depending on certain
conditions, or (2) the eurodollar rate, plus an applicable margin ranging from
1.375% to 1.625% depending on certain conditions. In addition, the credit
agreement provides that NationsBank, N.A. shall make swing-line loans of up to
$5,000,000 to be used for working capital purposes. CIBC, Inc. and NationsBank,
N.A. will also issue letters of credit of up to $5,000,000 to the Company.

As part of the credit facility, all of the Company's direct and indirect
domestic subsidiaries agreed to guarantee the Company's obligations under the
credit facility pursuant to a guarantee by certain subsidiaries. The credit
facility is secured by (1) a pledge of all of the issued and outstanding shares
of stock of certain domestic subsidiaries of the Company pursuant to a pledge
agreement and (2) a pledge of 65% of the issued and outstanding shares of the
Company's foreign subsidiary, Armor Holdings Limited, organized under the laws
of England and Wales.

On February 24, 1999, the Company announced that it signed a letter of
intent to acquire all of the outstanding stock of Safariland Ltd., Inc., a
leading U.S. manufacturer of law enforcement equipment based in Ontario,
California. The purchase price of approximately $41 million, subject to certain
adjustments, will consist of $37 million in cash and the balance in the
Company's stock, plus the assumption of $5.2 million of indebtedness.

F-31
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Safariland Ltd., Inc.

We have audited the accompanying consolidated balance sheets of Safariland
Ltd., Inc. (the Company) as of September 30, 1997 and 1998, and the related
consolidated statements of income and retained earnings, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Safariland
Ltd., Inc. as of September 30, 1997 and 1998, and the consolidated results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.

Ernst & Young LLP
Riverside, California
December 10, 1998, except for Note 11,
as to which the date is February 24, 1999

F-32
<PAGE>

SAFARILAND LTD., INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------
1997 1998
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................................... $ 35,000 $ --
Receivables, net:
Trade, less allowance for doubtful accounts of $51,000 in 1997
and $30,000 in 1998 ......................................... 6,654,000 6,202,000
Other ........................................................ 257,000 365,000
Note receivable .............................................. -- 316,000
Inventories, net ............................................... 4,235,000 3,555,000
Prepaid expenses ............................................... 505,000 642,000
Income tax receivable .......................................... 459,000 565,000
Deferred taxes ................................................. 338,000 959,000
------------ ------------
Total current assets ............................................ 12,483,000 12,604,000
Equipment and leasehold improvements, net ....................... 3,783,000 3,733,000
Investments and other assets .................................... 1,661,000 1,459,000
Note receivable -- employee ..................................... 108,000 168,000
Notes receivable ................................................ -- 235,000
Deferred taxes .................................................. 684,000 145,000
------------ ------------
Total assets .................................................... $ 18,719,000 $ 18,344,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................... $ 1,911,000 $ 1,781,000
Accrued expenses ............................................... 1,664,000 1,976,000
Line-of-credit ................................................. 2,954,000 1,741,000
Cash overdraft ................................................. -- 709,000
Current portion of long-term debt .............................. 377,000 378,000
Current portion of deferred compensation ....................... 29,000 31,000
------------ ------------
Total current liabilities ....................................... 6,935,000 6,616,000
Long-term liabilities, less current portion:
Notes payable .................................................. 1,964,000 1,568,000
Accrued rent expense ........................................... 277,000 261,000
Deferred compensation .......................................... 544,000 514,000
------------ ------------
Total liabilities ............................................... 9,720,000 8,959,000
Commitments and contingencies
Stockholders' equity:
Common stock, no par value:
Authorized shares -- 2,000,000 ...............................
Issued and outstanding shares -- 219,804 ..................... 272,000 272,000
Preferred stock, no par value:
Authorized shares -- 100,000 .................................
Issued and outstanding shares -- 12,000 ...................... 1,200,000 1,200,000
Additional paid-in capital ..................................... 100,000 100,000
Notes receivable from stockholders ............................. (215,000) (215,000)
Retained earnings .............................................. 7,642,000 8,028,000
------------ ------------
Total stockholders' equity ...................................... 8,999,000 9,385,000
------------ ------------
Total liabilities and stockholders' equity ...................... $ 18,719,000 $ 18,344,000
============ ============
</TABLE>

See accompanying notes.

F-33
<PAGE>

SAFARILAND LTD., INC.

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------
1997 1998
--------------- ---------------
<S> <C> <C>
Net sales ................................................... $ 46,275,000 $ 45,283,000
Cost of goods sold .......................................... 28,110,000 26,209,000
------------ ------------
Gross profit ................................................ 18,165,000 19,074,000
Operating expenses:
Sales and marketing ........................................ 6,677,000 7,007,000
General and administrative ................................. 7,395,000 8,184,000
Research and development ................................... 2,448,000 2,215,000
Shipping ................................................... 1,191,000 1,309,000
------------ ------------
17,711,000 18,715,000
------------ ------------
Operating income ............................................ 454,000 359,000
Other income (expense):
Interest expense, net ...................................... (384,000) (482,000)
Equity in net income (loss) of Safariland Graphics ......... 89,000 (16,000)
Other ...................................................... 398,000 473,000
------------ ------------
103,000 (25,000)
------------ ------------
Income before income taxes .................................. 557,000 334,000
Income tax (benefit) expense ................................ 159,000 (166,000)
------------ ------------
Net income .................................................. 398,000 500,000
Dividends paid .............................................. (114,000) (114,000)
------------ ------------
Net income available to common stockholders ................. 284,000 386,000
Retained earnings at beginning of period .................... 7,358,000 7,642,000
------------ ------------
Retained earnings at end of period .......................... $ 7,642,000 $ 8,028,000
============ ============
Earnings per common share ................................... $ 1.29 $ 1.76
============ ============
Average common shares outstanding ........................... 219,804 219,804
</TABLE>

See accompanying notes.

F-34
<PAGE>

SAFARILAND LTD., INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------
1997 1998
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ...................................................... $ 398,000 $ 500,000
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation and amortization ................................ 715,000 661,000
Gain on disposal of equipment ................................ -- (39,000)
Deferred taxes ............................................... 605,000 (82,000)
Provision for doubtful accounts .............................. 49,000 58,000
Equity in net loss (income) of Safariland Graphics ........... (89,000) 16,000
Change in assets and liabilities:
(Increase) decrease in trade receivables .................... (1,867,000) 78,000
(Increase) decrease in other receivables .................... 54,000 (108,000)
Increase in note receivable -- employee ..................... (272,000) (60,000)
(Increase) decrease in inventories .......................... (1,129,000) 680,000
Increase in prepaid expenses ................................ (111,000) (137,000)
Increase in income tax receivable ........................... (38,000) (106,000)
Increase in deposits ........................................ (60,000) (28,000)
Increase (decrease) in accounts payable ..................... 17,000 (130,000)
Increase (decrease) in accrued expenses ..................... (625,000) 312,000
Other, net .................................................. (623,000) (35,000)
------------ ------------
Net cash provided by (used in) operations ....................... (2,976,000) 1,580,000
INVESTING ACTIVITIES:
Purchase of trademarks and patents .............................. (56,000) (71,000)
Purchase of property and equipment .............................. (1,731,000) (740,000)
Cash received from sale of fixed assets ......................... -- 214,000
Increase in cash surrender value of life insurance .............. (1,000) (5,000)
------------ ------------
Net cash provided by (used in) investing activities ............. (1,788,000) (602,000)
FINANCING ACTIVITIES:
Net borrowings (payments) on line of credit ..................... 5,976,000 (1,213,000)
Principal payments on notes payable ............................. (2,285,000) (395,000)
Cash dividends paid ............................................. (114,000) (114,000)
------------ ------------
Net cash used in financing activities ........................... 3,577,000 (1,722,000)
------------ ------------
Decrease in cash ................................................ (1,187,000) (744,000)
Cash and cash equivalents at beginning of year .................. 1,222,000 35,000
Cash and cash equivalents (overdraft) at end of year ............ $ 35,000 $ (709,000)
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest .......................................... $ 428,000 $ 524,000
============ ============
Cash paid for income taxes ...................................... $ 140,000 $ 127,000
============ ============
</TABLE>

During 1998, the Company converted an accounts receivable from a customer
to a note receivable of $316,000 (interest of 8.5% and due December 31, 1998)
in a noncash transaction. In addition, the Company exchanged its investment in
Safariland Graphics for a note receivable of $235,000 in a noncash transaction.

See accompanying notes.

F-35
<PAGE>

SAFARILAND LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998

1. ACCOUNTING POLICIES

NATURE OF BUSINESS

Safariland Ltd., Inc. (the Company) manufactures and markets law
enforcement duty gear and body armor on an international basis. Additionally,
the Company's automotive division serves as an original equipment manufacturer
of a variety of sewn and molded products for the automotive industry.

Established in 1964, the Company maintains its corporate headquarters and
primary manufacturing facilities in Ontario, California.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Safariland Government Sales, Inc., and
Safariland International, Inc. Significant intercompany accounts and
transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

Cash equivalents include all highly liquid investments with an original
maturity of three months or less.

CASH CONCENTRATION

The Company has checking and money market deposits in one bank which
exceed the federally insured limits.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method)
or market.

INVESTMENTS

The investment in Safariland Graphics (a California partnership), a joint
venture between Safariland Ltd., Inc. and the Stewart Co., is accounted for on
the equity method and represents the Company's 50% interest in the joint
venture. Total assets of Safariland Graphics as of September 30, 1997 were
approximately $654,000, and net sales for the years ended September 30, 1997
was approximately $1,655,000.

Effective May 29, 1998, the net assets of Safariland Graphics were sold to
VISCO, a newly formed limited liability company, in exchange for a note
receivable in the amount of $235,000 (interest of 6% and due December 31, 2005)
which was outstanding at December 31, 1998. This transaction did not result in
any gain or loss.

F-36
<PAGE>

SAFARILAND LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. ACCOUNTING POLICIES (CONTINUED)

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements are recorded at cost. Depreciation is
provided primarily by the straight-line method over the following estimated
useful lives of the asset:

<TABLE>
<CAPTION>
YEARS
--------
<S> <C>
Automobiles and trucks .......... 5
Leasehold improvements .......... 7 -- 31
Furniture and fixtures .......... 5 -- 10
Equipment ....................... 5 -- 11
Molds and dies .................. 3 -- 6
Airplanes ....................... 5 -- 12
</TABLE>

Improvements to leased properties are amortized over the lesser of the
remaining term of the lease or the estimated life of the assets.

INTANGIBLES

Patents, included in investments and other assets, are amortized using the
straight-line method over a useful life of ten to nineteen years.

INCOME TAXES

The Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the financial
statement and tax bases of assets and liabilities at the applicable enacted tax
rates.

REVENUE RECOGNITION

The Company records sales upon shipment of product. The Company performs
ongoing credit evaluations of its customers' financial condition and,
generally, requires no collateral from its customers. The Company offers a
diversity of products over a broad geographic base and is not dependent on any
single customer, market or geographic area.

ADVERTISING EXPENSE

Advertising costs are expensed as incurred. Advertising expense was
approximately $944,000 and $1,032,000 for the years ended September 30, 1997
and 1998, respectively.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

RECLASSIFICATION

Certain amounts for 1997 have been reclassified to conform to the 1998
financial statement presentation.

F-37
<PAGE>

SAFARILAND LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. ACCOUNTS RECEIVABLE ALLOWANCES

Changes in the accounts receivable allowance are as follows for the year
ended:

<TABLE>
<CAPTION>
1997 1998
----------- ------------
<S> <C> <C>
Balance at beginning of period .......... $ 100,000 $ 51,000
Charged to costs and expenses ........... 49,000 58,000
Deductions from reserves ................ (98,000) (79,000)
--------- ---------
Balance at end of period ................ $ 51,000 $ 30,000
========= =========
</TABLE>

3. INVENTORIES

Inventories consist of the following components as of September 30:

<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
Raw materials ...................................... $2,686,000 $1,937,000
Work in process .................................... 183,000 385,000
Finished goods ..................................... 1,780,000 1,337,000
---------- ----------
4,649,000 3,659,000
Less allowances for slow-moving inventory .......... 414,000 104,000
---------- ----------
$4,235,000 $3,555,000
========== ==========
</TABLE>

4. INVESTMENTS AND OTHER ASSETS

Investments and other assets consist of the following components as of
September 30:

<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
Cash surrender value of life insurance ................... $ 123,000 $ 128,000
Investment in Safariland Graphics joint venture .......... 252,000 --
Deposits, including a rent deposit with a related party
of $195,000 at September 30, 1997 and 1998 .............. 303,000 331,000
Patents, net of accumulated amortization of $462,000
and $507,000 at September 30, 1997 and 1998,
respectively ............................................ 316,000 318,000
Other .................................................... 667,000 682,000
---------- ----------
$1,661,000 $1,459,000
========== ==========
</TABLE>

5. EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements consist of the following components
as of September 30:

<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
Automobiles and trucks ................. $ 159,000 $ 159,000
Leasehold improvements ................. 848,000 1,122,000
Furniture and fixtures ................. 537,000 540,000
Equipment .............................. 3,733,000 4,045,000
Molds and dies ......................... 537,000 588,000
Airplanes .............................. 771,000 448,000
---------- ----------
6,585,000 6,902,000
Less accumulated depreciation .......... 2,802,000 3,169,000
---------- ----------
$3,783,000 $3,733,000
========== ==========
</TABLE>

F-38
<PAGE>

SAFARILAND LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. LINE OF CREDIT AND NOTES PAYABLE

LINE OF CREDIT

The Company has a line-of-credit facility which provides for borrowings up
to $5,000,000 at the bank's prime rate with a LIBOR rate option. The
line-of-credit agreement expires on March 2, 2000. At September 30, 1998,
amounts outstanding on the line-of-credit were $741,000 at the bank's prime
rate (8.5% at September 30, 1998) and $1,000,000 at LIBOR plus 2.125% (7.5% at
September 30, 1998) and $3,259,000 was available for borrowing. The
line-of-credit is collateralized by substantially all of the Company's assets.
The weighted average interest rate was 7.4% and 8.5% for 1997 and 1998,
respectively.

NOTES PAYABLE

Notes payable at September 30 is as follows:

<TABLE>
<CAPTION>
1997 1998
-------------- --------------
<S> <C> <C>
Term notes, due in equal monthly principal payments
aggregating $29,000 through August 2, 2003, plus
interest at LIBOR plus 2.375% (approximately
8.1% at September 30, 1998). The notes are secured
by substantially all of the Company's assets. ......... $ 2,060,000 $ 1,692,000
Contract payable, due in equal monthly payments of
$4,000 through August 31, 2005, including interest
at 9.2%, secured by patents with a carrying value of
$22,000. .............................................. 281,000 254,000
----------- -----------
2,341,000 1,946,000
Less current maturities ................................ 377,000 378,000
----------- -----------
$ 1,964,000 $ 1,568,000
=========== ===========
</TABLE>

At September 30, 1998, the principal maturities for long-term debt are due
as follows:

<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
- ---------------------------------- -------------
<S> <C>
1999 ...................... $ 378,000
2000 ...................... 380,000
2001 ...................... 383,000
2002 ...................... 387,000
2003 ...................... 361,000
Years thereafter .......... 57,000
----------
$1,946,000
==========
</TABLE>

The line of credit and term notes contain restrictive covenants, including
the maintenance of certain levels of working capital and tangible net worth.
The Company was in compliance with these covenants at September 30, 1998.

7. LEASE AGREEMENTS, RENT EXPENSE, RELATED PARTY TRANSACTIONS

The Company leases its manufacturing and distribution facilities under an
operating lease agreement with a related party, NAP Properties Ltd., a
California Limited Partnership. It is the Company's intent to continue the
lease through 2014, however, due to matters discussed in Note 11,

F-39
<PAGE>

SAFARILAND LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. LEASE AGREEMENTS, RENT EXPENSE, RELATED PARTY TRANSACTIONS (CONTINUED)

the lease has only been extended through December 2000. The lease requires
monthly payments of approximately $53,000. The Company has other operating
leases, with aggregate monthly rentals totaling approximately $7,000 as of
September 30, 1998. These lease agreements contain provisions which require the
Company to pay for normal maintenance and property taxes. For purposes of the
minimum rental commitments disclosed below, the Company's intent to continue
the lease through 2014 has been presented. The Company is guarantor for NAP
Properties Ltd. for certain Industrial Development Bonds which mature through
August 2014. The balance of such debt at September 30, 1998 was $3,700,000.
Therefore, the Company is treating this lease of the facility with NAP
Properties as if it expires in August 2014.

The lease agreement with NAP Properties Ltd. requires varied monthly
payments, however, the Company recognizes rent expense on a straight-line
basis. The cumulative amount of rent expense recognized by the Company from
inception of the lease through September 30, 1997 and 1998 exceeded actual cash
payments by $277,000 and $261,000, respectively. This amount is reflected as a
long-term liability on the balance sheet. Total rental expense included in the
statement of income was approximately $715,000 and $743,000 for 1997 and 1998,
respectively. Total rental expense to related parties was approximately
$635,000 in 1997 and 1998.

The minimum rental commitment at September 30, 1998 is as follows:

<TABLE>
<CAPTION>
RELATED PARTY OTHER
YEARS ENDING SEPTEMBER 30, AMOUNT AMOUNT TOTAL
- ---------------------------- --------------- ---------- --------------
<S> <C> <C> <C>
1999 ....................... $ 635,000 $ 37,000 $ 672,000
2000 ....................... 635,000 29,000 664,000
2001 ....................... 635,000 29,000 664,000
2002 ....................... 635,000 29,000 664,000
2003 ....................... 635,000 7,000 642,000
Years thereafter ........... 6,977,000 -- 6,977,000
----------- -------- -----------
$10,152,000 $131,000 $10,283,000
=========== ======== ===========
</TABLE>

Note receivable -- employee and notes receivable from stockholders are due
on December 31, 2010, including interest at 6.1%.

8. EMPLOYEE BENEFIT PLANS

INCENTIVE AND BONUS PLANS

The Company has various incentive and bonus programs for a substantial
number of employees. The amount of the payments for these programs are at the
discretion of the Company's Executive Committee. The Company expended $256,000
and $828,000 for these programs during 1997 and 1998, respectively.

401(K) PLAN

The Company has a qualified retirement savings plan for all qualified
employees which allows participants to make contributions by salary reduction
pursuant to Section 401(k) of the Internal Revenue Code. The Company matches
25% of the first 4% of the employees' contributions. The Company's
contributions to the plan were approximately $42,000 and $55,000 for 1997 and
1998, respectively.

F-40
<PAGE>

SAFARILAND LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. INCOME TAXES

Components of income tax expense (benefit) charged to operations for the
year ended September 30 are summarized as follows:

<TABLE>
<CAPTION>
1997 1998
-------------- -------------
<S> <C> <C>
Current:
Federal ............... $ (446,000) $ (57,000)
State ................. -- (27,000)
---------- ----------
$ (446,000) $ (84,000)
========== ==========

Deferred:
Federal ............... $1,140,000 $ (13,000)
State ................. (535,000) (69,000)
---------- ----------
605,000 (82,000)
---------- ----------
$ 159,000 $ (166,000)
========== ==========
</TABLE>

A reconciliation of the difference between income tax expense (benefit)
and the amount computed by applying the statutory federal income tax rate to
income before income taxes at September 30 are as follows:

<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
Federal tax at statutory rate of 34% .............. $ 189,000 $ 114,000
State tax expense net of federal benefit .......... 33,000 19,000
Tax credits ....................................... (141,000) (216,000)
Nondeductible items ............................... 28,000 43,000
Other ............................................. (50,000) (126,000)
---------- ----------
$ 159,000 $ (166,000)
========== ==========
</TABLE>

Deferred tax assets (liabilities) consists of the following at September
30:

<TABLE>
<CAPTION>
1997 1998
-------------- -------------
<S> <C> <C>
Allowance for bad debts ................... $ 21,000 $ 12,000
Inventory ................................. 234,000 111,000
Accrued expenses .......................... 291,000 381,000
Deferred compensation ..................... 230,000 218,000
Net operating loss carryforwards .......... 37,000 157,000
Depreciation and amortization ............. 27,000 (206,000)
Tax credits ............................... 232,000 448,000
Investment in joint venture ............... (55,000) (16,000)
Other ..................................... 5,000 (1,000)
---------- ----------
$1,022,000 $1,104,000
========== ==========
</TABLE>

The Company has a net operating loss carryforward (NOL) at September 30,
1998 of approximately $297,000 and $966,000, expiring in 2018 and 2000 to 2003,
for federal and state, respectively.

Although there can be no assurances as to future taxable income of the
Company, the Company believes that its expectations of future taxable income,
when combined with the income taxes paid in prior years, will be adequate to
realize the deferred income tax assets.

F-41
<PAGE>

SAFARILAND LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. COMMITMENTS AND CONTINGENCY

LICENSE AGREEMENTS

The Company licenses products from third-party licensers and pays a
royalty based on sales of the licensed products. Two license agreements require
the Company to guarantee a minimum amount of royalties. In a third agreement,
the Company pays royalties associated with a patent. The Company incurred
royalty expenses of $577,000 and $551,000 for 1997 and 1998, respectively.

Future minimum royalty payments under these agreements are as follows:

<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
- ---------------------------------- ----------
<S> <C>
1999 ...................... $ 30,000
2000 ...................... 30,000
2001 ...................... 30,000
2002 ...................... 30,000
2003 ...................... 30,000
Years thereafter .......... 150,000
--------
$300,000
========
</TABLE>

DEFERRED COMPENSATION AGREEMENT

The Company has deferred compensation and consulting agreements with a
former officer which calls for monthly payments of $6,477 through December
2009. As of September 30, 1997 and 1998, the present value of the Company's
obligation for these agreements was $573,000 and $545,000, respectively.

11. SUBSEQUENT EVENT

In February 1999, the Company signed a letter of intent to sell 100% of
its stock to a third party. The proposed sale is subject to the terms and
conditions of a definitive agreement which both parties expect to be completed
on or before March 31, 1999.

F-42

<PAGE>

SAFARILAND LTD., INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1998
(UNAUDITED)
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Receivables, net:
Trade, less allowance for doubtful accounts of $30,000 and
$36,000 at September 30, 1998 and December 31, 1998,
respectively .................................................... $ 6,202,000 $ 5,858,000
Other ............................................................ 365,000 400,000
Note receivable .................................................. 316,000 60,000
Inventories, net ................................................... 3,555,000 4,010,000
Prepaid expenses ................................................... 642,000 868,000
Income tax receivable .............................................. 565,000 515,000
Deferred taxes ..................................................... 959,000 959,000
------------ ------------
Total current assets ................................................ 12,604,000 12,670,000
Equipment and leasehold improvements, net ........................... 3,733,000 3,726,000
Investments and other assets ........................................ 1,459,000 1,544,000
Note receivable -- employee ......................................... 168,000 172,000
Notes receivable .................................................... 235,000 235,000
Deferred taxes ...................................................... 145,000 145,000
------------ ------------
Total assets ........................................................ $ 18,344,000 $ 18,492,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................... $ 1,781,000 $ 1,530,000
Accrued expenses ................................................... 1,976,000 1,170,000
Line-of-credit ..................................................... 1,741,000 2,784,000
Cash overdraft ..................................................... 709,000 856,000
Current portion of long-term debt .................................. 378,000 378,000
Current portion of deferred compensation ........................... 31,000 31,000
------------ ------------
Total current liabilities ........................................... 6,616,000 6,749,000
Long-term liabilities, less current portion:
Notes payable ...................................................... 1,568,000 1,474,000
Accrued rent expense ............................................... 261,000 256,000
Deferred compensation .............................................. 514,000 493,000
------------ ------------
Total liabilities ................................................... 8,959,000 8,972,000

Commitments and contingencies
Stockholders' equity:
Common stock, no par value:
Authorized shares -- 2,000,000
Issued and outstanding shares -- 219,804 ......................... 272,000 272,000
Preferred stock, no par value:
Authorized shares -- 100,000
Issued and outstanding shares -- 12,000 .......................... 1,200,000 1,200,000
Additional paid-in capital ......................................... 100,000 100,000
Notes receivable from stockholders ................................. (215,000) (129,000)
Retained earnings .................................................. 8,028,000 8,077,000
------------ ------------
Total stockholders' equity .......................................... 9,385,000 9,520,000
------------ ------------
Total liabilities and stockholders' equity .......................... $ 18,344,000 $ 18,492,000
============ ============
</TABLE>

See accompanying notes.

F-43
<PAGE>

SAFARILAND LTD., INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
---------------------------------
1997 1998
--------------- ---------------
<S> <C> <C>
Net sales .................................................. $ 10,515,000 $ 11,170,000
Cost of goods sold ......................................... 6,330,000 6,509,000
------------ ------------
Gross profit ............................................... 4,185,000 4,661,000
Operating expenses:
Sales and marketing ....................................... 1,804,000 1,600,000
General and administrative ................................ 1,850,000 1,966,000
Research and development .................................. 571,000 493,000
Shipping .................................................. 269,000 409,000
------------ ------------
4,494,000 4,468,000
------------ ------------
Operating income (loss) .................................... (309,000) 193,000
Other income (expense):
Interest expense, net ..................................... (142,000) (73,000)
Equity in net income of Safariland Graphics ............... 34,000 --
Other ..................................................... 44,000 7,000
------------ ------------
(64,000) (66,000)
------------ ------------
Income (loss) before income taxes .......................... (373,000) 127,000
Income tax (benefit) expense ............................... (149,000) 50,000
------------ ------------
Net income (loss) .......................................... (224,000) 77,000
Dividends .................................................. (28,000) (28,000)
------------ ------------
Net income (loss) available to common stockholders ......... (252,000) 49,000
Retained earnings at beginning of period ................... 7,642,000 8,028,000
------------ ------------
Retained earnings at end of period ......................... $ 7,390,000 $ 8,077,000
============ ============
Earnings (loss) per common share ........................... $ (1.15) $ 0.22
============ ============
Average common shares outstanding .......................... 219,804 219,804
============ ============
</TABLE>

See accompanying notes.

F-44
<PAGE>

SAFARILAND LTD., INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
---------------------------------
1997 1998
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) .................................................... $ (224,000) $ 77,000
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization ....................................... 171,000 203,000
Provision for doubtful accounts ..................................... -- 6,000
Equity in net income of Safariland Graphics ......................... (34,000) --
Change in assets and liabilities:
(Increase) decrease in trade receivables .......................... (152,000) 338,000
(Increase) decrease in other receivables .......................... 3,000 (35,000)
Decrease in note receivable -- employee ........................... (5,000) (4,000)
(Increase) decrease in inventories ................................ 446,000 (455,000)
(Increase) in prepaid expenses .................................... 65,000 (226,000)
Decrease (increase) in income tax receivable ...................... (184,000) 50,000
Decrease in accounts payable ...................................... (406,000) (251,000)
Decrease in accrued expenses ...................................... (382,000) (806,000)
Other, net ........................................................ (90,000) (100,000)
----------- ------------
Net cash used in operations .......................................... (792,000) (1,203,000)
INVESTING ACTIVITIES:
Purchase of property and equipment ................................... (374,000) (206,000)
Cash received from sale of fixed assets .............................. 214,000 --
Decrease in note receivable .......................................... -- 256,000
Increase in cash surrender value of life insurance ................... -- (1,000)
----------- ------------
Net cash used in investing activities ................................ (160,000) 49,000
FINANCING ACTIVITIES:
Net borrowings on line of credit ..................................... 553,000 1,043,000
Principal payments on notes payable .................................. (95,000) (94,000)
Dividends ............................................................ (28,000) (28,000)
Proceeds from notes receivable from stockholders ..................... -- 86,000
----------- ------------
Net cash provided by financing activities ............................ 430,000 1,007,000
----------- ------------
Net change in cash overdraft ......................................... (522,000) (147,000)
Cash and cash equivalents (overdraft) at beginning of period ......... 35,000 (709,000)
----------- ------------
Cash overdraft at end of period ...................................... $ (487,000) $ (856,000)
=========== ============
</TABLE>

F-45

<PAGE>

SAFARILAND LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1998

1. BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited consolidated
financial statements contain all normal recurring adjustments necessary to
present fairly the financial position of Safariland Ltd., Inc. (the "Company")
as of December 31, 1997 and 1998 and the results of its operations and its cash
flows for the three months ended December 31, 1997 and 1998. These consolidated
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company's latest financial
statements. The operating results for the three months ended December 31, 1997
and 1998 are not necessarily indicative of the results of operations for a full
year.

2. INVENTORIES

Inventories consist of the following components as of:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1998
--------------- -------------
<S> <C> <C>
Raw materials .................................... $ 1,937,000 $ 2,499,000
Work in process .................................. 385,000 445,000
Finished goods ................................... 1,337,000 1,142,000
----------- -----------
3,659,000 4,086,000
Less allowance for slow-moving inventory ......... (104,000) (76,000)
----------- -----------
$ 3,555,000 $ 4,010,000
=========== ===========
</TABLE>

3. USE OF ESTIMATES

4. SUBSEQUENT EVENT

In March 1999, the Company was notified by one of its customers that due
to deteriorating operating results and reduced cash flows that they would not
be able to repay all amounts owed to the Company. At September 30, 1998 and
December 31, 1998, amounts due from this customer were approximately $80,000
and $488,000, respectively. Accordingly, the Company has accrued an allowance of
approximately $356,000 in March 1999, as it relates to these outstanding
balances.

F-46

<PAGE>

7,250,000 SHARES

ARMOR HOLDINGS, INC.

[LOGO]

COMMON STOCK

---------------------------
PROSPECTUS
, 1999
---------------------------

LEHMAN BROTHERS

BEAR, STEARNS & CO. INC.

SUNTRUST EQUITABLE SECURITIES

WARBURG DILLON READ LLC
<PAGE>
[Alternate Cover Page - International]

SUBJECT TO COMPLETION, MARCH 25, 1999

PROSPECTUS
7,250,000 SHARES

[ARMOR HOLGINDS, INC. GRAPHIC OMITTED]

COMMON STOCK

- --------------------------------------------------------------------------------

Investing in the shares involves risks. Risk Factors begin on page 6.

Armor Holdings and the selling stockholders have also granted the underwriters
the right to purchase up to an additional 1,087,500 shares within 30 days to
cover over-allotments.

Lehman Brothers expects to deliver the shares on or about , 1999.

- --------------------------------------------------------------------------------
LEHMAN BROTHERS BEAR, STEARNS INTERNATIONAL LIMITED

SUNTRUST EQUITABLE SECURITIES

WARBURG DILLON READ

, 1999

<PAGE>
[Alternate Back Cover Page - International]

7,250,000 SHARES

ARMOR HOLDINGS, INC.

[LOGO]

COMMON STOCK

------------------------------
PROSPECTUS
, 1999
------------------------------

LEHMAN BROTHERS

BEAR, STEARNS INTERNATIONAL LIMITED

SUNTRUST EQUITABLE SECURITIES

WARBURG DILLON READ
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Our expenses in connection with the offering of the shares of common stock
described in this registration statement are set forth below. No expenses will
be borne by the Selling Stockholders. All amounts except the Securities and
Exchange Commission registration fee are estimated.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee ......... $31,435.50
NASD registration fee ....................................... $11,807.73
Blue Sky fees and expenses .................................. $15,000.00
Printing and engraving expenses ............................. $ *
Legal fees and expenses ..................................... $ *
Accounting fees and expenses ................................ $ *
Transfer agent fees and expenses ............................ $ *
New York Stock Exchange listing fee ......................... $ *
Miscellaneous ............................................... $ *
----------
Total ....................................................... $ *
==========
</TABLE>

- ----------
* To be supplied by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law ("DGCL") makes
provision for the indemnification of officers and directors of corporations in
terms sufficiently broad to indemnify our officers and directors under certain
circumstances from liabilities (including reimbursement of expenses incurred)
arising under the Securities Act.

As permitted by the DGCL, our Certificate of Incorporation (the "Charter")
provides that, to the fullest extent permitted by the DGCL, no director shall
be liable to us or to our stockholders for monetary damages for breach of his
fiduciary duty as a director. Delaware law does not permit the elimination of
liability (i) for any breach of the director's duty of loyalty to us or our
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases or (iv)
for any transaction from which the director derives an improper personal
benefit. The effect of this provision in the Charter is to eliminate the rights
of Armor Holdings and its stockholders (through stockholders' derivative suits
on behalf of Armor Holdings) to recover monetary damages against a director for
breach of fiduciary duty as a director thereof (including breaches resulting
from negligent or grossly negligent behavior) except in the situations
described in clauses (i)-(iv), inclusive, above. These provisions will not
alter the liability of directors under federal securities laws.

Our Charter provides that we may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in our right) by reason of the
fact that he is or was a director, officer, employee or agent of Armor Holdings
or is or was serving at our request as a director, officer, employee or agent
of another corporation or enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner he reasonably believed to be in
or not opposed to our best interests, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful.

II-1
<PAGE>

The Charter also provides that we may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the our right to procure a judgment in our
favor by reason of the fact that such person acted in any of the capacities set
forth above, against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted under similar standards, except
that no indemnification may be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to Armor Holdings
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.

The Charter also provides that to the extent that one of our directors or
officers has been successful in the defense of any action, suit or proceeding
referred to in the previous paragraphs or in the defense of any claim, issue,
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith; that indemnification provided for in the Charter shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and that we may purchase and maintain insurance on behalf of any of our
directors or officers against any liability asserted against him or incurred by
him in any such capacity or arising out of his status as such whether or not we
would have the power to indemnify him against such liabilities under the
provisions of Section 145 of the DGCL.

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ ----------------------
<S> <C>
*1.1 Form of Underwriting Agreement
+2.1 Order confirming Debtor's Third Amended and Restated Plan of Reorganization with the
Third Amended and Restated Plan of Reorganization attached thereto (incorporated by
reference from Exhibit 2 to our Form 8-K, Current Report, dated October 1, 1993).
+2.2 Asset Purchase Agreement, dated as of July 2, 1996, between the Company, NIK,
Ivers-Lee and LFC No. 46 Corp. (filed as Exhibit 2.1 to our Form 8-K, Current Report,
dated July 30, 1996 and incorporated herein by reference).
+2.3 Asset Purchase Agreement, dated as of August 23, 1996, between the Company, DTC,
Robert L. Oliver, Sandra A. Oliver and DTCoA (filed as Exhibit 2.1 to our Form 8-K,
Current Report, dated October 9, 1996 and incorporated herein by reference).
+2.4 Agreement and Plan of Merger, dated July 23, 1996, by and between American Body
Armor & Equipment, a Florida corporation, and the Company (filed as Exhibit 2.1 to our
Form 8-K, Current Report, dated September 3, 1996 and incorporated herein by
reference).
+2.5 Share Acquisition Agreement, dated as of April 7, 1997, between Bodycote, AHL and the
Company (filed as Exhibit 2.1 to our Form 8-K, Current Report, dated April 22, 1997 and
incorporated herein by reference).
+2.6 Agreement for the Sale and Purchase of the Whole of the Issued Share Capital of DSL,
dated April 16, 1997, between the company, AHL, NatWest Ventures Nominees Limited
and Others and Martin Brayshaw (filed as Exhibit 2.2 to our Form 8-K, Current Report,
dated April 22, 1997 and incorporated herein by reference).
+2.7 Share Acquisition Agreement, dated as of June 9, 1997, between the Company, Strontian
Holdings Limited, Alpha-A Limited and Others (filed as Exhibit 2.1 to our Form 8-K,
Current Report, dated June 24, 1997 and incorporated herein by reference).
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
+3.1 Certificate of Incorporation of the Company (filed as Exhibit 3.1 to Form 8-K, Current
Report of the Company, dated September 3, 1996 and incorporated herein by reference).
+3.2 Certificate of Merger of American Body Armor & Equipment, Inc., a Florida corporation,
and the Company (filed as Exhibit 3.2 to Form 8-K, Current Report of the Company,
dated September 3, 1996 and incorporated herein by reference).
+3.3 Bylaws of the Company (filed as Exhibit 3.3 to Form 8-K, Current Report of the
Company, dated September 3, 1996 and incorporated herein by reference).
+3.4 Amendment to Bylaws of the Company (incorporated by reference to Exhibit 3.3.2 to
our Form 10-K Annual Report for the fiscal year ended December 31, 1998 (the "98
10-K)).
*5.1 Opinion of Kane Kessler, P.C., including consent.
+10.1 Credit Agreement, dated as of February 12, 1999, among the Company, CIBC,
NationsBank, First Union and SunTrust, as lenders, Canadian Imperial Bank of
Commerce, as Administrative Agent and NationsBank, as Documentation Agent, in the
aggregate principal amount of $60,000,000 (filed as Exhibit 5.1 to Form 8-K, Current
Report of the Company, dated March 10, 1999 and incorporated herein by reference).
+10.2 Borrower Pledge Agreement, dated as of February 12, 1999, made by the Company in
favor of Canadian Imperial Bank of Commerce as Administrative Agent for the Lenders
(filed as Exhibit 5.10 to Form 8-K, Current Report of the Company, dated March 10, 1999
and incorporated herein by reference).
+10.3 Security Deed, dated February 12, 1999, made by the Company in favor of Canadian
Imperial Bank of Commerce as Administrative Agent for the Lenders (filed as
Exhibit 5.11 to Form 8-K, Current Report of the Company, dated March 10, 1999 and
incorporated herein by reference).
+10.4 Subsidiaries Guarantee, dated as of February 12, 1999, made by the Company in favor of
Canadian Imperial Bank of Commerce as Administrative Agent for the Lenders (filed as
Exhibit 5.12 to Form 8-K, Current Report of the Company, dated March 10, 1999 and
incorporated herein by reference).
+10.5 Amended and Restated Employment Agreement between Jonathan M. Spiller and the
Company, dated as of January 1, 1999 (incorporated by reference to Exhibit 10.5 to our
98 10-K).
+10.6 Amended and Restated Employment Agreement between Robert R. Schiller and the
Company, dated as of January 1, 1999 (incorporated by reference to Exhibit 10.6 to the
98 10-K).
+10.7 Employment Agreement between Stephen E. Croskrey and the Company, dated as of
February 8, 1999 (incorporated by reference to Exhibit 10.7 to the 98 10-K).
+10.8 Employment Agreement between Nicholas B. Winiewicz and the Company, dated as of
February 16, 1999 (incorporated by reference to Exhibit 10.8 to the 98 10-K).
+10.9 Employment Agreement between Warren B. Kanders and the Company, dated as of
January 1, 1999 (incorporated by reference to Exhibit 10.9 to the 98 10-K).
+10.10 Form of Registration Rights Agreement, dated April 16, 1997, between the Company and
the Vendors of DSL (filed as Exhibit 10.3 to Form 8-K, Current Report of the Company,
dated April 22, 1997 and incorporated herein by reference).
+10.11 Form of Option for 300,000 shares of Common Stock, dated May 15, 1996 granted to
Richmont Capital Partners I, L.P. (filed as Exhibit 10.34 to Registration Statement
No. 333-28879 on Form S-1 of the Company and incorporated herein by reference).
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
+10.12 Agreement, dated as of April 21, 1998, amending Option, dated May 15, 1996, granted to
Richmont Capital Partners I, L.P. for 300,000 shares of Common Stock (incorporated by
reference to Exhibit 10.33 to the 98 10-K).
+10.13 Form of Indemnification Agreement for Directors of the Registrant, dated September 21,
1993 (filed as Exhibit 10.4 to Form 10-KSB, Annual Report of the Company for the fiscal
year ended December 31, 1993 and incorporated herein by reference).
+10.14 Form of Indemnification Agreement for Officers of the Registrant, dated February 28,
1994 (filed as Exhibit 10.5 to Form 10-KSB, Annual Report of the Company for the fiscal
year ended December 31, 1993 and incorporated herein by reference).
+10.15 American Body Armor & Equipment, Inc. 1994 Incentive Stock Plan (incorporated by
reference from Form S-8 filed on October 10, 1994, Reg. No. 33-018863).
+10.16 American Body Armor & Equipment, Inc. 1994 Directors Stock Plan (incorporated by
reference from Form S-8 filed on October 31, 1994, Reg. No. 33-018863).
+10.17 Armor Holdings, Inc. Amended and Restated 1996 Stock Option Plan (incorporated by
reference from the Company's 1997 Definitive Proxy Statement with respect to the
Company's 1997 Annual Meeting of Stockholders, held June 12, 1997, as filed with the
Commission on May 27, 1997).
+10.18 Armor Holdings Inc. Amended and Restated 1996 Non-Employee Directors Stock Option
Plan (incorporated by reference from the Company's 1997 Definitive Proxy Statement
with respect to the Company's 1997 Annual Meeting of Stockholders, held June 12, 1997,
as filed with the Commission on May 27, 1997).
+10.19 Armor Holdings, Inc. 1998 Stock Option Plan (incorporated by reference to Exhibit
10.19 to the 98 10-K).
+10.20 Lease for the Company's former primary facility located in Yulee, Florida, dated July 26,
1993, effective May 1, 1993 (filed as Exhibit 28.1 to Form 10-KSB, Annual Report of the
Company, for the fiscal year ended December 31, 1993 and incorporated herein by
reference).
+10.21 Agreement, dated as of March 8, 1999, between the Company and Kanders & Company,
Inc. (incorporated by reference to Exhibit 10.21 to the 98 10-K).
*15.1 Letter re: unaudited interim financial information.
*23.1 Consent of Kane Kessler, P.C. (included in Exhibit 5.1).
**23.2 Consent of PricewaterhouseCoopers LLP.
**23.3 Consent of Deloitte & Touche.
**23.4 Consent of Deloitte & Touche LLP.
**23.5 Consent of KPMG.
**23.6 Consent of Ernst & Young LLP.
24.1 Power of Attorney (included in the signature page to the registration statement).
**27.1 Financial Data Schedule.
</TABLE>

- ----------
* To be filed by amendment hereto.

** Filed herewith.

+ Incorporated herein by reference.

We filed reports on Form 8-K on October 22, 1998 and March 10, 1999.

II-4
<PAGE>

ITEM 17. UNDERTAKINGS

The Company hereby undertakes that:

1. For purposes of determining any liability under the Securities Act of
1933, each filing of the Company's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

2. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.

3. (i) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(ii) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in City of Jacksonville, State of Florida, on March 25, 1999.

ARMOR HOLDINGS, INC.

By: /s/ Jonathan M. Spiller
---------------------------------------
Name: Jonathan M. Spiller

Title: President and Chief Executive
Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Warren B. Kanders and Jonathan M. Spiller, and
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments and any abbreviated registration statement, and any
amendments thereto, filed pursuant to Rule 462(b) increasing the amount of
securities for which registration is being sought) to this registration
statement and all documents relating thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------- ---------------------------------------- ---------------
<S> <C> <C>
/s/ Warren B. Kanders
- -------------------------------
Warren B. Kanders Chairman of the Board of Directors March 25, 1999

/s/ Jonathan M. Spiller
- -------------------------------
Jonathan M. Spiller President, Chief Executive Officer and March 25, 1999
Director (Principal Executive Officer)

/s/ Nicholas B. Winiewicz
- -------------------------------
Nicholas B. Winiewicz Vice President--Finance, Chief Financial March 25, 1999
Officer, Secretary and Treasurer
(Principal Accounting Officer)

/s/ Burtt R. Ehrlich
- -------------------------------
Burtt R. Ehrlich Director March 25, 1999

/s/ Nicholas Sokolow
- -------------------------------
Nicholas Sokolow Director March 22, 1999

/s/ Thomas W. Strauss
- -------------------------------
Thomas W. Strauss Director March 22, 1999

/s/ Richard C. Bartlett
- -------------------------------
Richard C. Bartlett Director March 22, 1999

/s/ Alair A. Townsend
- -------------------------------
Alair A. Townsend Director March 25, 1999
</TABLE>

II-6
<PAGE>

EXHIBIT INDEX

The following Exhibits are filed herewith:

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Deloitte & Touche.
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of KPMG.
23.6 Consent of Ernst & Young LLP.
24.1 Power of Attorney (included in the signature page to the registration statement).
27.1 Financial Data Schedule
</TABLE>

<PAGE>

[PRICEWATERHOUSECOOPERS LOGO]

PricewaterhouseCoopers LLP
Barnett Center
50 North Laura Street
Suite 3000
Jacksonville FL 32202
Telephone (904) 354-0671
Facsimile (904) 366-3678
Direct phone (904) 366-3604
Direct fax (904)366-3678

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in the Prospectus constituting part of this
registration statement on Form S-3 of our report dated March 5, 1999 on our
audit of the consolidated financial statements of Armor Holdings, Inc. We also
consent to the incorporation by reference in the Prospectus constituting part
of the registration statement on Form S-3 (No. ___________), the registration
statement (No. 333-38765) on Form S-3, the registration statement (No.
333-38759) on Form S-4 and the registration statement (No. 333-71063) on Form
S-8 of our report dated March 5, 1999, on our audit of the consolidated
financial statements of Armor Holdings, Inc. as of December 31, 1998 and for
the year then ended, which appears on page F-2 of the Company's annual report
on Form 10-K. We also consent to the reference to our firm under the caption
"Experts".

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Jacksonville, Florida
March 25, 1999

<PAGE>

EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

We consent to the inclusion in the Prospectus constituting part of this
registration statement on Form S-3 of our report dated February 8, 1999
on our audit of the consolidated financial statements of Defense Systems
Columbia S.A. We also consent to the incorporation by reference in the
Prospectus constituting part of the registration statement on Form S-3
(No. ______________), the registration statement (No. 333-38765) on Form S-3,
the registration statement (No. 333-38759) on Form S-4 and the registration
statement (No. 333-71063) on Form S-8 of our report dated February 8, 1999,
on our audit of Defense Systems Columbia S.A., as of December 31, 1998 and
for the year then ended. We also consent to the reference to our firm under
the caption "Experts".

Deloitte & Touche

Santa fe de Bogota, Colombia
March 25, 1999

<PAGE>

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration Statement of
Armor Holdings, Inc. (the "Company") on Form S-3 of our report dated March 19,
1998 as to the Company's consolidated financial statements appearing in this
Annual Report on Form 10-K of Armor Holdings, Inc., for the year ended December
31, 1998 and to the reference to us under the heading "Experts" in the
Prospectus which is part of this Registration Statement.

Deloitte & Touche LLP

New York, New York
March 24, 1998

<PAGE>

The Board of Directors
DSL Group Limited

We consent to the inclusion in the registration statement on Form S-3 (first
filing), of Armor Holdings, Inc. of our report dated 15 April 1997 relating to
the consolidated profit and loss account and consolidated cash flow statement of
DSL Group Limited and subsidiaries for the period from 3 June 1996 to 31
December 1996. We also consent to the of our report dated 15 April 1997 relating
to the consolidated profit and loss account and consolidated cash flow statement
of DSL Group Limited and subsidiaries for the period from 3 June 1996 to 31
December 1996, in the Annual Report on Form 10-K of Armor Holdings, Inc. which
is incorporated by reference in the registration statement on Form S-3 (first
filing) of Armor Holdings, Inc. and to the reference to our firm under the
heading "Experts" in such registration statement.

/s/KPMG
KPMG
London, England
25 March 1999

<PAGE>

EXHIBIT 23.6

Consent of Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated December 10, 1998 (except for Note 12, as to which the
date is February 24, 1999) with respect to the financial statements of
Safariland Ltd., Inc. included in the Registration Statement (Form S-3
No. 33-xxxxx) and related Prospectus of Armor Holdings, Inc. for the
registration of 6,125,000 shares of its common stock and 1,125,000 shares of
the selling stockholders.

ERNST & YOUNG LLP

Riverside, California
March 22, 1999

<PAGE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the 1998
Form 10-K of Armor Holdings, Inc., and is qualifed in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000845752
<NAME> ARMOR HOLDINGS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> DEC-31-1998
<CASH> 6,789,000
<SECURITIES> 0
<RECEIVABLES> 21,363,000
<ALLOWANCES> 1,380,000
<INVENTORY> 9,103,000
<CURRENT-ASSETS> 43,165,000
<PP&E> 16,345,000
<DEPRECIATION> 4,172,000
<TOTAL-ASSETS> 94,353,000
<CURRENT-LIABILITIES> 18,799,000
<BONDS> 0
0
0
<COMMON> 165,000
<OTHER-SE> 74,937,000
<TOTAL-LIABILITY-AND-EQUITY> 94,353,000
<SALES> 97,207,000
<TOTAL-REVENUES> 97,207,000
<CGS> 66,451,000
<TOTAL-COSTS> 83,562,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 418,000
<INTEREST-EXPENSE> (625,000)
<INCOME-PRETAX> 13,673,000
<INCOME-TAX> 5,077,000
<INCOME-CONTINUING> 8,596,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,596,000
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.50

</TABLE>