ARMOR HOLDINGS INC, S-3/A, 1999-04-15

ARMOR HOLDINGS INC
S-3/A, 1999-04-15
DETECTIVE, GUARD & ARMORED CAR SERVICES

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FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1999
REGISTRATION NO. 333-75053
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
--------------------

AMENDMENT NO. 1
TO

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
ARMOR HOLDINGS, INC.
(Exact name of registrant as specified in charter)

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

ARMOR HOLDINGS, INC.
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)
</TABLE>

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

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

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]

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.

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<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, APRIL 14, 1999

PROSPECTUS

7,250,000 SHARES

[GRAPHIC OMITTED]

ARMOR HOLDINGS, INC.

COMMON STOCK

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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
April 12, 1999 was $12.6875 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 of which 720,295 shares will be sold by Armor Holdings
and 367,205 shares will be sold by the selling stockholders.

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

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[Picture of global map with our locations highlighted.]

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
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
</TABLE>

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .............................. 21
Business ................................... 28
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
</TABLE>

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
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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 Alarm Systems Holding Company and its affiliate
Fire Alarm Service Corporation and 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 U.S. trademark registrations: Armitron (Registered
Trademark) , Series 2000 (Registered Trademark) , Armadillo (Design Mark)
(Registered Trademark) , 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) , Vest Express (Registered Trademark) , Best Defense
(Registered Trademark) , Def-Tec Products 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) , Secure-a-Seal
(Registered Trademark) , and Federal Laboratories (Registered Trademark) .
Other trademarks for which applications for U.S. registration are pending are:
Safari

ii
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Armor (Trade Mark) , Armorwear (Trade Mark) , Gold Standard (Trade Mark) ,
Gold Series GSX (Trade Mark) , Safari Gear (Trade Mark) , Safariland Armor Wear
(Trade Mark) , Series 229 (Trade Mark) , Smart Armor (Trade Mark) , Stab Pro
(Trade Mark) , Xtreme Armor (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 Gallet (Registered Trademark) trademark included in
this prospectus is owned by 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
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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 our recent acquisition of Safariland Ltd., Inc. but not to our
proposed acquisition of Alarm Systems Holding Company and its affiliate Fire
Alarm Service Corporation or The Parvus Company, and the historical financial
data do not give effect to the Safariland, Alarm Systems and Fire Alarm Service
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 to
multi-national corporations and governmental agencies through our ArmorGroup
Services division. We are also a leading manufacturer of security products for
law enforcement personnel around the world through our Armor Holdings Products
division. Our ArmorGroup Services division provides sophisticated security
planning and risk management, consulting and training services, intellectual
property asset protection, business intelligence and investigative services,
and electronic security systems integration. 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 Extensive Client Base and Distribution Network. ArmorGroup 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).

1
<PAGE>

o Proven Track Record of Identifying, Completing and Integrating
Acquisitions. Since January 1996, we have completed 12 acquisitions in
the security services and products industry. We 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 expands our client base or distribution network,

o increases blended 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 12 acquisitions including
Safariland, a leading manufacturer of law enforcement equipment, and announced
our intention to acquire two additional businesses.

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

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>
<CAPTION>
<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
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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
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Total ...................................... 1,125,000 shares
Common stock outstanding after this
offering(1) .................................. 22,873,776 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>

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(1) Assumes no exercise of the over-allotment option by the underwriters and
excludes an aggregate of 1,867,924 shares of common stock reserved for
issuance under our various stock option plans at a weighted average price
per share of $6.85.

3
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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
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(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) 2,464
Operating income ..................................... 2,141 5,285 13,645 15,982
Provision for income taxes ........................... 1,215 2,376 5,077 6,376
Net income applicable to common
stockholders ....................................... 689 3,158 8,596 10,107
Earnings per common share
Basic .............................................. $ 0.09 $ 0.23 $ 0.53 $ 0.61
Diluted ............................................ $ 0.08 $ 0.21 $ 0.50 $ 0.57
Weighted average common shares
Basic .............................................. 7,966 13,638 16,165 16,466
Diluted ............................................ 8,876 14,712 17,354 17,655
OTHER DATA:
EBITDA(1) ............................................ $ 3,476 $ 7,848 $ 15,702 $ 23,692
Depreciation & amortization(2) ....................... 818 1,976 2,654 4,745
Net cash from (used in) operating activities ......... 1,639 (1,556) 3,379 7,400
Net cash used in investing activities ................ (16,428) (7,877) (20,701) (55,407)
Net cash from financing activities ................... 23,848 20,812 5,032 42,534
Capital expenditures ................................. 1,860 5,153 3,301 4,041
</TABLE>

4
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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 $ 26,394 $ 26,394
Total assets ................. 94,353 146,610 175,991
Total debt ................... 5,818 45,287 1,022
Stockholders' equity ......... 75,102 79,102 152,748
</TABLE>

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(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 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
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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 ArmorGroup
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 ArmorGroup 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 ArmorGroup 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, 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 ArmorGroup
Services division, accounted for approximately 10.2% of net sales in fiscal
1998 (without giving effect to the acquisition of Safariland) under an annually
renewable contract which expired March 31, 1999. This contract is currently
being renegotiated for renewal. In addition, a portion of the security risk
management services we provide are under annually renewable contracts. The loss
of, or significant reduction in, this business could have a material adverse
effect on our business, financial condition and results of operations. 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

8
<PAGE>

capital spending. A reduction of funding for law enforcement could have a
material adverse effect on our business, financial condition and results of
operations.

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 ArmorGroup 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 ARE DEPENDENT UPON OUR PROPRIETARY TECHNOLOGY

We are dependent upon a variety of methods and techniques which we regard
as proprietary trade secrets. We are also dependent upon a variety of
trademarks, servicemarks and designs to promote brand name development and
recognition. We rely on a combination of trade secrets, copyright, patent,
trademark, unfair competition and other intellectual property laws as well as
contractual agreements to protect our rights to such intellectual property. Due
to the difficulty of monitoring unauthorized use of and access to intellectual
property, however, such measures may not provide adequate protection. In
addition, there can be no assurance that courts will always uphold our
intellectual property rights, or enforce the contractual arrangements which we
have entered into to protect our proprietary technology. Any unenforceability
or misappropriation of our intellectual property could have a material adverse
effect on our business, financial condition and results of operations. In
addition, if we bring or become subject to litigation to defend against claimed
infringement of our rights or of the rights of others or to determine the scope
and validity of our intellectual property rights, such litigation could result
in substantial costs and diversion of our resources which could have a material
adverse effect on our business, financial condition and results of operations.
Unfavorable results in such litigation could also result in the loss or
compromise of our proprietary rights, subject us to significant liabilities,
require us to seek licenses from third parties, or prevent us from selling our
products which could have a material adverse effect on our business, financial
condition and results of operations. See "Business -- Patents and Trademarks".

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

9
<PAGE>

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."

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 14.2% 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 19.0%, 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,

10
<PAGE>

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 22,873,776 shares of our common stock
will be outstanding. Of these shares, 12,757,484 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
10,116,292 outstanding shares of common stock are either deemed to be
"restricted securities", as that term is defined in Rule 144, are subject to
certain other restrictions on disposition and/or are expected to be subject to
an underwriters lock up agreement. 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.

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 $13.00 per
share and after deducting the underwriting discounts and commissions and
estimated related expenses, will be approximately $73.6 million ($82.5 million
if the underwriters' over-allotment option is exercised in full). We expect to
use approximately $44.3 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% on April 13 converting to 6.375% on April 16) 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 acquisition of Alarm Systems and its affiliate
Fire Alarm Service, an electronic security and fire alarm systems integration
business, 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.
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 ................ 145/8 115/16

1998
----

1st Quarter ................ 111/2 93/4
2nd Quarter ................ 121/2 105/8
3rd Quarter ................ 1111/16 87/8
4th Quarter ................ 119/16 9

1997
----

1st Quarter ................ 91/2 71/2
2nd Quarter ................ 107/8 83/4
3rd Quarter ................ 123/4 101/2
4th Quarter ................ 133/8 101/8
</TABLE>

On April 12, 1999, the last reported sales price of the common stock on
the AMEX was $12.6875 per share. As of March 8, 1999, we had approximately
1,783 stockholders of record. Holders of shares held in "nominee" or street
name 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 $ 36,170
======== ======== ========
Short-term debt ................................................ 5,041 5,041 --
Borrowings under credit facility ............................... -- 39,224 --
Current portion of long-term debt and capitalized lease
obligations ................................................... 433 473 473
-------- -------- --------
Total short-term debt ......................................... $ 5,474 $ 44,738 $ 473
======== ======== ========
Long-term debt and capitalized lease obligations, net current
portion ....................................................... 344 549 549
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, 16,798,560 shares issued pro
forma and 16,527,832 shares outstanding pro forma and
22,923,560 shares issued pro forma as adjusted and
22,652,832 shares outstanding pro forma as adjusted ......... 165 168 229
Additional paid-in capital .................................... 65,408 69,405 142,990
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 79,102 152,748
-------- -------- --------
Total capitalization ..................................... $ 75,554 $ 79,759 $153,405
======== ======== ========
</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 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)

- ----------
* 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 $380 negotiated with the landlord in
connection with the acquisition of Safariland and reduction of labor
costs of $940 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:

<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>

(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 $35,749 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, to be eliminated due to the repayment of certain Safariland
indebtedness, and is calculated using a rate of 7.875% on borrowings of
$39,224. The actual borrowing rate is expected to be 6.375%.

(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, which will be repaid in full with
proceeds from this offering. Does not reflect the anticipated $1,469 in
interest income anticipated to be generated excess proceeds of this
offering invested 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 $ 29,381(9) $ 36,170
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 29,381 85,150
Property, plant and
equipment, net ................. 12,173 3,733 (1,836)(2) 14,070 14,070
Intangible assets, net .......... 34,562 35,749 (3) 70,311 70,311
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 $ 33,913 $146,610 $ 29,381 $175,991
======== ======= ========= ======== ============ ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Short-term debt ................ $ 5,041 $ 2,450 $ (2,450)(4) $ 5,041 $ (5,041)(10) $ --
Borrowing from credit
facility ..................... 39,224 (4) 39,224 (39,224)(10)
Current portion of
long-term debt and
capitalized lease
obligations .................. 433 378 (338)(4) 473 473
Accounts payable, accrued
expenses and other ........... 13,325 3,788 5,000 (5) 22,113 22,113
-------- ------- --------- -------- --------
Total current liabilities ....... 18,799 6,616 41,436 66,851 (44,265) 22,586
-------- ------- --------- -------- ------------ --------
Minority interest ............... 108 108 108
Long-term debt and
capitalized lease obligations
and other long term
liabilities .................... 344 2,343 (2,138)(4) 549 549
-------- ------- --------- -------- --------
Total liabilities ............... 19,251 8,959 39,298 67,508 (44,265) 23,243
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 73,585 (11) 142,990
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 73,646 152,748
-------- ------- --------- -------- ------------ --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ........... $ 94,353 $18,344 $ 33,913 $146,610 $ 29,381 $175,991
======== ======= ========= ======== ============ ========
</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) Reflects borrowings necessary to consummate the Safariland acquisition and
to repay certain indebtedness of Safariland.

(5) The adjustment to accounts payable, accrued expenses and other liabilities
represents the accrual of direct costs and other non-recurring charges we
have incurred and 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 300,752 shares of our
common stock with $0.01 par value per share.

(7) Represents additional paid in capital associated with the issuance of
300,752 shares of our common stock at an assumed price of $13.30 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.

(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 to
multi-national corporations and governmental agencies through our ArmorGroup
Services division. We are also a leading manufacturer of security products for
law enforcement personnel around the world through our Armor Holdings Products
division. Our ArmorGroup Services division provides sophisticated security
planning and risk management, consulting and training services, intellectual
property asset protection, business intelligence and investigative services,
and electronic security systems integration. 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

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

o expands our client base or distribution network,

o increases blended 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 12 acquisitions, including
Safariland, a leading manufacturer of equipment for the law enforcement,
military and sporting goods markets worldwide and announced our intention to
acquire 2 additional businesses. The aggregate purchase price for the
consummated acquisitions, including assumed debt and subject to certain post
closing adjustments, was approximately $167.5 million, with aggregate sales of
approximately $122.3 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 ArmorGroup
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 ArmorGroup 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 ArmorGroup 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 ArmorGroup 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 ArmorGroup 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 ArmorGroup 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, ArmorGroup 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 ArmorGroup 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.

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>

25
<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.

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<PAGE>

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.

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.

27
<PAGE>

BUSINESS

COMPANY OVERVIEW

We are a leading global provider of security risk management services to
multi-national corporations and governmental agencies through our ArmorGroup
Services division. We are also a leading manufacturer of security products for
law enforcement personnel around the world through our Armor Holdings Products
division. Our ArmorGroup Services division provides sophisticated security
planning and risk management, consulting and training services, intellectual
property asset protection, business intelligence and investigative services,
and electronic security systems integration. 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.

ArmorGroup Services Division. Our ArmorGroup 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 our 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
ArmorGroup 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

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<PAGE>

specialized government and military agencies. In addition, management believes
that consistent 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 52% 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

29
<PAGE>

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.

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.

Extensive Client Base and Distribution Network. ArmorGroup 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 12 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

30
<PAGE>

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 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) expands our client base or distribution network, (3) increases
blended margins, (4) is accretive to earnings, and (5) offers the opportunity
to enhance profitability by improving the efficiency of our operations. Since
January 1996, we have consummated 12 acquisitions including Safariland, a
leading manufacturer of law enforcement equipment, and announced our intention
to acquire 2 additional businesses.

Safariland. On April 12, 1999, we acquired 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 was approximately $39.9 million, subject to
adjustments, consisting of approximately $35.9 million in cash and $4 million
or 300,752 shares in

31
<PAGE>

our common stock. As part of our acquisition of Safariland we repaid
approximately $5.1 million of Safariland's indebtedness. We financed the
acquisition with borrowings of approximately $39.2 million. Safariland
manufactures and distributes a variety of products including ballistic
resistant vests and duty gear.

Parvus. On December 2, 1998, we signed a non-binding letter of intent to
acquire The Parvus Company, a Washington, D.C. consulting firm specializing in
international investigations, corporate intelligence and security services. The
purchase price is $1.4 million, subject to adjustments. The transaction is
subject to entering into a definitive agreement and customary closing
conditions.

Alarm Systems and Fire Alarm Service. On April 14, 1999, we signed
non-binding letters of intent for the combination with each of Alarm Systems
Holding Company, a Lyndhurst, New Jersey-based systems integrator, and its
affiliate Fire Alarm Service Corporation, a Tampa, Florida-based systems
integrator. Both Alarm Systems and Fire Alarm Service design, integrate and
service commercial fire alarm systems, access control systems, burglar alarm
systems and other engineered low voltage systems. The purchase price for Alarm
Systems is approximately $8.6 million, subject to adjustments, and the purchase
price for Fire Alarm Service is approximately $5.6 million, subject to
adjustments. The transactions are subject to entering into definitive
agreements and customary closing conditions. Each transaction is contingent on
the closing of the other, and we anticipate that both transactions will be
accounted for as a pooling of interests.

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

ARMORGROUP 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 and fire $ 2.0
Inc. alarm systems 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 $ 2.0
intelligence
Alarm Systems Holding Company 1999 Electronic security and $12.0
and its affiliate Fire Alarm fire alarm systems integration
Service Corporation*
</TABLE>

32
<PAGE>

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 $45.9
under the brand names
Safariland, Safari Armor,
Duty Gear, Safari Gear,
Zero-G, Nylok
</TABLE>

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

SERVICES AND PRODUCTS

ArmorGroup Services

Our ArmorGroup 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.

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<PAGE>

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 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.

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<PAGE>

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. We are a leading supplier of duty gear to law enforcement
personnel in the United States. Uniformed police officers require a wide
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.

35
<PAGE>

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 have become 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

ArmorGroup 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 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)
Fluor Daniel, Inc. Eastern Europe All facilities Expatriate security managers (1997
to date)
Halliburton Company Houston, TX Northern Expatriate security managers (1992
Africa to date)
Reebok International Ltd. Boston, MA Worldwide Intellectual property asset
protection program (1998 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.

36
<PAGE>

The British Petroleum Company, plc, a client of our ArmorGroup Services
division, accounted for approximately 10.2% of our net sales in fiscal 1998
(without giving effect to the acquisition of Safariland) under an annually
renewable contract which expired March 31, 1999. This contract is currently
being renegotiated for renewal. No other clients or customers of the ArmorGroup
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.
A portion of the security risk management services we provide are under
annually renewable contracts. The loss or significant reduction in this
business could have a material adverse effect on our business, condition and
results of operations.

MARKETING AND DISTRIBUTION

ArmorGroup 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 ArmorGroup. 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 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.

37
<PAGE>

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. 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

38
<PAGE>

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 were shipped in the
first quarter of 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.

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.

39
<PAGE>

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. ArmorGroup
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) In connection with the acquisition of Safariland we entered into a lease
expiring December 31, 2000 and providing for an annual rent of $144,000.

(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. ArmorGroup 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.

EMPLOYEES

As of March 2, 1999, 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 ArmorGroup Services. 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.

40
<PAGE>

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 U.S.
trademark registrations, and applications 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. In other countries, our proprietary rights may
not be protected to the same extent as in the United States.

We are dependent upon a variety of methods and techniques which we regard
as proprietary trade secrets. We are also dependent upon a variety of
trademarks to promote brand name development and recognition. We rely on a
combination of trade secrets, copyright, patent, trademark, unfair competition
and other intellectual property laws as well as contractual agreements to
protect our rights to such intellectual property. Due to the difficulty of
monitoring unauthorized use of and access to intellectual property, however,
such measures may not provide adequate protection. In addition, there can be no
assurance that courts will uphold our intellectual property rights, or enforce
the contractual arrangements which we have entered into to protect our
proprietary technology. Any unenforceability or misappropriation of our
intellectual property could have a material adverse effect on our business,
financial condition and results of operations. In addition, if we bring or
become subject to litigation to defend against claimed infringement of our
rights or of the rights of others or to determine the scope and validity of our
intellectual property rights, such litigation could result in substantial costs
and diversion of our resources which could have a material adverse effect on
our business, financial condition and results of operations. Unfavorable
results in such litigation could also result in the loss or compromise of our
proprietary rights, subject us to significant liabilities, require us to seek
licenses from third parties, or prevent us from selling our products which
could have a material adverse effect on our business, financial condition and
results of operations.

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.

41
<PAGE>

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 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 ArmorGroup 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
ArmorGroup 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 April 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
Stephen J. Loffler ............. 45 President and Chief Executive Officer -- ArmorGroup
Services Division
Richard C. Bartlett ............ 64 Director
Burtt R. Ehrlich ............... 59 Director
Stephen B. Salzman ............. 33 Director -- Nominee
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 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.

43
<PAGE>

Stephen J. Loffler joined us as President and Chief Executive Officer --
ArmorGroup Services division in April 1999. From April 1998 to March 1999, Mr.
Loffler served as Vice President and General Manager Europe at Office Depot, an
office products retailer, where he was responsible for European
operations. From August 1991 to March 1998 Mr. Loffler served as Deputy
Chairman of Acco Europe, an office products manufacturer, where he led the
integration of Ofrex Group Holdings, an international distributor and
manufacturer of office products.

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 and affiliate of Richmont Capital Partners I,
L.P., 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.

Stephen B. Salzman has been a principal of FS Partners since its inception
in 1994. FS Partners and its affiliates invest in public and private companies
through the purchase of equity and related securities. Mr. Salzman has been
nominated for election as a director at our next annual meeting of stockholders,
scheduled to take place in June 1999.

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.

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<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

PRINCIPAL STOCKHOLDERS

As of April 12, 1999, there were 16,748,776 shares of our common stock
outstanding. The following table sets forth as of April 12, 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 SHARES BENEFICIALLY
OWNED 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 23.7% 3,266,732 14.2%
Lord Abbett & Co.(4) .......................... 1,913,665 11.4 1,913,665 8.4
Nevis Capital Management, Inc.(5) ............. 1,621,800 9.7 1,621,800 7.1
FS Partners (6) ............................... 1,344,924 8.0 1,344,924 5.9
Stephen B. Salzman(7) ......................... 1,344,924 8.0 1,344,924 5.9
Jonathan M. Spiller(8) ........................ 783,083 4.6 612,229 2.6
Richmont Capital Partners I, L.P.(9) .......... 625,000 3.7 550,000 2.4
Burtt R. Ehrlich(10) .......................... 289,100 1.7 240,800 1.0
Nicholas Sokolow(11) .......................... 205,000 1.2 186,250 *
Thomas W. Strauss(12) ......................... 125,000 * 125,000 *
Robert R. Schiller(13) ........................ 100,000 * 43,750 *
Alair A. Townsend(14) ......................... 55,516 * 55,516 *
Richard C. Bartlett(15) ....................... 0 * 0 *
Stephen E. Croskrey(16) ....................... 0 * 0 *
Stephen J. Loffler(17) ........................ 0 * 0 *
Nicholas B. Winiewicz(18) ..................... 0 * 0 *
All executive officers and directors as a group
(11 persons)(19) ............................. 5,580,277 31.4% 4,530,277 19.0%
</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 12.7% 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

45
<PAGE>

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 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) Includes 66,000 shares of common stock owned by FS Partners II, LP. The
address of FS Partners is 767 Fifth Avenue, New York, New York 10153.

(7) Comprised of shares of common stock beneficially owned by FS Partners.
Mr. Salzman serves as a Managing Member of FS Partners, LLC and owns a
50% interest in FS Ventures Inc., the general partner of FS Partners II,
LP. Mr. Salzman disclaims beneficial ownership of such shares except to
the extent of his proportionate pecuniary interest therein.

(8) Includes options to purchase 428,480 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. Does not include
options to purchase 350,000 shares of common stock which are exercisable
more than 60 days after the date hereof.

(9) 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.

(10) 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.

(11) 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.

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

(13) Includes options to purchase 100,000 shares of common stock. Does not
include options to purchase 175,000 shares of common stock which are
exercisable more than 60 days after the date hereof.

(14) Includes 5,516 shares of common stock and options to purchase 50,000
shares of common stock. Does not include options to purchase 25,000 shares
of common stock which are exercisable more than 60 days after the date
hereof.

(15) 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.

(16) Does not include options to purchase 200,000 shares of common stock which
are exercisable more than 60 days after the date hereof.

(17) Does not include options to purchase 150,000 shares of common stock which
are exercisable more than 60 days after the date hereof.

(18) Does not include options to purchase 75,000 shares of common stock which
are exercisable more than 60 days after the date hereof.

(19) See footnotes (3), (8) and (10-15). Does not include shares beneficially
owned by Stephen B. Salzman. Assuming the inclusion of the shares
beneficially owned by Mr. Salzman, all executive officers and directors
as a group would own 6,925,201 shares, or 39.0%, of the common stock
before the offering and 5,875,201 shares, or 24.7% of the common stock
after the offering.

46
<PAGE>

SELLING STOCKHOLDERS

The following table sets forth as of April 12, 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 23.7% 755,846 3,266,732 14.2%
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 1.0
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 12.7% 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.

<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 22,873,776 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 5,235,903 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% or greater stockholders
who, after this offering, will hold in the aggregate 8,705,040 shares (which
includes certain of the "restricted securities") 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 be asked to 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

49
<PAGE>

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 997,101, 200,000, 200,000, 150,000 and 75,000 shares and options subject to
a Company Lockup, that are held by Messrs. Spiller, Schiller, Croskrey, Loffler
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 701,499 shares issued in connection with our
acquisition of various companies are subject to escrow and lock-up agreements
expiring between July 1999 and December 2002. In total, an aggregate of
1,872,848 shares are subject to such 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>
NUMBER OF
U.S. UNDERWRITERS: SHARES
------------------ ----------
<S> <C>
Lehman Brothers Inc.
Bear, Stearns & Co. Inc. ..........................
SunTrust Equitable Securities Corporation .........
Warburg Dillon Read LLC, a subsidiary of UBS AG ...

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

<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS: SHARES
----------------------- ----------
<S> <C>
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 2710(c)(8) 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>
<CAPTION>
<S> <C>
ARMOR HOLDINGS, INC.
Report of Independent Accountants ................................................. F-2
Statutory Auditor's Report ........................................................ F-3
Independent Auditors' 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-11 -- 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>

STATUTORY AUDITOR'S REPORT

Messrs.

Shareholders of:

DEFENCE SYSTEMS COLOMBIA S.A.

I have audited the balance sheet of Defense 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.

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>
TIBLE
CONVERD STOCK STOCK
PREFERRE----------- COMMON---------
------------ 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
====== ========= ====== =======

<PAGE>

<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
to multi-national corporations and governmental agencies through our ArmorGroup
Services division. We are also a leading manufacturer of security products for
law enforcement personnel around the world through our Armor Holdings Products
division. Our ArmorGroup Services division provides sophisticated security
planning and risk management, consulting and training services, intellectual
property asset protection, business intelligence and investigative services,
and electronic security systems integration. 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.

ArmorGroup Services Division. ArmorGroup 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
ArmorGroup Services offices on five continents, ArmorGroup 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.
ArmorGroup 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. ArmorGroup 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, ArmorGroup 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>
<CAPTION>
<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

F-22
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. COMMITMENTS AND CONTINGENCIES (CONTINUED)

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.

ANGOLAN OPERATIONS -- On January 16, 1998, ArmorGroup 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 ArmorGroup 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.

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.

F-23
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCKHOLDERS' EQUITY AND PREFERRED STOCK (CONTINUED)

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.

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:

F-24
<PAGE>

ARMOR HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCKHOLDERS' EQUITY AND PREFERRED STOCK (CONTINUED)

<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 -- ArmorGroup
Services and Armor Holdings Products. The ArmorGroup 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 manufacturers 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:

<PAGE>

<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
--------------- ---------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Receivables, net:
Trade, less allowance for doubtful accounts of $30,000 and
$36,000 at September 30 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 and its filing under
Chapter 11 of the bankruptcy code 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 reserved 100% of the amounts due
from this customer in March 1999, as it relates to these outstanding balances.

F-46

<PAGE>

[Pictures of certain of our products]

<PAGE>

7,250,000 SHARES

[GRAPHIC OMITTED]

ARMOR HOLDINGS, INC.

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, APRIL 14, 1999

PROSPECTUS

7,250,000 SHARES

[GRAPHIC OMITTED]

ARMOR HOLDINGS, INC.

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.

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

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

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

LEHMAN BROTHERSBEAR, STEARNS INTERNATIONAL LIMITED

SUNTRUST EQUITABLE SECURITIES

WARBURG DILLON READ

, 1999
<PAGE>

[ALTERNATE BACK COVER PAGE -- INTERNATIONAL]

7,250,000 SHARES

[GRAPHIC OMITTED]

ARMOR HOLDINGS, INC.

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>
<CAPTION>
<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 ............................. $ 275,000.00
Legal fees and expenses ..................................... $ 550,000.00
Accounting fees and expenses ................................ $ 250,000.00
Transfer agent fees and expenses ............................ $ 25,000.00
New York Stock Exchange listing fee ......................... $ 180,000.00
Miscellaneous ............................................... $ 261,756.80
-------------
Total ....................................................... $1,600,000.00
=============
</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>
**2.8 Stock Purchase Agreement by and among Armor Holdings, Inc., The Neale A. Perkins
Trust, The Scott T. O'Brien and Victoria S. O'Brien Revocable Trust, The David M.
Holmes and Katherine C. Holmes Revocable Trust, Neale A. Perkins, David M. Holmes,
Scott T. O'Brien and Safariland Ltd., Inc. dated as of April 12, 1999.
+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).
**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.
**23.7 Consent of Stephen B. Salzman.
*24.1 Power of Attorney.
*27.1 Financial Data Schedule.
</TABLE>

- ----------
* Previously filed.

** 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 April 13, 1999.

ARMOR HOLDINGS, INC.

By: /s/ Jonathan M. Spiller

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

Name: Jonathan M. Spiller

Title: President and Chief Executive
Officer

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 Chairman of the Board of Directors April 13, 1999
/s/ Jonathan M. Spiller
- -------------------------------
President, Chief Executive Officer and
Jonathan M. Spiller
Director (Principal Executive Officer) April 13, 1999
/s/ *
- -------------------------------
Vice President -- Finance, Chief
Nicholas B. Winiewicz
Financial Officer, Secretary and
Treasurer (Principal Accounting Officer) April 13, 1999
/s/ *
- -------------------------------
Burtt R. Ehrlich Director April 13, 1999
/s/ *
- -------------------------------
Nicholas Sokolow Director April 13, 1999
/s/ *
- -------------------------------
Thomas W. Strauss Director April 13, 1999
/s/ *
- -------------------------------
Richard C. Bartlett Director April 13, 1999
/s/ *
- -------------------------------
Alair A. Townsend Director April 13, 1999
</TABLE>

*By: /s/ Jonathan M. Spiller
Jonathan M. Spiller
as Attorney-in-fact

II-6
<PAGE>

EXHIBIT INDEX

The following Exhibits are filed herewith:

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
2.8 Stock Purchase Agreement by and among Armor Holdings, Inc., The Neale A. Perkins
Trust, The Scott T. O'Brien and Victoria S. O'Brien Revocable Trust, The David M.
Holmes and Katherine C. Holmes Revocable Trust, Neale A. Perkins, David M. Holmes,
Scott T. O'Brien and Safariland Ltd., Inc. dated as of April 12, 1999.
5.1 Opinion of Kane Kessler, P.C., including consent.
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.
23.7 Consent of Stephen B. Salzman.
</TABLE>

<PAGE>

7,250,000 Shares

ARMOR HOLDINGS, INC.

COMMON STOCK

FORM OF
UNDERWRITING AGREEMENT

[______], 1999
LEHMAN BROTHERS INC.
BEAR, STEARNS, & CO. INC.
SUNTRUST EQUITABLE SECURITIES CORPORATION
WARBURG DILLON READ LLC, A SUBSIDIARY OF UBS AG
As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285

LEHMAN BROTHERS INTERNATIONAL (EUROPE)
BEAR, STEARNS INTERNATIONAL LIMITED
SUNTRUST EQUITABLE SECURITIES CORPORATION
WARBURG DILLON READ, A DIVISION OF UBS AG
As Representatives of the several
Underwriters named in Schedule 2,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285

Dear Sirs:

Armor Holdings, Inc., a Delaware corporation (the "Company"), and
certain stockholders of the Company named in Schedule 3 hereto (the "Selling
Stockholders") propose to sell an aggregate of 7,250,000 shares (the "Firm
Stock") of the Company's Common Stock, par value $.01 per share (the "Common
Stock"). Of the 7,250,000 shares of the Firm Stock, 6,125,000 are being sold by
the Company and 1,125,000 are being sold by the Selling Stockholders.

It is understood that, subject to the conditions hereinafter stated,
5,800,000 shares of the Firm Stock (the "U.S. Firm Stock") will be sold to the
several U.S. Underwriters named in Schedule 1 hereto (the "U.S. Underwriters")
in connection with the offering and sale of such U.S. Firm Stock in the United
States and Canada to United States and Canadian Persons (as such terms are
defined in the Agreement Between U.S. and International Underwriters of even
date herewith), and 1,450,000 shares of the Firm Stock (the "International Firm
Stock") will be sold to the several International Underwriters named in Schedule
2 hereto (the "International Underwriters") in connection with the offering and
sale of such International Firm Stock outside the United States and

<PAGE>

Canada to persons other than United States and Canadian Persons. Lehman Brothers
Inc., Bear, Stearns & Co., Inc., SunTrust Equitable Securities Corporation and
Warburg Dillon Read LLC, a subsidiary of UBS AG, shall act as representatives
(the "U.S. Representatives") of the several U.S. Underwriters, and Lehman
Brothers International (Europe), Bear, Stearns International Limited, SunTrust
Equitable Securities Corporation and Warburg Dillon Read LLC, a division of UBS
AG shall act as representatives (the "International Representatives") of the
several International Underwriters. The U.S. Underwriters and the International
Underwriters are hereinafter collectively referred to as the "Underwriters." The
U.S. Representatives and the International Representatives are hereinafter
collectively referred to as the "Representatives."

In addition, the Company and the Selling Stockholders propose to grant
to the Underwriters an option to purchase up to an additional 1,087,500 shares
of the Common Stock on the terms and for the purposes set forth in Section 5
(the "Option Stock"). Of the 1,087,500 shares of Option Stock, 720,295 shall be
sold by the Company and 367,205 shall be sold by the Selling Stockholders (in
the respective amounts set forth opposite the Selling Stockholders' names in
Schedule 3 hereto). In addition, of the 1,087,500 shares of Option Stock,
870,000 shall be sold to the U.S. Underwriters and 217,500 shall be sold to the
International Underwriters. The Firm Stock and the Option Stock, if purchased,
are hereinafter collectively called the "Stock." This is to confirm the
agreement concerning the purchase of the Stock from the Company and the Selling
Stockholders by the Underwriters.

SECTION 1. Representations, Warranties and Agreements of the Company.
The Company represents, warrants and agrees that:

(a) A registration statement on Form S-3 with respect to the Stock has
(i) been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, (ii) been filed with the Commission
under the Securities Act and (iii) become effective under the Securities
contains two prospectuses to be used in connection with the offering and sale of
the Stock: the U.S. prospectus, to be used in connection with the offering and
sale of Stock in the United States and Canada to United States and Canadian
Persons, and the international prospectus, to be used in connection with the
offering and sale of Stock outside the United States and Canada to persons other
than United States and Canadian Persons. The international prospectus is
identical to the U.S. prospectus except for the outside front and back cover
pages. Copies of such registration statement and each of the amendments thereto
have been delivered by the Company to you. As used in this Agreement, "Effective
Time" means the date and the time as of which such registration statement, or
the most recent post-effective amendment thereto, if any, was declared effective
by the Commission; "Effective Date" means the date of the Effective Time;
"Preliminary Prospectus" means each prospectus included in such registration
statement, or amendments thereof, before it became effective under the
Securities Act and any prospectus filed with the Commission by the Company with
the consent of the Representatives pursuant to Rule 424(a) of the Rules and
Regulations; "Registration Statement" means such registration statement, as
amended at the Effective Time, including all information contained in the final
prospectus filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations and deemed to be a part of the registration statement as of the
Effective Time pursuant to Rule 430A of the Rules and Regulations; and
"Prospectus"

-2-

<PAGE>

means the U.S. prospectus and the international prospectus in the respective
forms first used to confirm sales of Stock. If the Company has filed an
abbreviated registration statement to register additional shares of Common Stock
pursuant to Rule 462(b) under the Securities Act (the "Rule 462 Registration
Statement"), then any reference herein to the term "Registration Statement"
shall be deemed to include such Rule 462 Registration Statement. The Commission
has not issued any order preventing or suspending the use of any Preliminary
Prospectus.

(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the Commission, as
the case may be, conform in all respects to the requirements of the Securities
Act and the Rules and Regulations and do not and will not, as of the applicable
effective date (as to the Registration Statement and any amendment thereto) and
as of the applicable filing date (as to the Prospectus and any amendment or
supplement thereto) contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided that no representation or warranty
is made as to information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon and in conformity with written
information furnished to the Company through the Representatives by or on behalf
of any Underwriter specifically for inclusion therein.

(c) The Company and each of its subsidiaries (as defined in Section
17) have been duly incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of incorporation, are
duly qualified to do business and are in good standing as foreign corporations
in each jurisdiction in which their respective ownership or lease of property or
the conduct of their respective businesses requires such qualification, and have
all power and authority necessary to own or hold their respective properties and
to conduct the businesses in which they are engaged; none of the subsidiaries of
the Company other than [ ] and [ ] is a "significant subsidiary", as such term
is defined in Rule 405 of the Rules and Regulations; and all of the subsidiaries
of the Company which had fiscal 1998 revenues of $1,000,000 or greater are
listed in part III of Schedule 4 hereto.

(d) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description thereof contained in the Prospectus; and all of
the issued shares of capital stock of each subsidiary of the Company have been
duly and validly authorized and issued and are fully paid and non-assessable and
(except for directors' qualifying shares) are owned directly or indirectly by
the Company, free and clear of all liens, encumbrances, equities or claims.

(e) The shares of the Stock to be issued and sold by the Company to
the Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor in accordance with this Agreement
will be duly and validly issued, fully paid and non-assessable; and the Stock
and the Common Stock will conform to the descriptions thereof contained in the
Prospectus.

(f) This Agreement has been duly authorized, executed and delivered by
the Company.

-3-
<PAGE>

(g) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, nor will such actions result in any
violation of the provisions of the charter or by-laws of the Company or any of
its subsidiaries or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties or assets; and except for the
registration of the Stock under the Securities Act, such consents, approvals,
authorizations, registrations or qualifications as may be required under the
Exchange Act and applicable state securities laws in connection with the
purchase and distribution of the Stock by the Underwriters, clearance of the
Stock with the National Association of Securities Dealers, Inc. and the listing
of the Firm Stock on the New York Stock Exchange, no consent, approval,
authorization or order of, or filing or registration with, any such court or
governmental agency or body is required for the execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby.

(h) Except as described in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting such
person the right to require the Company to file a registration statement under
the Securities Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company under the Securities Act.

(i) The Company has not sold or issued any shares of Common Stock
during the six-month period preceding the date of the Prospectus, including any
sales pursuant to Rule 144A under, or Regulations D or S of, the Securities Act
other than shares issued pursuant to employee benefit plans, qualified stock
options plans or other employee compensation plans or pursuant to outstanding
options, rights or warrants.

(j) Neither the Company nor any of its subsidiaries has sustained,
since the date of the latest audited financial statements included in the
Prospectus, any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since such date, there
has not been any change in the capital stock or long-term debt of the Company or
any of its subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the general
affairs, management, consolidated financial position, stockholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus.

(k) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or included in
the Prospectus present fairly the financial condition and results of operations
of the entities purported to be shown thereby, at the dates and for

-4-

<PAGE>

the periods indicated, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved.

(l) PricewaterhouseCoopers LLP, who has certified certain financial
statements of the Company, whose report appears in the Prospectus and who have
delivered one the initial letters referred to in Section 9(l) hereof, are
independent public accountants as required by the Securities Act and the Rules
and Regulations; and Ernst & Young LLP, Deloitte & Touche LLP and Deloitte &
Touche, each of whose report appears in the Prospectus and who (other than
Deloitte & Touche) have delivered one of the initial letters referred to in
Section 9(l) hereof, were independent accountants as required by the Securities
Act and the Rules and Regulations during the periods covered by the financial
statements on which they reported.

(m) The Company and each of its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects, except such as are described in the Prospectus or such
as do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and all assets held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable
leases, with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its subsidiaries.

(n) The Company and each of its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of their respective businesses and the value of their respective properties and
as is customary for companies engaged in similar businesses in similar
industries.

(o) The Company and each of its subsidiaries own or possess adequate
rights to use all material patents, patent applications, trademarks, service
marks, trade names, trademark registrations, service mark registrations,
copyrights and licenses necessary for the conduct of their respective businesses
and have no reason to believe that the conduct of their respective businesses
will conflict with, and have not received any notice of any claim of conflict
with, any such rights of others.

(p) Except as described in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its subsidiaries
is a party or of which any property or assets of the Company or any of its
subsidiaries is the subject which, if determined adversely to the Company or any
of its subsidiaries, might have a material adverse effect on the consolidated
financial position, stockholders' equity, results of operations, business or
prospects of the Company and its subsidiaries; and to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others.

(q) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the Registration Statement
by the Securities Act or by the Rules and Regulations which have not been
described in the Prospectus or filed as exhibits to the Registration Statement.

-5-

<PAGE>

(r) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders, customers or
suppliers of the Company on the other hand, which is required to be described in
the Prospectus which is not so described.

(s) No labor disturbance by the employees of the Company exists or, to
the knowledge of the Company, is imminent, which might be expected to have a
material adverse effect on the general affairs, management, consolidated
financial position, stockholders' equity, results of operations, business or
prospects of the Company and its subsidiaries.

(t) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.

(u) The Company has filed all federal, state and local income and
franchise tax returns required to be filed through the date hereof and has paid
all taxes due thereon, and no tax deficiency has been determined adversely to
the Company or any of its subsidiaries which has had (nor does the Company have
any knowledge of any tax deficiency which, if determined adversely to the
Company or any of its subsidiaries, might have) a material adverse effect on the
consolidated financial position, stockholders' equity, results of operations,
business or prospects of the Company and its subsidiaries.

(v) Since the date as of which information is given in the Prospectus
through the date hereof, and except as may otherwise be disclosed in the
Prospectus, the Company has not (i) issued or granted any securities, (ii)
incurred any liability or obligation, direct or contingent, other than
liabilities and obligations which were incurred in the ordinary course of
business, (iii) entered into any transaction not in the ordinary course of
business or (iv) declared or paid any dividend on its capital stock.

(w) The Company (i) makes and keeps accurate books and records and
(ii) maintains internal accounting controls which provide reasonable assurance
that (A) transactions are executed in accordance with management's
authorization, (B) transactions are recorded as necessary to permit preparation
of its financial statements and to maintain accountability for its assets, (C)
access to its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is compared
with existing assets at reasonable intervals.

(x) Neither the Company nor any of its subsidiaries (i) is in
violation of its charter or by-laws, (ii) is in default in any material respect,
and no event has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any term,
covenant or condition contained in any material indenture, mortgage, deed of
trust, loan

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<PAGE>

agreement or other agreement or instrument to which it is a party or by which it
is bound or to which any of its properties or assets is subject or (iii) is in
violation in any material respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be subject
or has failed to obtain any material license, permit, certificate, franchise or
other governmental authorization or permit necessary to the ownership of its
property or to the conduct of its business.

(y) Neither the Company nor any of its subsidiaries, nor any director,
officer, agent, employee or other person associated with or acting on behalf of
the Company or any of its subsidiaries, has used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the Foreign Corrupt Practices Act of 1977; or
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.

(z) Except as described in the Prospectus, there has been no storage,
disposal, generation, manufacture, refinement, transportation, handling or
treatment of toxic wastes, medical wastes, hazardous wastes or hazardous
substances by the Company or any of its subsidiaries (or, to the knowledge of
the Company, any of their predecessors in interest) at, upon or from any of the
property now or previously owned or leased by the Company or its subsidiaries in
violation of any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or which would require remedial action under any applicable
law, ordinance, rule, regulation, order, judgment, decree or permit, except for
any violation or remedial action which would not have, or could not be
reasonably likely to have, singularly or in the aggregate with all such
violations and remedial actions, a material adverse effect on the general
affairs, management, consolidated financial position, stockholders' equity or
results of operations of the Company and its subsidiaries; there has been no
material spill, discharge, leak, emission, injection, escape, dumping or release
of any kind onto such property or into the environment surrounding such property
of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous
substances due to or caused by the Company or any of its subsidiaries or with
respect to which the Company or any of its subsidiaries have knowledge, except
for any such spill, discharge, leak, emission, injection, escape, dumping or
release which would not have or would not be reasonably likely to have,
singularly or in the aggregate with all such spills, discharges, leaks,
emissions, injections, escapes, dumpings and releases, a material adverse effect
on the general affairs, management, consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; and the terms "hazardous wastes", "toxic wastes", "hazardous
substances" and "medical wastes" shall have the meanings specified in any
applicable local, state, federal and foreign laws or regulations with respect to
environmental protection.

(aa) Neither the Company nor any subsidiary is, or, as of the Closing
Date after giving effect to the offering and the application of the net proceeds
therefrom as described in the Prospectus, will be, an "investment company" as
defined in the Investment Company Act of 1940, as amended.

(bb) The Company has obtained lock-up agreements, substantially in the
form of Exhibit A hereto, from each of its executive officers, directors and
five percent or greater stockholders.

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<PAGE>

SECTION 2. Representations, Warranties and Agreements of the Selling
Stockholders. Each Selling Stockholder severally represents, warrants and agrees
that:

(a) The Selling Stockholder has, and immediately prior to the First
Delivery Date (as defined in Section 5 hereof) the Selling Stockholder will have
good and valid title to the shares of Stock to be sold by the Selling
Stockholder hereunder on such date, free and clear of all liens, encumbrances,
equities or claims; and upon delivery of such shares and payment therefor
pursuant hereto, good and valid title to such shares, free and clear of all
liens, encumbrances, equities or claims, will pass to the several Underwriters.

(b) The Selling Stockholder has placed in custody under a custody
agreement (the "Custody Agreement" and, together with all other similar
agreements executed by the other Selling Stockholders, the "Custody Agreements")
with [ ], as custodian (the "Custodian"), for delivery under this Agreement,
certificates in negotiable form (with signature guaranteed by a commercial bank
or trust company having an office or correspondent in the United States or a
member firm of the New York or American Stock Exchanges) representing the shares
of Stock to be sold by the Selling Stockholder hereunder.

(c) The Selling Stockholder has full right, power and authority to
enter into this Agreement and the Custody Agreement; the execution, delivery and
performance of this Agreement and the Custody Agreement by the Selling
Stockholder and the consummation by the Selling Stockholder of the transactions
contemplated hereby and thereby will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Selling Stockholder is a party or by which the Selling
Stockholder is bound or to which any of the property or assets of the Selling
Stockholder is subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Selling Stockholder, if applicable,
the articles of partnership of the Selling Stockholder, if applicable, or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Selling Stockholder or the property or assets
of the Selling Stockholder; and, except for the registration of the Stock under
the Securities Act and such consents, approvals, authorizations, registrations
or qualifications as may be required under the Exchange Act and applicable state
or foreign securities laws in connection with the purchase and distribution of
the Stock by the Underwriters, no consent, approval, authorization or order of,
or filing or registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement or the
Custody Agreement by the Selling Stockholder and the consummation by the Selling
Stockholder of the transactions contemplated hereby and thereby.

(d) The Registration Statement and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus will,
when they become effective or are filed with the Commission, as the case may be,
do not and will not, as of the applicable effective date (as to the Registration
Statement and any amendment thereto) and as of the applicable filing date (as to
the Prospectus and any amendment or supplement thereto) contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided that no representation or warranty is made as to information contained
in or omitted from the Registration Statement or the Prospectus in reliance

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<PAGE>

upon and in conformity with written information furnished to the Company through
the Representatives by or on behalf of any Underwriter specifically for
inclusion therein.

(e) The Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in Section 1 hereof are
not materially true and correct, is familiar with the Registration Statement and
the Prospectus (as amended or supplemented) and has no knowledge of any material
fact, condition or information not disclosed in the Registration Statement, as
of the effective date, or the Prospectus (or any amendment or supplement
thereto), as of the applicable filing date, which has adversely affected or may
adversely affect the business of the Company and is not prompted to sell shares
of Common Stock by any information concerning the Company which is not set forth
in the Registration Statement and the Prospectus.

(f) The Selling Stockholder has not taken and will not take, directly
or indirectly, any action which is designed to or which has constituted or which
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the shares of the Stock.

SECTION 3. Purchase of the Stock by the Underwriters. On the basis of
the representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell 6,125,000 shares of
the Firm Stock and each Selling Stockholder hereby agrees to sell the number of
shares of the Firm Stock set forth opposite its/his name in Schedule 3 hereto,
severally and not jointly, to the several Underwriters and each of the
Underwriters, severally and not jointly, agrees to purchase the number of shares
of the Firm Stock set forth opposite that Underwriter's name in Schedule 1 and 2
hereto. The respective purchase obligations of the Underwriters with respect to
the Firm Stock shall be rounded among the Underwriters to avoid fractional
shares, as the Representatives may determine.

In addition, the Company and the Selling Stockholders grant to the
Underwriters an option to purchase up to 1,087,500 shares of Option Stock. Of
the 1,087,500 shares of Option Stock, 720,295 shall be sold by the Company and
367,205 shall be sold by the Selling Stockholders (in the respective amounts set
forth opposite the Selling Stockholders' names in Schedule 3 hereto). Such
option is granted for the purpose of covering over-allotments in the sale of
Firm Stock and is exercisable as provided in Section 5 hereof. Shares of Option
Stock shall be purchased severally for the account of the Underwriters in
proportion to the number of shares of Firm Stock set forth opposite the name of
such Underwriters in Schedule 1 and 2 hereto. The respective purchase
obligations of each Underwriter with respect to the Option Stock shall be
adjusted by the Representatives so that no Underwriter shall be obligated to
purchase Option Stock other than in 100 share amounts.

The price of both the Firm Stock and any Option Stock shall be
$[ ] per share.

The Company shall not be obligated to deliver any of the Stock to be
delivered on any Delivery Date (as hereinafter defined), except upon payment for
all the Stock to be purchased on such Delivery Date as provided herein.

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<PAGE>

SECTION 4. Offering of Stock by the Underwriters.

Upon authorization by the Representatives of the release of the Firm
Stock, the several Underwriters propose to offer the Firm Stock for sale upon
the terms and conditions set forth in the Prospectus.

Each U.S. Underwriter agrees that, except to the extent permitted by
the Agreement Between U.S. Underwriters and International Managers, it will not
offer or sell any of the Stock outside of the United States.

SECTION 5. Delivery of and Payment for the Stock. Delivery of and
payment for the Firm Stock shall be made at the offices of Kane Kessler, P.C.,
1350 Avenue of the Americas, New York, New York 10019, at 10:00 A.M., New York
City time, on the fourth full business day following the date of this Agreement
or at such other date or place as shall be determined by agreement between the
Representatives and the Company. This date and time are sometimes referred to as
the "First Delivery Date." On the First Delivery Date, the Company and the
Selling Stockholders shall deliver or cause to be delivered certificates
representing the Firm Stock to the Representatives for the account of each
Underwriter against payment to or upon the order of the Company and the Selling
Stockholders of the purchase price by wire transfer in immediately available
funds. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation of
each Underwriter hereunder. Upon delivery, the Firm Stock shall be registered in
such names and in such denominations as the Representatives shall request in
writing not less than two full business days prior to the First Delivery Date.
For the purpose of expediting the checking and packaging of the certificates for
the Firm Stock, the Company and the Selling Stockholders shall make the
certificates representing the Firm Stock available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the First Delivery Date.

The option granted in Section 3 will expire 30 days after the date of
this Agreement and may be exercised in whole or in part from time to time by
written notice being given to the Company by the Representatives. Such notice
shall set forth the aggregate number of shares of Option Stock as to which the
option is being exercised, the names in which the shares of Option Stock are to
be registered, the denominations in which the shares of Option Stock are to be
issued and the date and time, as determined by the Representatives, when the
shares of Option Stock are to be delivered; provided, however, that this date
and time shall not be earlier than the First Delivery Date nor earlier than the
second business day after the date on which the option shall have been exercised
nor later than the fifth business day after the date on which the option shall
have been exercised. The date and time the shares of Option Stock are delivered
are sometimes referred to as a "Second Delivery Date" and the First Delivery
Date and any Second Delivery Date are sometimes each referred to as a "Delivery
Date".

Delivery of and payment for the Option Stock shall be made at the
place specified in the first sentence of the first paragraph of this Section 5
(or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 A.M., New York City time, on such
Second Delivery Date. On such Second Delivery Date, the Company and the Selling
Stockholders shall deliver or cause to be delivered the certificates
representing the Option Stock to

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<PAGE>

the Representatives for the account of each Underwriter against payment to or
upon the order of the Company and the Selling Stockholders of the purchase price
by wire transfer in immediately available funds. Time shall be of the essence,
and delivery at the time and place specified pursuant to this Agreement is a
further condition of the obligation of each Underwriter hereunder. Upon
delivery, the Option Stock shall be registered in such names and in such
denominations as the Representatives shall request in the aforesaid written
notice. For the purpose of expediting the checking and packaging of the
certificates for the Option Stock, the Company and the Selling Stockholders
shall make the certificates representing the Option Stock available for
inspection by the Representatives in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to such Second Delivery
Date.

SECTION 6. Further Agreements of the Company. The Company agrees:

(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b) under the
Securities Act not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement or, if
applicable, such earlier time as may be required by Rule 430A(a)(3) under the
Securities Act; to make no further amendment or any supplement to the
Registration Statement or to the Prospectus prior to the last Delivery Date
except as permitted herein; to advise the Representatives, promptly after it
receives notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish the
Representatives with copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or sale of
the Stock; to advise the Representatives, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, of the suspension of the qualification of the Stock for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the Prospectus
or suspending any such qualification, to use promptly its best efforts to obtain
its withdrawal;

(b) To furnish promptly to each of the Representatives and to counsel
for the Underwriters a signed copy of the Registration Statement as originally
filed with the Commission, and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith;

(c) To deliver promptly to the Representatives such number of the
following documents as the Representatives shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto (in each case excluding exhibits), (ii)
each Preliminary Prospectus, the Prospectus and any amended or supplemented
Prospectus and (iii) any document incorporated by reference in the Prospectus
(excluding exhibits thereto); and, if the delivery of a prospectus is required
at any time after the Effective Time in

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connection with the offering or sale of the Stock or any other securities
relating thereto and if at such time any events shall have occurred as a result
of which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary to amend or supplement the Prospectus
or to file under the Exchange Act any document incorporated by reference in the
Prospectus in order to comply with the Securities Act or the Exchange Act, to
notify the Representatives and, upon their request, to prepare and furnish
without charge to each Underwriter and to any dealer in securities as many
copies as the Representatives may from time to time reasonably request of an
amended or supplemented Prospectus which will correct such statement or omission
or effect such compliance.

(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Company or the Representatives, be required by
the Securities Act or requested by the Commission;

(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus, any document
incorporated by reference in the Prospectus or any Prospectus pursuant to Rule
424 of the Rules and Regulations, to furnish a copy thereof to the
Representatives and counsel for the Underwriters and obtain the consent of the
Representatives to the filing;

(f) As soon as practicable after the Effective Date, to make generally
available to the Company's security holders and to deliver to the
Representatives an earnings statement of the Company and its subsidiaries (which
need not be audited) complying with Section 11(a) of the Securities Act and the
Rules and Regulations (including, at the option of the Company, Rule 158);

(g) For a period of five years following the Effective Date, to
furnish to the Representatives copies of all materials furnished by the Company
to its shareholders and all public reports and all reports and financial
statements furnished by the Company to the principal national securities
exchange upon which the Common Stock may be listed pursuant to requirements of
or agreements with such exchange or to the Commission pursuant to the Exchange
Act or any rule or regulation of the Commission thereunder;

(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Stock for offering and
sale under the securities laws of such jurisdictions as the Representatives may
request and to comply with such laws so as to permit the continuance of sales
and dealings therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Stock; provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to file
a general consent to service of process in any jurisdiction;

(i) For a period of 90 days from the date of the Prospectus, not to,
directly or indirectly, (1) offer for sale, sell, pledge or otherwise dispose of
(or enter into any transaction or device which is designed to, or could be
expected to, result in the disposition by any person at any time in the future
of) any shares of Common Stock or securities convertible into or exchangeable
for Common Stock (other than the Stock and shares issued pursuant to employee
benefit plans, qualified stock

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<PAGE>

option plans or other employee compensation plans existing on the date hereof or
pursuant to currently outstanding options, warrants or rights), 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 (other than the
grant of options pursuant to option plans existing on the date hereof), or (2)
enter into any swap or other derivatives transaction that transfers to another,
in whole or in part, any of the economic benefits or risks of ownership of such
shares of Common Stock, whether any such transaction described in clause (1) or
(2) above 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; and to cause each officer, director
and five percent or greater shareholder of the Company to furnish to the
Representatives, prior to the First Delivery Date, a letter or letters,
substantially in the form of Exhibit A hereto, pursuant to which each such
person shall agree not to, directly or indirectly, (1) offer for sale, sell,
pledge or otherwise dispose of (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition by any person at
any time in the future of) any shares of Common Stock or securities convertible
into or exchangeable for Common Stock or (2) enter into any swap or other
derivatives transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of such shares of Common Stock,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or other securities, in cash or otherwise,
in each case for a period of 90 days from the date of the Prospectus, without
the prior written consent of Lehman Brothers Inc. on behalf of the Underwriters;

(j) To apply for the listing of the Stock on the New York Stock
Exchange, and to use its best efforts to complete that listing, subject only to
official notice of issuance, prior to the First Delivery Date;

(k) To apply the net proceeds from the offering as set forth in the
Prospectus; and

(l) To take such steps as shall be necessary to ensure that neither
the Company nor any subsidiary shall become an "investment company" as defined
in the Investment Company Act of 1940, as amended.

SECTION 7. Further Agreements of the Selling Stockholders. Each
Selling Stockholder agrees:

(a) For a period of 90 days from the date of the Prospectus, not to,
directly or indirectly, (1) offer for sale, sell, pledge or otherwise dispose of
(or enter into any transaction or device which is designed to, or could be
expected to, result in the disposition by any person at any time in the future
of) any shares of Common Stock or securities convertible into or exchangeable
for Common Stock (other than the Stock) or (2) enter into any swap or other
derivatives transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of such shares of Common Stock,
whether any such transaction described in clause (1) or (2) above 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;

(b) That the Stock to be sold by the Selling Stockholder hereunder,
which is represented by the certificates held in custody for the Selling
Stockholders, is subject to the interest of the Underwriters and the other
Selling Stockholders thereunder, that the arrangements made by the

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<PAGE>

Selling Stockholder for such custody are to that extent irrevocable, and that
the obligations of the Selling Stockholder hereunder shall not be terminated by
any act of the Selling Stockholder, by operation of law, by the death or
incapacity of any individual Selling Stockholder or, in the case of a trust, by
the death or incapacity of any executor or trustee or the termination of such
trust, or the occurrence of any other event; and

(c) To deliver to the Representatives prior to the First Delivery Date
a properly completed and executed United States Treasury Department Form W-8 (if
the Selling Stockholder is a nonUnited States person or Form W-9 (if the Selling
Stockholder is a United States person.)

SECTION 8. Expenses. The Company agrees to pay (a) the costs incident
to the authorization, issuance, sale and delivery of the Stock and any taxes
payable in that connection;(b) the costs incident to the preparation, printing
and filing under the Securities Act of the Registration Statement and any
amendments and exhibits thereto; (c) the costs of distributing the Registration
Statement as originally filed and each amendment thereto and any post-effective
amendments thereof (including, in each case, exhibits), any Preliminary
Prospectus, the Prospectus and any amendment or supplement to the Prospectus,
all as provided in this Agreement; (d) the costs of producing and distributing
this Agreement, the Agreement Between U.S. Underwriters and International
Managers, any Supplemental Agreement Among U.S. Underwriters and any other
related documents in connection with the offering, purchase, sale and delivery
of the stock; (e) the filing fees incident to securing the review by the
National Association of Securities Dealers, Inc. of the terms of sale of the
Stock; (f) any applicable listing or other fees; (g) the fees and expenses (not
in excess, in the aggregate, of $15,000) of qualifying the Stock under the
securities laws of the several jurisdictions as provided in Section 6(h) and of
preparing, printing and distributing a Blue Sky Memorandum (including related
fees and expenses of counsel to the Underwriters); (h) the costs and expenses of
the Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Stock, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the road
show; and (i) all other costs and expenses incident to the performance of the
obligations of the Company under this Agreement; provided that, except as
provided in this Section 8 and in Section 13 the Underwriters shall pay their
own costs and expenses, including the costs and expenses of their counsel, any
transfer taxes on the Stock which they may sell and the expenses of advertising
any offering of the Stock made by the Underwriters.

SECTION 9. Conditions of Underwriters' Obligations. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on each Delivery Date, of the representations and warranties of the Company
and the Selling Stockholders contained herein, to the performance by the Company
and the Selling Stockholders of their respective obligations hereunder, and to
each of the following additional terms and conditions:

(a) The Prospectus shall have been timely filed with the Commission in
accordance with Section 6(a); no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or

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<PAGE>

threatened by the Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus or
otherwise shall have been complied with.

(b) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Stock, the Registration
Statement and the Prospectus, and all other legal matters relating to this
Agreement, the transactions contemplated hereby shall be reasonably satisfactory
in all material respects to counsel for the Underwriters, and the Company shall
have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.

(c) Kane, Kessler, P.C. shall have furnished to the Representatives
its written opinion, as counsel to the Company, addressed to the Underwriters
and dated such Delivery Date, in form and substance reasonably satisfactory to
the Representatives, to the effect that:

(i) The Company and each of the subsidiaries of the Company
incorporated in Delaware listed in part I of Schedule 4 hereto (each a
"Delaware Subsidiary" and collectively, the "Delaware Subsidiaries")
have been duly incorporated and are validly existing as corporations
in good standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good
standing as foreign corporations in each jurisdiction in which their
respective ownership or lease of property or the conduct of their
respective businesses requires such qualification and have all power
and authority necessary to own or hold their respective properties and
conduct the businesses in which they are engaged;

(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description thereof
contained in the Prospectus; and all of the issued shares of capital
stock of each Delaware Subsidiary has been duly and validly authorized
and issued and is fully paid, non-assessable and (except for
directors' qualifying shares) is owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims;

(iii) Except as described in the Prospectus, there are no
preemptive or other rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of, any shares of the Stock
pursuant to the Company's charter or by-laws or any agreement or other
instrument known to such counsel;

(iv) To the best of such counsel's knowledge and other than
as set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its material
subsidiaries, domestic or foreign, listed in part II of Schedule 4
hereto ("Material Subsidiaries") is a party or of which any property
or assets of the Company or any of its Material Subsidiaries is the
subject which, if determined adversely to the Company or any of its
Material Subsidiaries, might have a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and its Material
Subsidiaries; and, to the best of such counsel's knowledge, no such

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<PAGE>

proceedings are threatened or contemplated by governmental authorities
or threatened by others;

(v) The Registration Statement was declared effective under
the Securities Act as of the date and time specified in such opinion,
the Prospectus was filed with the Commission pursuant to the
subparagraph of Rule 424(b) of the Rules and Regulations specified in
such opinion on the date specified therein and no stop order
suspending the effectiveness of the Registration Statement has been
issued and, to the knowledge of such counsel, no proceeding for that
purpose is pending or threatened by the Commission;

(vi) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company prior to
such Delivery Date (except for the financial statements and financial
schedules and other financial and statistical data included therein,
as to which such counsel need express no belief) comply as to form in
all material respects with the requirements of the Securities Act and
the Rules and Regulations and the documents incorporated by reference
in the Prospectus (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion),
when they were filed with the Commission complied as to form in all
material respects with the requirements of the Exchange Act and the
rules and regulations of the Commission thereunder;

(vii) The statements contained in the Prospectus under the
caption "Certain United States Federal Income Tax Consequences to
Non-United States Holders", insofar as they describe federal statutes,
rules and regulations, constitute a fair summary thereof and the
opinion of such counsel filed as Exhibit 5.1 to the Registration
Statement is confirmed and the Underwriters may rely upon such opinion
as if it were addressed to them;

(viii) To the best of such counsel's knowledge, there are no
contracts or other documents which are required to be described in the
Prospectus or filed as exhibits to the Registration Statement by the
Securities Act or by the Rules and Regulations which have not been
described or filed as exhibits to the Registration Statement;

(ix) This Agreement has been duly authorized, executed and
delivered by the Company;

(x) The issue and sale of the shares of Stock being delivered
on such Delivery Date by the Company pursuant to this Agreement, and
the execution, delivery and compliance by the Company with all of the
provisions of this Agreement and the consummation of the transactions
contemplated hereby will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
Material Subsidiaries is a party or by which the Company or any of its
Material Subsidiaries is bound or to which any of the property or
assets of the Company or any of its Material Subsidiaries is subject,
nor will such actions result in any violation of the provisions of the
charter or by-laws of the Company or any of its Material U.S.
Subsidiaries or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company or any of its Material U.S. Subsidiaries

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<PAGE>

or any of their properties or assets; and, except for the registration
of the Stock under the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under the Exchange Act and applicable state securities laws in
connection with the purchase and distribution of the Stock by the
Underwriters, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby, except for such consents, approvals,
authorizations, orders, filings or registrations as have been obtained
or made;

(xi) Except as described in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities
registered pursuant to the Registration Statement or in any securities
being registered pursuant to any other registration statement filed by
the Company under the Securities Act;

(xii) Neither the Company nor any subsidiary is an
"investment company" as defined in the Investment Company Act of 1940,
as amended;

(xiii) this Agreement has been fully authorized, executed and
delivered by each of the Selling Stockholders;

(xiv) each of the Selling Stockholders has full legal right
and power, and has obtained any authorization or approval required by
law (other than those imposed by the Securities Act and the securities
or blue sky laws of certain jurisdictions), to sell, assign, transfer
and deliver the Stock to be sold by such Selling Stockholder in the
manner provided in this Agreement;

(xv) delivery of certificates for the Stock to be sold by the
Selling Stockholders pursuant hereto will pass marketable title
thereto to the Underwriters severally, free and clear of any adverse
claim, assuming that the several Underwriters are good faith
purchasers and without notice of any adverse claim; and

(xvi) the consummation of the transactions contemplated
hereby and the fulfillment of the terms hereof will not constitute a
breach or violation of or default under any trust, indenture,
agreement or other instrument to which any of the Selling Stockholders
is a party or by which any of the Selling Stockholders is bound.

In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the Federal laws of the United States of America,
the laws of the State of New York and the General Corporation Law of the State
of Delaware. Such opinion shall also be to the effect that (x) such counsel has
acted as counsel to the Company in connection with the preparation of the
Registration Statement and (y) based on the foregoing, no facts have come to the
attention of such counsel which lead it to believe that (I) the Registration
Statement (except for the financial statements and financial schedules and other
financial and statistical data included therein, as to

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<PAGE>

which such counsel need express no belief) as of the Effective Date, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, or that the Prospectus (except as stated above) contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading or (II) any document incorporated by reference in the Prospectus when
it was filed with the Commission contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The foregoing opinion and statement may be qualified by a
statement to the effect that such counsel does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus (other than as set forth in clause
(vii) above).

(d) The Company shall have furnished to the Representatives an opinion
of [ ] addressed to the Underwriters and dated such Delivery Date, in form and
substance reasonably satisfactory to the Representatives, to the effect that:

(i) Safariland Ltd., Inc. ("Safariland") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of California, and has all power and
authority necessary to own or hold its properties and conduct the
business in which it is engaged;

(ii) All of the issued shares of capital stock of Safariland
have been duly and validly authorized and issued and are fully paid
and non-assessable; and

(iii) The issue and sale of the shares of Stock being
delivered on the Delivery Date by the Company pursuant to this
Agreement, and the execution, delivery and compliance by the Company
with all of the provisions of this Agreement and the consummation of
the transactions contemplated hereby will not result in any violation
of the provisions of the charter or by-laws of Safariland.

(e) The Company shall have furnished to the Representatives an opinion
of [ ] addressed to the Underwriters and dated such Delivery Date, in form and
substance reasonably satisfactory to the Representatives, to the effect that:

(i) Pro-Tech Armored Product of Massachusetts, Inc.
("Pro-Tech") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of
Massachusetts, and has all power and authority necessary to own or
hold its properties and conduct the business in which it is engaged;

(ii) All of the issued shares of capital stock of Pro-Tech
have been duly and validly authorized and issued and are fully paid
and non-assessable; and

(iii) The issue and sale of the shares of Stock being
delivered on the Delivery Date by the Company pursuant to this
Agreement, and the execution delivery and compliance by the Company
with all of the provisions of this Agreement and the consummation of
the

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<PAGE>

transactions contemplated hereby will not result in any violation of
the provisions of the charter or by-laws of Pro-Tech.

(f) The Company shall have furnished to the Representatives an opinion
of [ ] addressed to the Underwriters and dated such Delivery Date, in form and
substance reasonably satisfactory to the Representatives, to the effect that:

(i) Low Voltage Systems Technology, Inc. ("Low Voltage") has
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of New Jersey, and has all
power and authority necessary to own or hold its properties and
conduct the business in which it is engaged;

(ii) All of the issued shares of capital stock of Safariland
have been duly and validly authorized and issued and are fully paid
and non-assessable; and

(g) The Company shall have furnished to the Representatives an opinion
of [ASHURST MORRIS CRISP] addressed to the Underwriters and dated such Delivery
Date relating to DSL Holdings Limited, DSL Group Limited, Defence Systems
International Limited and Defence Systems Limited, and in form and substance
reasonably satisfactory to the Representatives, to the effect that:

(i) Each of DSL Holdings Limited, DSL Group Limited, Defence
Systems International Limited and Defence Systems Limited, is a
limited liability company, duly formed and subsisting under the laws
of England and, so far as is discoverable from public records in
England and Wales, is not in liquidation;

(ii) Each of DSL Holdings Limited, DSL Group Limited, Defence
Systems International Limited and Defence Systems Limited has all
power and authority to own its respective properties and to conduct
its respective business as described in the Registration Statement and
in the Prospectus;

(iii) All of the issued shares in the capital of each of DSL
Holdings Limited, DSL Group Limited, Defence Systems International
Limited and Defence Systems Limited have
been duly created and validly issued and are fully paid;

(iv) Armor Holdings Limited is the registered holder of the
whole of the issued capital of DSL Group Limited. DSL Group Limited is
the registered holder of the whole of the issued capital of DSL
Holdings Limited. DSL Holdings Limited is the registered holder of the
whole of the issued capital of Defence Systems International Limited.
Defence Systems International Limited is the registered holder of the
whole of the issued share capital of Defence Systems Limited;

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<PAGE>

(v) The execution, delivery and performance of this Agreement
by the Company and the issue and sale of the Stock and the application
of the net proceeds thereof as described in the Prospectus do not and
will not conflict with, or result in any breach of, or constitute a
default under (nor constitute any event which with notice, lapse of
time or both would constitute a breach of or default under), the
memorandum or articles of association of any of DSL Holdings Limited,
DSL Group Limited, Defence Systems International Limited and Defence
Systems Limited or under English law.

(h) The Company shall furnish to the Representatives an opinion of
[TRAVERS SMITH BRAITHWAITE], counsel for Armor Holdings Limited and Supercraft
(Garments) Limited, addressed to the Underwriters and dated such Delivery Date,
and in form and substance reasonably satisfactory to the Representatives, to the
effect that:

(i) Each of Armor Holdings Limited and Supercraft (Garments)
Limited is a limited liability company, duly formed and subsisting
under the laws of England and, so far as is discoverable from public
records in England and Wales, is not in liquidation;

(ii) Each of Armor Holdings Limited and Supercraft (Garments)
Limited has all requisite power and authority to own its properties
and to conduct its business as described in the Registration Statement
and in the Prospectus;

(iii) All of the issued shares in the capital of Armor
Holdings Limited have been duly created and validly issued and are
fully paid;

(iv) Armor Holdings, Inc. is the registered holder of the
whole of the issued share capital of Armor Holdings Limited. Armor
Holdings Limited is the only registered holder of the issued share
capital of Supercraft (Garments) Limited;

(v) The execution, delivery and performance of this Agreement
by the Company and the issue and sale of the Stock and the application
of the net proceeds thereof as described in the Prospectus do not and
will not conflict with, or result in any breach of, or constitute a
default under (nor constitute any event which with notice, lapse of
time or both would constitute a breach of (or default under), the
memorandum or articles of association of either Armor Holdings Limited
or Supercraft (Garments) Limited or under English law.

[LOCAL COUNSEL OPINIONS SHOULD ALSO BE GIVEN WITH RESPECT TO
ASMARA AND CDR INTERNATIONAL LIMITED]

(i) The Company shall have furnished to the Representatives an opinion
of [ ] addressed to the Underwriters and dated such Delivery Date, in form and
substance reasonably satisfactory to the Representatives, to the effect that:

(i) Alarm Protection Services Limited ("Alarm Protection")
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of Uganda and has all power and authority
necessary to own or hold its properties and conduct the business in
which it is engaged;

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<PAGE>

(ii) All of the issued shares of capital stock of Alarm
Protection have been duly and validly authorized and issued and are
fully paid and non-assessable; and

(j) The Company shall have furnished to you at the time of purchase
and at such additional time of purchase, as the case may be, opinions of such
local counsel with respect to certain other subsidiaries identified as DSL Group
Companies in part III of Schedule 4 hereto, addressed to the Underwriters and
dated such Delivery Date, with reproduced copies for each of the other
Underwriters and in form and substance reasonably satisfactory to
Representatives.

(k) The Representatives shall have received from Kirkland & Ellis,
counsel for the Underwriters, such opinion or opinions, dated such Delivery
Date, with respect to the issuance and sale of the Stock, the Registration
Statement, the Prospectus and other related matters as the Representatives may
reasonably require, and the Company shall have furnished to such counsel such
documents as they reasonably request for the purpose of enabling them to pass
upon such matters.

(l) At the time of execution of this Agreement, the Representatives
shall have received from PricewaterhouseCoopers LLP, Ernst & Young LLP and
Deloitte & Touche LLP a letter or letters, in form and substance satisfactory to
the Representatives, addressed to the Underwriters and dated the date hereof (i)
confirming that they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission and (ii) stating, as of the date hereof (or, with respect to
matters involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus, as of a date not
more than five days prior to the date hereof), the conclusions and findings of
such firm with respect to the financial information and other matters ordinarily
covered by accountants, "comfort letters" to underwriters in connection with
registered public offerings.

(m) With respect to the letter of PricewaterhouseCoopers, LLP referred
to in the preceding paragraph and delivered to the Representatives concurrently
with the execution of this Agreement (the "Initial Letter"), the Company shall
have furnished to the Representatives a letter (the "Bring- down Letter") of
such accountants, addressed to the Underwriters and dated such Delivery Date (i)
confirming that they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (ii) stating, as of the date of the Bring-down Letter (or,
with respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the Prospectus, as
of a date not more than five days prior to the date of the Bring-down Letter),
the conclusions and findings of such firm with respect to the financial
information and other matters covered by the Initial Letter and (iii) confirming
in all material respects the conclusions and findings set forth in the Initial
Letter.

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<PAGE>

(n) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, of its Chairman of the Board, its
President or a Vice President and its chief financial officer stating that:

(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of such Delivery Date;
the Company has complied with all its agreements contained herein; and
the conditions set forth in Sections 9(a), 9(q) and 9 (r) have been
fulfilled; and

(ii) They have carefully examined the Registration Statement
and the Prospectus and, in their opinion (A) as of the Effective Date,
the Registration Statement and Prospectus did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (B) since the Effective Date no event has
occurred which should have been set forth in a supplement or amendment
to the Registration Statement or the Prospectus.

(o) Each Selling Stockholder (or the Custodian) shall have furnished
to the Representatives on the First Delivery Date a certificate, dated the First
Delivery Date, signed by, or on behalf of, the Selling Stockholder (or the
Custodian) stating that the representations, warranties and agreements of the
Selling Stockholder contained herein are true and correct as of the First
Delivery Date and that the Selling Stockholder has complied with all agreements
contained herein to be performed by the Selling Stockholder at or prior to the
First Delivery Date.

(p) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus (i) any loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Prospectus
or (ii) since such date there shall not have been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any change,
or any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case described
in clause (i) or (ii), is, in the judgment of the Representatives, so material
and adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Stock being delivered on such Delivery
Date on the terms and in the manner contemplated in the Prospectus.

(q) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded the Company's debt
securities by any "nationally recognized statistical rating organization", as
that term is defined by the Commission for purposes of Rule 436(g)(2) of the
Rules and Regulations and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities.

(r) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market, or trading in any securities of

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<PAGE>

the Company on any exchange or in the over-the-counter market, shall have been
suspended or minimum prices shall have been established on any such exchange or
such market by the Commission, by such exchange or by any other regulatory body
or governmental authority having jurisdiction, (ii) a banking moratorium shall
have been declared by Federal or state authorities, (iii) the United States
shall have become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a declaration
of a national emergency or war by the United States or (iv) there shall have
occurred such a material adverse change in general economic, political or
financial conditions (or the effect of international conditions on the financial
markets in the United States shall be such) as to make it, in the judgment of
the Representatives, impracticable or inadvisable to proceed with the public
offering or delivery of the Stock being delivered on such Delivery Date on the
terms and in the manner contemplated in the Prospectus.

(s) The New York Stock Exchange, Inc. shall have approved the Stock
for listing, subject only to official notice of issuance.

All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.

SECTION 10. Indemnification and Contribution.

(a) The Company shall indemnify and hold harmless each Underwriter,
its officers and employees and each person, if any, who controls any Underwriter
within the meaning of the Securities Act, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of Stock), to which that Underwriter, officer,
employee or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto, (ii) the
omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, any material fact required to be stated therein or necessary to make
the statements therein not misleading or (iii) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or relating
in any manner to, the Stock or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon matters covered by clause (i) or (ii) above
(provided that the Company shall not be liable under this clause (iii) to the
extent that it is determined in a final judgment by a court of competent
jurisdiction that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by such Underwriter through its gross negligence or willful misconduct), and
shall reimburse each Underwriter and each such officer, employee or controlling
person promptly upon demand for any legal or other expenses reasonably incurred
by that Underwriter, officer, employee or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability

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<PAGE>

or action arises out of, or is based upon, any untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any such
amendment or supplement, in reliance upon and in conformity with written
information concerning such Underwriter furnished to the Company through the
Representatives by or on behalf of any Underwriter specifically for inclusion
therein which information consists solely of the information specified in
Section 10(f). The foregoing indemnity agreement is in addition to any liability
which the Company may otherwise have to any Underwriter or to any officer,
employee or controlling person of that Underwriter.

(b) The Selling Stockholders, jointly and severally, shall indemnify
and hold harmless each Underwriter, its officers and employees, and each person,
if any, who controls any Underwriter within the meaning of the Securities Act,
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to purchases and sales of Stock), to which
that Underwriter, officer, employee or controlling person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any amendment or
supplement thereto, (ii) the omission or alleged omission to state in any
Preliminary Prospectus, Registration Statement or the Prospectus, or in any
amendment or supplement thereto, any material fact required to be stated therein
or necessary to make the statements therein not misleading or (iii) any act or
failure to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Stock or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Selling Stockholders
shall not be liable under this clause (iii) to the extent that it is determined
in a final judgment by a court of competent jurisdiction that such loss, claim,
damage, liability or action resulted directly from any such acts or failures to
act undertaken or omitted to be taken by such Underwriter through its gross
negligence or willful misconduct), and shall reimburse each Underwriter and each
such officer, employee or controlling person for any legal or other expenses
reasonably incurred by that Underwriter, officer, employee or controlling person
in connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Selling Stockholders shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any such amendment or
supplement, in reliance upon and in conformity with written information
concerning such Underwriter furnished to the Company through the Representatives
by or on behalf of any Underwriter specifically for inclusion therein which
information consists solely of the information specified in Section 10(f). The
foregoing indemnity agreement is in addition to any liability which the Selling
Stockholders may otherwise have to any Underwriter or any officer, employee or
controlling person of that Underwriter.

(c) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, its officers and employees, each of its directors,
and each person, if any, who controls the Company within the meaning of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company or any such
director,

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<PAGE>

officer or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or (ii)
the omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, any material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information concerning
such Underwriter furnished to the Company through the Representatives by or on
behalf of that Underwriter specifically for inclusion therein, and shall
reimburse the Company and any such director, officer or controlling person for
any legal or other expenses reasonably incurred by the Company or any such
director, officer or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing indemnity agreement is in
addition to any liability which any Underwriter may otherwise have to the
Company or any such director, officer, employee or controlling person.

(d) Promptly after receipt by an indemnified party under this Section
10 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 10, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 10 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 10.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 10 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Representatives shall have the right to employ counsel to represent jointly
the Representatives and those other Underwriters and their respective officers,
employees and controlling persons who may be subject to liability arising out of
any claim in respect of which indemnity may be sought by the Underwriters
against the Company under this Section 10 if, in the reasonable judgment of the
Representatives, it is advisable for the Representatives and those Underwriters,
officers, employees and controlling persons to be jointly represented by
separate counsel, and in that event the fees and expenses of such separate
counsel shall be paid by the Company. No indemnifying party shall (i) without
the prior written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement

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<PAGE>

of any such action effected without its written consent (which consent shall not
be unreasonably withheld), but if settled with the consent of the indemnifying
party or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.

(e) If the indemnification provided for in this Section 10 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 10(a), 10(b) or 10(c) in respect of any loss, claim, damage
or liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Stock or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and the Underwriters on the
other with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriters on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Stock purchased under this Agreement (before deducting expenses)
received by the Company, on the one hand, and the total underwriting discounts
and commissions received by the Underwriters with respect to the shares of the
Stock purchased under this Agreement, on the other hand, bear to the total gross
proceeds from the offering of the shares of the Stock under this Agreement, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Underwriters, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 10 were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 10 shall be deemed
to include, for purposes of this Section 10(e), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 10(e), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Stock underwritten by
it and distributed to the public was offered to the public exceeds the amount of
any damages which such Underwriter has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute as provided in this Section 10(e) are
several in proportion to their respective underwriting obligations and not
joint.

-26-

<PAGE>

(f) The Underwriters severally confirm and the Company and the Selling
Stockholders acknowledge that the statements with respect to the public offering
of the Stock by the Underwriters set forth on the cover page of, the legend
concerning over-allotments on the inside front cover page of and the concession
and reallowance figures appearing under the caption "Underwriting" in, the
Prospectus are correct and constitute the only information concerning such
Underwriters furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.

SECTION 11. Defaulting Underwriters.

If, on either Delivery Date, any Underwriter defaults in the
performance of its obligations under this Agreement, the remaining
non-defaulting Underwriters shall be obligated to purchase the Stock which the
defaulting Underwriter agreed but failed to purchase on such Delivery Date in
the respective proportions which the number of shares of the Firm Stock set
opposite the name of each remaining non-defaulting Underwriter in Schedule 1 or
Schedule 2 hereto bears to the total number of shares of the Firm Stock set
opposite the names of all the remaining non-defaulting Underwriters in Schedule
1 or Schedule 2 hereto; provided, however, that the remaining non-defaulting
Underwriters shall not be obligated to purchase any of the Stock on such
Delivery Date if the total number of shares of the Stock which the defaulting
Underwriter or Underwriters agreed but failed to purchase on such date exceeds
9.09% of the total number of shares of the Stock to be purchased on such
Delivery Date, and any remaining non-defaulting Underwriter shall not be
obligated to purchase more than 110% of the number of shares of the Stock which
it agreed to purchase on such Delivery Date pursuant to the terms of Section 4.
If the foregoing maximums are exceeded, the remaining non-defaulting
Underwriters, or those other underwriters satisfactory to the Representatives
who so agree, shall have the right, but shall not be obligated, to purchase, in
such proportion as may be agreed upon among them, all the Stock to be purchased
on such Delivery Date. If the remaining Underwriters or other underwriters
satisfactory to the Representatives do not elect to purchase the shares which
the defaulting Underwriter or Underwriters agreed but failed to purchase on such
Delivery Date, this Agreement (or, with respect to the Second Delivery Date, the
obligation of the Underwriters to purchase, and of the Company to sell, the
Option Stock) shall terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholders, except that
the Company will continue to be liable for the payment of expenses to the extent
set forth in Sections 8 and 13. As used in this Agreement, the term
"Underwriter" includes, for all purposes of this Agreement unless the context
requires otherwise, any party not listed in Schedule 1 or 2 hereto who, pursuant
to this Section 11, purchases which a defaulting Underwriter agreed but failed
to purchase.

Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company and the Selling Stockholders for damages
caused by its default. If other underwriters are obligated or agree to purchase
the Stock of a defaulting or withdrawing Underwriter, either the Representatives
or the Company may postpone the Delivery Date for up to seven full business days
in order to effect any changes that in the opinion of counsel for the Company or
counsel for the Underwriters may be necessary in the Registration Statement, the
Prospectus or in any other document or arrangement.

-27-

<PAGE>

SECTION 12. Termination. The obligations of the Underwriters hereunder
may be terminated by the Representatives by notice given to and received by the
Company and the Selling Stockholders prior to delivery of and payment for the
Firm Stock if, prior to that time, any of the events described in Sections 9(p),
9(q) or 9(r), shall have occurred or if the Underwriters shall decline to
purchase the Stock for any reason permitted under this Agreement.

SECTION 13. Reimbursement of Underwriters' Expense. If the Company or
any Selling Stockholder shall fail to tender the Stock for delivery to the
Underwriters by reason of any failure, refusal or inability on the part of the
Company or the Selling Stockholders to perform any agreement on their part to be
performed, or because any other condition of the Underwriters' obligations
hereunder required to be fulfilled by the Company or the Selling Stockholders
(including, without limitation, with respect to the transactions) is not
fulfilled, the Company and the Selling Stockholders will reimburse the
Underwriters for all reasonable out-of-pocket expenses (including fees and
disbursements of counsel) incurred by the Underwriters in connection with this
Agreement and the proposed purchase of the Stock, and upon demand the Company
and the Selling Stockholders shall pay the full amount thereof to the
Representatives. If this Agreement is terminated pursuant to Section 11 by
reason of the default of one or more Underwriters, neither the Company nor any
Selling Stockholder shall be obligated to reimburse any defaulting Underwriter
on account of those expenses.

SECTION 14. Notices, Etc. All statements, requests, notices and
agreements hereunder shall be in writing, and:

(a) if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to Lehman Brothers Inc., Three World Financial Center,
New York, New York 10285, Attention: Syndicate Department (Fax: 212-526-6588),
with a copy, in the case of any notice pursuant to Section 10(d), to the
Director of Litigation, Office of the General Counsel, Lehman Brothers Inc., 3
World Financial Center, 10th Floor, New York, NY 10285;

(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: [____________] (Fax: );

(c) if to any Selling Stockholder, shall be delivered or sent by mail,
telex or facsimile transmission to such Selling Stockholder at its address or
facsimile number set forth on Schedule 3 hereto;

provided, however, that any notice to an Underwriter pursuant to Section 10(d)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company and the
Selling Stockholders shall be entitled to act and rely upon any request,
consent, notice or agreement given or made on behalf of the Underwriters by
Lehman Brothers Inc., and the Company and the Underwriters shall be entitled to
act and rely upon any request, consent, notice or agreement given or made on
behalf of the Selling Stockholders by the Custodian.

-28-

<PAGE>

SECTION 15. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Underwriters, the Company,
the Selling Stockholders and their respective successors. This Agreement and the
terms and provisions hereof are for the sole benefit of only those persons,
except that (a) the representations, warranties, indemnities and agreements of
the Company and the Selling Stockholders contained in this Agreement shall also
be deemed to be for the benefit of the person or persons, if any, who control
any Underwriter within the meaning of Section 15 of the Securities Act and (b)
the indemnity agreement of the Underwriters contained in Section 10(c) of this
Agreement shall be deemed to be for the benefit of directors of the Company,
officers of the Company who have signed the Registration Statement and any
person controlling the Company within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this Section 15, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.

SECTION 16. Survival. The respective indemnities, representations,
warranties and agreements of the Company, the Selling Stockholders and the
Underwriters contained in this Agreement or made by or on behalf on them,
respectively, pursuant to this Agreement, shall survive the delivery of and
payment for the Stock and shall remain in full force and effect, regardless of
any investigation made by or on behalf of any of them or any person controlling
any of them.

SECTION 17. Definition of the Terms "Business Day" and "Subsidiary".
For purposes of this Agreement, (a) "business day" means each Monday, Tuesday,
Wednesday, Thursday or Friday which is not a day on which banking institutions
in New York are generally authorized or obligated by law or executive order to
close and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules
and Regulations.

SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of New York.

SECTION 19. Counterparts. This Agreement may be executed in one or
more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.

SECTION 20. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.

-29-

<PAGE>

If the foregoing correctly sets forth the agreement between the
Company and the Underwriters, please indicate your acceptance in the space
provided for that purpose below.

Very truly yours,

ARMOR HOLDINGS, INC.

By: ____________________________________
Name:
Title:

THE SELLING STOCKHOLDERS:

Warren B. Kanders and Kanders Florida
Holdings, Inc.

By: ____________________________________
Name: Warren B. Kanders
Title: Director

Jonathan M. Spiller

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

Richmont Capital Partners I, L.P.

By: ____________________________________
Name:
Title:

Burtt R. Ehrlich

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

-30-

<PAGE>

Nicholas Sokolow

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

Robert R. Schiller

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

-31-

<PAGE>

Accepted:

LEHMAN BROTHERS INC.
BEAR, STEARNS & CO. INC.
SUNTRUST EQUITABLE SECURITIES CORPORATION
WARBURG DILLON READ LLC, A SUBSIDIARY OF UBS AG

For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto

By: LEHMAN BROTHERS INC.

By: ____________________________
Authorized Representative

LEHMAN BROTHERS INTERNATIONAL (EUROPE)
BEAR, STEARNS INTERNATIONAL LIMITED
SUNTRUST EQUITABLE SECURITIES CORPORATION
WARBURG DILLON READ, A DIVISION OF UBS AG

For themselves and as Representatives
of the several Underwriters named
in Schedule 2 hereto

By: LEHMAN BROTHERS INTERNATIONAL (EUROPE)

By: ____________________________
Authorized Representative

-32-
<PAGE>

SCHEDULE 1

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

Total..................................................
</TABLE>

-1-

<PAGE>

SCHEDULE 2

Total..................................................
</TABLE>

-1-

<PAGE>

SCHEDULE 3

Selling Stockholders

<TABLE>
<CAPTION>
OPTION STOCK
FIRM STOCK WHICH MAY BE
BEING SOLD IN SOLD IN THE
NAME OF BENEFICIAL OWNER THE OFFERING OFFERING
- ------------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
Warren B. Kanders and Kanders Florida Holdings, Inc......... 755,846 244,154
Jonathan M. Spiller......................................... 170,854 56,951
Richmont Capital Partners I, LP............................. 75,000 25,000
Burtt R. Ehrlich............................................ 48,300 16,100
Nicholas Sokolow............................................ 18,750 6,250
Robert R. Schiller.......................................... 56,250 18,750
</TABLE>

The address for Richmont Capital Partners I, LP is 4300 Westgrove Drive, Dallas,
TX 75248. [FAX NUMBER?] The addresses for all other Selling Stockholders is c/o
Armor Holdings, Inc., 13386 International Parkway, Jacksonville, FL 32218. [FAX
NUMBER?]

-2-

<PAGE>

SCHEDULE 4

Subsidiaries

I. Delaware Subsidiaries

American Body Armor & Equipment, Inc.
CDR International, Inc.
Defense Technology Corporation of America
Federal Laboratories, Inc.
NIK Public Safety, Inc.
US Defense Systems, Inc.

II. Material Subsidiaries

Alarm Protection Services Limited
American Body Armor & Equipment, Inc.
Armor Holdings Limited
Asmara Limited
CDR International, Inc.
Defence Systems Limited
Defence Systems Colombia SA
Defence Systems International Limited
Defense Technology Corporation of America
DSL Group Limited
Federal Laboratories, Inc.
Gorandel Trading Limited
Low Voltage Systems Technology, Inc.
NIK Public Safety, Inc.
Pro-Tech Armored Products of Massachusetts, Inc.
Safariland Ltd., Inc.
Supercraft (Garments) Limited
US Defense Systems, Inc.

III. DSL Group Companies

Defence Systems Colombia SA
Defence Systems (Jersey) Ltd.
DSL (Overseas) Ltd.
Gorandel Trading Ltd.
US Defense Systems Inc.

-1-

<PAGE>

Exhibit A

LOCK-UP LETTER AGREEMENT

Lehman Brothers Inc.
Bear, Stearns & Co. Inc.
SunTrust Equitable Securities Corporation
Warburg Dillon Read LLC,
a subsidiary of UBS AG

As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285

Lehman Brothers International (Europe)
Bear, Stearns International Limited
SunTrust Equitable Securities Corporation
Warburg Dillon Read,
a division of UBS AG

As Representatives of the several
Underwriters named in Schedule 2,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285

Dear Sirs:

The undersigned understands that you and certain other firms propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") providing
for the purchase by you and such other firms (the "Underwriters") of shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of
Armor Holdings, Inc., a Delaware corporation (the "Company"), and that the
Underwriters propose to reoffer the Shares to the public (the "Offering").

In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the undersigned
hereby irrevocably agrees that, without the prior written consent of Lehman
Brothers Inc., on behalf of the Underwriters, the undersigned will not, directly
or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or
enter into any transaction or device that is designed to, or could be expected
to, result in the disposition by any person at any time in the future of) any
shares of Common Stock (including, without limitation, shares of Common Stock
that may be deemed to be beneficially owned by the

-2-

<PAGE>

undersigned in accordance with the rules and regulations of the Securities and
Exchange Commission and shares of Common Stock that may be issued upon exercise
of any option or warrant) or securities convertible into or exchangeable for
Common Stock (other than the Shares) owned by the undersigned on the date of
execution of this Lock-Up Letter Agreement or on the date of the completion of
the Offering, or (2) enter into any swap or other derivatives transaction that
transfers to another, in whole or in part, any of the economic benefits or risks
of ownership of such shares of Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or other securities, in cash or otherwise, for a period of 90 days after
the date of the final Prospectus relating to the Offering.

In furtherance of the foregoing, the Company and its Transfer Agent are
hereby authorized to decline to make any transfer of securities if such transfer
would constitute a violation or breach of this Lock-Up Letter Agreement.

It is understood that, if the Company notifies you that it does not intend
to proceed with the Offering, if the Underwriting Agreement does not become
effective, or if the Underwriting Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to payment for
and delivery of the Shares, we will be released from our obligations under this
Lock-Up Letter Agreement.

The undersigned understands that the Company, the Selling Stockholders and
the Underwriters will proceed with the Offering in reliance on this Lock-Up
Letter Agreement.

Whether or not the Offering actually occurs depends on a number of factors,
including market conditions. Any Offering will only be made pursuant to an
Underwriting Agreement, the terms of which are subject to negotiation between
the Company, the Selling Stockholders and the Underwriters.

The undersigned hereby represents and warrants that the undersigned has full
power and authority to enter into this Lock-Up Letter Agreement and that, upon
request, the undersigned will execute any additional documents necessary in
connection with the enforcement hereof. Any obligations of the undersigned shall
be binding upon the heirs, personal representatives, successors and assigns of
the undersigned.

Very truly yours,

[NAME OF SIGNING PARTY]

By:______________________________
Name:
Title:

Dated: _______________

-3-

<PAGE>

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

STOCK PURCHASE AGREEMENT

BY AND AMONG

ARMOR HOLDINGS, INC.,

THE NEALE A. PERKINS TRUST,
THE SCOTT T. O'BRIEN AND VICTORIA S. O'BRIEN REVOCABLE TRUST,
THE DAVID M. HOLMES AND KATHERINE C. HOLMES REVOCABLE TRUST,
NEALE A. PERKINS, DAVID M. HOLMES, SCOTT T. O'BRIEN

AND

SAFARI LAND LTD., INC.

with respect to the purchase of all of
the issued and outstanding capital stock of

SAFARI LAND LTD., INC.

---------

April 12, 1999

---------

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

<PAGE>

STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT (the "AGREEMENT"), dated as of April 12,
1999, by and among SAFARI LAND LTD., INC., a California corporation (the
"COMPANY"), THE NEALE A. PERKINS TRUST, THE SCOTT T. O'BRIEN AND VICTORIA S.
O'BRIEN REVOCABLE TRUST and THE DAVID M. HOLMES AND KATHERINE C. HOLMES
REVOCABLE TRUST (collectively the "TRUSTS"), NEALE A. PERKINS ("PERKINS"),
SCOTT T. O'BRIEN ("O'BRIEN") and DAVID M. HOLMES ("HOLMES," together with
Perkins and O'Brien, collectively, the "EXECUTIVES;" and together with the
Trusts, collectively the "SELLERS") and ARMOR HOLDINGS, INC., a Delaware
corporation ("AHI") and/or one or more of its affiliates ("PURCHASER").

W I T N E S S E T H:

WHEREAS, the Company, is engaged principally in the business of
developing, manufacturing and distributing products for the law enforcement,
military, sporting goods and automotive markets; and

WHEREAS, the Sellers collectively own all of the issued and
outstanding common stock and preferred stock of the Company, and desire to sell
to Purchaser, and Purchaser desires to acquire, on the terms and subject to the
conditions set forth in this Agreement, all of such issued and outstanding
stock;

NOW, THEREFORE, in consideration of the premises and the respective
mutual covenants, representations and warranties herein contained, the parties
hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

In addition to terms defined elsewhere in this Agreement, the
following terms when used in this Agreement shall have the meanings indicated
below:

"Affiliate" shall mean with respect to a specified Person, a
partnership, corporation or any other Person which, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with such Person, and without limiting the generality of the
foregoing, includes, with respect to a Person (a) any other Person which
beneficially owns or holds twenty percent (20%) or more of any class of voting
securities or other securities convertible into voting securities of such
Person or beneficially owns or holds twenty percent (20%) or more of any other
equity interests in such Person, (b) any other Person with respect to which
such Person beneficially owns or holds twenty percent (20%) or more of any
class of voting securities or other securities convertible into voting
securities of such Person, or owns or holds twenty percent (20%) or more of the
equity interests of the other Person, and (c) any director, officer or employee
of such

<PAGE>

Person. For purposes of this definition, the term "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.

"Agreement" shall mean this Stock Purchase Agreement together with all
exhibits and schedules referred to herein.

"Closing" shall have the meaning set forth in Section 6.1.

"Closing Date" shall mean the date that the Closing takes place.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Environmental Laws" shall have the meaning set forth in Section 4.31.

"Financial Statements" shall mean (i) the audited balance sheet of the
Company for the period ending September 30, 1998 and the related statement of
income, cash flow and retained earnings, and (ii) the audited balance sheet and
the audited statements of income, cash flows and retained earnings of the
Company for the fiscal years ended September 30, 1995, September 30, 1996, and
September 30, 1997, including any related notes, each prepared according to
U.S. GAAP (as defined in Section 4.13 herein), consistently applied with prior
periods.

"Governmental Authorizations" shall have the meaning given such term
in Section 4.19.

"Guaranty" shall mean, as to any Person, all liabilities or
obligations of such Person, with respect to any indebtedness or other
obligations of any other person, which have been guaranteed, directly or
indirectly, in any manner by such Person, through an agreement, contingent or
otherwise, to purchase such indebtedness or obligation, or to purchase or sell
property or services, primarily for the purpose of enabling the debtor to make
payment of such indebtedness or obligation or to guarantee the payment to the
owner of such indebtedness or obligation against loss, or to supply funds to or
in any manner invest in the debtor, or otherwise.

"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, and the rules and regulations promulgated thereunder.

"Indemnified Party" shall have the meaning set forth in Section
5.3(c).

"Indemnifying Party" shall have the meaning set forth in Section
5.3(c).

"Intellectual Property Rights" means domestic and foreign: letters
patent, patents, patent applications, patent licenses, software licenses and
know-how licenses, trade names, trademarks, trademark registrations and
applications, copyrights, copyright registrations and

<PAGE>

applications, service marks, service mark registrations and applications, and
all, inventions, trade secrets and related goodwill used by the Company.

"Investments" shall mean, with respect to any Person, all advances,
loans or extensions of credit to any other Person (except for extensions of
credit to customers in the ordinary course of business), all purchases or
commitments to purchase any stock, bonds, notes, debentures or other securities
of any other Person, and any other investment in any other Person, including
partnerships or joint ventures (whether by capital contribution or otherwise)
or other similar arrangement (whether written or oral) with any Person,
including but not limited to arrangements in which (i) the Person shares
profits and losses, (ii) any such other Person has the right to obligate or
bind the Person to any third party, or (iii) the Person may be wholly or
partially liable for the debts or obligations of such partnership, joint
venture or other arrangement.

"Knowledge" for purposes of this Agreement shall mean, with respect to
an individual Seller or Executive, the knowledge, assuming due inquiry, of such
person and with respect to the Company, the knowledge, assuming due inquiry of
the Sellers, the Executives and the individuals set forth on Schedule 1.1
hereto.

"Leased Property" shall have the meaning set forth in Section 4.17.

"Leases" shall have the meaning set forth in Section 4.17.

"Material Agreements" shall have the meaning set forth in Section
4.28.

"Material Adverse Effect" shall mean any event or condition of any
character which has had or could have a material adverse effect on the
condition (financial or otherwise), results of operations, assets, liabilities,
properties, business or prospects of the Company, or on its relations with any
Person, employee, customer or supplier.

"Net Worth" shall mean the Company's total assets, less the
liabilities of the Company, all as determined in accordance with U.S. GAAP (as
defined in Section 4.13 herein) consistently applied with prior periods. For
purposes of calculating the Company's Net Worth pursuant to Section 2.3(a), the
Accountants shall take into account those items set forth in Section 2.3(b).

"Person" shall mean any natural person, corporation, unincorporated
organization, partnership, association, joint stock company, joint venture,
trust or government, or any agency or political subdivision of any government
or any other entity.

"Product" shall have the meaning set forth in Section 4.30.

"Related Party" shall have the meaning set forth in Section 4.22.

"Securities" shall mean the Outstanding Common Stock, as defined
herein, and the Outstanding Preferred Stock, as defined herein, collectively of
the Company.

<PAGE>

"Subsidiary" of any Person shall mean any Person, whether or not
capitalized, in which such Person owns, directly or indirectly, an equity
interest of more than fifty percent (50%), or which may effectively be
controlled, directly or indirectly, by such Person.

ARTICLE II

PURCHASE OF SECURITIES; CONSIDERATION

2.1 Purchase of Securities. Subject to the terms and conditions set
forth herein, on the Closing Date, each of the Trusts shall sell to Purchaser,
and Purchaser shall purchase from each of the Trusts, all of such Trusts'
right, title and interest in and to the Securities indicated next to such
Trusts' name on Schedule A hereto, which shall collectively constitute one
hundred percent (100%) of the issued and outstanding capital stock of the
Company. At the Closing, each of the Trusts shall deliver to Purchaser all of
the certificates representing the Securities indicated next to such Trust's
name on Schedule A, together with stock powers separate from the certificates
duly executed by each of the Trusts in blank and sufficient to convey to
Purchaser good and marketable title to the Securities free and clear of any and
all claims, liens, charges, security interests, pledges or encumbrances of any
nature whatsoever and together with all accrued benefits and rights attaching
thereto, [except for any applicable legend required by the California
Department of Corporations to be placed upon any certificates representing the
Securities].

2.2 Consideration. Subject to adjustment as set forth in Section 2.3,
the aggregate purchase price for the Securities shall be Thirty Nine Million
Nine Hundred Thirty Thousand Five Hundred Thirty-One Dollars ($39,930,531) (the
"Purchase Price"), payable by Purchaser to the Trusts at the Closing as
follows: (i) $1,450,000 shall be payable in cash by wire transfer of
immediately available funds to Neale A. Perkins for the Outstanding Preferred
Stock (ii) $34,480,531 shall be payable in cash by wire transfer of immediately
available funds to the Sellers in the amounts set forth on Schedule A hereto,
which amounts shall be adjusted and paid as set forth on Schedule B hereto (the
"Cash Consideration"), and (iii) the balance of the Purchase Price shall be
paid by the issuance to each Trust (or the designees of any such Trust
identified to Purchaser in writing at least 2 days prior to the Closing), as
set forth on Schedule "A" hereto, of such number of registered shares (the
"Consideration Shares") of AHI's common stock, par value $.01 per share (the
"AHI Common Stock") as will have a value equal to $4,000,000, as determined by
the average closing price of the AHI Common Stock on the American Stock
Exchange for the ten (10) consecutive trading day period ending five (5)
trading days prior to the Closing. The Consideration Shares shall, upon
issuance and delivery to the Sellers in accordance with the terms hereof, be
fully paid, validly issued and non-assessable, and shall be registered under
AHI's Registration Statement on Form S-4, Registration No. 333-38759. In order
to partially secure the payment by Sellers of any liability that they may have
to the Purchaser pursuant to Section 5.3(a) herein, one-half of the
Consideration Shares shall be held in escrow (any such Consideration Shares
held in escrow hereunder shall be referred to as the "Escrowed Shares"), which
shares shall be held by Kane Kessler, P.C. (the "Escrow Agent"), pursuant to
the terms of an Escrow Agreement in the form of Exhibit "A" hereto (the "Escrow
Agreement"), to be released in accordance with the terms of the Escrow
Agreement. The Sellers acknowledge that no Consideration Shares may be sold
under AHI's Registration Statement on Form S-4, Registration No. 333-38759
until the satisfaction of the

<PAGE>

conditions set forth herein and the filing by AHI of an 8-K, 10-Q or other
appropriate report under the Securities Exchange Act of 1934 disclosing the
consummation of the transactions contemplated by this Agreement. AHI shall
maintain the prospectus relating to the Consideration Shares effective for at
least one year following the Closing Date.

2.3 Certain Closing Adjustments and Covenants.

(a) The Purchase Price shall be reduced dollar for dollar
to the extent that the Company's Net Worth, as determined in the Closing Audit
Statements (as hereinafter defined) in accordance with GAAP as of the Closing
Date is less than $7,380,531, as adjusted. For purposes of calculating the
Company's Net Worth, the Closing Audit Statements will be adjusted (i) to
include and give effect to the Non-Purchased Asset Notes (as hereinafter
defined), as if such notes had not been fully paid and discharged at Closing,
it being understood such notes shall be fully paid and satisfied at closing in
accordance with Sections 2.3(c) and 2.3(f) of this Agreement, (ii) to accrue
$500,000 of bonus payments to be paid to certain employees of the Company for
services rendered prior to the Closing as agreed to between the parties and
(iii) and not to include any accrued rent liability for the facility owned by
NAP Properties, Ltd.

For purposes of calculating the Company's Net Worth, the Seller's
accountants shall conduct a post-closing audit of the Company promptly after
the Closing and within 45 days following the Closing Date, the Sellers shall
deliver to the Purchaser a balance sheet of the Company as at the Closing Date,
and a statement of income of the Company for the period commencing on October
1, 1998 and ending on the Closing Date, prepared in accordance with generally
accepted accounting principles consistently applied. Such financial statements
(the "Closing Audit Statements") shall be audited in accordance with generally
accepted auditing standards and reported upon by Ernst & Young, LLP,
independent certified public accountants (the "Accountants"), whose report with
respect thereto shall accompany delivery of such statements. Purchaser and its
accountants shall be afforded access to and shall review the workpapers of the
Seller and its accountants in connection with such audit, and be reasonably
satisfied therewith. Such financial statements shall become final and binding
upon the parties unless, within 30 days following delivery to the Purchaser
(such 30 day period hereinafter referred to as the "Review Period"), notice is
given by the Purchaser of the Purchaser's objection setting forth in reasonable
detail the Purchaser's basis for objection. If notice of objection is given,
the parties shall consult with each other with respect to the objection. If the
parties are unable to reach agreement within 30 days after notice of objection
has been given, the dispute shall be referred for resolution to Arthur
Andersen, LLP, or such other "big-five" accounting firm that has not had a
previous relationship with Purchaser or the Company (the "Determining
Accountants") as promptly as practicable. Each party hereto represents that it
has no material relationship with the Determining Accountants. The Determining
Accountants will make a determination as to each item in dispute, which
determination will be (i) in writing, (ii) furnished to each party hereto as
promptly as practicable after the items in dispute have been referred to the
Determining Accountants, (iii) made in accordance with this Agreement, and (iv)
conclusive and binding upon each party hereto. Each of Purchaser and the
Sellers will use reasonable efforts to cause the Determining Accountants to
render their decision as soon as reasonably practicable, including without
limitation by promptly complying with all reasonable requests by the
Determining Accountants for information, books, records and similar items. If
any post-closing adjustment is

<PAGE>

required to be made pursuant hereto, the settlement thereof (the "Post-Closing
Settlement") shall take place at the offices of Kane Kessler, P.C. at 10:00
a.m. local time on the fifth business day following the end of the Review
Period, or in the event such matter has been referred to the Determining
Accountants, on the fifth business day following the date upon which the
written determination of the Determining Accountants become final and binding
upon the parties, or at such other time and place as the Purchaser and the
Sellers may mutually agree in writing. The amount of any such reduction shall
be paid by the Sellers to the Purchaser at the Post-Closing Settlement by
certified or cashier's check. The fees and expenses of the Accountants incurred
in connection with their examination and report shall be borne by the Sellers.
The fees and expenses of the Determining Accountants incurred in connection
with its review and determination shall be borne one-half by the Purchaser and
one-half by the Sellers.

(b) The parties agree that for the purposes of calculating
the Company's Net Worth, the Accountants shall take into account, in addition
to the provisions of Sections 2.3(a)(i)-(iii), the following items:

(i) the outstanding balance of the promissory note made
by Texas State Distributors, Inc. in favor of the
Company, dated February 6, 1998 (the "Texas State Note"),
which the parties estimate to be $673,762 and shall be
written off, thereby reducing the Company's Net Worth by
$673,762 (at the Closing, Purchaser shall assign to the
Sellers the obligation represented by the Texas State
Note);

(ii) all amounts paid by or to be paid by the Company
pursuant to the settlement of the lawsuit against the
Company by Rita Garcia, Sandra Garcia and Brandy Garcia,
Max L. Garcia, III and Alex Garcia, which the parties
estimate to be $282,000 and shall be assumed to reduce
the Net Worth of the Company by $282,000;

(iii) the liability from the ongoing sales tax audit
currently being conducted by the State of California,
which the parties estimate to be $236,000 and shall be
assumed to reduce the Net Worth of the Company by
$236,000 (the "Estimated Sales Tax Liability");

(iv) the outstanding amount of the "advantage" inventory,
which the parties estimate to be $76,450 and shall be
reserved, thereby reducing the Net Worth of the Company
by $76,450 (the "Advantage Inventory");

(v) the outstanding amount of the Obsolete and
Slow-Moving Inventory (as hereinafter defined), which the
parties estimate to be $253,400 and shall be reserved,
thereby reducing the Net Worth of the Company by
$253,400; and

<PAGE>

(vi) certain pre-paid expenses and deposits of the
Company which would not be included in AHI's opening
balance sheet because AHI will not derive the benefits of
such pre-paid expenses or deposits and which are set
forth on Schedule 2.3(b), which the parties estimate to
be $496,650 and shall be written off, thereby reducing
the Net Worth of the Company by $496,650.

The parties acknowledge and agree that the amounts set forth in this
Section 2.3(b) are merely estimates of how such items will affect the Net Worth
of the Company as of the Closing Date. Amounts that Sellers are obligated to
pay Purchaser will be accounted for as a reduction in Purchase Price. To the
extent that (x) the Net Worth of the Company, as adjusted, as of the Closing
Date exceeds $7,380,531 and (y) the actual amount of those items set forth in
Sections 2.3(b)(i)-(iii) is less than $1,191,762, then the amount of such
shortfall, (the "Overestimated Amount"), shall be paid by the Purchaser to the
Sellers at the Post-Closing Settlement, pro-rata in accordance with their
relative common stock ownership of the Company as set forth on Schedule A.

(c) Prior to the Closing, certain assets of the Company, as
set forth on Schedule 2.3(c) (the "Non-Purchased Assets"), will be sold to the
Sellers for an aggregate purchase price of$1,826,506. The purchase price for
the Non-Purchased Assets shall be paid by the Sellers by the issuance of
promissory notes to the Company in the form of Exhibit B attached hereto (the
"Non-Purchased Asset Notes"). At the Closing the Sellers shall direct the
Purchaser to pay the Company the amount of the Non-Purchased Assets and the
Non-Purchased Asset Notes shall be fully paid and discharged; and

(d) To the extent not compromised or released by the
Purchaser with the consent of the Sellers, if any accounts and notes receivable
reflected on the Post-Closing Balance Sheet are uncollectible 120 days after
the Closing Date, the Sellers shall pay to the Purchaser, at the Purchaser's
office within 20 days of receipt of notice from the Purchaser that such
accounts and notes receivable are uncollectible, an amount equal to the
aggregate unpaid balance of all such accounts and notes receivable, exclusive
of late charges, interest, service charges or like sums. Such amount shall be
paid by delivery to the Purchaser of a certified or cashier's check payable to
the order of the Purchaser. Upon receipt of such payment Purchaser shall assign
to the Sellers the obligation represented by the accounts or notes receivable
with respect to which such payment was made. After assignment of such
obligation to the Sellers, the Purchaser agrees that it will not compromise or
release the account or note receivable without the prior written consent of the
Sellers which shall not be unreasonably withheld or delayed, it being not
unreasonable for Sellers to demand payment of the account or note receivable so
assigned. Any monies received from any account debtor reflected on the
Post-Closing Balance Sheet shall be applied on the books of the Company as
designated by the account debtor in writing, and if not so designated, then to
the oldest unpaid invoice of such debtor that is not in dispute by the account
debtor.

(e) The parties acknowledge that the Purchase Price has been
reduced by an amount equal to $76,450, which amount represents an estimate by
the parties of the Advantage Inventory and $253,400 which amount represents an
estimate by the parties of certain inventory of the Company that is deemed to
be below standard quality, damaged, obsolete or of a quality or

<PAGE>

quantity not usable or saleable in the ordinary course of the business of the
Company as currently conducted and which has been specifically identified by
the Company on Schedule 2.3(e) (the "Obsolete and Slow Moving Inventory").
Within ninety (90) days of the applicable periods set forth below, the
Purchaser shall pay to the Sellers, pro-rata in accordance with their
respective ownership of the common stock of the Company an amount (not to
exceed $329,850) equal to any cash realized by the Company on the sale of the
Advantage Inventory and Obsolete and Slow-Moving Inventory in excess of such
identified inventory, net of reserves, during (i) the period between the
Closing Date and 90 days following the Closing Date and (ii) the period
beginning 91 days after the Closing Date and December 31, 1999. Other than as
set forth above, neither the Company nor AHI shall have any further obligation
to the Sellers with respect to the Obsolete and Slow-Moving Inventory.

(f) Any amounts that are owed by any of the Sellers or
Executives to the Company on the Closing Date, shall be paid to the Company by
the Purchaser as a setoff against such amounts that would otherwise be
delivered to such Seller or Executive out of the Cash Consideration pursuant to
this Agreement.

(g) Subject to approval by AHI's stockholders at the next
annual meeting of stockholders, AHI will make available stock options for the
purchase of 187,500 shares of AHI Common Stock to be awarded to certain key
employees of the Company, as the Sellers and AHI shall agree, under a stock
option plan of AHI. Such options will vest and become exercisable at the end of
three years if, and only if, such employee remains an employee of AHI or its
subsidiaries three years after the Closing Date. The exercise price for such
options shall be the average of the high and low trading price of the shares of
AHI Common Stock on the later of the date of approval by AHI stockholders
(expected to be June 24, 1999) of such AHI stock option plan or the date of
grant. In the event that AHI's stockholders do not approve of the grant of
options described in this Section 2.3(g), then the Purchaser and the Sellers
shall negotiate in good faith to determine what other benefit may be conferred
upon those key employees of the Company that would be of equal value to the
proposed grant of options set forth in this Section 2.3(g). If after a
reasonable time the parties are unable to identify an appropriate benefit to be
conferred upon such employees, then the Purchaser shall pay $500,000 to the
Sellers, pro-rata in accordance with their relative common stock ownership of
the Company as set forth on Schedule A.

2.4 Credit Facilities. At Closing, the Purchaser shall repay or cause
to be repaid the outstanding amount of the Company's credit facilities with
Imperial Bank (the "Credit Facilities"), and as a condition to such repayment,
Imperial Bank shall release and terminate all liens, security interests,
mortgages and guarantees with respect thereto. The Sellers shall communicate
with Imperial Bank to arrange and coordinate a pay-off of the Credit Facilities
and the release as set forth above and shall inform Purchaser in writing of
applicable payoff amounts at least four (4) days prior to Closing.

<PAGE>

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PURCHASER

In order to induce the Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser makes the
representations and warranties set forth below to the Sellers.

3.1 Organization; Standing and Power. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Purchaser has all requisite right, power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby.

3.2 Authorization; Enforceability. The execution, delivery and
performance of this Agreement by Purchaser and the consummation by Purchaser of
the transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of Purchaser. This Agreement and all other
documents to be executed and delivered by Purchaser pursuant to this Agreement
have been and will be duly executed and delivered by Purchaser and constitute
the legal, valid and binding obligations of Purchaser, enforceable in
accordance with their terms, except to the extent that its enforcement is
limited by bankruptcy, insolvency, reorganization or other laws relating to or
affecting the enforcement of creditors' rights generally and by general
principles of equity.

3.3 No Violation or Conflict. The execution, delivery and performance
of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby do not violate or conflict with any provision
of law or regulation, or any writ, order or decree of any court or governmental
or regulatory authority, the violation of which would interfere in any material
respect with Purchaser's ability to consummate the transactions contemplated
hereby, or any provision of Purchaser's Certificate of Incorporation or Bylaws.

3.4 Consent of Governmental Authorities. No consent, approval or
authorization of, or registration, qualification or filing with any federal,
state or local governmental or regulatory authority is required to be made by
Purchaser in connection with the execution, delivery or performance by
Purchaser of this Agreement or the consummation by Purchaser of the
transactions contemplated hereby.

3.5 Brokers. Purchaser has not employed any financial advisor, broker
or finder and has not incurred and will not incur any broker's, finder's,
investment banking or similar fees, commissions or expenses, in connection with
the transactions contemplated by this Agreement.

3.6 Litigation. There are no actions, suits, investigations, claims or
proceedings pending or, to the knowledge of the Purchaser, threatened before
any court or by or before any governmental or regulatory authority or
arbitrator against the Purchaser, relating to the transactions contemplated by
this Agreement and there exists no facts or circumstances known to Purchaser
creating any reasonable basis for the institution of any such action, suit,
investigation, claim or proceeding described above.

9
<PAGE>

3.7 Disclosure. No representations or warranties of Purchaser
contained in this Agreement, and no statement, report, or certificate furnished
by or on behalf of Purchaser to the Sellers pursuant hereto or in connection
with the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading or
omits or will omit to state a material fact.

3.8 Pre-merger Notification. The Purchaser has filed notification and
report forms with respect to the transactions contemplated by this Agreement in
accordance with the HSR Act.

3.9 Investment Representation. The Purchaser has acquired the
Securities for its own account, for investment and not with a view or for the
purpose of the sale or other distribution thereof.

3.10 No WARN Notice. It is expressly understood by the parties that,
if Purchaser intends to take any action that would require the giving of notice
under the Workers Adjustment and Retraining Act (the "WARN Act"), any
obligation to provide any notice under the WARN Act shall be that of the
Purchaser and not of any Seller or, before the Closing, of the Company.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY

In order to induce Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company and the Sellers,
jointly and severally, make the representations and warranties set forth below
to Purchaser.

4.1 Organization. The Company and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. The Company and each of its
Subsidiaries is duly qualified to transact business as a foreign corporation in
all jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification and the failure to so
qualify would not have a Material Adverse Effect on the Company. Each
jurisdiction in which the Company and each of its Subsidiaries is so qualified
is listed on Schedule 4.1 hereto. The Company and each of its Subsidiaries has
the requisite power and authority to (a) own or lease and operate its
properties and (b) conduct its business as presently conducted.

4.2 Authorization; Enforceability. Each of the Company and each of the
Sellers has the capacity to execute, deliver and perform this Agreement. This
Agreement and all other documents to be executed and delivered by the Company
and each of the Sellers pursuant to this Agreement have been and will be duly
executed and delivered and constitute the legal, valid and binding obligations
of each of the Company and each of the Sellers, enforceable in accordance with
their respective terms, except to the extent that their enforcement is limited
by bankruptcy,

10
<PAGE>

insolvency, reorganization or other laws relating to or affecting the
enforcement of creditors' rights generally and by general principals of equity.

4.3 No Violation or Conflict. The execution, delivery and performance
of this Agreement by each of the Company and each of the Sellers and the
consummation by each of the Company and each of the Sellers of the transactions
contemplated hereby: (a) do not violate or conflict with any provision of law
or regulation (whether federal, state or local), or any writ, order or decree
of any court or governmental or regulatory authority, or any provision of the
Company's Certificate of Incorporation or Bylaws; and (b) except as set forth
on Schedule 4.3 hereto, do not, with or without the passage of time or the
giving of notice, result in the breach of, or constitute a default, cause the
acceleration of performance or require any consent under, or result in the
creation of any lien, charge or encumbrance upon any property or assets of any
Seller or the Company or any of its Subsidiaries pursuant to any instrument or
agreement to which any of the Sellers or the Company or any of its Subsidiaries
is a party or by which any of the Sellers or the Company or any of its
Subsidiaries or their respective properties may be bound or affected, other
than instruments or agreements as to which consent shall have been obtained at
or prior to the Closing (each of which instruments or agreements is listed in
Schedule 4.3 hereto).

4.4 Consents of Governmental Authorities and Others. Except as set
forth on Schedule 4.4, no consent, approval or authorization of, or
registration, qualification or filing with any federal, state or local
governmental or regulatory authority, or any other Person, is required to be
made by any of the Sellers or the Company or any of its Subsidiaries in
connection with the execution, delivery or performance of this Agreement by the
Sellers or the consummation by the Sellers of the transactions contemplated
hereby.

4.5 Conduct of Business. Except as disclosed on Schedule 4.5 hereto,
since September 30, 1998, the Company and each of its Subsidiaries has
conducted its businesses in the ordinary and usual course consistent with past
practices and there has not occurred any adverse change in the condition
(financial or otherwise), results of operations, properties, assets,
liabilities, business or prospects of the Company or any of its Subsidiaries.
Without limiting the generality of the foregoing, except as disclosed on
Schedule 4.5, since September 30, 1998, neither the Company or any of its
Subsidiaries has : (a) amended its Certificate of Incorporation or Bylaws; (b)
issued, sold or authorized for issuance or sale, shares of any class of its
securities (including, but not limited to, by way of stock split or dividend)
or any subscriptions, options, warrants, rights or convertible securities or
entered into any agreements or commitments of any character obligating it to
issue or sell any such securities; (c) redeemed, purchased or otherwise
acquired, directly or indirectly, any shares of its capital stock or any
option, warrant or other right to purchase or acquire any such shares; (d)
suffered any damage, destruction or loss, whether or not covered by insurance,
which has had or could have a Material Adverse Effect on any of its properties,
assets, business or prospects; (e) granted or made any mortgage or pledge or
subjected itself or any of its properties or assets to any lien, charge or
encumbrance of any kind, except liens for taxes not currently due; (f) made or
committed to make any capital expenditures in excess of $10,000; (g) become
subject to any Guaranty; (h) granted any increase in the compensation payable
or to become payable to directors, officers, employees (including, without
limitation, any such increase pursuant to any bonus, pension, profit-sharing or
other plan or commitment); (i) entered into any agreement which would be a

11
<PAGE>

Material Agreement, or amended or terminated any existing Material Agreement or
received notice of any such amendment or termination; (j) experienced any
strike, work stoppage or slowdown; (k) received notice of any material adverse
change in its relationship with any financial institution, distributor,
customer or supplier with which it currently does business, nor is it aware of
any circumstances that could reasonably lead to such a change, nor do the
Sellers have any knowledge of any of the foregoing; or (l) experienced any
other event or condition of any character which has had or could have a
Material Adverse Effect.

4.6 Litigation. Except as set forth on Schedule 4.6, there are no
actions, suits, investigations, claims or proceedings ("Litigation") pending
or, to the knowledge of any of the Sellers, threatened before any court or by
or before any governmental or regulatory authority or arbitrator, (a) affecting
the Company or any of its Subsidiaries (as plaintiff or defendant) which could,
individually or in the aggregate, have a Material Adverse Effect or (b) against
the Sellers relating to the Securities or the transactions contemplated by this
Agreement and there exist no facts or circumstances known to Sellers creating
any reasonable basis for the institution of any such action, suit,
investigation, claim or proceeding described above. Schedule 4.6 sets forth a
list of any Litigation commenced against the Company or any of its Subsidiaries
in the last five (5) years.

4.7 Brokers. Except for the fees of Kerlin Capital to be paid by the
Sellers, none of the Sellers or the Company has employed any other financial
advisor, broker or finder, and none of them has incurred or will incur any
other broker's, finder's, investment banking or similar fees, commissions or
expenses in connection with the transactions contemplated by this Agreement.

4.8 Compliance. To the best of the Sellers' knowledge, the Company and
each of its Subsidiaries is in compliance with all federal, state, local and
foreign laws, ordinances, regulations, judgments, rulings, orders and other
requirements applicable to it including, without limitation, those relating to
(a) the development, manufacture, packaging, distribution and marketing of
products, (b) employment, safety and health, (c) building, zoning and land use,
and (d) Environmental Laws. Neither the Company nor any of its Subsidiaries is
subject to any judicial, governmental or administrative order, judgment or
decree. Attached hereto as Schedule 4.8 are true and correct copies of all
material reports of inspections of the Company's and any of its Subsidiaries
business and properties (which occurred during the past five (5) years) through
the date hereof, under all applicable federal, state, foreign and local laws
and regulations.

4.9 Charter, Bylaws and Corporate Records. A true, correct and
complete copy of (a) the Articles and/or Certificate of Incorporation of the
Company and its Subsidiaries, as amended and in effect on the date hereof, (b)
the Bylaws of the Company and its Subsidiaries, as amended and in effect on the
date hereof, and (c) the minute books of the Company and its Subsidiaries
(containing all corporate proceedings for the past five (5) years) have been
previously provided to Purchaser. Such minute books contain complete and
accurate records of all meetings and other corporate actions of the board of
directors, committees of the board of directors, incorporators and shareholders
of the Company and its Subsidiaries from the date of its incorporation to the
date hereof. A listing of all of the corporate directors and officers and
certain managers of the Company and each of its Subsidiaries is set forth on
Schedule 4.9.

12
<PAGE>

4.10 Subsidiaries and Investments. Except as described on Schedule
4.10, the Company has no Subsidiaries or Investments.

4.11 Capitalization. The authorized capital stock of the Company
consists of (i) 2,000,000 shares of Series A Common Stock, no par value, of
which 219,804 shares are issued and outstanding and owned by Sellers as set
forth on Schedule A hereto (the "Outstanding Common Stock"), (ii) 2,000,000
shares of Series B Common Stock, no par value, none of which shares are issued
and outstanding and (iii) 100,000 shares of preferred stock (the "Outstanding
Preferred Stock"), no par value, of which 12,000 shares are issued and
outstanding and owned by Neale A. Perkins, Trustee, The Neale A. Perkins Trust
Agreement UAD 3/13/90. All shares of the Company's issued and outstanding
capital stock have been duly authorized, are validly issued and outstanding,
and are fully paid and nonassessable. No securities issued by the Company from
the date of its incorporation to the date hereof were issued in violation of
any statutory or common law preemptive rights. There are no dividends which
have accrued or been declared but are unpaid on the capital stock of the
Company. Except as set forth on Schedule 4.11 hereto, all taxes required to be
paid in connection with the issuance and any transfers of the Company's capital
stock have been paid. Except as set forth on Schedule 4.11, all permits or
authorizations required to be obtained from or registrations required to be
effected with any Person in connection with any and all issuances of securities
of the Company from the date of the Company's incorporation to the date hereof
have been obtained or effected and all securities of the Company have been
issued and are held in accordance with the provisions of all applicable
securities or other laws. The Securities constitute one hundred percent (100%)
of the issued and outstanding capital stock of the Company.

4.12 Rights, Warrants, Options. There are no outstanding (a)
securities or instruments convertible into or exercisable for any of the
capital stock or other equity interests of the Company or any of its
Subsidiaries; (b) options, warrants, subscriptions or other rights to acquire
capital stock or other equity interests of the Company or any of its
Subsidiaries; or (c) except as set forth on Schedule 4.12 hereto, commitments,
agreements or understandings of any kind, including employee benefit
arrangements, relating to the issuance or repurchase by the Company or any of
its Subsidiaries of any capital stock or other equity interests of the Company
or any of its Subsidiaries, or any instruments convertible or exercisable for
any such securities or any options, warrants or rights to acquire such
securities.

4.13 Financial Statements. Attached hereto as Schedule 4.13 are true
and complete copies of the Financial Statements. The Financial Statements: (a)
have been prepared in accordance with the books of account and records of the
Company; (b) fairly present the Company's financial condition and the results
of its operations at the dates and for the periods specified in those
statements; and (c) have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") consistently applied with
prior periods.

4.14 Absence of Undisclosed Liabilities. Other than as disclosed by
the Financial Statements dated September 30, 1998, neither the Company nor any
of its Subsidiaries have any direct or indirect indebtedness, liability, claim,
loss, damage, deficiency, obligation or responsibility, known or unknown, fixed
or unfixed, choate or inchoate, liquidated or unliquidated secured or
unsecured, accrued, absolute, contingent or otherwise, including, without
limitation,

13
<PAGE>

liabilities on account of taxes, other governmental charges or lawsuits
brought, whether or not of a kind required by generally accepted accounting
principles to be set forth on a financial statement, ("Liabilities"), which
were not fully and adequately reflected on the Financial Statements or Schedule
4.14. Except as listed on Schedule 4.14, neither the Company nor any of its
Subsidiaries have any Liabilities, other than (i) Liabilities fully and
adequately reflected on the Financial Statements and (ii) those incurred since
September 30, 1998 in the ordinary course of business. The Sellers have no
knowledge of any circumstances, conditions, events or arrangements which may
hereafter give rise to any Liabilities of the Company or any of its
Subsidiaries except in the ordinary course of business or as otherwise set
forth on Schedule 4.14.

4.15 Title to Securities. Except as set forth on Schedule 4.15, each
Seller is the record and beneficial owner of the Securities listed opposite his
name on Schedule A, and, such Securities are owned free and clear of any liens,
encumbrances, pledges, security interests and claims whatsoever, including,
without limitation, claims or rights under any voting trust agreements,
shareholder agreements or other agreements. At the Closing, the Sellers will
transfer and convey, and Purchaser will acquire, good and marketable title to
the Securities, free and clear of all liens, encumbrances, pledges, security
interests and claims whatsoever, except for encumbrances set forth on Schedule
4.11. Upon the transfer of the Securities to Purchaser, the Purchaser will
posses ownership of the entire business of the Company and its Subsidiaries
necessary to operate the Company as an on-going concern as such business is
presently being conducted.

4.16 Title to and Condition of Personal Property. Schedule 4.16 sets
forth all interests owned or claimed by the Company and its Subsidiaries
(including, without limitation, options) in or to the plant, machinery,
equipment, furniture, leasehold improvements, fixtures, vehicles, structures,
any related capitalized items and other tangible property used in the business
of the Company and its Subsidiaries and which is treated by the Company as
depreciable or amortizable property ("Tangible Property"). The Company and each
of its Subsidiaries has good and marketable title to each item of Tangible
Property, free and clear of any security interests, options, liens, claims,
charges or encumbrances whatsoever, except as set forth in Schedule 4.16 hereto
or specifically identified as such in the September 30, 1998 Financial
Statements. Except as set forth in Schedule 4.16, all Tangible Property owned
by the Company and its Subsidiaries or used by the Company or its Subsidiaries
on the date hereof (with a replacement value in excess of $1,000) in the
operation of its business is in good operating condition and in a good state of
maintenance and repair, and is adequate for the business conducted and proposed
to be conducted by the Company and its Subsidiaries. Except for the Leases
specifically identified in Schedule 4.17, there are no assets owned by any
third party which are used in the operation of the business of the Company or
its Subsidiaries, as presently conducted or proposed to be conducted.

4.17 Real Property. Neither the Company nor any of its Subsidiaries
own any fee simple interest in real property other than as set forth on
Schedule 4.17. Except as set forth on Schedule 4.17, neither the Company nor
any of its Subsidiaries leases or subleases any real property other than as set
forth on Schedule 4.17. Schedule 4.17 sets forth the street address of each
parcel of real property leased or subleased by the Company and its Subsidiaries
(the "Leased Property"). The Company has previously delivered to the Purchaser
true and complete copies of all of the lease and sublease agreements, as
amended to date (the "Leases") relating to the Leased Property. The

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Company and each of its Subsidiaries enjoys a peaceful and undisturbed
possession of the Leased Property. All improvements located on the Leased
Property are in a state of good maintenance and repair and in a condition
adequate and suitable for the effective conduct therein of the business
conducted and proposed to be conducted by the Company and its Subsidiaries. No
person other than the Company and its Subsidiaries has any right to use or
occupy any part of the Leased Property. The Leases are valid, binding and in
full force and effect, all rent and other sums and charges payable thereunder
are current, no notice of default or termination under any of the Leases is
outstanding, no termination event or condition or uncured default on the part
of the Company or any of its Subsidiaries or, to the Sellers' knowledge, on the
part of the landlord or sublandlord, as the case may be, thereunder, exists
under the Leases, and no event has occurred and no condition exists which, with
the giving of notice or the lapse of time or both, would constitute such a
default or termination event or condition. In the event that any of the Leases
is a sublease, the Company or its Subsidiaries, as sublessee or sublessor, as
the case may be, has obtained the required consent of the prime landlord to
such sublease, and to the Sellers' knowledge, such prime lease is in full force
and effect, there are no outstanding uncured notices of default or termination,
and no right of the Company or any of its Subsidiaries in any such sublease
conflicts with such prime lease. There are no subleases, licenses or other
agreements granting to any person other than the Company or any of its
Subsidiaries any right to the possession, use, occupancy or enjoyment of the
premises demised by the Leases. All of the premises are used in the conduct of
the Company's and its Subsidiaries' business.

The heating, ventilation, air conditioning, plumbing and electrical
systems at the Leased Property will be in good working order and repair on the
Closing Date (except as set forth on Schedule 4.17C hereof). Except as set
forth on Schedule 4.17C, neither the Company nor any of its Subsidiaries has
experienced any material interruption in such services provided to any of the
Premises within the last year. NAP Properties, Ltd. has no, and the to the best
of Seller's knowledge, no landlord under any of the other Leases has any plans
to make any material alterations to any of the other Leased Property, the
construction of which would interfere with the use of any portion of the Leased
Property. NAP Properties, Ltd. has no, and the to the best of Seller's
knowledge, no landlord under any of the other Leases has any plans to make any
material alterations to any of the buildings in which Leased Property is
located, the costs of which alterations would be borne in any part by a tenant
under the applicable Lease.

All material permits, licenses, franchises, approvals and
authorizations (collectively, the "Real Property Permits") of all governmental
authorities having jurisdiction over each Leased Property and from all
insurance companies and fire rating and other similar boards and organizations
(collectively, the "Insurance Organizations"), required or appropriate are set
forth on Schedule 4.17D and have been issued to the Company or its Subsidiaries
to enable each Leased Property to be lawfully occupied and used for all of the
purposes for which they are currently occupied and used have been lawfully
issued and are, as of the date hereof, in full force and effect. Neither the
Sellers nor the Company or any of its Subsidiaries has received or been
informed by a third party of the receipt by it of any notice from any
governmental authority having jurisdiction over any Leased Property or from any
Insurance Organization threatening a suspension, revocation, modification or
cancellation of any Real Property Permit or of any insurance policies and, to
the best knowledge and belief of Sellers, there is no basis for the issuance of
any such notice or the taking of any such action. Sellers know of no action
required by Sellers or the Company or any of its

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Subsidiaries in order for all Real Property Permits and liability and casualty
insurance policies required under any of the Leases to remain Real Property
Permits and insurance policies of Purchaser.

Neither Sellers nor the Company or any of its Subsidiaries have
received any notice nor have they any knowledge of any pending, threatened or
contemplated condemnation proceeding affecting any Leased Property or any part
thereof.

There are no liabilities (other than rent and other sums, charges and
obligations regularly payable and other obligations under the Leases,
including, but not limited to insurance, taxes and utilities) associated with
any of the Leases including, without limitation, any liability under any
Environmental Law or regulation, which is or which may become payable by
Purchaser.

4.18 Insurance. Schedule 4.18 sets forth a true and complete list of
all insurance policies providing insurance coverage of any nature to the
Company and each of its Subsidiaries. The Company has previously provided the
Purchaser with true and complete copies of all of such insurance policies, as
amended to the date hereof. Such policies provide adequate and customary
coverage for the business in which the Company and each of its Subsidiaries is
engaged and are sufficient for compliance by the Company and its Subsidiaries
with all requirements of law and all material agreements to which the Company
or its Subsidiaries is a party or by which any of its assets are bound. All of
such policies are in full force and effect and are valid and enforceable in
accordance with their terms, and the Company and each of its Subsidiaries has
complied with all material terms and conditions of such policies, including
premium payments. None of the insurance carriers has indicated to the Company
or its Subsidiaries an intention to cancel any such policy. Except as set forth
on Schedule 4.6, neither the Company nor any of its Subsidiaries has any claim
pending against any of the insurance carriers under any of such policies and
there has been no actual or alleged occurrence of any kind which may give rise
to any such claim. All applications for such policies are accurate in all
material respects.

4.19 Licenses. Schedule 4.19 lists all authorizations, consents,
approvals, franchises, licenses and permits required under applicable law or
regulation for the operation of the business of the Company and its
Subsidiaries as presently operated (the "Governmental Authorizations"). All the
Governmental Authorizations have been duly issued or obtained and are in full
force and effect, and the Company and each of its Subsidiaries is in compliance
with the terms of all the Governmental Authorizations. No fact or condition
exists which could cause the Governmental Authorizations not be renewed by the
appropriate governmental authorities in the ordinary course. No violations have
been recorded in respect of any Governmental Authorization and no proceeding is
pending or, to the knowledge of Sellers, threatened, to revoke or limit any
Governmental Authorization. Neither the execution, delivery nor performance of
this Agreement shall adversely affect the status of any of the Governmental
Authorizations.

4.20 Intellectual Property Rights. (a) Set forth on Schedule 4.20 is a
list and description of the Company's Intellectual Property Rights, including
(as appropriate) where such items are filed, issued and/or registered. The
Intellectual Property Rights of the Company includes

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all rights necessary for the Company to be entitled to conduct its business as
presently conducted and to protect its rights therein. As to those matters
shown on Schedule 4.20 as trademarks registered in the United States and
countries foreign thereto, the Company is the sole and exclusive owner of all
right, title and interest in such United States and foreign marks and
registrations, and said registrations are valid. With respect to trademark
applications indicated as pending, the Company has made and will continue to
make available to Purchaser and its counsel all information of the Company and
its counsel regarding such applications, including, but not limited to, its use
of the marks covered thereby. The trademarks shown on Schedule 4.20 as being
registered have been properly registered, all pending registrations and
applications for trademarks have been properly made and filed and all annuity,
maintenance, renewal and other fees relating to registrations and applications
are current. To the knowledge of the Sellers and the Company, there are no
equitable defenses to enforcement of the trademarks shown on Schedule 4.20,
except as shown on Schedule 4.20. The Company is the sole and complete owner of
all right, title and interest in and to the patents listed on Schedule 4.20 and
the inventions claimed therein. The Company has valid licenses to use all
patents shown on Schedule 4.20 as being licensed; and the Company is not in
breach of any such license and, to the knowledge of the Sellers and the
Company, no other party to such license agreement is in breach thereof. The
Company owns valid and enforceable copyrights with respect to each of the
materials listed on Schedule 4.20 as such. With respect to such works, the
Company represents that it is the author thereof except for those materials
which are works for hire and as to such works, the Company has secured in
writing all rights of authorship therein. The Company has the right to use the
trade secrets utilized in the Company's business as the same is currently
conducted and does not require any trade secrets that it does not now already
own or have the right to use. The Company is not infringing the Intellectual
Property Rights of others in the conduct of its business. There is no
litigation or claims pending, or, to the Sellers' or the Company's knowledge,
threatened to challenge the Company's right, title or interest in or to, or
continued use of any of the Company's Intellectual Property Rights and, to the
Sellers' or the Company's knowledge, there is no reasonable basis for such
litigation. To the knowledge of the Sellers and the Company, no one is
infringing the Company's Intellectual Property Rights and neither the Company
nor its Subsidiaries has made any claim of any violation or infringement by
others of its rights in the Intellectual Property Rights and no reasonable
grounds for such claims exist except as described on Schedule 4.20. The Company
has not granted any assignments, licenses or sublicenses, security interests or
other rights or interests and no royalties or fees are payable to or by the
Company or any of its Subsidiaries with respect to any Intellectual Property
Rights, except as described in Schedule 4.20. The Company has not transferred,
assigned or otherwise conveyed, voluntarily or involuntarily, any right to sue
for any infringement of the Intellectual Property Rights. Except as indicated
on Schedule 4.20, the consummation of the transactions contemplated by this
Agreement will not alter or impair any of the Company's Intellectual Property
Rights. None of the Sellers or the Company has any knowledge of any fact which
could render invalid or unenforceable, or prevent the Company from using any
such Intellectual Property Rights.

(b) The Enterprise Resource Planning ("ERP") system currently
being implemented and applied to the software and hardware owned or developed
by (or on behalf of), or licensed or leased to, or otherwise used by, the
Company or its Subsidiaries (the "Computer System") will, when fully
implemented result in the Computer System, being Year 2000 Compliant. "Year
2000 Compliant" means, as applied to software or hardware, as the case may be,
that (i) such

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software or hardware will operate and correctly store, represent and process
(including sort) all dates (including single and multi-century formulas and
leap year calculations), such that errors will not occur when the date being
used is in the year 2000, or in a year preceding or following the year 2000;
(ii) such software or hardware has been developed and tested to support numeric
and date transitions from the twentieth century to the twenty-first century,
and back (including without limitation all calculations, aging, reporting,
printing, displays, reversals, disaster and vital records recoveries) without
error, corruption or impact to current and/or future operations; and (iii) such
software or hardware will function without error or interruption related to any
date information, specifically including errors or interruptions from functions
which may involve date information from more than one century. If the Company
fulfills its commitments under its written agreement with PowerCerv, the
implementation of the ERP system will be accomplished by November, 1999.

4.21 Major Customers and Suppliers; Supplies. Schedule 4.21 sets forth
a list of the twenty (20) largest customers (measured by dollar volume) of the
Company and its Subsidiaries and all suppliers of significant goods or services
to the Company and its Subsidiaries for each of the two fiscal periods ended
September 30, 1997 and September 30, 1998. Schedule 4.21 identifies those
suppliers of significant goods or services with respect to which alternative
sources of supply are not readily available on comparable terms and conditions.
Except as indicated on Schedule 4.21, all supplies and services necessary for
the conduct of the business of the Company and its Subsidiaries, as presently
conducted, may be obtained from alternate sources on terms and conditions
comparable to those presently available to the Company and its Subsidiaries,
and no facts, circumstances or conditions exist which create a reasonable basis
for believing that the Company or its Subsidiaries will be unable to continue
to procure the supplies and services necessary to conduct its business on
substantially the same terms and conditions as such supplies and services are
currently procured. There has not been, and to the best knowledge of the
Sellers there will not be, any material adverse change in the relations of the
Company or any of its Subsidiaries with their respective customers, suppliers,
contractors, licensors and lessors, as a result of the announcement or
consummation of the transactions contemplated by this Agreement and except as
set forth on Schedule 4.21 the Sellers have no knowledge that any of the
Company's or any of its Subsidiaries' major customers or suppliers has or is
contemplating terminating its relationship with the Company or any of its
Subsidiaries. Except as set forth on Schedule 4.21, to the knowledge of the
Sellers, no major customer or supplier has experienced any type of work
stoppage or other material adverse circumstances or conditions that may
jeopardize or adversely affect the Company's or any of its Subsidiaries' future
relationship with any major customer or supplier. Except as set forth on
Schedule 4.21, there are no pending disputes or controversies between any major
customer or supplier of the Company or any of its Subsidiaries, nor do the
Sellers have any knowledge of any facts which in the future would impair the
relationship of the Company or any of its Subsidiaries with its major customers
or suppliers.

4.22 Related Parties. Except as set forth on Schedule 4.22, none of
the Sellers, nor any current or former (within the past five (5) years)
director, officer, family member or, to the best knowledge of Sellers, employee
of the Company or any of its Subsidiaries (individually a "Related Party" and
collectively the "Related Parties") or any Affiliate of any of the Sellers or
any Related Party: (a) owns, directly or indirectly, any interest in any person
which is a competitor of the Company or any of its Subsidiaries, or of a
supplier or customer of the Company or any of its

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<PAGE>

Subsidiaries; (b) owns, directly or indirectly, in whole or in part, any
property, asset or right, real, personal or mixed, tangible or intangible
(including, but not limited to, any of the Intellectual Property Rights) which
is utilized in the operation of the business of the Company or of its
Subsidiaries; (c) has an interest in or is, directly or indirectly, a party to
any contract, agreement, lease or arrangement pertaining or relating to the
Company or any of its Subsidiaries, except for employment, consulting or other
personal service agreements that may be in effect and which are listed on
Schedule 4.26 hereto; or (d) has any cause of action or other claim whatsoever
against, or owes any amount to, the Company or any of its Subsidiaries.

4.23 List of Accounts and Proxies. Set forth on Schedule 4.23 is: (a)
the name and address of each bank or other institution in which the Company and
each of its Subsidiaries maintains an account (cash, securities or other) or
safe deposit box; (b) the name and phone number of the Company's and its
Subsidiaries' contact person at such bank or institution; (c) the account
number of the relevant account and a description of the type of account; (d)
the name of each person authorized by the Company or any of its Subsidiaries to
effect transactions therewith or to have access to any safe deposit box or
vault; and (e) all proxies, powers of attorney or other like instruments to act
on behalf of the Company or any of its Subsidiaries in matters concerning its
business or affairs.

4.24 Personnel. Schedule 4.24 contains the names, job descriptions and
annual salary rates and other compensation of all officers, directors,
consultants and employees of the Company and any of its Subsidiaries (including
compensation paid or payable by the Company under the Company Plans). A list of
all employee policies, employee manuals or other written statements of rules or
policies as to working conditions, vacation and sick leave, a complete copy of
each of which has been made available to Purchaser.

4.25 Labor Relations. (a) There is no strike, sit-down, stay-in,
sympathy strike, slow-down, walkout, picketing, work stoppage, sick out,
retarding of work, boycott or any other interference with the Company's
business or the operation or conduct of the business of any of its affiliated
companies or its Subsidiaries, (all of the foregoing referred to as "work
interference"), and the Sellers have no knowledge of any pending or threatened
work interference. There are no facts or circumstances which might give rise to
any work interference. Neither the Company nor any of its Subsidiaries is in
breach of any provision of any collective bargaining agreement, and no such
claims have been made or are pending or exist that might give rise to any work
interference. Neither the Company nor any of its Subsidiaries is in breach of
any court, arbitration, administrative decision or order which might result in
any work interference or give rise to a claim that a work interference is
protected by, or does not violate, any law or provision of any collective
bargaining agreement and Sellers know of no facts or circumstances and have no
knowledge of any facts or circumstances, which might result in the foregoing.

(b) There are no unfair labor practices, representation or
other proceedings claimed, pending or threatened before any governmental or
regulatory agency and Sellers have no knowledge of, any facts or circumstances
which might give rise to such unfair labor practice, representation or other
proceeding.

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<PAGE>

(c) There are no filed, pending or threatened injunctions
against the Company or any of its Subsidiaries which would have the effect of
constituting a work interference and no facts or circumstances exist which
might give rise to any such injunction and no such claim has been made or is
pending.

4.26 Employment Agreements and Employee Benefit Plans.

(a) Neither the Company nor any of its Subsidiaries has had
any defined contribution plan and it is not part of a controlled group
contributing to any defined contribution plan. Neither the Company nor any of
its Subsidiaries has, nor do they contribute to any pension, profit-sharing,
option, other incentive plan, or any other type of Employee Benefit Plan (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), or have any obligation to or customary arrangement with
employees for bonuses, incentive compensation, vacations, severance pay,
insurance, or other benefits, except as set forth in Schedule 4.26 and it is
not part of a controlled group with regard to any of the foregoing. The Company
has furnished to AHI true and correct copies of all documents evidencing plans,
obligations, or arrangements referred to in Schedule 4.26 (or true and correct
written summaries of such plans, obligations, or arrangements to the extent not
evidenced by documents) and true and correct copies of all documents evidencing
trusts relating to any such plans. Schedule 4.26 also contains a true and
correct statement of the names, relationship with the Company and its
Subsidiaries, present rates of compensation (whether in the form of salary,
bonuses, commissions, or other supplemental compensation now or hereafter
payable), and aggregate compensation for the fiscal year ended December 31,
1998 of (1) each director, officer, consultant or other employee of the Company
or any of its Subsidiaries and (2) all sales agents, dealers, or distributors
of the Company and each of its Subsidiaries. Except as set forth on Schedule
4.26, Since November 1, 1998, neither the Company nor any of its Subsidiaries
has changed the rate of compensation of any of its directors, officers,
employees, agents, dealers, or distributors.

(b) No Employee Benefit Plan (as so defined) of the Company
or of any plan of any controlled group relating to the Company is, or during
the last three years was, subject to Title IV of ERISA.

(c) There has been no violation of the reporting and
disclosure requirements imposed either under ERISA or the Code for which a
penalty has been or to the knowledge of Sellers may be imposed with respect to
any such Employee Benefit Plan of the Company or which Sellers should
reasonably know of or have constructive knowledge of. There is no litigation,
arbitration, claim, governmental or other proceeding (formal or informal),
pending and, to the knowledge of Sellers, there is no litigation, arbitration,
claim, governmental or other proceeding (formal or informal), or investigation
threatened with respect to any such Employee Benefit Plan or related trust or
with respect to any fiduciary, administrator, or sponsor (in its capacity as
such) of any such Employee Benefit Plan. No event has occurred or, to the
knowledge of Sellers, is threatened which would constitute a non-exempt
prohibited transaction under Section 406 of ERISA.

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<PAGE>

(d) Except as set forth on Schedule 4.26, the Company does
not have any Employee Pension Benefit Plans (as defined in Section 3(2) of
ERISA) and is not part of any controlled group that has any Employee Pension
Benefit Plan.

(e) The Company does not contribute or have an obligation to
contribute to any multiemployer Pension Plan within the meaning of Section
3(37) of ERISA and is not part of any controlled group that contributes, or has
an obligation to contribute, to any multi-employer Pension Plan.

(f) Neither the Company nor any of its Subsidiaries is a
party and have never been a party to any collective bargaining agreements,
memoranda of agreement, side letters, court, administrative, arbitration, ADR,
or mediation decisions or awards, wage or benefit schedules or any other
documents which reflect or pertain to understandings or practices communicated
or agreed upon between the Company or any of its Subsidiaries and any union
representatives.

(g) Except as set forth on Schedule 4.6, there are no
complaints, charges, claims, allegations or grievances pending or to the
knowledge of the Sellers threatened which reflects or pertains to: (i) any
federal, state or local labor, employment, wage or hour, workers compensation,
disability or unemployment law, regulation or ordinance; (ii) any claim for
wrongful discharge, breach of employment contract or employment related tort
(iii) any employment agreement, restrictive covenant, non-competitive agreement
or employee confidentiality agreement.

(h) The Company and each of its Subsidiaries is in full and
complete compliance with all past and present profit sharing plans, money
purchase plans, target benefit plans, ESOP's, stock bonus plans, defined
benefit plans or any other tax qualified employee benefit plan, whether
terminated or not, and any amendments thereto.

(i) The Company and each of its Subsidiaries is in full and
complete compliance with all past and present welfare benefit plans, (i.e.,
health, dental, vision, long term disability, short term disability, life
insurance, AD&D), child care, tuition reimbursement, prepaid legal services,
severance plans, programs or arrangements.

(j) The Company and each of its Subsidiaries is in full and
complete compliance with all past and present supplemental benefit plans,
deferred compensation plans, executive compensation agreements, bonus
agreements, consulting agreements or any other non-qualified employee benefit
plans.

(k) The Company and each of its Subsidiaries is in full and
complete compliance with all past and present trusts, group annuity contracts,
Voluntary Employees' Beneficiary Association, cafeteria plans and any Multiple
Employer Welfare Arrangements as described in Section 3(1) of ERISA.

(l) Neither the Company nor any of its Subsidiaries is
engaged in any prohibitive transaction and, except as set forth on Schedule
4.26, is not a fiduciary or a party in interest to any employee benefit plan
governed by ERISA.

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(m) Neither the Company nor any of its Subsidiaries is a
federal contractor, except that Safariland Government Sales, Inc. (a
wholly-owned subsidiary of the Company) is a federal contractor and, except as
set forth on Schedule 4.26, it and the Company are in compliance with all
labor, employment and wage/hour, pricing and other laws, rules and regulations
relating to the procurement, maintenance and delivery of services and products
under or pursuant to any and all federal, state or local government contracts
or other agreements or arrangements to which it is a party.

(n) In connection with subparagraphs (i) through (m) above,
except as set forth on Schedule 4.26, there are no complaints, charges, claims,
litigation, audits, investigations or administrative proceedings known or which
Sellers should reasonably know of, or which Sellers have constructive
knowledge, filed, pending or threatened.

4.27 Tax Matters. The Company has previously delivered to Purchaser
true, correct and complete copies of each of the federal, state and local
income tax returns filed by the Company and its Subsidiaries for the past five
fiscal years through 1998. Except as set forth on Schedule 4.27, all tax
returns and tax reports required to be filed with respect to the income,
operations, business or assets of the Company and its Subsidiaries have been
timely filed (or appropriate extensions have been obtained which extensions are
listed on Schedule 4.27) with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to be filed, all
of the foregoing as filed are true, correct and complete and, in all material
respects, reflect accurately all liability for taxes of the Company and its
Subsidiaries for the periods to which such returns relate, and all amounts
shown as owing thereon have been paid. Except as set forth on Schedule 4.27,
all income, profits, franchise, sales, use, value added, occupancy, property,
excise, payroll, withholding, FICA, FUTA and other taxes (including interest
and penalties), if any, collectible or payable by the Company and its
Subsidiaries or relating to or chargeable against any of its assets, revenues
or income or relating to any employee, independent contractor, creditor,
stockholder or other third party through September 30, 1998, and through the
Closing Date, were fully collected and paid by such date or provided for by
adequate reserves in the September 30, 1998 Financial Statements and all
similar items due through the Closing Date will have been fully paid by that
date or provided for by adequate reserves, whether or not any such taxes were
reported or reflected in any tax returns or filings. Except as set forth on
Schedule 4.27, no taxation authority has sought to audit the records of the
Company or any of its Subsidiaries for the purpose of verifying or disputing
any tax returns, reports or related information and disclosures provided to
such taxation authority, or for the Company's or any of its Subsidiaries'
alleged failure to provide any such tax returns, reports or related information
and disclosure. Except as provided on Schedule 4.27, no claims or deficiencies
have been asserted against or inquiries raised with the Company or any of its
Subsidiaries with respect to any taxes or other governmental charges or levies
which have not been paid or otherwise satisfied, including claims that, or
inquiries whether, the Company or any of its Subsidiaries has not filed a tax
return that it was required to file, and, to the best of the Sellers'
knowledge, there exists no reasonable basis for the making of any such claims
or inquiries. Neither the Company or any of its Subsidiaries has waived any
restrictions on assessment or collection of taxes or consented to the extension
of any statute of limitations relating to taxation. Neither the Company nor any
of its Subsidiaries has filed a consent under Section 341(f) of the Code
concerning collapsible corporations, is not and has never been a party to a tax
allocation or sharing agreement

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<PAGE>

or a member of a group filing, a consolidated federal income tax return and has
not been a United States real property holding corporation within the meaning
of Code Section 897 (c)(2), during the applicable period specified in Code
Section 897(c)(1)(A)(ii).

4.28 Material Agreements.

(a) Schedule 4.28 sets forth a brief description of all
material written and oral contracts or agreements relating to the Company and
its Subsidiaries (except with respect to the Leases, which are set forth on
Schedule 4.17, which is hereby incorporated by reference into Schedule 4.28 and
made a part thereof), including without limitation any: (i) contract resulting
in a commitment or potential commitment for expenditure or other obligation or
potential obligation, or which provides for the receipt or potential receipt,
involving in excess of Ten Thousand Dollars ($10,000.00) in any instance, or
series of related contracts that in the aggregate give rise to rights or
obligations exceeding such amount; (ii) indenture, mortgage, promissory note,
loan agreement, guarantee or other agreement or commitment for the borrowing or
lending of money or encumbrance of assets involving more than Five Thousand
Dollars ($5,000.00) in each instance or series of such agreements exceeding
such amount; (iii) agreement which restricts the Company or any of its
Subsidiaries from engaging in any line of business or from competing with any
other Person; (iv) warranties made with respect to products manufactured,
packaged, distributed or sold by the Company or any of its Subsidiaries; or (v)
any other contract, agreement, instrument, arrangement or commitment that is
material to the condition (financial or otherwise), results of operation,
assets, properties, liabilities, business or prospects of the Company or any of
its Subsidiaries (collectively, and together with the Leases, Employment
Agreements, Company Plans and all other agreements required to be disclosed on
any Schedule to this Agreement, the "Material Agreements"). The Company has
previously furnished to Purchaser true, complete and correct copies of all
written agreements, as amended, required to be listed on Schedule 4.28.

(b) Except as set forth on Schedule 4.28, none of the
Material Agreements was entered into outside the ordinary course of business of
the Company or its Subsidiaries, contains any unusual, onerous or burdensome
provisions that will impair or adversely effect in any material way the
operations of the Company or its Subsidiaries, or is reasonably likely to be
performed at a material loss.

(c) The Material Agreements, including, without limitation,
any agreement with Imperial Bank or any other contract or agreement relating to
borrowed money to which the Company or any of its Subsidiaries is a party or by
or to which it or its assets are bound or subject, are each in full force and
effect and are the valid and legally binding obligations of the Company or its
Subsidiaries and, to the best of Sellers' knowledge, the other parties thereto,
enforceable in accordance with their respective terms, subject only to
bankruptcy, insolvency or similar laws affecting the rights of creditors
generally and to general equitable principles. Neither the Company nor any of
the Sellers have received notice of default by the Company

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or any of its Subsidiaries under any of the Material Agreements, including any
agreement with Imperial Bank or any other contract or agreement relating to
borrowed money to which the Company or any of its Subsidiaries is a party or by
or to which it or its assets are bound or subject, and no event has occurred
which, with the passage of time or the giving of notice or both, would
constitute a default by the Company or any of its Subsidiaries thereunder.
Neither the Company or its Subsidiaries, nor to the Sellers' knowledge, any of
the other parties to any of the Material Agreements is in default thereunder,
nor has an event occurred which, with the passage of time or the giving of
notice or both would constitute a default by such other party thereunder.
Neither the Company or its Subsidiaries, nor any of the Sellers have received
notice of the pending or threatened cancellation, revocation or termination of
any of the Material Agreements, including, without limitation, any agreement
with Imperial Bank or any other contract or agreement relating to borrowed
money to which the Company or any of its Subsidiaries is a party or by or to
which it or its assets are bound or subject, nor are any of them aware of any
facts or circumstances which could reasonably be expected to lead to any such
cancellation, revocation or termination.

(d) Except as otherwise indicated on Schedule 4.28, to the
best of the Sellers' knowledge, after due inquiry, the continuation, validity
and effectiveness of the Material Agreements under the current terms thereof
will in no way be affected by the consummation of the transactions contemplated
by this Agreement.

4.29 Guaranties. Except as set forth on Schedule 4.29, neither the
Company nor any of its Subsidiaries is a party to any Guaranty, and no Person
is a party to any Guaranty for the benefit of the Company or any of its
Subsidiaries.

4.30 Products.

(a) Except as set forth on Schedule 4.30, there exists no set
of facts (i) which could furnish a basis for the recall, withdrawal or
suspension of any product, governmental license, approval or consent of any
governmental or regulatory agency with respect to any product distributed or
sold by the Company or any of its Subsidiaries (a "Product"), (ii) which could
furnish a basis for the recall, withdrawal or suspension by order of any state,
federal or foreign court of law of any Product, or (iii) which could have an
adverse effect on the continued operation of any facility of the Company or any
of its Subsidiaries or which could otherwise cause the Company or any of its
Subsidiaries to recall, withdraw or suspend any such Product from the market or
to change the marketing classification of any such Product.

(b) Copies of all material correspondence received or sent by
or on behalf of the Company or any of its Subsidiaries during the past five (5)
years, from or to any governmental regulatory agency have been previously
delivered to Purchaser.

4.31 Environmental Matters. None of the Leased Property nor any other
property used by the Company or any of its Subsidiaries presently or in the
past has been used to manufacture, treat, store, or dispose of any hazardous
substance and such property is free of all such substances. Except as described
on Schedule 4.31, the Company and each of its Subsidiaries is in compliance
with all laws, regulations and other federal, state or local governmental
requirements, and all applicable judgments, orders, writs, notices, decrees,
permits, licenses, approvals, consents or injunctions relating to the
generation, management, handling, transportation, treatment, disposal, storage,
delivery, discharge, release or emission of any waste, pollutant or toxic or
hazardous substance (including, without limitation, asbestos, radioactive
material and pesticides) utilized by

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the Company or any of its Subsidiaries in its business or to any other actions,
omissions or conditions affecting the environment applicable to the Company or
any of its Subsidiaries or its business as a result of any hazardous substance
utilized by the Company or any of its Subsidiaries in its business or otherwise
placed at any of the facilities owned or operated by the Company or any of its
Subsidiaries (the "Environmental Laws"). Except as described on Schedule 4.31,
neither the Sellers, nor the Company or any of its Subsidiaries (or its
directors or officers), has received any complaint, notice, order, or citation
of any actual, threatened or alleged noncompliance by the Company or any of its
Subsidiaries or the Sellers with any of the Environmental Laws, and there is no
proceeding, suit or investigation pending or, to the best of Sellers'
knowledge, threatened against any of the Company, any of its Subsidiaries, the
Sellers or any such director or officer of the Company or any of its
Subsidiaries, with respect to any violation or alleged violation of the
Environmental Laws, and there is no reasonable basis for the institution of any
such proceeding, suit or investigation.

4.32 Insolvency. The Sellers are able to pay their respective debts as
they mature and the transfer of the Securities by the Sellers to Purchaser in
accordance with the terms of this Agreement shall not constitute a voidable
preference or transfer in fraud by any creditor under applicable federal or
state insolvency law.

4.33 Accounts and Notes Receivable. Except as set forth on Schedule
4.33, all accounts and notes receivable of the Company and its Subsidiaries
have arisen in the ordinary course of business, represent valid obligations to
the Company and its Subsidiaries and, subject only to consistently recorded
reserves for bad debts, have been collected or are collectible in the aggregate
recorded amounts thereof in accordance with their terms. All items which are
required by generally accepted accounting principles to be reflected as
accounts and notes receivable on the Financial Statements and on the books of
the Company and its Subsidiaries are so reflected. Appropriate reserves have
been recorded on the books of the Company and its Subsidiaries for all items
set forth on Schedule 4.33.

4.34 Indebtedness. All Indebtedness (as herein defined) of the Company
and its Subsidiaries arising prior to September 30, 1998 is set forth in the
Financial Statements. Schedule 4.34 sets forth a true and correct listing of
all accounts payable of the Company and its Subsidiaries as of the end of the
month prior to the date hereof. No account payable of the Company or its
Subsidiaries which has arisen subsequent to the end of the month prior to the
date hereof has exceeded $225,000 nor has the aggregate of such accounts
payable exceeded $1,100,000. All Indebtedness reflected in the Financial
Statements or on Schedule 4.34 or which has arisen after September 30, 1998 has
arisen in the ordinary course of business and represents valid Indebtedness of
the Company and its Subsidiaries. As used herein, the term "Indebtedness" means
all items which, in accordance with GAAP would be included on Schedule 4.34 or
which has arisen after September 30, 1998 in the ordinary course of business
and represents valid Indebtedness of the Company and its Subsidiaries.

4.35 Premerger Notification. The Company has filed notification and
report forms with respect to the transactions contemplated by this Agreement in
accordance with the HSR Act.

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<PAGE>

4.36 Inventory Valuation. The inventory of the Company and its
Subsidiaries as set forth on the Financial Statements was, and the inventory of
the Company and its Subsidiaries currently is, in usable or salable condition
in the ordinary course of business at the amounts carried on the Financial
Statements and currently on the books and records of the Company and its
Subsidiaries, respectively. The materials, supplies and work-in-process, and
additions thereto, included in such inventory are of at least the standard
quality for such items; are suitable for the manufacture and distribution of
products for the law enforcement, military, sporting goods and automotive
markets of standard quality for such products; and are not in excess of the
normal purchasing patterns of the Company or its Subsidiaries. Except as set
forth on Schedule 4.36, the Sellers do not know of any adverse condition
affecting the supply of materials available to the Company or its Subsidiaries.
The amounts of the inventories reflected on the Financial Statements and on the
books and records of the Company and its Subsidiaries have been determined in
accordance with generally accepted accounting principles consistently applied.

4.37 INTENTIONALLY LEFT BLANK.

4.38 No Material Adverse Change. Except as set forth on Schedule 4.38,
since September 30, 1998, there has been no material adverse change in the
assets, properties, business or condition, financial or otherwise, of the
Company or its Subsidiaries, and the Sellers do not know of any such change
which is threatened, nor has there been any damage, destruction or loss
materially affecting the assets, properties, business or condition of the
Company or its Subsidiaries, whether or not covered by insurance.

4.39 Non-Purchased Assets. Except as set forth on Schedule 2.3(c),
there are no other assets, prepaid or otherwise, on the balance sheet of the
Company which would be predominately for the personal benefit of the Sellers.

4.40 Absence of Certain Business Practices. None of the Sellers or the
Company or any of its Subsidiaries, their related parties or any affiliates or,
to the best of each of the Company and each of the Sellers knowledge, any other
Person acting on behalf of or associated with the Company or any of its
Subsidiaries or any individual related to any of the foregoing Persons, acting
alone or together, has with respect to the business or activities of the
Company or its Subsidiaries: (a) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic benefits,
regardless of their nature or type, from any customer, supplier, trading
company, shipping company, governmental employee or other Person with whom the
Company or its Subsidiaries has done business directly or indirectly; or (b)
directly or indirectly, given or agreed to give any gift or similar benefit to
any customer, supplier, trading company, shipping company, governmental
employee or other Person who is or may be in a position to help or hinder the
business of the Company or its Subsidiaries (or assist the Company or any of
its Subsidiaries in connection with any actual or proposed transaction) which,
in the case of both (a) and (b) above (i) may subject the Company or any of its
Subsidiaries to any material damage or any penalty in any civil, criminal or
governmental litigation or proceeding, (ii) if not given in the past, may have
had a material adverse effect on the assets, business or, operations of the
Company or its Subsidiaries as reflected in the Financial Statements or (iii)
if not continued in the future, may

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<PAGE>

materially adversely affect the assets, business or operations of the Company
or any of its Subsidiaries or subject the Company or any of its Subsidiaries to
suit or penalty in any private or governmental litigation or proceeding.

4.41 Review of Forms 10-K, 10-Q and 8-K. Sellers have (1) received and
carefully reviewed AHI's Annual Report on Form 10-KSB, Quarterly Reports on
Form 10-QSB and 10-Q and Current Reports on Form 8-K filed by it with the
Commission since January 1, 1998, as well as AHI's Registration Statement on
Form S-3,Registration No. 333-75053 and AHI's Registration Statement on Form
S-4,Registration No. 333-38759, including the section therein entitled "Risk
Factors", and (2) had the opportunity to ask questions and receive answers from
AHI concerning such Forms 10-KSB, 10-QSB, 10-Q and 8-K, the documents
incorporated by reference therein and the terms and conditions of this
Agreement and to obtain any documents relating to AHI which are on file with
the Commission and available for inspection by the public. Sellers are aware of
the risks inherent in an investment in AHI and specifically the risks of an
investment in the AHI Common Stock. In addition, Sellers are aware and
acknowledge that there can be no assurance of the future viability or
profitability of AHI, nor can there be any assurance relating to the current or
future price of the AHI Common Stock, as quoted on the American Stock Exchange.

4.42 Disclosure. Neither this Agreement nor any Schedule hereto, or
any written statement or certificate required under Section 6.1(A) furnished at
the Closing by the Company or the Sellers, contains or will contain any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading or
omits or will omit to state a material fact necessary in order to provide a
prospective purchaser of the Securities with full and proper information as to
the business, financial condition, assets, results of operation or prospects of
the Company and its Subsidiaries and the value of its properties or the
ownership or operation of the Company.

4.43 Trust Representations. Each of the Sellers (and not the Company)
jointly and severally represent and warrant to the Purchaser as follows:

(a) The Neale A. Perkins Trust (the "Perkins Trust") was
formed pursuant to The Neale A. Perkins Trust Agreement DTD 3/13/90 ( the
"Perkins Trust Agreement").

(b) The Scott T. O'Brien Trust (the "O'Brien Trust") was
formed pursuant to The Scott T. O'Brien and Victoria S. O'Brien Revocable Trust
DTD 6/11/96 ( the "O'Brien Trust Agreement").

(c) The David M. Holmes (the "Holmes Trust") was formed
pursuant to The David M. Holmes and Katherine C. Holmes Revocable Trust DTD
1/31/97 ( the "Holmes Trust Agreement").

(d) Neale A. Perkins alone, both as an individual and as
trustee of the Perkins Trust, has full power and capacity to execute, deliver
and perform each of its obligations under this Agreement and each of the
documents to which it is a party pursuant to the terms of this Agreement. Each
of the documents to which Neale A. Perkins or the Perkins Trust is named as a

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<PAGE>

party, has been duly executed and delivered by Neale A. Perkins, and has been
duly authorized by all requisite legally required action. No material approval,
authorization or other action by, or filing with, any other person, entity or
agency is required at or prior to the closing of the transactions contemplated
by this Agreement in connection with the execution, delivery and performance by
Neale A. Perkins of each document to which he is a party and the consummation
of the transactions thereunder or contemplated thereby.

(e) Scott T. O'Brien alone, both as an individual and as
trustee of the O'Brien Trust, has full power and capacity to execute, deliver
and perform each of its obligations under this Agreement and each of the
documents to which it is a party pursuant to the terms of this Agreement. Each
of the documents to which Scott T. O'Brien or the O'Brien Trust is named as a
party, has been duly executed and delivered by Scott T. O'Brien, and has been
duly authorized by all requisite legally required action. No material approval,
authorization or other action by, or filing with, any other person, entity or
agency is required at or prior to the closing of the transactions contemplated
by this Agreement in connection with the execution, delivery and performance by
Scott T. O'Brien of each document to which he is a party and the consummation
of the transactions thereunder or contemplated thereby.

(f) David M. Holmes alone, both as an individual and as
trustee of the Holmes Trust, has full power and capacity to execute, deliver
and perform each of its obligations under this Agreement and each of the
documents to which it is a party pursuant to the terms of this Agreement. Each
of the documents to which David M. Holmes or the Holmes Trust is named as a
party, has been duly executed and delivered by David M. Holmes, and has been
duly authorized by all requisite legally required action. No material approval,
authorization or other action by, or filing with, any other person, entity or
agency is required at or prior to the closing of the transactions contemplated
by this Agreement in connection with the execution, delivery and performance by
David M. Holmes of each document to which he is a party and the consummation of
the transactions thereunder or contemplated thereby.

(g) The execution and delivery of this Agreement and the
performance of its terms by Neale A. Perkins will not conflict with or result
in a violation of: (a) any provision of federal or state law, (b) the Perkins
Trust Agreement, or (c) any material contract or other agreement or undertaking
to which Neale A. Perkins is a party or by which he is bound. Such execution,
delivery and performance will not result in the creation or imposition of any
lien on any properties or assets of the Perkins Trust or Neale A. Perkins.

(h) The execution and delivery of this Agreement and the
performance of its terms by Scott T. O'Brien will not conflict with or result
in a violation of: (a) any provision of federal or state law, (b) the O'Brien
Trust Agreement, or (c) any material contract or other agreement or undertaking
to which Scott T. O'Brien is a party or by which he is bound. Such execution,
delivery and performance will not result in the creation or imposition of any
lien on any properties or assets of the O'Brien Trust or Scott T. O'Brien.

(i) The execution and delivery of this Agreement and the
performance of its terms by David M. Holmes will not conflict with or result in
a violation of: (a) any provision

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<PAGE>

of federal or state law, (b) the Holmes Trust Agreement, or (c) any material
contract or other agreement or undertaking to which David M. Holmes is a party
or by which he is bound. Such execution, delivery and performance will not
result in the creation or imposition of any lien on any properties or assets of
the Holmes Trust or David M. Holmes.

(j) Each of the Perkins Trust Agreement and this Agreement
constitutes the legal, valid and binding obligation of Neale A. Perkins (both
as settlor and in his capacity as trustee of the Perkins Trust), and is
enforceable against the Perkins Trust and Neale A. Perkins, as the case may be,
in accordance with its respective terms. As of the date hereof, the Perkins
Trust Agreement is currently in effect and has not been rescinded or revoked
and the Perkins Trust created thereby is duly organized and validly existing.

(k) Each of the O'Brien Trust Agreement and this Agreement
constitutes the legal, valid and binding obligation of Scott T. O'Brien (both
as settlor and in his capacity as trustee of the O'Brien Trust), and is
enforceable against the O'Brien Trust and Scott T. O'Brien, as the case may be,
in accordance with its respective terms. As of the date hereof, the O'Brien
Trust Agreement is currently in effect and has not been rescinded or revoked
and the O'Brien Trust created thereby is duly organized and validly existing.

(l) Each of the Holmes Trust Agreement and this Agreement
constitutes the legal, valid and binding obligation of David M. Holmes (both as
settlor and in his capacity as trustee of the Holmes Trust), and is enforceable
against the Holmes Trust and David M. Holmes, as the case may be, in accordance
with its respective terms. As of the date hereof, the Holmes Trust Agreement is
currently in effect and has not been rescinded or revoked and the Holmes Trust
created thereby is duly organized and validly existing.

4.44 Representations and Warranties on Closing Date. The
representations and warranties contained in this Article IV shall be true and
complete on and as of the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of the Closing
Date.

ARTICLE V

ADDITIONAL AGREEMENTS

5.1 Survival of the Representations and Warranties. The
representations and warranties contained in Sections 2.1, 4.1, 4.2, 4.11, 4.12,
4.15 and 4.43 and the covenants in Sections 6.1, 7.6 or 7.7 shall survive the
Closing and remain in effect indefinitely. The representations and warranties
contained in Section 4.31 (relating to environmental matters), shall survive
the Closing until the expiration of three (3) years from the Closing Date. The
representations and warranties contained in Section 4.27 (relating to taxes),
shall survive the Closing until the later of the expiration of twenty four
months from the Closing Date and the expiration of the last day on which any
tax may be validly assessed by the Internal Revenue Service or any other
governmental entity against the Company's assets or the Company's business.
Except as set forth above, the

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<PAGE>

representations and warranties and covenants of the Sellers, the Company and
the Purchaser contained in this Agreement shall survive the Closing until the
expiration of twenty-four months from the Closing Date.

5.2 Investigation. The representations, warranties, covenants and
agreements set forth in this Agreement shall not be affected or diminished in
any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. All statements contained herein or in any
schedule, certificate, exhibit, list or other document delivered pursuant
hereto , shall be deemed to be representations and warranties for purposes of
this Agreement.

5.3 Indemnification.

(a) By the Company and Sellers. Except with respect to the provisions
of Sections 5.3(a)(ii), 5.3(a)(iii), 5.3(a)(vii) and 5.3(a)(ix), subject to the
limitations set forth in Section 5.3(d)(i), the Company (but, with respect to
the Company, only if the Closing has not occurred) and each of the Sellers
agree, jointly and severally, to indemnify and hold harmless Purchaser and its
directors, officers, employees and agents from, against and in respect of, the
full amount of any and all liabilities, damages, claims, deficiencies, fines,
assessments, losses, taxes, penalties, interest, costs and expenses, including,
without limitation, reasonable fees and disbursements of counsel arising from,
in connection with, or incident to (i) any breach or violation of any of the
representations, warranties, covenants or agreements of the Company or any of
the Sellers contained in this Agreement or any agreement, document or other
writing referred to herein and delivered pursuant hereto to which any
Indemnifying Party (as hereinafter defined) is a party; (ii) any liability
resulting from any litigation not covered by insurance involving the Company or
any of its Subsidiaries for (1) any and all claims (excluding product liability
claims) arising out of, relating to, resulting from or caused by any
transaction, event, condition, occurrence or situation arising prior to and
including the Closing Date, regardless of whether or not such litigation was
disclosed by the Sellers on Schedule 4.6, or (2) any and all product liability
claims relating to any event, accident or occurrence arising prior to and
including the Closing Date; (iii) any and all taxes and related penalties,
interest or other charges (1) for any unaccrued or unreported tax liabilities
with respect to the Company or any of its Subsidiaries for all periods prior to
and including the Closing Date; (2) for any liability with respect to the
federal tax audit of the Company for the fiscal years ended September 30, 1995;
(3) for any liability to the Company or the Purchaser resulting from the sale
of the Non-Purchased Assets and the payment and satisfaction of the
Non-Purchased Asset Note; and (4) for any tax liability of any of the Sellers
or arising out of the ownership or operation of the Company or its businesses
by the Sellers or out of any position taken by any of the Sellers in connection
with the transactions contemplated by this Agreement; (iv) except for product
liability claims relating to any event, accident or occurrence arising after
the Closing Date, any and all claims arising out of, relating to, resulting
from or caused by any transaction, event, condition, occurrence or situation in
any way relating to the Company or any of its Subsidiaries, or Safariland
Ballistics, Inc., Rogers Holster, Inc. or Safariland Graphics, or the conduct
of its or their business arising or occurring on or prior to the Closing Date
without regard to whether such claim exists on the Closing Date or arises at
any time thereafter; (v) any and all claims arising out of, relating to,
resulting from or caused by any transaction, event, condition, occurrence or
situation in any way relating to (1)

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<PAGE>

Mark Nelson's employment by and ownership of any capital stock of the Company;
or (2) the prior transfer of any shares of capital stock of the Company from
Neale A. Perkins or the Perkins Trust to Mark Nelson or a trust for the benefit
of Mark Nelson; (vi) any and all liabilities owing to any investment banker,
broker, finder or financial advisor engaged by the Company or any Seller; (vii)
to the extent that the Sellers do not satisfy any payment obligations set forth
in Section 2.3(a) ; (viii)any liability resulting from any bonus or severance
plans or policies of the Company instituted prior to the Closing Date, to the
extent that any bonus or severance paid to any employee currently employed by
the Company after the Closing is less than what any such employee claims that
he/she should have been entitled to under any bonus or severance plans or
policies of the Company instituted prior to the Closing Date; (ix) any and all
claims or liability arising out of, relating to, resulting from or caused by
any default by NAP Properties, Ltd. to its lenders under NAP Properties, Ltd.'s
Industrial Development Bond financing, including the failure to obtain the
consent of such lenders to enter into the New Lease (as hereinafter defined);
and (x) any and all actions, suits, proceedings, demands, assessments or
judgments, costs and expenses incidental to any of the foregoing. The
provisions of this Section 5.3(a) are for the benefit of the Purchaser and
shall not give rise to any right of action by or for the Sellers.

(b) By Purchaser. Purchaser agrees to indemnify and hold
harmless the Sellers from, against and in respect of, the full amount of any
and all liabilities, damages, claims, deficiencies, fines, assessments, losses,
taxes, penalties, interest, costs and expenses, including, without limitation,
reasonable fees and disbursements of counsel arising from, in connection with,
or incident to (i) any breach or violation of any of the representations,
warranties, covenants or agreements of Purchaser contained in this Agreement or
any agreement referred to herein and delivered at or prior to the Closing; (ii)
any liability for taxes arising out of a Section 338 election by the Purchaser
under state law or the Code; (iii) any and all liabilities owing to any
investment banker, broker, finder or financial advisor engaged by the Purchaser
and (iv) any and all actions, suits, proceedings, demands, assessments or
judgments, costs and expenses incidental to any of the foregoing.

(c) Indemnity Procedure. A party or parties hereto agreeing
to be responsible for or to indemnify against any matter pursuant to this
Agreement is referred to herein as the "Indemnifying Party" and the other party
or parties claiming indemnity is referred to as the "Indemnified Party".

An Indemnified Party under this Agreement shall, with respect to
claims asserted against such party by any third party, give written notice to
the Indemnifying Party of any liability which might give rise to a claim for
indemnity under this Agreement, to the extent reasonably possible, not later
than ten (10) days prior to the date any answer or responsive pleading is due,
and with respect to other matters for which the Indemnified Party may seek
indemnification, give prompt written notice to the Indemnifying Party of any
liability which might give rise to a claim for indemnity; provided, however,
that any failure to give such notice will not waive any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
materially prejudiced.

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<PAGE>

The Indemnifying Party shall have the right, at its election, to take
over the defense or settlement of such claim by giving written notice to the
Indemnified Party at least ten (10) days prior to the time when an answer or
other responsive pleading or notice with respect thereto is required. If the
Indemnifying Party makes such election, it may conduct the defense of such
claim through counsel of its choosing (subject to the Indemnified Party's
approval of such counsel, which approval shall not be unreasonably withheld),
shall be solely responsible for the expenses of such defense and shall be bound
by the results of its defense or settlement of the claim. The Indemnifying
Party shall not settle any such claim without prior notice to and consultation
with the Indemnified Party, and no such settlement involving any equitable
relief or which might have an adverse effect on the Indemnified Party may be
agreed to without the written consent of the Indemnified Party (which consent
shall not be unreasonably withheld). So long as the Indemnifying Party is
diligently contesting any such claim in good faith, the Indemnified Party may
pay or settle such claim only at its own expense and the Indemnifying Party
will not be responsible for the fees of separate legal counsel to the
Indemnified Party, unless the named parties to any proceeding include both
parties and representation of both parties by the same counsel would be
inappropriate in the reasonable opinion of the Indemnified Party. If the
Indemnifying Party does not make such election, or having made such election
does not, in the reasonable opinion of the Indemnified Party proceed diligently
to defend such claim, then the Indemnified Party may (after written notice to
the Indemnifying Party), at the expense of the Indemnifying Party, elect to
take over the defense of and proceed to handle such claim in its discretion and
the Indemnifying Party shall be bound by any defense or settlement that the
Indemnified Party may make in good faith with respect to such claim. In
connection therewith, the Indemnifying Party will fully cooperate with the
Indemnified Party should the Indemnified Party elect to take over the defense
of any such claim.

The parties agree to cooperate in defending such third party claims
and the Indemnified Party shall provide such cooperation and such access to its
books, records and properties as the Indemnifying Party shall reasonably
request with respect to any matter for which indemnification is sought
hereunder; and the parties hereto agree to cooperate with each other in order
to ensure the proper and adequate defense thereof.

With regard to claims of third parties for which indemnification is
payable hereunder, such indemnification shall be paid by the Indemnifying Party
upon the earlier to occur of: (i) the entry of a judgment against the
Indemnified Party and the expiration of any applicable appeal period, or if
earlier, five (5) days prior to the date that the judgment creditor has the
right to execute the judgment; (ii) the entry of an unappealable judgment or
final appellate decision against the Indemnified Party; or (iii) a settlement
of the claim. Notwithstanding the foregoing, provided that there is no good
faith dispute as to the applicability of indemnification, the reasonable
expenses of counsel to the Indemnified Party shall be reimbursed on a current
basis by the Indemnifying Party if such expenses are a liability of the
Indemnifying Party. With regard to other claims for which indemnification is
payable hereunder, such indemnification shall be paid promptly by the
Indemnifying Party upon demand by the Indemnified Party.

(d) Limitations on Indemnification.

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(i) Anything in this Agreement to the contrary notwithstanding, no
indemnification payment shall be made to the Purchaser pursuant to this
Agreement, whether from the Escrow Fund or otherwise, until the amounts which
the Purchaser would otherwise be entitled to receive as indemnification under
this Agreement aggregate at least $250,000, which shall be treated as a
reduction of Purchaser's damages. The indemnification provisions set forth in
Sections 5.3(a)(ii), 5.3(a)(iii), 5.3(a)(vii), 5.3(a)(v)(2) and 5.3(a)(ix) or a
claim for "fraud" (as hereinafter defined) shall not be subject to the
limitations set forth in this Section 5.3(d)(i) and shall be indemnified to
Purchaser dollar for dollar to the extent any liability with respect to such
matters exists.

(ii) The maximum liability of all Sellers to Purchaser and any and all
Indemnified Parties for any claim arising from or relating to this Agreement or
the transactions contemplated hereby, whether asserted as breach of contract,
tort, violation of statute or otherwise, irrespective of the theory or basis of
such claim, shall not exceed $20,000,000, provided, that the limitation set
forth in this sentence shall not apply to (1) any breach by Sellers of the
representations, warranties or covenants contained in Sections 4.1, 4.2, 4.11,
4.12, 4.15, 4.43, 5.3(a)(ix),7.6 or 7.7 of this Agreement, or (2) the
commission of "fraud" by the Sellers with respect to any matters pertaining to
this Agreement and the consummation of the transactions contemplated hereby.
For purposes of this Section 5.3(d)(ii), the term "fraud" shall mean the
making, by the Company or any Seller, directly or indirectly of any untrue
statement of a material fact or the omission to state a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading; provided, that with respect to this portion of
the definition of "fraud", the person making any untrue statement of a material
fact or omitting to state a material fact knows such statement or omission to
be untrue when made or omitted. "Knowledge" for purposes of the definition of
"fraud" under this Section 5.3(d)(ii) and the last sentence of Section 5.6
shall mean the conscious awareness of such person as to the lack of
truthfulness of the statement or omission.

(iii) The extent to which any Indemnified Party shall be entitled to
indemnification hereunder shall be reduced by (1) any tax benefit actually
realized by an Indemnified Party, and (2) any insurance proceeds received by
the Indemnified Party on account of the claim that the Indemnified Party is
seeking to be indemnified for irrespective of the identity of the party that
paid for such insurance.

(e) Resort to Escrowed Shares. Except for the items set forth
in Sections 2.3(b) and 5.3(a)(vii), the Purchaser shall first be required to
resort to the Escrowed Shares for the amount of any loss for which the Sellers
are required to indemnify the Purchaser pursuant to the provisions of this
Agreement. The Purchaser shall have the right to reduce the number of Escrowed
Shares by the amount of any losses for which Sellers are required to indemnify
Purchaser pursuant to the provisions of Section 5.3(a) above or for any
adjustments made pursuant to Section 2.3, the value of which shall be based
upon the average closing price of such shares in the American Stock Exchange
for the ten consecutive trading days ending five trading days prior to the date
of determination. If the amount of deduction is subsequently determined to be
in excess of the amount which Purchaser is legally entitled to deduct,
Purchaser shall promptly pay such difference to Sellers, after such final
determination. Pursuant to Section 2.2 herein, if no claims have arisen
pursuant to Section 5.3(a) hereof on the Release Date the Escrowed Shares shall
be released to Sellers.

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5.4 Power of Attorney. The Sellers each hereby irrevocably constitute
and appoint Jonathan M. Spiller, the President and Chief Executive Officer of
AHI, with full power of substitution, the true and lawful attorney-in-fact (the
"Attorney") of Sellers with the full power in the name of, for and on behalf of
Sellers, to effect any and all sales of the Escrowed Shares delivered to
Sellers pursuant to this Agreement. The power and authority granted to the
Attorney hereunder shall include, but not be limited to, the power and
authority to endorse and deliver stock certificates and stock powers, to
instruct all appropriate persons to sell and deliver the Consideration Shares
in accordance with the instructions of the Purchaser, all in conformity with
the terms and provisions of this Agreement and to perform such other acts as
may be necessary or appropriate to carry out the intent and purposes of the
foregoing. This power of attorney is an agency coupled with an interest and all
authority conferred hereby shall be irrevocable.

5.5 General Release. As additional consideration for the sale of the
Securities pursuant to this Agreement, each of the Sellers hereby
unconditionally and irrevocably releases and forever discharges, effective as
of the Closing Date, the Company and its officers, directors, employees and
agents, from any and all rights, claims, demands, judgments, obligations,
liabilities and damages, whether accrued or unaccrued, asserted or unasserted,
and whether known or unknown ("Claims"), relating to the Company which ever
existed or now exist, by reason of any tort, breach of contract, violation of
law or other act or failure to act which shall have occurred at or prior to the
Closing Date, or in relation to any other liabilities of the Company to the
Sellers. The Sellers expressly intend that the foregoing release shall be
effective regardless of whether the basis for any claim or right hereby
released shall have been known to or anticipated by the Sellers.

5.6 Joint and Several Obligation. Except as otherwise set forth below,
all liabilities of the Company, each Trust and each Executive hereunder shall
be the joint and several obligation of each of the Trusts and the Executives,
and the Company for the period prior to the Closing Date to the extent that the
Closing has not occurred, and in the case of any breach or other violation of
any of the terms and provisions of this Agreement AHI or the Purchaser may seek
to enforce any remedy against any or all of the Company, the Trusts or the
Executives as AHI or the Purchaser shall determine in their sole discretion.
The provisions of this Section 5.6 are for the benefit of the Purchaser and
shall not give rise to any right of action by or for the Sellers.
Notwithstanding anything to the contrary contained herein, the Sellers shall be
severally, but not jointly, liable for their obligations under Sections 7.6,
7.7 and 7.11 hereof. Further, with respect to the making of any untrue
statement of a material fact or the omission to state a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading by any Seller, the liability of the Sellers
shall be joint and several with respect to the Sellers who have knowledge of
such "fraud" and not joint and several to those who have no knowledge of such
"fraud."

ARTICLE VI

CLOSING; DELIVERIES; CONDITIONS PRECEDENT

6.1 Closing; Effective Date. Subject to the terms and conditions set
forth herein, the closing of the transactions contemplated by this Agreement
(the "Closing") shall take

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place at the offices of Kane Kessler, P.C., 1350 Avenue of the Americas, New
York, New York 10019, on April 12, 1999, or on such other date and at such
other place as may be agreed to by the parties. All proceedings to be taken and
all documents to be executed at the Closing shall be deemed to have been taken,
delivered and executed simultaneously, and no proceeding shall be deemed taken
nor documents deemed executed or delivered until all have been taken, delivered
and executed.

(A) At Closing, the Sellers shall deliver the following documents to
Purchaser:

(i) the certificates representing the Securities, together
with stock powers duly executed in blank;

(ii) the written resignations of each of the directors and
officers of the Company, as may be requested by Purchaser, effective upon
Closing;

(iii) the minute books of the Company, including its
corporate seals, unissued stock certificates, stock registers, Certificate of
Incorporation, bylaws and corporate minutes approving the terms and conditions
of this Agreement, the documents to be executed in connection herewith and the
transactions contemplated hereby certified by the Secretary of the Company;

(iv) certificates issued by the Secretary of State or other
similar appropriate governmental department, as to the good standing of the
Company in its jurisdiction of incorporation and certifying its Certificate of
Incorporation;

(v) the written consents (on terms satisfactory to Purchaser)
of the lessor to each Leased Property to which consent is required under the
terms of the Leases for consummation of the transactions contemplated hereby;

(vi) the Consulting Agreements by and between the Company and
each of Neale A. Perkins and Scott O'Brien, duly executed by each of Neale A.
Perkins and Scott O'Brien and in the forms attached as Exhibits "C" and "D"
hereto (the "Consulting Agreements");

(vii) the certificate referred to in Section 6.2(d);

(viii) a certificate of the Sellers certifying that the
Company has filed an application with the California Department of Corporations
requesting the removal of the legend set forth on the certificates representing
the Securities;

(ix) a certificate of the Sellers certifying that from
December 31, 1998, there have been no payments by the Company to the Sellers or
any Affiliates of the Sellers other than (a) salary at an annual rate as set
forth on Schedule 4.24, (b) reasonable expense reimbursements consistent with
past practices, or (c) rent payable to NAP Properties, Ltd. in accordance with
the lease for the premises of the Company;

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(x) a certificate of the Sellers certifying that (i) there is
no outstanding indebtedness owing by any of the Sellers or their respective
affiliates or family members to the Company other than as indicated in the
Non-Purchased Assets; and (ii) there is no outstanding indebtedness owing by
the Company to any of the Sellers or their respective affiliates or family
members;

(xi) the Escrow Agreement, duly executed by the Sellers with
stock powers executed in blank and medallion guaranteed;

(xii) an Investment Representation Letter regarding the
acceptance of the Consideration Shares in the form of Exhibit E attached
hereto; and

(xiv) such other documents and instruments as the Purchaser
may reasonably request.

(B) At Closing, Purchaser shall deliver the following documents to the
Sellers:

(i) a wire transfer of funds to the Sellers (and to Mark
Nelson for the release of certain of the Securities) in the amounts set forth
on Schedule A hereto;

(ii) the certificates of AHI Common Stock to be delivered (1)
to the Sellers, and (2) to the Escrow Agent;

(iii) the Escrow Agreement, duly executed by the Purchaser;

(iv) a certificate of the Secretary of State of the State of
Delaware, as of a recent date, as to the good standing of Purchaser and
certifying its Certificate of Incorporation;

(v) a certificate, dated the Closing Date, of the Secretary
of Purchaser, setting forth the authorizing resolutions adopted by Purchaser's
Board of Directors with respect to the transactions contemplated hereby;

(vi) the certificate referred to in Section 6.3(d);

(vii) an assignment of the Texas State Note; and

(viii) such other documents and instruments as the Seller may
reasonably request;

6.2 Conditions Precedent to the Obligations of Purchaser. Each and
every obligation of Purchaser to consummate the transactions described in this
Agreement and any and all liability of Purchaser to the Sellers shall be
subject to the fulfillment on or before the Closing Date of the following
conditions precedent:

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(a) Representations and Warranties True. Each of the
representations and warranties of the Company and each of the Sellers contained
herein or in any certificate or other document delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby shall be
true and correct as of the Closing Date with the same force and effect as
though made on and as of such date.

(b) Performance. The Sellers shall have performed and
complied with all of the agreements, covenants and obligations required under
this Agreement to be performed or complied with by them on or prior to the
Closing Date.

(c) No Material Adverse Change. Except as expressly permitted
in the sole discretion of the Purchaser, or contemplated by this Agreement, no
event or condition shall have occurred which has adversely affected or may
adversely affect in any respect the condition (financial or otherwise) of the
Company or of the Company's assets, liabilities (whether accrued, absolute,
contingent or otherwise), earnings, book value, business or operations based
upon the Company's audited financial statements as of September 30, 1998 as
provided to AHI, and the Company shall have operated its business only in the
ordinary course during the period from September 30, 1998 through the Closing
Date. All supply and distribution agreements and similar business relationships
to which the Company is currently a party shall be in full force and effect in
accordance with their respective terms.

(d) Sellers' Certificate. The Sellers shall have delivered to
Purchaser a certificate dated the Closing Date, certifying that the conditions
specified in Section 6.2(a), (b) and (c) above have been fulfilled and as to
such other matters as Purchaser may reasonably request.

(e) No Litigation. No litigation, arbitration or other legal
or administrative proceeding shall have been commenced or be pending by or
before any court, arbitration panel or governmental authority or official, and
no statute, rule or regulation of any foreign or domestic, national or local
government or agency thereof shall have been enacted after the date of this
Agreement, and no judicial or administrative decision shall have been rendered
which enjoins or prohibits, or seeks to enjoin or prohibit, the consummation of
all or any of the transactions contemplated by this Agreement.

(f) Governmental Permits and Approvals. Any and all permits
and approvals from any governmental or regulatory body, including with respect
to the HSR Act, required for the lawful consummation of the Closing shall have
been obtained.

(g) Consents. Purchaser and the Sellers shall have obtained,
all authorizations, consents, waivers and approvals as may be required to
consummate the transactions contemplated by this Agreement including, but not
limited to, any required notices to creditors of the Company and the consents
of any of the landlords to the Leased Property which is required in accordance
with the terms of the Leases and consents with respect to any Material
Agreement.

(h) Due Diligence Review. AHI shall have completed its due
diligence investigation of the Company to its satisfaction, in its sole and
absolute discretion.

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(i) Opinion of Counsel. The favorable opinions of Inglis,
Ledbetter & Gower LLP, Christie Parker & Hale and Baker & McKenzie, counsel to
the Company and the Sellers, dated the Closing Date, addressed to AHI and the
Purchaser, in form and substance reasonably acceptable to Purchaser.

(j) Satisfactory Business Review. The Purchaser shall have
satisfied itself, after receipt and consideration of the Schedules and after
the Purchaser and its representatives have completed the review of the business
of the Company contemplated by this Agreement, that none of the information
revealed thereby or in the opinion of the Purchaser may result in, a materially
adverse change in the business or financial condition of the Company.

(k) Payment of Taxes. Sellers shall have fully satisfied all
tax liabilities and obligations and shall be responsible for any and all taxes
and related penalties, interest or other charges with respect to the Company
for all periods prior to and including the Closing Date, other than taxes for
which reserves were taken as reflected on the Post Closing Balance Sheet.

(l) Consulting Agreements. Neale A. Perkins and Scott O'Brien
shall have entered into the Consulting Agreements with the Company.

(m) Option Agreement. The individuals designated by the
Sellers to be receiving options to purchase AHI Common Stock pursuant to
Section 2.3(g) shall have entered into an Option Agreement in the form attached
as Exhibit "F" hereto (the "Option Agreement").

(n) Lease Agreement. NAP Properties shall have entered into a
new lease with the Company, satisfactory to the Purchaser in its sole and
absolute discretion, for the premises at 3120 East Mission Boulevard, Ontario,
CA in the form of Exhibit "G" attached hereto (the "New Lease").

(o) Hart-Scott-Rodino. The waiting period specified in the
HSR Act, including any extensions thereof, shall have expired.

(p) Prior Stockholders' Agreement. The Stockholders'
Agreement by and among the Company, Sellers and Mark Nelson shall have been
terminated.

(q) Joint Venture Agreement. The Joint Venture Agreement by
and between the Company and The Stewart Group shall have been terminated.

(r) Payment of Debts. Each Seller or Executive, as the case
may be, shall have paid to the Company any amounts owed by such person to the
Company.

(s) Release of Industrial Revenue Bond Guaranty. The Company
shall have been released of its obligation to guaranty certain obligations of
NAP Properties, Ltd. relating to NAP Properties, Ltd.'s Industrial Revenue
Bonds, including a release and termination of all liens, security interests,
mortgages and any and all other obligations relating thereto.

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<PAGE>

(t) Release of VISCO Guaranty. The Company shall have been
released of its obligation to guaranty certain obligations of Visual Image
Systems Company, LLC to Imperial Bank.

(u) Bank of America Release. Bank of America shall have
released all of its liens on the Intellectual Property Rights of the Company.

(v) Imperial Bank Pay-Off. The outstanding amount of the
Credit Facilities shall be repaid in full and the release and termination of
all liens, security interests, mortgages and guarantees with respect thereto
shall have been obtained.

6.3 Conditions Precedent to the Obligations of Seller. Each and every
obligation of Sellers to consummate the transactions described in this
Agreement and any and all liability of Sellers to Purchaser shall be subject to
the fulfillment on or before the Closing Date of the following conditions
precedent:

(a) Representations and Warranties True. Each of the
representations and warranties of Purchaser contained herein or in any
certificate or other document delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be true and correct
in all material respects as of the Closing Date with the same force and effect
as though made on and as of such date.

(b) Performance. Purchaser shall have performed and complied
in all respects with all of the agreements, covenants and obligations required
under this Agreement to be performed or complied with by it on or prior to the
Closing Date.

(c) Officers' Certificate. Purchaser shall have delivered to
the Sellers, a certificate addressed to Sellers executed by Purchaser's
President or Chief Executive Officer, dated the Closing Date, certifying that
the conditions specified in Sections 6.3(a) and (b) above have been fulfilled.

(d) No Litigation. No litigation, arbitration or other legal
or administrative proceeding shall have been commenced or be pending by or
before any court, arbitration panel or governmental authority or official, and
no statute, rule or regulation of any foreign or domestic, national or local
government or agency thereof shall have been enacted after the date of this
Agreement, and no judicial or administrative decision shall have been rendered
which enjoins or prohibits, or seeks to enjoin or prohibit, the consummation of
all or any of the transactions contemplated by this Agreement.

(e) Consents. Purchaser and Sellers shall have obtained all
authorizations, consents, waivers and approvals as may be required to
consummate the transactions contemplated by this Agreement including, but not
limited to, the consents of any of the landlords to the Leased Property which
is required in accordance with the terms of the Leases.

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<PAGE>

(f) Hart-Scott-Rodino. The waiting period specified in the
HSR Act, including any extensions thereof, shall have expired.

(g) Consulting Agreements. Neale A. Perkins and Scott O'Brien
shall have entered into the Consulting Agreements with the Company.

(h) Lease Agreement. The Purchaser shall have entered into
the New Lease.

6.4 Best Efforts. Subject to the terms and conditions provided in this
Agreement, each of the parties shall use their respective best efforts in good
faith to take or cause to be taken as promptly as practicable all reasonable
actions that are within its power to cause to be fulfilled those of the
conditions precedent to its obligations or the obligations of the other parties
to consummate the transactions contemplated by this Agreement that are
dependent upon its actions, including obtaining all necessary consents,
authorizations, orders, approvals and waivers.

6.5 Termination. This Agreement and the transactions contemplated
hereby may be terminated (i) at any time by the mutual consent of the parties
hereto; (ii) by Sellers, jointly, or by Purchaser, if the Closing has not
occurred on or prior to May 31, 1999 (such date of termination being referred
to herein as the "Termination Date"), provided the failure of the Closing to
occur by such date is not the result of the failure of the party seeking to
terminate this Agreement to perform or fulfill any of its obligations
hereunder; (iii) by Purchaser at any time at or prior to Closing in its sole
discretion if (1) any of the representations or warranties of the Sellers in
this Agreement are not true, accurate and complete or if the Sellers breach any
covenant contained in this Agreement or (2) any of the conditions precedent to
Sellers' obligations to conduct the Closing have not been satisfied by the date
required thereof; (iv) by Sellers at any time at or prior to Closing in their
sole discretion if (1) any of the representations or warranties of the
Purchaser in this Agreement are not true, accurate and complete or if the
Purchaser breaches any covenant contained in this Agreement or (2) any of the
conditions precedent to Purchaser's obligations to conduct the Closing have not
been satisfied by the date required thereof. If this Agreement is terminated
pursuant to this Section 6.5, written notice thereof shall promptly be given by
the party electing such termination to the other party and, subject to the
expiration of the cure periods provided in clauses (iii) and (iv) above, if
any, this Agreement shall terminate without further actions by the parties and
no party shall have any further obligations under this Agreement.
Notwithstanding the preceding sentence, the respective obligations of the
parties under Sections 7.3, 7.5, 8.9 and 8.16 shall survive the termination of
this Agreement. Notwithstanding anything to the contrary contained herein, if
the termination of this Agreement is a result of the willful misrepresentation,
willful inaccuracy or omission in a representation, willful breach of warranty,
fraud or any willful failure to perform or comply with any covenant or
agreement contained herein, the aggrieved party shall be entitled to recover
from the non-performing party all out-of-pocket expenses which such aggrieved
party has incurred and the termination of this Agreement shall not be deemed or
construed as limiting or denying any other legal or equitable right or remedy
of such party.

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ARTICLE VII

COVENANTS

7.1 Interim Operations of the Company. During the period from the date
of this Agreement to the Closing Date, except with Purchaser's prior specific
written consent or as expressly contemplated by this Agreement, the Sellers
shall cause the Company to operate its business only in the ordinary and usual
course consistent with past practices and to preserve intact its business
organization and good will in all material respects. Additionally, during the
period from the date of this Agreement to the Closing Date, the Sellers shall
cause the Company not to do any of the following (unless otherwise expressly
contemplated by this Agreement or permitted in writing by Purchaser):

(i) amend its Certificate of Incorporation or By-Laws;

(ii) issue, sell or authorize for issuance or sale, shares of
any class of its securities (including, but not limited
to, by way of stock split or dividend) or any
subscriptions, options, warrants, rights or con vertible
securities, or enter into any agreements or commitments of
any character obligating it to issue or sell any such
securities;

(iii) redeem, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock or any option,
warrant or other right to purchase or acquire any such
shares;

(iv) declare or pay any dividend or other distribution (whether
in cash, stock or other property) with respect to its
capital stock, except the payment to the Perkins Trust of
its pro-rata dividend payment on the Outstanding Preferred
Stock through March 31, 1999.

(v) voluntarily sell, transfer, surrender, abandon or dispose
of any of its assets or property rights (tangible or
intangible), other than the Non-Purchased Assets or in the
ordinary course of business consistent with past
practices;

(vi) grant or make any mortgage or pledge or subject itself or
any of its properties or assets to any lien, charge or
encumbrance of any kind, except liens for taxes not
currently due;

(vii) create, incur or assume any liability or indebtedness,
except trade indebtedness in the ordinary course of
business consistent with past practices;

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(viii) make or commit to make any capital expenditures exceeding
in the aggregate Ten Thousand Dollars ($10,000.00);

(ix) become subject to any Guaranty;

(x) apply any of its assets to the direct or indirect payment,
discharge, satisfaction or reduction of any amount payable
directly or indirectly to or for the benefit of the
Sellers or any Affiliate of the Sellers or any Related
Party or to the prepayment of any such amounts, other than
payment of salary in the ordinary course consistent with
past practice, compensation benefits, and expenses payable
in the ordinary course of business to Seller and scheduled
lease payments under the Leases listed on Schedule 4.22,
including rent on the buildings located at 3120 East
Mission Boulevard, Ontario, CA;

(xi) grant any increase in the compensation payable or to
become payable to directors, officers or employees
(including, without limitation, any such increase pursuant
to any bonus, pension, profit-sharing or other plan or
commitment);

(xii) except as listed on Schedule 7.1, enter into any agreement
which would be a Material Agreement, or amend or terminate
any existing Material Agreement, which is outside the
ordinary course of business consistent with past
practices. With respect to the foregoing, the Sellers
shall provide Purchaser with a complete list of any such
Material Agreement not entered into in the ordinary course
of business between the date hereof and the Closing Date;

(xiii) alter the manner of keeping its books, accounts or
records, or change in any manner the accounting practices
therein reflected;

(xiv) except as set forth on Schedule 7.1, enter into any
commitment or transaction other than in the ordinary
course of business consistent with past practices;

(xv) do any act, or omit to do any act, or permit to the extent
within the Company's or the Sellers' control, any act or
omission to act which would cause a violation or breach of
any of the representations, warranties or covenants of the
Company or the Sellers set forth in this Agreement;

(xvi) take any action which has or could have a Material Adverse
Effect on the Company, or on employee, customer or
supplier relations; or

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(xvii) agree, whether in writing or otherwise, to do any of the
foregoing.

7.2 Access. The Sellers shall, and shall cause the Company to, afford
to Purchaser and its agents and representatives, access throughout the period
prior to the Closing Date to the properties, books, records and contracts of
the Company, for the purpose of permitting Purchaser to fully investigate and
perform a due diligence review of the Company, their respective businesses,
assets and properties, and financial condition, provided that such access shall
be granted during normal business hours in such a manner as to not unreasonably
interfere with the Company' normal business operations. During such period the
Sellers shall furnish promptly to Purchaser copies of (i) all correspondence
received or sent by or on behalf of the Company from or to any governmental
authority and (ii) all other information and documents concerning its business,
assets, liabilities, properties and personnel as Purchaser may reasonably
request.

7.3 Confidentiality (through Closing Date). Except as otherwise
required in the performance of obligations under this Agreement and except as
otherwise required by law, any non-public information received by a party or
its advisors from the other party shall be kept confi dential and shall not be
used or disclosed for any purpose other than in furtherance of the transactions
contemplated by this Agreement. Such confidential information includes, without
limitation, audited and unaudited financial statements that show the Company
current and projected costs, and detailed financial information supporting such
statements. Purchaser shall not use (or permit to be used) any confidential
information in any manner to compete against the Company, whether with respect
to corporate acquisitions, sales, financing, development, management,
investment, or otherwise. The obligation of confidentiality shall not extend to
information (a) which is or shall become generally available to the public
other than as a result of an unauthorized disclosure by a party to this
Agreement or a person to whom a party has provided such information, (b) which
was available to a party to this Agreement on a nonconfidential basis prior to
its disclosure by one party to the other pursuant to this Agreement, (c) was
independently developed by Purchaser or (d) which is disclosed by Purchaser in
any legal proceeding requiring any such disclosure. Upon any termination of
this Agreement, each party shall promptly return any confidential information
received from the other party and, upon request, shall destroy any copies of
such information in its possession. The covenants of the parties contained in
this Section 7.3 supersedes the confidentiality agreement between the parties,
dated December 29, 1998, and shall survive any termination of this Agreement
until the earlier of (i) two (2) years from the date hereof, or (ii) the date
when such information becomes generally available to the public, but shall
terminate at the Closing, if it occurs, with respect to information concerning
the Company.

7.4 Notification. Each party to this Agreement shall promptly notify
the other party in writing of the occurrence, or pending or threatened
occurrence, of any event that would constitute a breach or violation of this
Agreement by any party or that would cause any representation or warranty made
by the notifying party in this Agreement to be false or misleading in any
respect (including without limitation, any event or circumstance which would
have been required to be disclosed on any schedule to this Agreement had such
event or circumstance occurred or existed on or prior to the date of this
Agreement). Any such notification shall not limit or alter any of the
representations, warranties or covenants of the parties set forth in this
Agreement nor any

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rights or remedies a party may have with respect to a breach of any
representation, warranty or covenant.

7.5 Acquisition Proposals; No Solicitation. Except for the
transactions contemplated by this Agreement, unless and until July 15, 1999,
the Sellers shall not, nor will it permit the Company, nor any of their
respective officers, directors, Affiliates, representatives, employees or
agents to, directly or indirectly (i) solicit, encourage, initiate or
participate in any negotiations or discussions with respect to any offer or
proposal to acquire all or any material part of the business and properties or
capital stock of the Company or a sale of a material equity or debt security of
the Company, whether by merger, consolidation, purchase of assets or otherwise,
or (ii) except as required by law, disclose to any Person any information not
customarily disclosed concerning the business, properties or financial
statements of the Company, afford to any Person other than Purchaser and its
designees access to the properties, books or records of the Company or
otherwise assist or encourage any Person in connection with any of the
foregoing. If the Seller or the Company shall receive any offer or proposal,
written or otherwise, of the type referred to above, the Seller shall promptly
inform Purchaser of such offer or proposal and furnish Purchaser with a copy
thereof if such offer or proposal is in writing. In the event that the Sellers
do not consummate the transaction contemplated hereby as a result of Sellers'
or the Company's breach of this Section 7.5, Sellers and the Company shall be
jointly and severally liable to the Purchaser for liquidated damages in the
agreed upon amount of $5,000,000.00.

7.6 Non-competition. (For purposes of this Section 7.6, all references
to either AHI or the Company shall be deemed to include all of AHI's or the
Company's Affiliates and Subsidiaries, as the case may be). The Sellers
acknowledge that in order to assure Purchaser that Purchaser will retain the
value of the Company as a "going concern," each of the Sellers agree, on the
terms set forth in this Section 7.6, not to utilize their special knowledge of
the business of the Company and their relationships with customers, suppliers
and others to compete with the Company, subject to the terms hereafter set
forth. For a period of five (5) years beginning on the Closing Date, each of
the Sellers and their respective Affiliates at the time of determination, shall
not engage or have an interest, anywhere in the United States of America or any
other geographic area where AHI or the Company does business at the date hereof
or in which its products are marketed at the date hereof, alone or in
association with others, as principal, officer, agent, employee, director,
partner or stockholder (except as an employee or consultant of Purchaser or any
of its Affiliates or as an owner of two percent (2%) or less of the stock of
any company listed on a national securities exchange or traded in the
over-the-counter market), or through the investment of capital, lending of
money or property, rendering of services or capital, or otherwise, in any
business involving, relating or similar to, directly or indirectly, the
business of AHI or the Company. During the same period, the Sellers and their
then respective Affiliates shall not (except as an employee or consultant of
Purchaser or its Affiliates), and shall not permit any of their respective
employees, agents or others then under their control to, directly or
indirectly, on behalf of the Sellers or any other Person, (i) call upon, accept
competitive business from, or solicit the competitive business of any Person
who is, or who had been at any time during the preceding three (3) years, a
customer or supplier of the Company or AHI or any successor to the business of
the Company or AHI or any such successor, or (ii) recruit or otherwise solicit
or induce any person who is an employee or consultant of, or otherwise engaged
by, the Company or AHI or any successor to the business of the Company or AHI

44
<PAGE>

to terminate his or her employment or other relationship with the Company or
AHI or such successor, or hire any person who has left the employ of Purchaser
or any such successor during the preceding three (3) years. The Sellers shall
not at any time, directly or indirectly, use or purport to authorize any Person
to use any name, mark, logo, a trade dress or other identifying words or images
which are the same as or similar to those used currently or in the past by the
Company or AHI in connection with any product or service, whether or not such
use would be in a business competitive with that of the Company or AHI. The
Sellers acknowledge that compliance with the restrictions set forth in this
Section 7.6 will not prevent them from earning a livelihood. As used herein,
the phrase "competitive business" means any business competitive with the type
of business engaged in by the Company, AHI, Purchaser or any of their
Subsidiaries or Affiliates at the date hereof.

7.7 General Confidentiality. (For purposes of this Section 7.7, all
references to the Company shall be deemed to include all of the Company's
Affiliates and Subsidiaries). The Sellers acknowledge that the Intellectual
Property Rights and all other confidential or proprietary information with
respect to the business and operations of the Company are valuable, special and
unique assets of the Company. The Sellers shall not, at any time after the
Closing Date, disclose, directly or indirectly, to any Person, or use or
purport to authorize any Person to use any confidential or proprietary
information with respect to the Company or Purchaser, whether or not for a
Sellers' own benefit, without the prior written consent of Purchaser or unless
required by law, including without limitation, (i) trade secrets, designs,
formulae, drawings, Intellectual Property Rights, diagrams, techniques,
research and development, specifications, data, know-how, formats, marketing
plans, business plans, budgets, strategies, forecasts and client data; (ii)
information relating to the products developed by the Company or AHI, (iii) the
names of AHI's or the Company's customers and contacts, AHI's or the Company's
marketing strategies, the names of their vendors and suppliers, the cost of
materials and labor, the prices obtained for services sold (including the
methods used in price determination, manufacturing and sales costs), lists or
other written records used in AHI's or the Company's business, compensation
paid to employees and consultants and other terms of employment, production
operation techniques or any other confidential information of, about or
pertaining to the business of AHI or the Company, and any other information and
material relating to any customer, vendor, licensor, licensee, or other party
transacting business with AHI or the Company, (iv) all tangible material that
embodies any confidential and proprietary information as well as all records,
files, memoranda, reports, price lists, drawings, plans, sketches and other
written and graphic records, documents, equipment, and the like, relating to
the business of AHI or the Company, and (vi) any other confidential information
or trade secrets relating to the business or affairs of AHI or the Company
which the Sellers may acquire or develop in connection with or as a result of
the performance of his or its performance of the terms and conditions of this
Agreement, excepting only such information as is already known to the public or
which may become known to the public without any fault of the Sellers or in
violation of any confidentiality restrictions. The Sellers acknowledge that
Purchaser would not enter into this Agreement without the assurance that all
such confidential and proprietary information will be used for the exclusive
benefit of the Company.

7.8 Continuing Obligations. The restrictions set forth in Sections 7.6
and 7.7 are considered by the parties to be reasonable for the purposes of
protecting the value of the business and goodwill of the Company and Purchaser.
Purchaser and the Sellers acknowledge that Purchaser

45
<PAGE>

would be irreparably harmed and that monetary damages would not provide an
adequate remedy to Purchaser in the event the covenants contained in Sections
7.6 and 7.7 were not complied with in accordance with their terms. Accordingly,
Sellers agree that any breach or threatened breach by any of them of any
provision of Sections 7.6 or 7.7 shall entitle Purchaser to injunctive and
other equitable relief to secure the enforcement of these provisions, in
addition to any other remedies (including damages) which may be available to
Purchaser. If the Sellers breach the covenant set forth in Section 7.6, the
running of the five (5) year non-compete period described therein shall be
tolled for so long as such breach continues. It is the desire and intent of the
parties that the provisions of Sections 7.5 and 7.6 be enforced to the fullest
extent permissible under the laws and public policies of each jurisdiction in
which enforcement is sought. If any provisions of Sections 7.5 and 7.6 relating
to the time period, scope of activities or geographic area of restrictions is
declared by a court of competent jurisdiction to exceed the maximum permissible
time period, scope of activities or geographic area, as the case may be, the
time period, scope of activities or geographic area shall be reduced to the
maximum which such court deems enforceable. If any provisions of Section 7.6 or
7.7 other than those described in the preceding sentence are adjudicated to be
invalid or unenforceable, the invalid or unenforceable provisions shall be
deemed amended (with respect only to the jurisdiction in which such
adjudication is made) in such manner as to render them enforceable and to
effectuate as nearly as possible the original intentions and agreement of the
parties. In addition, if any party brings an action to enforce Sections 7.3,
7.5, 7.6 or 7.7 hereof or to obtain damages for a breach thereof, the
prevailing party in such action shall be entitled to recover from the
non-prevailing party all attorney's fees and expenses incurred by the
prevailing party in such action.

7.9 Lock-Up Period. Other than as set forth in this Agreement, each of
the Sellers hereby acknowledges and agrees that none of them will sell,
transfer, hypothecate, pledge or otherwise dispose of any of the Consideration
Shares not constituting a part of the Escrowed Shares for a period of three (3)
years from the Closing Date without the prior consent of AHI, and thereafter,
upon prior notice to AHI. The Escrowed Shares shall not be subject to the
restrictions set forth in this Section 7.9.

7.10 401 (K) Contribution. After the Closing, Purchaser will cause the
Company (or its successor) to make a discretionary payment to the Company's
401(K) Plan for the year ended September 30, 1999 in accordance with the past
practice of the Company. The Sellers and the Executives represent and warrant
that for the year ended September 30, 1999, the Company has agreed to make a
discretionary payment of 33% of the first 5% that an employee of the Company
contributes to the Company's 401(K) Plan.

7.11 Consulting Agreements. At the Closing, Neale A. Perkins and Scott
O'Brien will each enter into a Consulting Agreement with the Company. It is
each of Neale A. Perkins' and Scott O'Brien's express intention to fully comply
with the terms of his Consulting Agreement. Each of Neale A. Perkins and Scott
O'Brien knows of no reason why he would be unable to honor his obligations
pursuant to such Consulting Agreement. Notwithstanding anything to the contrary
set forth in this Agreement, the representations and covenants set forth in the
second and third sentences of this Section 7.11 are personal to the party who
has made such representation and covenant and no other party shall be liable
for any breach of such representation or covenant.

46
<PAGE>

7.12 Preservation of Business. From the date hereof through the
Closing Date, the Sellers shall cause the Company to preserve its business
organization intact, keep available the services of its present officers,
employees, consultants and agents, maintain its present suppliers and customers
and preserve its goodwill.

7.13 Notice of Certain Events. The Company or the Sellers shall
promptly notify the Purchaser of (i) any lawsuits, claims, proceedings or
investigations which after the date hereof are threatened or commenced against
the Company or against any officer, director, employee, consultant, agent or
shareholder with respect to the affairs of the Company, (ii) any notice or
other communication from any Person alleging that the consent of such Person is
or may be required in connection with the transactions contemplated by this
Agreement, and (iii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement.

7.14 Continued Effectiveness of Representations and Warranties. From
the date hereof through the Closing Date, the Sellers shall conduct the
business of the Company in such a manner so that the representations and
warranties contained in Article IV shall continue to be true and correct on and
as of the Closing Date as if made on and as of the Closing Date, and the
Purchaser shall promptly be given notice of any event, condition or
circumstance occurring from the date hereof through the Closing Date which
would constitute a violation or breach of this Agreement.

7.15 Payment of Debts. Prior to the Closing, the Sellers and each
Executive, as the case may be, shall pay to the Company any amounts owed by
such person to the Company.

7.16 Release of Industrial Revenue Bond Guaranty. At or prior to the
Closing, the Sellers shall obtain a release of the Company's obligation to
guaranty certain obligations of NAP Properties, Ltd. relating to NAP
Properties, Ltd.'s Industrial Revenue Bonds, including a release and
termination of all liens, security interests, mortgages and any and all other
obligations relating thereto.

7.17 Release of VISCO Guaranty. At or prior to the Closing, the
Sellers shall obtain a release of the Company's obligation to guaranty certain
obligations of Visual Image Systems Company, LLC to Imperial Bank.

7.18 Bank of America Release. At or prior to the Closing, the Sellers
shall obtain the release by Bank of America of its liens on the Intellectual
Property Rights of the Company.

7.19 Prior Stockholders' Agreement. Prior to the Closing, the Sellers
shall obtain a termination of the Stockholders' Agreement by and among the
Company, Sellers and Mark Nelson.

7.20 Joint Venture Agreement. Prior to the Closing, the Sellers shall
obtain a termination of the Joint Venture Agreement by and between the Company
and The Stewart Group.

47
<PAGE>

7.21 Medical Insurance Coverage. For a period of twelve (12) months
following the Closing, Purchaser will provide the Executives with such medical
insurance as the Purchaser may make available to, or have in effect for, its
[executive]employees from time to time.

7.22 AHI S-3. To the extent that AHI requests the Company or any of
its agents to perform services for AHI in connection with the filing and
preparation of AHI's Form S-3, AHI shall reimburse the Company for all
reasonable expenses incurred in connection with such request by AHI, provided
that the Company delivers to AHI proper invoices, reasonably detailed,
outlining the work and the time spent pursuant to AHI's request.

7.23 Tax Returns. The Sellers shall prepare and file, at their own
expense all federal, state and local income tax returns and tax reports
required to be filed with respect to the income, operations, business or assets
of the Company and its Subsidiaries for (i) the period ending September 30,
1998 and (ii) for the period commencing October 1, 1998 and ending on the
Closing Date. Not less than ten (10) business days prior to filing, the Sellers
shall provide the Purchaser with a copy of any such tax returns or reports for
the approval of Purchaser, which approval will not be unreasonably withheld or
delayed.

7.24 Removal of Encumbrances. The Sellers represent, warrant and
covenant that they will use their best efforts as promptly as practicable to
remove any encumbrance set forth on Schedule 4.11. In the event that the
Sellers fail to have the encumbrances set forth on Schedule 4.11 removed within
three (3) weeks of the Closing Date, Sellers shall pay the Purchaser the sum of
$10,000.

ARTICLE VIII

MISCELLANEOUS

8.1 Notices. Any notice, demand, claim or other communication under
this Agreement shall be in writing and shall be deemed to have been given upon
the delivery, mailing or transmission thereof, as the case may be, if delivered
personally or sent by certified mail, return receipt requested, postage
prepaid, or sent by facsimile or prepaid overnight courier to the parties at
the addresses set forth below their names on the signature pages of this
Agreement (or at such other addresses as shall be specified by the parties by
like notice). A copy of any notices delivered to Purchaser shall also be sent
to (i) Kane Kessler, P.C., 1350 Avenue of the America, New York, New York
10019, Attention: Robert L. Lawrence, Esq., Fax No. (212) 245-3009. A copy of
any notices delivered to the Sellers shall also be sent to David M. Holmes,
Esq., 27281 Las Ramblas, Suite 155, Mission Viejo, CA 92691, Fax No. (949)
582-6410.

8.2 Entire Agreement. This Agreement contains every obligation and
understanding between the parties relating to the subject matter hereof and
merges all prior discussions, negotiations and agreements, if any, between
them, and none of the parties shall be bound by any conditions, definitions,
understandings, warranties or representations other than as expressly provided
or referred to herein.

48
<PAGE>

8.3 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, heirs,
personal representatives, legal representatives, and permitted assigns.

8.4 Knowledge of the Parties. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to the best
knowledge or to the knowledge of any of the parties hereto, each of the parties
hereto acknowledges and confirms that it has made due and diligent inquiry as
to the matters that are the subject of such representations and warranties.

8.5 Assignment. This Agreement may not be assigned by any party
without the written consent of the other party, provided that, Purchaser may
assign this Agreement to a corporation of which the Purchaser maintains
majority control.

8.6 Waiver and Amendment. Any representation, warranty, covenant, term
or condition of this Agreement which may legally be waived, may be waived, or
the time of performance thereof extended, at any time by the party hereto
entitled to the benefit thereof, and any term, condition or covenant hereof
(including, without limitation, the period during which any condition is to be
satisfied or any obligation performed) may be amended by the parties thereto at
any time. Any such waiver, extension or amendment shall be evidenced by an
instrument in writing executed on behalf of the appropriate party by its
President or any Vice President or other person, who has been authorized by its
Board of Directors to execute waivers, extensions or amendments on its behalf.
No waiver by any party hereto, whether express or implied, of its rights under
any provision of this Agreement shall constitute a waiver of such party's
rights under such provisions at any other time or a waiver of such party's
rights under any other provision of this Agreement. No failure by any party
thereof to take any action against any breach of this Agreement or default by
another party shall constitute a waiver of the former party's right to enforce
any provision of this Agreement or to take action against such breach or
default or any subsequent breach or default by such other party.

8.7 No Third Party Beneficiary. Except for the provisions of Section
5.4, nothing expressed or implied in this Agreement is intended, or shall be
construed, to confer upon or give any Person other than the parties hereto and
their respective heirs, personal representatives, legal representatives,
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.

8.8 Severability. In the event that any one or more of the provisions
contained in this Agreement shall be declared invalid, void or unenforceable,
the remainder of the provisions of this Agreement shall remain in full force
and effect, and such invalid, void or unenforceable provision shall be
interpreted as closely as possible to the manner in which it was written.

8.9 Expenses. Each party agrees to pay, without right of reimbursement
from the other party, the costs incurred by it incident to the performance of
its obligations under this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, costs incident to the
preparation of this Agreement, and the fees and disbursements of counsel,
accountants and consultants employed by such party in connection herewith, and,
in the case

49
<PAGE>

of Sellers, any advisory or other fees to Kerlin Capital. No expenses of the
Sellers relating to the transactions contemplated hereby shall be paid by the
Company, but all such fees shall be paid directly by the Sellers.

8.10 Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of any provisions of this Agreement.

8.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

8.12 Time of the Essence. Wherever time is specified for the doing or
performance of any act or the payment of any funds, time shall be considered of
the essence.

8.13 Injunctive Relief. It is possible that remedies at law may be
inadequate and, therefore, the parties hereto shall be entitled to equitable
relief including, without limitation, injunctive relief, specific performance
or other equitable remedies in addition to all other remedies provided
hereunder or available to the parties hereto at law or in equity.

8.14 Remedies Cumulative. No remedy made available by any of the
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity.

8.15 Governing Law. This Agreement has been entered into and shall be
construed and enforced in accordance with the laws of the State of New York
without reference to the choice of law principles thereof.

8.16 Jurisdiction and Venue. This Agreement shall be subject to the
exclusive jurisdiction of the courts of New York County, New York. The parties
to this Agreement agree that any breach of any term or condition of this
Agreement shall be deemed to be a breach occurring in the State of New York by
virtue of a failure to perform an act required to be performed in the State of
New York and irrevocably and expressly agree to submit to the jurisdiction of
the courts of the State of New York for the purpose of resolving any disputes
among the parties relating to this Agreement or the transactions contemplated
hereby. The parties irrevocably waive, to the fullest extent permitted by law,
any objection which they may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement, or
any judgment entered by any court in respect hereof brought in New York County,
New York, and further irrevocably waive any claim that any suit, action or
proceeding brought in New York County, New York has been brought in an
inconvenient forum.

8.17 Participation of Parties. The parties hereto acknowledge that
this Agreement and all matters contemplated herein, have been negotiated among
all parties hereto and their respective legal counsel and that all such parties
have participated in the drafting and

50
<PAGE>

preparation of this Agreement from the commencement of negotiations at all
times through the execution hereof.

8.18 Further Assurances. The parties hereto shall deliver any and all
other instruments or documents required to be delivered pursuant to, or
necessary or proper in order to give effect to, all of the terms and provisions
of this Agreement including, without limitation, all necessary stock powers and
such other instruments of transfer as may be necessary or desirable to transfer
ownership of the Securities.

8.19 Publicity. No public announcement or other publicity concerning
this Agreement or the transactions contemplated hereby shall be made without
the giving of prior written notice to the Purchaser and the Company as to form,
content, timing and manner of distribution. Nothing contained herein shall
prevent any party or its Affiliates or Subsidiaries from making any public
announcement or filing required by federal or state securities laws or stock
exchange rules.

IN WITNESS WHEREOF, the parties hereto have each executed and
delivered this Agreement as of the day and year first above written.

ARMOR HOLDINGS, INC.

By: /s/ Robert R. Schiller
--------------------------------------------------
Name: Robert R. Schiller
Title: Executive Vice President and Director -
Corporate Development

Address: 13386 International Parkway
Jacksonville, FL 32218

Facsimile: (904)741-5403

<PAGE>

SELLERS:

THE NEALE A. PERKINS TRUST UAD 3/13/90

By: /s/ Neale A. Perkins, Trustee
-----------------------------------------
Neale A. Perkins, Trustee

THE SCOTT T. O'BRIEN AND VICTORIA S.
O'BRIEN REVOCABLE TRUST UAD 6/11/96

By: /s/ Scott T. O'Brien, Trustee
-----------------------------------------
Scott T. O'Brien, Trustee

Address:
------------------------------------

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

THE DAVID M. HOLMES AND KATHERINE C.
HOLMES REVOCABLE TRUST UAD 1/13/97

By: /s/ David M. Holmes, Trustee
-----------------------------------------
David M. Holmes, Trustee

Address:
------------------------------------

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

COMPANY:

SAFARI LAND LTD., INC.

By: /s/ Scott T. O'Brien
-----------------------------------------
Name: Scott T. O'Brien
Title: President

Address:
------------------------------------

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

Facsimile: ( )
---------------------------

/s/ Neale A. Perkins
---------------------------------------------
Neale A. Perkins

/s/ Scott T. O'Brien
---------------------------------------------
Scott T. O'Brien

/s/ David M. Holmes
---------------------------------------------
David M. Holmes

<PAGE>

KANE KESSLER P.C.
1350 Avenue of the Americas
New York, N.Y. 10019

April 13, 1999

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549

Ladies and Gentlemen:

We have acted as counsel for Armor Holdings, Inc., a Delaware corporation
(the "Company") in connection with the Registration Statement on Form S-3
(No. 333-75053), as amended (the "Registration Statement"), under the Securities
Act of 1933, as amended (the "Act") filed by the Company with the Securities
and Exchange Commission. The Registration Statement relates to the offer and
sale of up to a maximum of 8,337,500 shares of Common Stock, par value $.01 per
share (the "Common Stock"), of the Company, including the underwriters' over-
allotment option in an aggregate amount of up to 1,087,500 shares of Common
Stock, proposed to be sold by the Company and certain selling stockholders.

We have examined copies of the Certificate of Incorporation, as amended,
and Bylaws of the Company, the Registration Statement, records of certain of the
Company's corporate proceedings as reflected in the Company's minute books, and
other records and documents that we have deemed necessary for purposes of this
opinion. We have also examined such other documents, papers, authorities and
statutes as we have deemed necessary to form the basis of the opinion
hereinafter set forth.

In our examination, we have assumed the genuineness of all signatures
and the conformity to original documents of all copies submitted to us. As to
various questions of fact

<PAGE>

Securities and Exchange Commission
April 13, 1999
Page 2

material to our opinion, we have relied on statements and certificates of
officers and representatives of the Company and public officials.

Based upon the foregoing and the statements contained herein, it is our
opinion that (i) the Common Stock proposed to be sold by the Company, when duly
sold, issued and paid for pursuant to, and in the manner contemplated by, the
Prospectus included as part of the Registration Statement and assuming that
adequate consideration therefor has been paid to, and received by the Company,
will be validly issued, fully paid and non-assessable, and (ii) the Common
Stock proposed to be sold by the selling stockholders in accordance with the
terms of the Prospectus included as part of the Registration Statement either
(A) has been validly issued and are fully paid and non-assessable or, (B) when
duly sold, issued and paid for pursuant to, and in the manner contemplated by,
any stock option or other agreement, providing for such sale and issuance, and
assuming that adequate consideration therefor has been paid to, and received
by the Company, will be validly issued, fully paid and non-assessable.

We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the Prospectus which forms a part thereof. In giving this consent,
we do not admit that we are in the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.

We are qualified to practice law in the State of New York and do not
purport to be experts on, or to express any opinion herein concerning any
law, other than the laws of the State of New York and the General Corporation
Law of the State of Delaware.

Very truly yours,

KANE KESSLER, P.C.

<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 (No. 333-75053) 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. 333-38765),
the registration statement on Form S-4 (No. 333-38759) and the registration
statement on Form S-8 (No. 333-71063) 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
April 14, 1999

<PAGE>

EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

We consent to the inclusion in the Prospectus constituting part of this
Amendment No. 1 to 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. 333-75053), 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, Columbia
April 14, 1999

<PAGE>

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement of Armor Holdings, Inc. (the "Company") on Form S-3,
Registration No. 333-75053 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
April 14, 1998

<PAGE>

The Board of Directors
DSL Group Limited

We consent to the inclusion in this Amendment No. 1 to Registration Statement on
Form S-3 (Registration No. 333-75053), 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
14 April 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 11, as to which the
date is February 24, 1999) with respect to the financial statements of
Safariland Ltd., Inc. included in Amendment No. 1 to the Registration Statement
(Form S-3 No. 333-75053) 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
April 14, 1999

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EXHIBIT 23.7

STEPHEN B. SALZMAN
767 FIFTH AVENUE
NEW YORK, N.Y.

April 13, 1999

I consent to the references to me in the Prospectus constituting a part of
this Registration Statement on Form S-3, Registration No. 333-75-53. I also
consent to serve as a director of Armor Holdings, Inc. if appointed, subject to
its By-laws and applicable law.

Stephen B. Salzman