10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2008

¨ TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 001-13112

POINT BLANK SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware	11-3129361
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

2102 SW 2nd St. Pompano Beach, Florida	33069
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (954) 630-0900

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  ¨    Accelerated Filer  x

Non-Accelerated Filer  ¨    (Do not check if a smaller reporting company)        Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of May 5, 2008, 51,142,261 shares of the Registrant’s common stock at $0.001 par value were outstanding.

POINT BLANK SOLUTIONS, INC.

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION
Cautionary Note on Forward-Looking Statements	3
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets at March 31, 2008 and December 31, 2007	4
Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2008 and 2007	5
Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2008 and 2007	6
Notes to Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	16
Item 4. Controls and Procedures.	16
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.	16
Item 1A. Risk Factors.	17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	22
Item 3. Defaults Upon Senior Securities.	22
Item 4. Submission of Matters to a Vote of Security Holders.	22
Item 5 Other Information.	22
Item 6. Exhibits.	22
Signatures.	24
Exhibit Index.	25

2

Cautionary Note on Forward-Looking Statements

Certain statements made in this Quarterly Report on Form 10-Q that are not statements of historical or current facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from historical results or from any future results expressed or implied by such forward-looking statements.

In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements in future or conditional tenses or, which include terms such as “believes,” “belief,” “expects,” “intends,” “anticipates” or “plans” to be uncertain and forward-looking. Forward-looking statements may include comments as to Point Blank Solutions, Inc.’s (the “Company”) beliefs and expectations as to future events and trends affecting its business. Forward-looking statements are based upon management’s current expectations concerning future events and trends and are necessarily subject to uncertainties, many of which are outside of the Company’s control. The factors set forth in Part II, Item 1A. RISK FACTORS, of this Quarterly Report on Form 10-Q as well as other factors could cause actual results to differ materially from those reflected or predicted in forward-looking statements.

Any forward-looking statements are based on management’s beliefs and assumptions, using information currently available to the Company. The Company assumes no obligation to update these forward-looking statements.

If one or more of these or other risks or uncertainties materialize, or if the underlying assumptions prove to be incorrect, actual results may vary materially from those reflected in, or suggested by, forward-looking statements. Any forward-looking statement included in this Quarterly Report on Form 10-Q reflects the Company’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to its operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to the Company or individuals acting on its behalf are expressly qualified in their entirety by this paragraph. You should specifically consider the factors identified in Part II, Item 1A. RISK FACTORS of this Quarterly Report on Form 10-Q, which could cause actual results to differ from those referred to in forward-looking statements.

3

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	March 31, 2008			December 31, 2007
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	835		$	213
Restricted cash		35,200			35,200
Accounts receivable, less allowance for doubtful accounts of $196 and $296, respectively		14,147			25,144
Inventories, net		41,436			43,550
Income tax receivables		12,720			20,285
Deferred income taxes		21,178			21,468
Prepaid expenses and other current assets		2,913			3,150
Total current assets		128,429			149,010
Property and equipment, net		11,121			5,967
Other assets
Deferred income taxes		1,548			1,312
Deposits and other assets		78			78
Total other assets		1,626			1,390
Total assets	$	141,176		$	156,367
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Revolving line of credit	$	9,285		$	16,254
Note payable		2,500			—
Accounts payable		8,037			15,416
Accrued expenses and other current liabilities		5,050			8,384
Reserve for class action settlement		39,372			39,372
Vest replacement program obligation		488			527
Employment tax withholding obligation		34,176			34,176
Total current liabilities		98,908			114,129
Long term liabilities:
Unrecognized tax benefits		10,933			11,134
Other liabilities		482			525
Total long term liabilities		11,415			11,659
Total liabilities		110,323			125,788
Commitments and contingencies		—			—
Minority and non-controlling interests in consolidated subsidiaries		659			406
Contingently redeemable common stock (related party)		19,326			19,326
Stockholders’ equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 48,135,162 and
48,037,510 shares issued and outstanding, respectively		48			48
Additional paid in capital		85,533			84,552
Accumulated deficit		(74,713	)		(73,753	)
Total stockholders’ equity		10,868			10,847
Total liabilities and stockholders' equity	$	141,176		$	156,367

See notes to condensed consolidated financial statements.

4

POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except per share data)

	For The Three Months Ended March 31,
	2008			2007
Net sales	$	49,902		$	92,110
Cost of goods sold		41,173			73,445
Gross profit		8,729			18,665
Selling, general and administrative expenses		8,439			9,507
Litigation and costs of investigations		1,895			2,650
Total operating costs		10,334			12,157
Operating income (loss)		(1,605	)		6,508
Interest expense		199			114
Other (income) expense		(268	)		(6	)
Total other (income) expense		(69	)		108
Income before income tax expense (benefit)		(1,536	)		6,400
Income tax expense (benefit)		(580	)		2,567
Income before minority and non-controlling interests of subsidiaries		(956	)		3,833
Less minority and non-controlling interests of subsidiaries		3			54
Net income (loss)	$	(959	)	$	3,779
Basic and diluted earnings per common share	$	(0.02	)	$	0.07
Basic and diluted earnings per contingently redeemable common share	$	—		$	0.07

See notes to condensed consolidated financial statements.

5

POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

	For The Three Months Ended March 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(959	)	$	3,779
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		234			140
Amortization of deferred financing costs		29			—
Deferred income tax expense (benefit)		54			562
Gain on sale of fixed assets		(3	)		—
Minority and non-controlling interests in consolidated subsidiaries		3			54
Equity based compensation		981			839
Changes in assets and liabilities:
Restricted cash		—			(475	)
Accounts receivable		10,997			2,843
Inventories		2,114			1,105
Income tax receivable		7,565			—
Prepaid expenses and other current assets		208			297
Deposits and other assets		—			(360	)
Accounts payable		(12,034	)		1,191
Accrued expenses and other current liabilities		(3,334	)		(5,532	)
Vest replacement program obligation		(39	)		(1,268	)
Income taxes payable		—			2,272
Unrecognized tax benefits		(201	)		—
Other liabilities		(44	)		(27	)
Net cash provided by operating activities		5,571			5,420
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment		4			—
Purchases of property and equipment		(2,889	)		(765	)
Net cash used in investing activities		(2,885	)		(765	)
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft		4,655			198
Contribution from minority owners		250			—
Net repayment of revolving line of credit		(6,969	)		(4,955	)
Net cash used in financing activities		(2,064	)		(4,757	)
Net increase (decrease) in cash and cash equivalents		622			(102	)
Cash and cash equivalents at beginning of year		213			177
Cash and cash equivalents at end of period	$	835		$	75
Supplemental cost flow information:
Property and equipment acquired by issuing a note payable	$	2,500		$	—

See notes to condensed consolidated financial statements.

6

POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 1. BASIS OF PRESENTATION

Interim Financial Information

The accompanying unaudited condensed consolidated financial statements of Point Blank Solutions, Inc. (“Point Blank”) and its subsidiaries (“PBSI”, or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited financial statements include all adjustments, consisting only of normal and recurring adjustments, which, in the opinion of management, were necessary for a fair presentation of financial condition, results of operations and cash flows for such periods presented. The results of operations for the interim periods are not necessarily indicative of the results for any other interim periods or for an entire year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with published rules and regulations of the Securities and Exchange Commission (the “SEC”). The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to those financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Point Blank and its subsidiaries, Point Blank Body Armor, Inc., Protective Apparel Corporation of America and Life Wear Technologies, Inc. All subsidiaries are wholly owned except for a 0.65% interest in Point Blank Body Armor, Inc. The accounts of Lifestone Materials, LLC (“Lifestone”) are also included in the accompanying condensed consolidated financial statements. Point Blank has a 50% interest and is the primary beneficiary of Lifestone (See Note 8). All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The Company has prepared the unaudited condensed consolidated financial statements in conformity with GAAP. Such preparation 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 based upon future events. The Company evaluates the estimates on an ongoing basis. In particular, the Company regularly evaluates estimates related to recoverability of accounts receivable and inventory, and accrued liabilities. The estimates are based on historical experience and on various other specific assumptions that the Company believes to be reasonable. Actual results could differ from those estimates based upon future events.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides a definition of fair value, establishes acceptable methods of measuring fair value and expands disclosures for fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 157 on January 1, 2008 did not have a material impact on the Company’s financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including as amendment of FASB Statement No. 115” (“SAFS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 159 on January 1, 2008 did not have a material impact on the Company’s financial statements.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations,” (“SFAS 141R”) which requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date. SFAS 141R requires, among other things, that in a business combination achieved through stages (sometimes referred to as a “step acquisition”) that the acquirer recognize the identifiable assets and liabilities, as well as the non-controlling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with this Statement). SFAS 141R also requires the acquirer to recognize goodwill as of the acquisition date, measured as a residual, which in most types of business combinations will result in measuring goodwill as the excess of the consideration transferred plus the fair value of any non-controlling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired. SFAS

7

141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company does not expect that the adoption of SFAS 141R will have a material impact on its financial statements.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS 160”). SFAS 160 changes the way the consolidated income statement is presented. SFAS 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. Currently, net income attributable to non-controlling interests is reported as an other deduction in arriving at consolidated net income. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company does not believe that SFAS 160 will have a material impact on its financial statements.

Note 2. INVENTORIES

The components of inventories as of March 31, 2008 and December 31, 2007 are as follows:

	March 31, 2008		December 31, 2007
Raw materials	$	34,434	$	26,414
Work in process		750		8,409
Finished goods		6,252		8,727
	$	41,436	$	43,550

Note 3. DEBT

Revolving Line of Credit

The Company entered into an Amended and Restated Loan and Security Agreement (“Credit Facility”) with its lender in 2007. The Credit Facility provides for a three-year, $35,000 revolving credit line available to the Company’s subsidiaries, jointly and severally, bearing interest at the prime rate plus 0.25% or, at our option, LIBOR plus 2.25%. Borrowings are available in the form of advances or letters of credit granted or issued against a percentage of the Company’s subsidiaries’ eligible accounts receivable and eligible inventory. The Credit Facility also includes financial covenants related to minimum sales and maximum capital expenditures. Additionally, the Company is negotiating with its lender regarding additional financial covenants including a (1) senior leverage ratio, (2) total leverage ratio, (3) minimum tangible net worth, (4) fixed charge coverage ratio and (5) minimum consolidated earnings before interest, taxes, depreciation and amortization. The revolving credit line is secured by substantially all of the Company’s assets.

Note Payable

In March 2008, the partner to the Lifestone Materials, LLC (“Lifestone”, See Note 8) contributed property and equipment to Lifestone in exchange for a $2,500 note payable. This loan bears interest at the Prime rate plus .25%. Principal and interest are repaid on a quarterly basis from LifeStone’s available cash as determined by Lifestone’s partners.

Note 4. COMMITMENTS AND CONTINGENCIES

Steel Partners II, L.P. Action

In January 2008, the Company announced that it would be holding its Annual Meeting of Stockholders on April 22, 2008. On April 8, 2008, the Company’s Board of Directors determined that the Company should pursue all strategic alternatives, including a possible sale, and concluded that it was in the best interests of the Company’s stockholders to postpone the Annual Meeting until August 19, 2008, in order to pursue the alternatives. On April 16, 2008, Steel Partners II, L.P. (“Steel Partners”) filed a lawsuit in the Chancery Court of the State of Delaware requesting that the court order the Company to (i) conduct the Annual Meeting at the soonest practicable date and (ii) grant Steel Partners other relief deemed appropriate by the court. The Company believes that the lawsuit filed by Steel Partners is without merit and the Company’s Board of Directors continues to pursue all strategic alternatives to enhance stockholder value.

Employment Tax Withholding Obligations

From 2003 through early 2006, the Company paid certain cash bonuses to management and other employees. Members of senior management during that time and other employees also exercised warrants to purchase shares of the Company’s common stock between 2003 and 2006 that had previously been granted to them. The payment of cash bonuses and exercise of warrants trigger tax withholding obligations by the Company related to the employees’ share of federal income tax, state income tax and Social Security charges on the compensation associated with the bonuses and warrants. The Company also had to remit to applicable taxing authorities the employer’s share of Social Security and other payroll related taxes.

8

The Company has determined that income and other payroll related taxes were not withheld and remitted by the Company to the taxing authorities when those bonuses were paid and, with one exception, when the warrants were exercised. The Company self-reported these apparent violations to the relevant taxing authorities, including the Internal Revenue Service.

As of March 31, 2008 and December 31, 2007, the Company has recognized Employment Tax Withholding Obligations, including applicable penalties related to this matter, totaling $34,176, in the accompanying condensed consolidated balance sheets.

The Company does not believe that it will be required to discharge the liability of former senior management personnel for income tax withholding obligations. Moreover, to the extent that the Company is required to discharge employee income tax withholding obligations for other current and former employees, management is pursuing recovery of those amounts from the affected employees. In July 2006, Mr. Brooks, the Former Chief Executive Officer, signed a memorandum of understanding with the Company in which he represented, warranted and covenanted that he has paid (or will pay) all taxes (including, without limitation, federal and state, Social Security, Medicare, FICA or other withholding taxes or similar amounts) attributable to personal income received by him from the Company, including any fines, penalties or back taxes incurred by the Company solely as a result of personal income paid to him. The Company intends to pursue recovery from Mr. Brooks for any of the foregoing amounts ultimately due and payable by the Company to the taxing authorities. At March 31, 2008, the income tax withholding obligations that may be recoverable from former executive officers were $32,827.

During the second quarter of 2007, the statute of limitations for the 2003 employment tax withholding obligations expired. Accordingly, the charge and related liability originally recorded during 2003 (totaling $737) was reversed during the second quarter of 2007.

Patents

On September 6, 2007, Christopher Van Winkle and David Alan Cox filed an action against the United States in the U.S. Court of Federal Claims alleging patent infringement and seeking compensation for the government’s alleged unlicensed use of their Patent. The allegedly infringing products were purchased on behalf of the U.S. Army by the General Services Administration (“GSA”) from Point Blank Body Armor. Because the relevant contract with the GSA contains a patent indemnity clause, the Company may be obligated to reimburse the United States in the event the United States is found liable for patent infringement. The Company filed a motion to intervene in this action in order to protect its interests. That motion is pending. The Company cannot predict the outcome of this matter.

Tortious Interference

On April 7, 2008, Point Blank Body Armor filed suit against BAE Systems Specialty Defense Systems of Pennsylvania, Inc (“BAE”). and John Norwood in the Southern District of Florida for tortious interference with advantageous business relationship. The suit alleges that John Norwood used confidential information regarding Point Blank Body Armor that he obtained while working as a program manager for the U. S. Army to the detriment of Point Blank Body Armor and the advantage of his new employer, BAE. In particular, the confidential information was used to interfere with Point Blank Body Armor’s bid for the production of 230,000 IOTV’s pursuant to a request to submit a bid it had received from the U.S. Army.

Letters of Credit

As of March 31, 2008, the Company had open letters of credit for $626.

Note 5. EQUITY AWARDS

A total of 288,329 deferred stock awards were granted to executive officers and members of the Board of Directors of the Company during the first three months of 2008. Additionally, during the first three months of 2008, 43,368 shares of the Company’s common stock were issued to members of the Board of Directors pursuant to 2007 deferred stock awards for 2007 retainer fees.

Note 6. BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE

For all periods presented, basic and diluted income (loss) per common share is presented in accordance with SFAS No. 128, “Earnings per Share,” which provides for the accounting principles used in the calculation of income per share. Basic income (loss) per common share excludes dilution and is calculated by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per common share reflects the potential dilution from assumed conversion of all dilutive securities such as stock warrants using the treasury stock method. When the effect of the outstanding stock warrants is anti-dilutive, they are not included in the calculation of diluted income per common share.

Basic income (loss) per common share calculations are based on the weighted average number of common shares outstanding during each period: 48,135,162 and 48,037,510 shares for the quarter ended March 31, 2008 and March 31, 2007, respectively. For the quarter ended March 31, 2008, the common stock warrants are anti-dilutive. For the quarter ended March 31, 2007, the Company’s common stock warrants outstanding which are above the market value of the stock are dilutive.

The computation for basic and diluted income (loss) per common share is as follows:

9

	Three Months Ended March 31,
	2008			2007
Common Shareholders
Net income (loss)	$	(959	)	$	3,779
Net income (loss) attributable to contingently redeemable common shares		—			(223	)
Net income (loss) attributable to common shares	$	(959	)	$	3,556
Weighted-average shares		48,135,162			48,037,510
Common stock equivalents—warrants		—			130,452
Weighted-average shares and common stock equivalents		48,135,162			48,167,962
Basic and diluted income per common share	$	(0.02	)	$	0.07
Contingently redeemable common shares
Net income attibuted to contingently redeemable shares	$	—		$	223
Divided by weighted-average shares		3,007,099			3,007,099
Basic and diluted loss per common share	$	—		$	0.07

Note 7. PROVISION FOR INCOME TAXES

The Company’s effective tax rate was 37.7% and 40.1% for the three months ended March 31, 2008 and 2007, respectively. The Company’s effective tax rate differs from the statutory rate primarily due to state income tax expense, equity based and officer’s compensation in excess of the Internal Revenue Code Section 162 (m) limitation and manufacturing deduction pursuant to Section 199 of the Internal Revenue Code.

The Company is currently under examination by the Internal Revenue Service for its U.S. Corporate Income Tax Return for the tax years ended December 31, 2003 and 2004. There have been no adjustments proposed in connection with the examination. The Company is also under examination by the State of New York for the years 2002 through 2004 and has been assessed $1.8 million in additional taxes and interest related to the proposed disallowance of losses on discontinued operations, inter-company interest expense and other inter-company charges. The Company has filed a protest with the State of New York, believes it has a meritorious defense and anticipates the ultimate resolution of the assessment will not result in a material adjustment to the financial statements.

Note 8. LIFESTONE MATERIALS

On March 18, 2008, the Company entered into a strategic alliance with a manufacturer and supplier of technologically advanced lightweight ballistic armor material. Under the terms of the joint venture agreement, an entity Lifestone Materials, LLC (“Lifestone”) was created, which will manufacture and sell woven fabric to both partners. Each partner has a 50% equity ownership in Lifestone. Each partner contributed $250 to provide LifeStone with working capital. The venture partner contributed property and equipment valued at $2,500 in exchange for a note payable, and the Company loaned the venture $2,500 to purchase property and equipment. Lifestone leases a manufacturing facility in Anderson, South Carolina.

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Note 9. SUBSEQUENT EVENT

On April 16, 2008, the statute of limitations for the major portion of the 2004 Employment Tax Withholding Obligations expired (see Note 4). Accordingly, the charge and related liability originally recorded during 2004 will be reversed during the second quarter of 2008 in the amount of $25.9 million. The unaudited pro forma balance sheet presented below was derived from the application of the pro forma adjustments to the consolidated financial statements of the Company to give effect to the reversal of this liability and related income tax effect as of March 31, 2008 as if this event occurred effective March 31, 2008.

POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES

PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

MARCH 31, 2008

(In thousands, except share and per share data)

	As Reported			Proforma Adjustments					Proforma
ASSETS
Current assets:
Cash and cash equivalents	$	835							$	835
Restricted cash		35,200								35,200
Accounts receivable, less allowance for doubtful accounts of $196 and $296, respectively		14,147								14,147
Inventories, net		41,436								41,436
Income tax receivables		12,720								12,720
Deferred Income taxes		21,178			(9,451	)	2	)		11,727
Prepaid expenses and other current assets		2,913								2,913
Total current assets		128,429			(9,451	)				118,978
Property and equipment, net		11,121								11,121
Other assets
Deferred income taxes		1,548								1,548
Deposits and other assets		78								78
Total other assets		1,626								1,626
Total assets	$	141,176		$	(9, 451	)			$	131,725
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Revolving line of credit	$	9,285							$	9,285
Note payable		2,500								2,500
Accounts payable		8,037								8,037
Accrued expenses and other current liabilities		5,050								5,050
Reserve for class action settlement		39,372								39,372
Vest replacement program obligation		488								488
Employment tax withholding obligation		34,176			(25,946	)	1	)		8,230
Total current liabilities		98,908			(25,946	)				72,962
Long term liabilities:
Unrecognized tax benefits		10,933								10,933
Other liabilities		482								482
Total long term liabilities		11,415								11,415
Total liabilities		110,323			(25,946	)				84,377
Commitments and contingencies		—								—
Minority and non-controlling interests in consolidated subsidiaries		659								659
Contingently redeemable common stock (related party)		19,326								19,326
Stockholders equity:
Common stock $0.001 par value 100,000,000 shares authorized 48,135,162 and 48,037,510 shares issued and outstanding respectively		48								48
Additional paid in capital		85,533								85,533
Accumulated ed deficit		(74,713	)		16,495		3	)		(58,218	)
Total stockholders equity		10,868			16,495					27,363
Total liabilities and stockholders’ equity	$	141,176		$	(9,451	)			$	131,725

Proforma Adjustments:

1) Reversal of the 2004 Employment Tax Withholding Obligation

2) Reversal of deferred income taxes associated with the 2004 Employment Tax Withholding Obligation

3) Net effect of the Proforma Adjustments

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Introduction

The following should be read in conjunction with the Company’s unaudited condensed consolidated financial statements, including the respective notes thereto, all of which are included in this Form 10-Q. Unless stated to the contrary, or unless the context otherwise requires, references to “PBSI,” “the Company,” “we,” “our” or “us” in this report include Point Blank Solutions, Inc. and subsidiaries.

We are a leading manufacturer and provider bullet, fragmentation and stab resistant apparel and related ballistic accessories, which are used domestically and internationally by military, law enforcement, security and corrections personnel, as well as governmental agencies. We also manufacture and distribute sports medicine, health support and other products, including a variety of knee, ankle, elbow, wrist and back supports and braces that assist serious athletes, weekend sports enthusiasts and general consumers in their respective sports and everyday activities.

We are organized as a holding company that currently conducts business through three operating subsidiaries. Sales to the U.S. military comprise the largest portion of our business, followed by sales to federal, state and local law enforcement agencies, including correctional facilities. Accordingly, any substantial increase, reduction in or delay in government spending or change in emphasis in defense and law enforcement programs would have a material effect on our business.

We derive substantially all of our revenue from sales of our products. Our ability to maintain recent revenue levels is highly dependent on continued demand for body armor and projectile-resistant clothing. There is no assurance, however, that in the event that governmental agencies refocus their expenditures due to changed circumstances, that we will be able to diversify into alternate markets or alternate products, or that we will be able to increase market share through acquisitions of other businesses.

Our market share is highly dependent upon the quality of our products and our ability to deliver products in a prompt and timely fashion. Our current strategic focus is on product quality and accelerated delivery, which we believe are the key elements in obtaining additional orders under new as well as existing procurement contracts with the U.S. military and other governmental agencies.

Critical Accounting Policies

Our management believes that our critical accounting policies include:

Revenue recognition— We recognize revenue when there is persuasive evidence of an arrangement, delivery of the product has occurred, the price for the goods is fixed or determinable and collectibility is reasonably assured.

We enter into contracts with all of our customers. These contracts specify the material terms and conditions of each sale, including prices and delivery terms for each product sold.

Ballistics apparel and accessory products sold to the U.S. military are manufactured to specifications provided by the U.S. military. Prior to shipment, each manufactured product is inspected by U.S. military representatives. Once the goods pass inspection by the U.S. Government Quality Assurance Specialist (denoted on Form DD 250), the U.S military immediately accepts risk of ownership associated with those goods.

Non-military contracts specify that customers may return products to us only if such products do not meet agreed upon specifications. Ballistics apparel products sold to other customers besides the U.S. military for use in combat comply with National Institute of Justice (“NIJ”) standards, and are subjected to internal and external quality control procedures. Because of these internal and external quality control procedures, warranty returns of products sold to law enforcement agencies and to distributors are minimal.

We warrant that our ballistics apparel products will be free from manufacturing defects for a period of five years from the date of purchase. From time to time, individual ballistics apparel products may be returned because they are the incorrect size. In most cases, the product returned for sizing is retailored and reshipped to the customer. Returns for sizing, along with the cost involved in tailoring the units, are minimal.

We do not offer any general rights of return, express or implied, associated with any of our military sales or our sports medicine and health support sales. Ballistic resistant apparel and other accessories sold to non-military customers have a 30-day right of return. At the time of sale, the sales transactions meet the conditions of Financial Accounting Standards Board (“FASB”) Statement No. 48, “Revenue Recognition When Right of Return Exists,” and revenue is recognized at the time of sale.

All our contracts specify that products will be shipped FOB shipping point or FOB destination. Shipments to the U.S. military are made FOB shipping point. We recognize revenue for military sales and for those non-military sales sent FOB shipping point when the related products are shipped. We defer revenue recognition for those sales that are shipped FOB destination until the related goods are received at the customers’ designated receiving locations.

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Inventories—Inventories are stated at the lower of cost (determined on the first-in, first-out basis) or market. An allowance for potential non-saleable inventory due to excess stock or obsolescence is based upon a detailed review of inventory components, past history, and expected future usage.

Income taxes—We use the asset and liability approach to account for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Other—Judgments and estimates underlying our accounting policies vary based on the nature of the judgment or estimate. We use judgments and estimates to determine our allowance for doubtful accounts, which are determined through analysis of the aging of the accounts receivable at the date of the consolidated financial statements, assessments of collectibles based on an evaluation of historic and anticipated trends, the financial condition of customers and an evaluation of the impact of economic conditions. We also use judgments and estimates to determine the valuation allowances on our deferred tax assets to establish reserves for income taxes, each of which relate to our income taxes critical accounting policy. We base these estimates on projections of future earnings, effective tax rates and the impact of economic conditions. These judgments and estimates are based upon empirical data as applied to present facts and circumstances. Judgments and estimates are susceptible to change because the projections that they are based upon do not always turn out to be correct and unanticipated issues may arise that are not considered in our assumptions.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent assets and liabilities in the financial statements and accompanying notes. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include the carrying value of long-lived assets and allowances for receivables and inventories. Actual results could differ from these estimates and the differences could be material.

Results of Operations

THREE MONTHS ENDED MARCH 31, 2008, COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2007

ANALYSIS OF NET SALES

Three Months Ended March 31, 2008 and 2007

(In thousands)

	2008					2007					Dollar Change
Net sales
Military and Federal Government	$	38,716		77.6	%	$	80,367		87.3	%	$	(41,651	)
Domestic/Distributors		9,424		18.9	%		9,968		10.8	%		(544	)
International		329		0.7	%		411		0.4	%		(82	)
Sports and Health Products		1,621		3.2	%		1,625		1.8	%		(4	)
Other		11		0.0	%		14		0.0	%		(3	)
Total		50,101		100.4	%		92,385		100.3	%		(42,284	)
Less Discounts, Returns and Allowances		(199	)	-0.4	%		(275	)	-0.3	%		76
Net Sales	$	49,902		100.0	%	$	92,110		100.0	%	$	(42,208	)

For the three months ended March 31, 2008, our consolidated net sales were approximately $49.9 million, a decrease of 45.8% from our consolidated net sales of $92.1 million for the three months ended March 31, 2007. Armor products net sales decreased 46.6% from $90.7 million for the three months ended March 31, 2007 to $48.5 million for the three months ended March 31, 2008 due primarily to delays in military and contract awards. Over the last six months, we had several solicitations extended for Outer Tactical Vests (OTV’s), Interceptor Outer Tactical Vests (IOTV’s) and Modular Lightweight Load-carrying Equipment (MOLLE). Because of the delay in the timing of such awards, revenues associated with such awards may be reflected in future periods, if at all.

The 45.8% decrease in net sales for the first three months of 2008 compared with the first three month period in 2007 is a result of delays in the awarding of expected military contracts. These delays have significantly affected net sales and results of operations. Additionally, during the first three months of 2007, we targeted certain contract opportunities for aggressive pricing strategy. This strategy produced significant gains in net sales in the comparison quarter, which further highlights the decline in the first quarter of 2008.

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We believe that it is important to understand the nature of contracting with the federal government and the possible effect of the federal government’s budgeting process on operating results and production backlog in any given year. Frequently, there may be events surrounding the U.S. and defense budgets that create fluctuations in our backlog and portfolio of contracts with the federal government. These include availability of year-end monies to accomplish important last minute contracts for supplies and services, enactment of a continuing resolution which limits spending to the previous year’s level until a budget is signed into law, late approval of a new budget, use and timing of a supplemental appropriation and other possible events. These events can significantly affect the amount of orders we have in backlog and the number as well as size of major contracts we have for our products. In fact, requests for proposals and the awarding of contracts were delayed and impacted this quarter. It is important to adequately understand the U.S. government’s budget and contracting process and its potential impact on our results of operations and production backlog.

Gross profit for the quarter ended March 31, 2008 was approximately $8.7 million (17.5% of net sales), as compared to approximately $18.7 million for the three months ended March 31, 2007 (20.3% of net sales). The decline in gross profit margin as a percentage of net sales is due primarily to lower volume as a result of delays in contract awards, constraints on price increases due to the competitive market and higher raw materials costs. To offset increases in raw material prices, we entered into a joint venture agreement on March 18, 2008 for the purpose of manufacturing woven ballistic fabric for our body armor products. As a result of this strategic action, we believe we are the only soft body armor manufacturer with a vertically-integrated weaving operation, which is intended to reduce material costs and allow us to competitively price our products to grow top line sales as well as improve our margins. Additionally, 50% of the net income generated from the joint venture will be accretive to our earnings. In order to capture a greater share of this market, we adopted an aggressive pricing structure on certain military contracts. Improving gross profit margin will require passing on material cost increases to our customers, enhancing the manufacturing process, planning inventory purchases carefully and reducing costs. These initiatives will be balanced with a marketing and sales strategy that addresses an unusually competitive environment.

OPERATING COSTS

Three Months Ended March 31, 2008 and 2007

(In thousands)

	2008		2007		Dollar Change
Selling and Marketing	$	2,227	$	2,412	$	(185	)
Research and Development		345		532		(187	)
Equity-Based Compensation		981		839		142
Other General and Administrative		4,886		5,724		(838	)
Selling, general and administrative expenses		8,439		9,507		(1,068	)
Litigation and Cost of Investigations		1,895		2,650		(755	)
Total Operating Costs	$	10,334	$	12,157	$	(1,823	)

Operating costs were $10.3, million or 20.7%, of net sales for the three months ended March 31, 2008 versus $12.2 million or 13.2% of net sales for the three months ended March 31, 2007. The decrease in expenses for the three months ended March 31, 2008 of $1.8 million as compared to the three months ended March 31, 2007 was principally due to the following:

• Lower litigation and costs of investigations expenses. We will continue to incur costs associated with the investigations described in Part II, Item 1 of this Form 10-Q in future periods and these costs could be material.

• Lower general and administrative expenses due mainly to lower legal and professional fees in 2008 compared to 2007, which we expect to continue to decrease in future periods as we improve our accounting functions, systems of internal control and related issues.

Interest expense for the three months ended March 31, 2008 was approximately $0.2 million compared to $0.1 million for the same period in 2007. The increase is attributed to higher outstanding balances in our revolving line of credit.

Our effective tax rate was 37.7% and 40.1% for the three months ended March 31, 2008 and 2007, respectively. The effective tax rate differs from the statutory rate primarily due to state income tax expense, equity based and officer’s compensation in excess of the Internal Revenue Code Section 162 (m) limitation and manufacturing deduction pursuant to section 199 of the Internal Revenue Code.

We are currently under examination by the Internal Revenue Service for our U.S. Corporate Income Tax Return for the tax years ended December 31, 2003 and 2004. There have been no adjustments proposed in connection with the examination. We are also under examination by the State of New York for the years 2002 through 2004 and have been assessed $1.8 million in additional taxes and interest related to the proposed disallowance of losses on discontinued operations, inter-company interest expense and other inter-company charges. We filed a protest with the State of New York. We believe we have a meritorious defense and anticipate the ultimate resolution of the assessment will not result in a material adjustment to our financial statements.

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Inflation and Changing Prices

Our profitability is dependent upon, among other things, our ability to anticipate and react to changes in the cost of key operating resources, including labor and raw materials. Substantial increases in costs and expenses could impact our operating results to the extent that such increases cannot be passed along to our customers. We take steps to mitigate the risk of rising prices by prudent purchasing practices and inventory management techniques. However, there can be no assurance that future supplies of raw materials and labor will not fluctuate due to market conditions outside of our ability to control.

Certain operating costs, such as rent, utilities and taxes continue to increase with the general level of inflation or are higher, and may be subject to other cost and supply fluctuations outside of the Company’s control.

While we have been able to react to inflation through effective negotiation of our sales contracts, efficient purchasing practices, and constant management of our raw materials inventory levels, there can be no assurance that we will be able to do so in the future. Additionally, competitive conditions could limit our ability to pass on cost increases to our customers.

Liquidity and Capital Resources

We intend to fund our cash requirements with cash flows from operating activities and, when necessary, borrowings under our revolving line of credit. As of March 31, 2008, our working capital was approximately $28.5 million compared to $34.9 million at December 31, 2007. The reduction in working capital at March 31, 2008, as compared to December 31, 2007 is a function of several factors, including; lower levels of accounts receivable (due to cash collections and lower levels of sales); a reduction in on-hand inventories; refunds of income taxes; and funding our investment in Lifestone Materials. These reductions were partially offset by payments made against our line of credit, as well as reductions in accounts payable and accrued expenses.

The accounts receivable days outstanding decreased to 37 days at March 31, 2008 as compared to 36 days at December 31, 2007. This change in days outstanding was primarily the result of the decrease in net sales and accounts receivable.

In order to meet the demands for working capital brought about by the volatility in sales experienced over the last four years and the credit terms given by us to our customers, we maintain a revolving credit line with a major financial institution, which is discussed below. The purpose of this facility is to provide liquidity when needed, on a short term basis. Our major material suppliers’ payment terms are normally 10 to 30 days from date of purchase. Any shortfall in working capital may lead us to borrow under our revolving credit line to maintain liquidity.

We entered into an Amended and Restated Loan and Security Agreement (“Credit Facility”) with our lender in 2007. The Credit Facility provides for a three-year, $35 million revolving credit line available to the Company’s subsidiaries, jointly and severally, bearing interest at the prime rate plus 0.25% or, at our option, LIBOR plus 2.25%. Borrowings are available in the form of advances or letters of credit granted or issued against a percentage of the Company’s subsidiaries’ eligible accounts receivable and eligible inventory. The Credit Facility also includes financial covenants related to minimum sales and maximum capital expenditures. Additionally, we are negotiating with our lender regarding additional financial covenants including a (1) senior leverage ratio, (2) total leverage ratio, (3) minimum tangible net worth, (4) fixed charge coverage ratio and (5) minimum consolidated earnings before interest, taxes, depreciation and amortization. The revolving credit line is secured by substantially all of our assets.

In March 2008, the partner to the Lifestone Materials, LLC (“Lifestone”) contributed property and equipment to Lifestone in exchange for a $2,500 note payable. This loan bears interest at the Prime rate plus .25%. Principal and interest are repaid on a quarterly basis from Lifestone’s available cash as determined by Lifestone’s partners.

Our capital expenditures for the three months ended March 31, 2008 were approximately $0.4 million, compared to $0.8 million for the three months ended March 31, 2007. Our capital budget is intended to replace fixed asset equipment as needed and to take advantage of technological improvements that would improve productivity. Beginning in the second quarter of 2007, we increased capital expenditures to improve our systems for inventory control, manufacturing and accounting processes. These expenditures will continue in subsequent periods. We anticipate our capital expenditures for the remainder of 2008 to be approximately $2.4 million.

We believe that the existing Credit Facility, together with funds generated from operations, will be adequate to sustain operations, including projected capital expenditures, for the foreseeable future. There can be no assurance that we will be able to obtain increases in our Credit Facility if needed. We may be required to explore other potential sources of financing (including the issuance of equity securities and, subject to the consent of our lender, other debt financing) if we experience escalating demands for our products or delays in sales. However, there can be no assurance that such sources will be available or, if available, provide terms satisfactory to us.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We do not issue or invest in financial instruments or their derivatives for trading or speculative purposes. Our market risk is limited to fluctuations in interest rates pertaining to our borrowings under our $35 million Credit Facility. We therefore are exposed to market risk from changes in interest rates on funded debt. We can borrow at the prime rate plus 0.25% or LIBOR plus 2.25%. Any increase in these reference rates could adversely affect our interest expense. Our current credit agreement provides for the establishment of performance pricing to be established at a future date. The extent of market rate risk associated with fluctuations in interest rates is not quantifiable or predictable because of the volatility of future interest rates and business financing requirements. We do not use derivative products to hedge or mitigate interest rate risk.

We purchase materials for use in our products based on market prices established with our suppliers. Many of the materials purchased can be subject to volatility due to market supply and demand factors outside our control. To mitigate this risk, in part, we attempt to enter into fixed price purchase agreements with reasonable terms.

Based on the outstanding balance on our revolving line of credit as of December 31, 2007, a 1% increase in interest rates would cost us approximately $0.2 million annually.

ITEM 4. CONTROLS AND PROCEDURES.

We evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), as of March 31, 2008. Our principal executive and financial officers supervised and participated in the evaluation. Based on the evaluation, and in light of the previously identified material weaknesses in internal control over financial reporting, as of December 31, 2007, described within the 2007 Annual Report on Form 10-K, our principal executive and financial officers each concluded that, as of March 31, 2008, our disclosure controls and procedures were not effective in providing reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (the “SEC”) form and rules.

Changes in Internal Control Over Financial Reporting

The following changes were made subsequent to December 31, 2007, to our internal control over financial reporting and have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting:

• We developed a detailed remediation plan to improve our internal control over financial reporting and disclosure controls and procedures. Senior level employees have been tasked with execution of the plan, which also includes target dates for completion of each of the items.

• The information technology infrastructure and enterprise systems (which were in the process of being installed and implemented at December 31, 2007) are now functional and operational.

• We hired a highly qualified Director of Financial Reporting, who is a Certified Public Accountant with over twenty years of experience in both public and corporate accounting.

• We developed accounting and closing procedures to ensure that performance of accounting functions, and evidence of review and approval of such performance, is done timely (including review of journal entries, bank reconciliations, analytical reviews, consolidation work papers and disclosure checklists).

• We established a resource center, containing accounting, disclosure, internal control, regulatory reporting and other related materials which are available to management and the accounting staff.

• We enhanced a recurring financial closing and quarterly reporting process. As part of this process, we have strengthened controls over the financial closing and reporting process and used process-reengineering techniques and technology to simplify the financial closing process and implement additional controls.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We refer to Item 3 of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, for a description of legal proceedings outstanding at the time of the filing of that report as to which no material developments occurred during the three months ended March 31, 2008.

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Steel Partners II, L.P. Action

In January 2008, we announced that we would be holding our Annual Meeting of Stockholders on April 22, 2008. On April 8, 2008, our Board of Directors determined that we should pursue all strategic alternatives, including a possible sale, and concluded that it was in the best interests of our stockholders to postpone the Annual Meeting until August 19, 2008, in order to pursue the alternatives. On April 16, 2008, Steel Partners II, L.P. (“Steel Partners”) filed a lawsuit in the Chancery Court of the State of Delaware requesting that the court order us to (i) conduct the Annual Meeting at the soonest practicable date and (ii) grant Steel Partners other relief deemed appropriate by the court. We believe that the lawsuit filed by Steel Partners is without merit and our Board of Directors continues to pursue all strategic alternatives to enhance stockholder value.

Patents

On September 6, 2007, Christopher Van Winkle and David Alan Cox filed an action against the United States in the U.S. Court of Federal Claims alleging patent infringement and seeking compensation for the government's alleged unlicensed use of their patent. The allegedly infringing products were purchased on behalf of the U.S. Army by the General Services Administration (“GSA”) from Point Blank Body Armor Inc., our subsidiary. Because the relevant contract with the GSA contains a patent indemnity clause, we may be obligated to reimburse the United States in the event the United States is found liable for patent infringement. We have filed a motion to intervene in this action in order to protect our interests. That motion is pending. We cannot predict the timing or the outcome of this matter.

Tortious Interference

On April 7, 2008, Point Blank Body Armor filed suit against BAE Systems Specialty Defense Systems of Pennsylvania, Inc (“BAE”) and John Norwood in the Southern District of Florida for tortious interference with advantageous business relationship. The suit alleges that John Norwood used confidential information regarding Point Blank Body Armor that he obtained while working as a program manager for the U. S. Army to the detriment of Point Blank Body Armor and the advantage of his new employer, BAE. In particular, the confidential information was used to interfere with Point Blank Body Armor’s bid for the production of 230,000 IOTV’s pursuant to a request to submit a bid it had received from the U.S. Army.

Item 1A. RISK FACTORS

We refer to Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, for a description of risk factors outstanding at the time of the filing of that report, as to which no material developments occurred since the date of that report.

The risks and uncertainties described below are not the only risks and uncertainties that we face. Additional risks and uncertainties not currently known or currently deemed not to be material also may impair business operations. If any of the following risks actually occur, our business, results of operations and financial condition could be adversely affected.

Risks Relating to Our Financial Controls and Historical Financial Statements

We face continuing risks in connection with the restatement of our financial statements for the years ended December 31, 2004 and 2003, and quarterly financial statements for 2005 and 2004, as reported in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2006.

Notwithstanding our efforts to date to identify and remedy all material errors in those financial statements, we may discover other errors in those financial statements in the future. Moreover, the cost of identifying and remedying those errors may be substantial.

We have identified a number of material weaknesses in our internal control over financial reporting, which could continue to impact negatively our ability to report our results of operations and financial condition accurately and in a timely manner.

As required by Section 404 of the Sarbanes-Oxley Act of 2002, our management has conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2007. We identified a number of material weaknesses in our internal control over financial reporting and concluded that, as of December 31, 2007, we did not maintain effective control over financial reporting based in part on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. For a detailed description of these material weaknesses, please see Item 9A. CONTROLS AND PROCEDURES in our Annual Report on Form 10-K for the period ended December 31, 2007. Each of the material weaknesses results in more than a remote likelihood that a material misstatement of our annual or interim financial statements will not be prevented or detected. As a result, we must perform extensive additional work to obtain reasonable assurance regarding the reliability of our financial statements. Even with this additional work, given the number of material weaknesses identified, there is a risk of additional errors not being prevented or detected, which could result in additional restatements. Moreover, other material weaknesses may be identified.

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We have extensive work remaining to remedy the material weaknesses in our internal control over financial reporting.

We are in the process of remedying the identified material weaknesses, and this work will continue during 2008 and perhaps beyond. For a detailed description of these remedial efforts, please see Item 9A. CONTROLS AND PROCEDURES in our Annual Report on Form 10-K for the period ended December 31, 2007. There can be no assurance as to when all of the material weaknesses will be remedied. Until the remedial efforts are completed, management will continue to devote significant time and attention to these efforts, which may be to the detriment of our operations. We will continue to incur expenses associated with the additional procedures and resources required to prepare our consolidated financial statements. Certain of the remedial actions will be ongoing and will result in the incurrence of additional costs even after the material weaknesses are remedied. As a result, our financial condition and results of operations may be negatively affected by the cost of these remediation measures.

If internal control over financial reporting remains ineffective, our business and future prospects may suffer.

If we are unsuccessful in implementing or following our remediation plan, or fail to update our internal control over financial reporting as our business evolves or to integrate acquired businesses into our control system, we may not be able to timely or accurately report our financial condition, results of operations or cash flows or to maintain effective disclosure controls and procedures. If we are unable to report financial information in a timely and accurate manner or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or enforcement actions by the SEC and a general loss of investor confidence, any one of which could adversely affect our business prospects and the market value of our common stock.

Further, there are inherent limitations to the effectiveness of any system of controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. We could face additional litigation exposure and additional SEC enforcement or other regulatory action if further restatements were to occur or other accounting-related problems emerge. In addition, any future restatements or other accounting-related problems may adversely affect our financial condition, results of operations and liquidity.

Business and Operational Risks

A substantial portion of our revenue is dependent on U.S. military business, and a decrease or delay in contract awards in such business could have a material adverse effect on us.

U.S. military contracts account for a significant amount of our revenue. The U.S. military funds its contracts in increments based on annual authorization and appropriation, as well as supplemental bills passed by Congress and approved by the President, which may not be enacted or may provide funding that is greater than or less than the amount of the contract. Changes in the U.S. military’s budget, spending allocations or the timing of such spending could adversely affect our ability to receive future contracts. Our contracts with the U.S. military do not have a minimum purchase commitment, and the U.S. military generally has the right to cancel our contracts unilaterally with limited notice. A significant reduction or delay in U.S. military expenditures for ballistic-resistant products would have a material adverse effect on our business, financial condition, results of operations and liquidity.

Many of our customers have fluctuating budgets, which may cause fluctuations in our results of operations.

Customers for our products include federal, state, municipal, foreign, military, law enforcement and other government agencies. Government tax revenues and budgetary constraints, which fluctuate from time to time, can affect budgetary allocations for these customers. Many domestic and foreign government agencies have in the past experienced budget deficits, that have led to decreased spending in defense, law enforcement and other military and security areas. Our results of operations may be subject to substantial period-to-period fluctuations because of these and other factors affecting military, law enforcement and other government spending. A reduction of funding for federal, state, municipal, foreign and other government agencies could have a material adverse effect on sales of our products and our business, financial condition, results of operations and liquidity.

Our business is subject to various laws and regulations favoring the U.S. government’s contractual position, and our failure to comply with such laws and regulations could harm operating results and prospects.

As a contractor to the U.S. government, we must comply with laws and regulations relating to the formation, administration and performance of the federal government contracts that affect how we do business with our U.S. government customers and may impose added costs on our business. These rules generally favor the U.S. government’s contractual position. For example, these regulations and laws include provisions that subject our federal government contracts to protest or challenge by unsuccessful bidders and unilateral termination, reduction or modification by the U.S. government. Failure to comply with these or other laws and regulations

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could result in contract termination, suspension or debarment from contracting with the federal government, civil fines and damages and criminal prosecution and penalties, any of which could have a material adverse effect on our business, financial condition, results of operations and liquidity.

Growth of operations may strain resources and if we fail to manage growth successfully, our business could be adversely affected.

Increased orders for body armor, as well as the introduction of new products, have placed, and may continue to place, a strain on our operational, financial and managerial resources and personnel. Any failure to manage growth effectively could have a material adverse effect on our business, operating results, financial condition and liquidity.

Increases in the prices paid for raw materials or labor costs may adversely affect profit margins.

If we experience significant increases in the prices paid for raw materials or labor costs, we may not be able to pass through to our customers such increases in those costs. Even if we are able to pass through all or a portion of such cost increases to our customers, profit margins on such products may be reduced. Fixed price contracts are especially susceptible to such profit margin reductions.

Our products are used in situations that are inherently risky. Accordingly, we may face product liability and exposure to other claims for which we may not be able to obtain adequate insurance.

The products that we manufacture are typically used in applications and situations that involve high levels of risk of personal injury. Failure to use these products for their intended purposes, failure to use these products properly, malfunction of these products and, in some circumstances, even correct use of these products could result in serious bodily injury or death. We cannot guarantee that our insurance coverage would be sufficient to cover the payment of any potential claim arising out of the use of our products. Any substantial uninsured loss thus would have to be paid out of our assets as applicable and may have a material adverse effect on our business, financial condition, results of operations and liquidity. In addition, we cannot guarantee that our current insurance or any other insurance coverage will continue to be available or, if available, that it will be obtainable at a reasonable cost. The cost of obtaining insurance coverage has risen substantially due to increased sales levels and increased volatility within the reinsurance industry. Any material uninsured loss could have a material adverse effect on our business, financial condition, results of operations and liquidity. If we are unable to obtain product liability coverage, then we may be prohibited from bidding for orders from certain government customers because many governmental agencies currently require such insurance coverage. Any inability to bid for government contracts as a result of insufficient insurance coverage would have a material adverse effect on our business, financial condition, results of operations and liquidity.

We are engaged in a highly competitive marketplace, which demands that producers continue to develop new products. Our business will be adversely affected if we are not able to continue to develop new and competitive products.

Our customers continually seek improvements in body armor and similar products that we manufacture and market. As a result, in order to meet our customers’ needs, we must continue to develop new products and innovations and enhancements to existing products. Many of our competitors have significantly more capital than we have and as a result have the ability to devote more resources to research and development and to marketing of their products. In order to remain competitive, we must continue to devote a material portion of our financial resources to research and development and there is no assurance that we will be successful in our product improvement efforts in our competitive marketplace.

We face continuous pricing pressure from our customers and our competitors. This will affect our margins and therefore our profitability and cash flow unless we can manage efficiently our manufacturing costs and market our products based on superior quality.

Our customers often award contracts based on product pricing, and we believe we have not received some awards due to pricing discounts given by our competitors. Many of our competitors have significantly greater financial resources than we have, and as a result may be able to withstand the adverse effect of discounted pricing and reduced margins in order to build market share. While one of our strategies is also to discount to retain and increase market share, and to seek to manage our manufacturing efficiently to sustain acceptable margins, we may not be able to maintain appropriate prices or to manage product manufacturing costs sufficiently to sustain acceptable margins. Similarly, we seek to compete based on product quality rather than price, but we may not be successful in these efforts with enough contract awards to offset the need to reduce prices for other products. This could adversely affect our profitability, our liquidity and our market share.

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We may have difficulty protecting our proprietary technology.

Intellectual property and proprietary technology are important to the success of our business. While we actively police the use of our intellectual property and proprietary technology, it is difficult to monitor all possible misappropriations and unauthorized access to our intellectual property and technology. Further, litigation involving these matters can be costly, with no guarantee of ultimate success. Dissemination or dilution of the aforementioned property and technology also could have an adverse effect on our business, financial condition, results of operations and liquidity.

If we are unable to successfully retain executive leadership and other key personnel, our ability to successfully develop and market our products and operate our business may be harmed.

We are substantially dependent on the personal efforts and abilities of General Larry Ellis, our President and CEO; John C. Siemer, our COO and Chief of Staff; James F. Anderson, our CFO; and Samuel White, our Executive Vice President Global Sales, Marketing and Research and Development. Our relationship with certain of our customers, particularly the U.S. military, is substantially dependent on certain of our management personnel. Changes to our executive officers or the inability to retain our key personnel could delay the development and introduction of new products, harm our ability to sell our products and damage the image of our brands and negatively impact our credibility with key customers. We believe that retention of our key personnel is critical to executing our business strategy and our operations going forward and the failure to retain our key personnel may impact our financial condition and results of operations.

We have launched and expect to continue to launch strategic and operational initiatives which if not successful could adversely affect our business.

We believe that in order to stay competitive and generate positive earnings and cash flow, we must successfully implement our strategies. In connection with the implementation of our strategies, we have launched, and expect to continue to launch, several operational and strategic initiatives. However, the success of any of these initiatives may not be achieved if:

• we do not maintain adequate levels of liquidity to finance such initiatives or are unable to meet the financial ratios and other covenants contained in our revolving line of credit agreement;

• they are not accepted by our customers and vendors;

• they do not result in revenue growth, generate cash flow, reduce operating costs or reduce our working capital investments; or

• we are unable to provide the products necessary to implement these initiatives successfully or other products are introduced to the marketplace that result in our strategies being of less value to customers.

Failure to implement one or more of our strategies and related initiatives successfully could materially and adversely affect our business, financial condition or results of operations.

We rely significantly on our credit facility for liquidity needs. The available credit under the facility is linked to a borrowing base, and reductions in eligible receivables and inventory will reduce our ability to draw on the line. The terms of the facility include various covenants, and failure to meet these covenants could affect our ability to borrow. These factors could affect our liquidity.

Our liquidity depends on cash generated from operations and the availability of funding under our credit agreement. The borrowing base under our credit agreement is limited to eligible receivables and inventories, as described in the agreement. Our availability of financing under the credit agreement also depends on the satisfaction of a number of other conditions, including meeting financial and other covenants. If we are unable to continue meeting these covenants, our lender could declare us in default, among other possible courses of action.

We continue to strive to grow our business, and if we are successful we may have increasing needs for liquidity through our credit facility and to increase the amount that we can borrow. While we have been able to negotiate increases in availability of credit in the past, it may not be possible to do so in the future. We may be required to seek other sources of financing. We may not be able to obtain additional sources of financing, and this could affect our ability to grow our business.

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The credit agreement governing our financing contains representations, warranties and covenants that, among other things, limit our ability to: (1) incur additional indebtedness; (2) incur liens; (3) pay dividends or make other restricted payments; (4) make certain investments; (5) sell or make certain dispositions of assets or engage in sale and leaseback transactions; (6) engage in certain business activities; (7) engage in mergers, acquisitions or consolidations; and (8) enter into certain contractual obligations. In addition, the credit agreement contains customary financial covenants that we must comply with on a monthly basis. The credit agreement also contains financial covenants that we must comply with on a periodic basis relating to our cumulative sales levels and an annual capital expenditure threshold. We are in compliance with the terms of the credit agreement at March 31, 2008.

In the event of default under the terms of our credit facility, we may be required to negotiate changes to our financial covenants with, or to obtain waivers of certain of these covenants from, the lender or to negotiate replacement financing arrangements with one or more other financial institutions. If such actions become necessary, we believe that we will be able to negotiate such changes, waivers and/or replacement financings, but no assurance can be given that we will be successful or as to the terms of any such arrangements. At March 31, 2008, we had $9.3 million outstanding under our credit facility, as more fully described in Note 3. Debt to our Condensed Consolidated Financial Statements.

Environmental issues could adversely affect our business.

We are subject to various federal, state and local laws and regulations governing the use, discharge and disposal of hazardous material. Compliance with current laws and regulations has not had and is not expected to have a material adverse effect on our financial condition. It is possible, however, that environmental issues may arise in the future that we cannot currently predict and which may have a material adverse effect on our business, financial condition, results of operations and liquidity.

We may incur additional costs or material shortages due to new NIJ certification and testing standards.

Body armor ballistic protection packages require certification to government standards in order to be sold to law enforcement and military customers. Law enforcement certification standards are set by the NIJ and for the military; the military specifications are set for each individual contract. Internationally, standards vary based on the country with whom we are dealing, though most will adhere to the NIJ certification requirements. The NIJ is in the process of revising their standard, which may result in a more complex and costly testing protocol. Any major change in testing procedures and performance standards carries both capital costs to build the testing protocol to meet the new standards, and potential material and production costs to build to the new standard. Additionally, expanding into international markets increases the likelihood that new certification standards will be required, leading to increased costs.

Risks Relating to the Securities Markets and Our Stock Price

Our stock price is volatile because it is affected by numerous factors out of our control.

The market price and trading volume of our common stock is subject to significant volatility and this trend may continue. The general economic, political, and stock market conditions that may affect the market prices of our common stock are beyond our control. The value of our common stock may decline regardless of our operating performance or prospects. Factors affecting market price include, but are not limited to: (i) variations in our operating results and whether we have achieved our key business targets; (ii) the limited number of shares of our common stock available for purchase or sale in the public markets; (iii) sales or purchases of large blocks of stock; (iv) changes in, or failure to meet, earnings estimates; (v) changes in securities analysts’ buy/sell recommendations; (vi) differences between reported results and those expected by investors and securities analysts; and (vii) announcements of new contracts by us or by our competitors. In the past, securities class action litigation has been instituted against companies following periods of volatility in the market price of their securities. We are presently a defendant in such litigation. Additionally, we are being investigated by the SEC and the U.S. Department of Justice. The outcomes of these investigations could result in increased volatility of the market price of our common stock. Please see Item 3. Legal Proceedings in our Annual Report on Form 10-K for the period ended December 31, 2007 for a detailed discussion of these investigations.

Our stock is quoted on the Pink Sheets, which may decrease the liquidity of our common stock.

On August 29, 2006, the American Stock Exchange de-listed our common stock because we were not able to file certain periodic reports with the SEC in a timely manner. Since that time our common stock has been quoted on the Pink Sheets through October 31, 2007, under the symbol “DHBT.PK” and as of November 1, 2007, under the symbol “PBSO.PK”. Broker-dealers often decline to trade in Pink Sheet stocks given that the market for such securities is often limited, the stocks are more volatile, and the risk to investors is greater than with stocks listed on other national securities exchanges. Consequently, selling our common stock can be difficult because smaller quantities of shares can be bought and sold, transactions can be delayed and securities analyst and news media coverage of our Company may be reduced. These factors could result in lower prices and larger spreads in the bid and ask

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prices for shares of our common stock as well as lower trading volume. We intend to apply for the listing of our common stock on a national securities exchange now that we are current in our periodic reporting obligations with the SEC. We cannot guarantee that we will be successful in those efforts. Investors should realize that they may be unable to sell shares of our common stock that they purchase. Accordingly, investors must be able to bear the financial risks associated with losing their entire investment in our common stock.

Our common stock may be subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.

Our common stock may be considered a “penny stock” pursuant to Rule 3a51-1 of the Exchange Act. Broker-dealer practices in connection with transactions in penny stocks are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are defined as equity securities with a price of less than $5.00 per share. The penny stock rules require a broker-dealer, prior to purchase or sale of a penny stock not otherwise exempt from the rules, to deliver to the customer a standardized risk disclosure document that provides information about penny stocks and the risks associated with the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer account. In addition, the penny stock rules generally require that, prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market of a stock that becomes subject to the penny stock rules.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 5. OTHER INFORMATION.

On April 8, 2008, we announced that our 2008 Annual Meeting of Stockholders has been postponed until August 22, 2008. Proposals by shareholders intended to be included in our proxy materials and considered at our 2008 Annual Meeting must be forwarded in writing to the Secretary’s attention and received at our principal executive office at 2102 SW 2^nd Street, Pompano Beach, Florida 33069, no later than May 21, 2008. Any proposals submitted by shareholders must comply in all respects with the SEC’s rules and regulations and the provisions of our Certificate of Incorporation and Second Amended and Restated By-laws and the laws of Delaware. In addition, if the Secretary receives notice of a shareholder proposal after May 21, 2008, the persons named as proxies in such proxy statement will have discretionary authority to vote on such shareholder proposal.

ITEM 6. EXHIBITS.

Exhibit	Description
10.1*	Employment Agreement, dated April 7, 2008 by and between the Company and Jennifer Coberly.
10.2*	Limited Liability Company Agreement, dated March 18, 2008 by and among PBSS, LLC and FMS Technologies LLC. Confidential portions of the agreement have been omitted and a confidential treatment request application has been submitted to the SEC pursuant to Rule 24 b-2.

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Exhibit	Description
10.3*	Supply Agreement, dated March 18, 2008, by and between the Company and Lifestone Materials, LLC. Confidential portions of the agreement have been omitted and filed separately and a confidential treatment request application has been submitted to the SEC pursuant to Rule 24 b-2.
10.4	Form of Indemnification Agreement (incorporated by reference to the Company’s Current Report on Form 8-K filed March 5, 2008).
10.5	Form of Deferred Stock Award Agreement (Incorporated by reference to the Company’s Current Report on Form 8-K filed March 18, 2008).
10.6	Amendment to Employment Agreement between John C. Seimer and the Company (Incorporated by reference to the Company’s Current Report on Form 8-K filed March 18, 2008).
10.7	Amendment to Employment Agreement between Samuel B. White and the Company (Incorporated by reference to the Company’s Current Report on Form 8-K filed March 18, 2008).
31.1*	Certification of President and Chief Executive Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
32.1*	Certification of President and Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	POINT BLANK SOLUTIONS, INC.
Dated May 12, 2008	/s/ Larry Ellis
	President and Chief Executive Officer (Principal Executive Officer)
Dated May 12, 2008	/s/ James F. Anderson
	Chief Financial Officer, Senior Vice President and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)

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INDEX OF EXHIBITS

Exhibit	Description
10.1*	Employment Agreement, dated April 7, 2008 by and between the Company and Jennifer Coberly.
10.2*	Limited Liability Company Agreement, dated March 18, 2008 by and among PBSS, LLC and FMS Technologies LLC. Confidential portions of the agreement have been omitted and a confidential treatment request application has been submitted to the SEC pursuant to Rule 24 b-2.
10.3*	Supply Agreement, dated March 18, 2008, by and between the Company and Lifestone Materials, LLC. Confidential portions of the agreement have been omitted and filed seperately and a confidential treatment request application has been submitted to the SEC pursuant to Rule 24 b-2.
10.4	Form of Indemnification Agreement (incorporated by reference to the Company’s Current Report on Form 8-K filed March 5, 2008).
10.5	Form of Deferred Stock Award Agreement (Incorporated by reference to the Company’s Current Report on Form 8-K filed March 18, 2008).
10.6	Amendment to Employment Agreement between John C. Seimer and the Company (Incorporated by reference to the Company’s Current Report on Form 8-K filed March 18, 2008).
10.7	Amendment to Employment Agreement between Samuel B. White and the Company (Incorporated by reference to the Company’s Current Report on Form 8-K filed March 18, 2008).
31.1*	Certification of President and Chief Executive Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
32.1*	Certification of President and Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (including any amendments hereto as are in effect from time to time “Agreement”) is made as of the 7th day of April, 2008 by and between Jennifer Coberly (“Executive”) and Point Blank Solutions, Inc., a Florida corporation ( alone or together with all divisions, subsidiaries and groups, the “Company”).

In consideration of the mutual covenants contained in this agreement, and for other good and valuable consideration the receipt and sufficiency of which is acknowledged, the parties agree as follows:

1. Agreement to Employ.

The company herby agrees to employ the Executive, and the Executive hereby agrees to be employed by the Company, pursuant to the terms and conditions set forth in this Agreement. Executive represents and agrees that (i) she is entering into this Agreement voluntarily and that her employment hereunder and compliance with the terms and conditions hereof will not conflict with or result in a breach by her of any agreement to which she is a party or by which she may be bound, (ii) she has not violated, and in connection with her employment by the Company will not violate, any non-solicitation or similar covenant to which she is or may be bound, and (iii) in connection with her employment by the Company, she will not use any confidential or proprietary information she may have obtained in connection with her employment by any previous employer.

2. Term.

The Company agrees to employ Executive, and Executive agrees to be employed by the Company, subject to the terms and conditions of this agreement , for the period commencing on the 7th of April, 2008 (the “Effective Date”) and terminating on the third anniversary of the Effective Date, unless earlier terminated as provided in Section 7, provided that such initial term shall be extended automatically for successive one-year periods unless the company shall have provided notice to the Executive not less than 30 days prior to the expiration of the initial term or any such extension of its intention not to extend the Employment Period, as defined below. The period during which the Executive is employed pursuant to this Agreement shall be referred to herein as the “Employment Period.”

3. Employment Duties.

3.1 Titles and Duties. During the Employment Period, Executive shall be employed by the business of the Company. Executive shall serve as General Counsel and Secretary of Point Blank Solutions, Inc. and may also assume similar positions or other positions with subsidiaries and affiliates of Point Blank Solutions, Inc. Executive shall devote substantially all of her working time efforts to the performance of her duties under thus agreement. Executive’s duties and responsibilities shall include those customarily assigned to the General Counsel and Secretary of a public company and such other duties

and responsibilities consistent with Executive’s title(s) as Board of directors or the Chief Executive Officer shall specify from time to time, including without limitation, taking overall responsibility for all legal natters affecting the Company and its subsidiaries, supporting the Board of Directors and committees thereof, supervising internal and external counsel of the Company and its subsidiaries, and reviewing all public releases and fillings of the company.

3.2 Location/Travel. In performing her duties hereunder, Executive shall be available for reasonable travel, as the needs of the business of the Company may require. It is expected that Executive shall be based and shall perform her duties primarily at the company’s Pompano Beach, Florida facility.

4. Compensation/Benefits.

In consideration of Executive’s services hereunder, the Company shall provide Executive the following:

4.1 Base Salary. During the Employment Period, the Executive shall receive an annual rate of base salary of $280.000.00 which the Company shall pay at semi-monthly intervals, or otherwise at such intervals (not less frequently than monthly) as are use generally for the Company’s senior executives. The base salary shall be increased $10,000 on the first anniversary and $10,000 on the second anniversary of your employment with the company.

4.2 Bonuses. Commencing at the close of each fiscal year of the Company during the Employment Period, the Company shall review the performance of the Company and of Executive during the prior fiscal year, and the Company may provide Executive with additional compensation as a bonus if the Board of Directors, any Compensation Committee thereof, in its sole discretion, determines.

4.3 Equity-Based Compensation. Effective on the Effective Date, to induce Executive to enter into this Agreement, Executive will be granted by the Company warrants to purchased 300,000 shares of common stock of the company, pursuant to a separate award agreement. Such warrants will have a term of 10 years from the Effective Date. On the Effective Date 10% of such warrants shall be vested and exercisable, 30% of such warrants shall vest and become exercisable on each of the first, second and third anniversaries following the Effective Date. The warrants shall have an exercise price equal to the closing price per share of the company’s common stock on the Effective Date, as set forth in the Award Agreement. The warrants will be subject to such other terms and restrictions as are set forth in the Award Agreement, the terms of the Award Agreement shall take precedence. The Company will reserve for insurance the number of shares of common stock underlying the warrants and, as promptly as practicable once it is in compliance with applicable reporting and other requirements, shall use its best efforts to file a registration statement with respect to such shares and to cause such registration statement to remain effective until the end of the term of such warrants.

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4.4 Vacation. Executive shall be entitled to 15 days of paid vacation in each year during the Employment Period (in addition to Federal holidays observed by the Company). Unused vacation shall not be carried over to subsequent year.

4.5 Expenses. Executive shall be entitled to reimbursement of reasonable business expenses incurred in carrying out her duties for the Company, provided that such expenses are evidenced by appropriate documentation and submitted in accordance with Company policies and procedures.

4.6 Other Benefits. The company shall provide to Executive such other benefits, including the right to participate in medical, savings, deferred compensation and other benefit plans and arrangements as are made generally available to other senior executives of the Company from time to time.

5. Indemnification.

5.1 Indemnify. To the fullest extent permitted by law, the Company shall indemnify Executive with respect to any actions commenced against Executive in her capacity as an officer, director, executive, agent or fiduciary or former officer, director, executive, agent or fiduciary of the Company, or any affiliate thereof, for which Executive may render service in such capacity, whether by or on behalf the Company, its shareholders or third parties, and the Company shall advance to Executive on a timely basis as an amount equal to the reasonable fees and expenses incurred in defending such actions, after receipt of an itemized request for such advance, and an undertaking from Executive to repay the amount of such advance, with interest at a reasonable rate from the date of the request, as determined by the Company, if it shall ultimately be determined that Executive is not entitled (as a matter of law or by judicial determination) to be indemnified against such expenses. This indemnity shall survive any termination of employment under this Agreement and is in addition to and not limitation of any other right to indemnification or exoneration to which Executive is entitled at law, or under the governing organizational documents and/or policies of the Company. The Company agrees to use its best efforts to secure and maintain officers’ and directors’ liability insurance, including coverage for Executive.

6. Covenants and Confidential Information.

6.1 Restrictive Covenants. Executive acknowledges the Company’s reliance on and expectation of Executive’s continued commitment to performance of her duties and responsibilities during the Employment Period. In light of such reliance and expectation on the part of Company, during the applicable period hereafter specified in Section 5.3, executive shall not, directly or indirectly, do or suffer either of the following:

6.1(A)

6.1.1 Own, manage, control or participate in the ownership, management or control of, or be employed or engaged by or otherwise affiliated or associated as an Executive, agent, representative, consultant, independent contractor or otherwise with, any other corporation, partnership,

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proprietorship, firm association or other business entity engaged in the business of, or otherwise engage in the business of, manufacturing, selling or distributing body armor or body armor related products, an other products manufactured, sold or distributed by the Company from time to time, within the United States in direct or indirect competition with the Company or any of its affiliates;

6.1.2 Solicit any business or contracts from any customers of the Company or its affiliates, any past customers of the Company or its affiliates, or any prospective customers of the Company or its affiliates (i.e., potential customers from which the Company or its affiliates has solicited business at any time during the twelve (12) month period preceding the expiration or termination of the Employment Period), expect as necessitated by Executive’s position with the Company and then only in furtherance of the business interests of the company or its affiliates;

6.1.3 Induce or attempt to induce any such customer to alter its business relationship with the Company or its affiliates except as necessitated by Executive’s position with the Company and then only furtherance of the business interests of the Company and its affiliates;

6.1.4 Solicit or induce or attempt to solicit or induce any executive or employee of the Company or its affiliates to leave the employ of the Company or any of its affiliates for any reason whatsoever or hire any person who was an executive or employee of the Company or its affiliates within the twelve (12) month period prior to such hiring; or

6.1.5 Direct or indirectly, engage in any conduct or make any statement, whether in commercial or noncommercial speech, disparaging or criticizing in any way the Company or any of its affiliates, or any products or services offered by any of them, nor shall Executive engage in any other conduct or make other statement that could be reasonably expected to impair the goodwill of any of the Company or any if its affiliates, the reputation of any products or services of the Company or any of its affiliates or the marketing of such products or services.

6.1(B)

6.1.6 Disclose, divulge, discuss copy or otherwise use or suffer to be used in manner, other than in accordance with Executive’s duties hereunder (and in a manner not in violation or conflict with applicable laws and regulations), any confidential or proprietary information relating to the Company’s or any of its affiliates businesses, prospects, finances, operations, pricing, products research and development or properties or other trade secrets of the Company or any affiliates, it being acknowledged and agreed by Executive that all such information regarding the business of the Company or any of its affiliates compiled or

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obtained by, or furnished to, Executive while Executive shall have been employed by or associated with the Company is confidential and/or proprietary information and the Company’s exclusive property; provided, however, that the foregoing restrictions shall not apply to the extent that such information: (a) is clearly obtainable in the public domain; (b) becomes obtainable in the public domain. Other than by reason of the breach by Executive of the terms hereof or breach by another person barred by a duty of confidentiality to the Company; or (c) is required to be disclosed by rule of law or by order of a court or governmental body or agency.

6.2 Litigation; Cooperation. If this Agreement is terminated by the Company other than for Cause or by the Executive for Good Reason (as defined herein), the Executive agrees that, for up to 12 months following the date of termination, she will provide to the Company and its affiliates truthful and complete cooperation including, but not limited to, the Executive’s appearance at interviews and depositions at reasonable times in all regulatory or litigation matters and proceedings relating to the Company and its affiliates, and to provide to the Company’s legal Counsel, upon request, all documents and materials in her possession or under her control relating to such matters and proceedings, all at no additional compensation to the Executive, provided that the company shall reimbursed promptly the Executive for all reasonable expenses, including attorney’s fees and other expenses, as well as pay to the Executive any amount of salary forfeited and including with respect to vacation time consumed by him during any time spent by Executive in connection with the foregoing.

6.3 Applicable Periods. The applicable periods shall be: (a) so long as Executive is an Executive of the Company; and (b) for a period of twelve (12) months after termination of employment or the expiration of the Employment Period.

6.4 Injunctive Relief. Executive agrees and understands tat the remedy at law for any breach by her of this Section 5 will be inadequate and that the damages flowing from such breach are not readily susceptible to being measured in monetary terms. Accordingly, it is acknowledged that the Company shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach. Nothing in this Section 5 shall be deemed to limit the Company’s remedies at law or in equity for any breach by Executive of any of the provisions of this Section 5 which may be pursued or availed of by the Company.

6.5 Acknowledge by Executive. Executive has carefully considered the nature and extent of the restrictions upon her and the rights and remedies conferred upon the Company under this Section 5, and hereby acknowledges and agrees that the same are reasonable in time and territory, do not stifle the inherent skill and experience of Executive, would not operate as a bar to Executive’s sole means of support, are fully required to protect the legitimate interests of the Company, and do not confer a benefit upon the Company disproportionate to the detriment of Executive.

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7. Proprietary Rights.

7.1 Copyrights. At all times during the Employment Period, all right, title and interest in all copyrightable material which Executive shall conceive or originate, either individually or jointly with others, and which arise out of the performance of this Agreement, will be the property of the Company and are by this Agreement assigned to the Company along with ownership of any and all copyrights in the copyrightable material. At all times during the Employment Period, Executive agrees to execute all papers and perform all other acts necessary to assist the Company to obtain and register copyrights on such materials in any and all countries, and the Company to agrees to pay expenses associated with such copyrights registration. Works of authorship created by Executive for the Company in performing her responsibilities under this Agreement shall be considered “works made for hire” as defined in the U.S Copyright Act. In addition, Executive hereby assignees to the Company all proprietary rights, including but not limited to, all patents copyrights, trade secrets and trademarks Executive might otherwise have, by operation of law or otherwise, in all inventions, discoveries, works, ideas, information, knowledge and data related to Executives’ access to confidential information of the Company during the Employment Period.

7.2 Know-How and Trade Secret. All know-how and trade secret information conceived or originated by Executive which arises out of the performance of her obligations or responsibilities under this Agreement during the Employment Period or otherwise shall be the property of the Company, and al rights therein are by this Agreement assigned to the Company.

7.3 Joint Ventures, etc. If, during the employment Period, Executive is engaged in or associated with the planning or implementing of any project, program or venture involving the company and third party or parties, all rights in such project, program or venture shall belong to the Company. Except as formally approved by the board of Directors of the Parent, Executive shall not be entitled to any interest in such project, program or venture or to any commission, finder’s fee or other compensation in connection therewith other than the compensation to be paid to Executive as provided in this Agreement.

7.4 Return of Materials. Upon termination of the employment Period, Executive shall deliver promptly to the Company all records, manuals, books, documents, letters memoranda, notes, notebooks, reports, data, tables, calculations, customer and prospective customer lists, and copies of all of the foregoing, which are the property of the Company, including, but not limited to, all documents which in whole or in part contain any trade secrets or confidential information of the Company, which in any of these cases are in her possession or under his control.

8. Termination.

8.1 Death or Disability. This Agreement shall terminate automatically upon the Executive’s death or upon a determination by the Board of Directors to terminate the Executive’s employment as a result of her disability during the employment Period. For purposes of this Agreement. “disability” shall mean a physical or mental disability that prevents or can be reasonably expected to prevent the performance by the Executive of

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her duties hereunder for a continuous period of 90 days or longer in any 12-month period. Determination of disability shall be supported by the report of an independent physician reasonably acceptable to the Company and Executive (or her representative), taking into account competent medical evidence, and otherwise shall be in accordance with the Americans with Disabilities Act and other applicable laws.

8.2 Termination by the Company. The Company may terminate the Executive’s employment during Employment Period for Cause or without Cause. For purpose of this Agreement, “Cause” shall mean the Executive’s (i) engaging in fraudulent or dishonest conduct (as determined by finding, order judgment or decree in any court or administration or investigative) that the Board reasonably determines has or would have a material adverse impact or Company, its affiliates or their respective businesses; (ii) conviction of, or entering a plea of nolo contender to, a felony criminal offense or comparable level of crime in any jurisdiction that uses a different nomenclature; (iii) willful refusal to perform her material employment-related duties or responsibilities or intentionally engaging in any activity that is in material conflict with or is materially adverse to the business interests of the Company, its affiliates or their respective businesses; (iv) gross negligence in the performance of her material employment-related duties or responsibilities; or (v) breach of any material provision of this Agreement (in the case of (iii), (iv) and (v) above, that is not cured by the Executive within 30 days following receipt by the Executive of notice from the Company setting forth in reasonable detail the circumstances giving rise to such Cause). A termination for Cause shall include a determination by the Board no later than 45 days following the termination of the Employment Period that circumstances existed during the Employment Period that would have justified a termination for cause. A termination of the Executive by the Company shall not be a termination for Cause for the purposes of the Agreement unless the determination to so terminate the Executive’s employment is made by a resolution of the Board (excluding the Executive) following a meeting convened upon not less than 10 days noticed to the Executive and at which the Executive and her legal counsel, if any, shall have had a reasonable opportunity to be heard by the Board.

8.3 Termination of Executive. The Executive may terminate her employment with or without Executive’s written consent: (i) a material diminution of Executive’s duties and responsibilities, or the assignment of responsibilities that are materially inconsistent with her position and responsibilities hereunder; (ii) a reduction of the Executive’s base salary, annual bonus or long-term compensation opportunity (it being understood that reduction of the dollar failure to achieve target performance objectives shall not constitute a reduction in Executive’s bonus opportunity) or of the benefits made available to executive as described herein; (iii) requiring Executive’s primary place of business to be located other than in south Florida (Broward, Dade or Palm Beach counties) or in the vicinity of Executive’s home residence address; (iv) a material breach by the Company of any other provision of this Agreement, in each case that is not cured by the Company within 30 days after its receipt from the Executive of written notice setting forth in reasonable detail the circumstances giving rise to such Good Reason.

8.4 Termination Procedures. Any termination of the Executive’s employment by the Company or by the Executive shall be communicated to the other party by a notice of

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termination given in accordance with this Agreement. For purposes of this Agreement, a “ notice of the termination’ means a written notice which (i) indicates the specific termination provision in this Agreement relied upon; (ii) to the extend applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for the termination under such provision; (iii) subject to this paragraph, specifies the date termination (as defined below). For the purposes of this Agreement, “date of termination” means (a) if the Executive’s employment is terminated other than for Cause or by reason of death or disability, 90 days following the receipt of the notice of termination, and (b) if the Executive’s employment is terminated for Cause or by reason of death or disability, the date of death or the date of the Board’s determination of Cause or of Executive’s disability, in accordance with this Agreement, provided that the Company may elect to pay the Executive (at the rate of her of her base salary then in effect) in lieu of part or all of such notice period preceding the date of termination.

8.5 Effect of Termination. Effective as of any date of termination or, if earlier, as of any date specified by the Company at or following the delivery of a notice of termination, the Executive shall resign, in writing, from all Board memberships and all other positions held by him with the Company and its affiliates.

8.6 Obligations of the Company upon Termination.

8.6(A)

8.6.1 General. If, during the Employment Period, the Executive’s employment terminates for any reason, the Executive (or her estate, beneficiary or legal representative) shall be entitled to receive (i) any earned or accrued but unpaid base salary through the date of terminate, and (ii) all amounts payable and benefits accrued under any otherwise applicable plan, policy, program or practice of the Company (other than relating to severance) in which the terms thereof (including, without limitation, amounts deferred under deferred compensation and similar plans, if any).

8.6(B)

8.6.2 Other than for cause, death or Disability; Good Reason. If, during the Employment Period, the Company terminates the Executive’s employment, other than for Cause, death or disability, or if the Executive terminates her employment for Good Reason, the Company shall, subject to Executive’s continued full performance of her obligations set forth in Section 5 hereof, in addition to the amounts payable under paragraph (a) above, pay to the Executive (or his estate, beneficiary or legal representative), in twelve equal monthly installments commencing on the first day of the month following the date of termination, an equal to the Executive’s annual base salary then in effect. In addition, the Executive and the Executive’s eligible spouse, dependents and beneficiaries will continue to be eligible to participate in the in the company’s health,

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medical, disability, life and other insurance plans (subject to Executive’s making required contributions to such plans) for a period of twelve months following the date of termination (or the Company will provide equivalent benefits for such period), provided that all such continuing benefits shall cease upon the date on which Executive becomes eligible to receive comparable benefits from a subsequent employer.

9. Notice.

Any notice required or permitted hereunder shall be in writing and shall be deemed sufficient when given by hand or by nationally recognized overnight courier or by express, registered or certified mail, postage prepaid, return receipt requested, and addressed, (i) if to the company, to Point Blank Solutions, Inc. 2101 SW 2^nd Street, Pompano Beach, Fl, 33069 Attn: Chief Executive Officer, with a copy delivered to the same address, Attn: General Counsel, and (ii) if to Executive, to him at the address set forth in the initial paragraph hereof (or to such other addresses as may be provided by either party by notice). Notice shall be effective two (2) days after it is delivered by any overnight courier, upon receipt if delivered by mail, or immediately if delivered by hand.

10. Miscellaneous.

This Agreement constitutes the entire agreement between the parties concerning the subjects hereof and supersedes any and all prior agreements, terms sheets or understandings. This Agreement may not be assigned by Executive, and may not be assigned by the Company except in connection with a sale of substantially all of the assets or stock of the Company and shall be binding upon, and inure to the benefits of, the Company’s successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement “Company” shall mean the Company as defined herein and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Headings herein are for convenience of reference only and shall not define, limit or interpret the contents hereof.

11. Amendment.

This Agreement may be amended, modified or supplemented by the mutual consent of the parties in writing, but no oral amendment, modification or supplement shall be effective. No waiver by either party of any breach by the other party of any condition or provision contained in this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be writing and signed by Executive or an authorized officer of the Company, as the case may be.

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12. Severability.

The provisions of this Agreement are severable. The invalidity of any provision shall nor affect the validity of any other provision, and each provision of this Agreement shall be valid and enforceable to the fullest extend permitted by law.

13. Resolution of Disputes; Enforcement.

Any controversy or claim seeking equitable relief pursuant to this Agreement, all controversies and claims arising under or in connection with this Agreement or relating to the interpretation, breach or enforcement hereof and all other disputes between the parties in connection with the employment of the Executive shall be referred for arbitration to be held in Miami, Florida ( or such other location as the Company and Executive shall agree) to a neutral arbitrator selected by Executive and the Company, and this shall be the sole and exclusive manner in which to resolve such controversy or claim hereunder (other than for injunctive relief that may be required by either party) The arbitration shall be conducted in accordance with the Employment Arbitration Rules ( the “Rules”) of the American Arbitration Association (“AAA”) in affect at the time of the arbitration. If the parties are not able to agree upon neutral arbitrator, then an arbitrator shall be selected in accordance with the rules and proceeding hereunder, provided that the arbitrator shall be entitled to award to the prevailing party reimbursement of its reasonable legal costs and expenses (including with respect to the arbitrator and the AAA).

14. Survivorship.

The provisions of Sections 4,5 and 6 Agreement shall survive Executive’s termination of employment. Other provisions of this Agreement shall survive any termination of executive’s employment to the extent necessary to the intended preservation of each party’s respective rights and obligations.

15. Withholding.

All amounts required to be paid by the Company shall be subject to reduction in order to comply with applicable federal, state and local tax withholding requirements.

16. Counterparts.

This Agreement may be executive in two or more counterparts, each of which shall be deemed to be original but all of which together shall constitute one and the same instrument. The executive of this Agreement may be by actual of facsimile signature.

17. Definition of Term.

The terms “affiliate,” when used in this Agreement with respect to any person, means any other person that, directly or indirectly, controls, is controlled by or is under common control with the first person. The term “person,” when used in this Agreement, means any natural person or equity with legal status.

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18. Governing Law.

This Agreement shall be construed and regulated in all respects under the internal laws of the State of Florida, without regard to principles of conflict of laws of such state.

19. Captions.

All captions are provided for convenience, do not form a part of this Agreement, and are not admissible for purposes of construction.

IN WITNESS OF, this Agreement is entered into as of the date first written above.

POINT BLANK SOLUTIONS, INC.
By:
	Larry R. Ellis, President / CEO:

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20. Expenses: Executive shall adhere to the following Employer policies:

20.1 Transportation.

21.1.1 Company Vehicles. Whenever an employee of Employer operates a company vehicle, the employee is responsible for operating the vehicle properly in accordance with the manufacturer’s instructions. Any traffic violations, citations or summonses, etc., issued against a company vehicle or its operator are the responsibility of the person operating the vehicle at the time the infraction occurred. Employees who accepted company vehicles in order to carry out the duties of their position with Employer are totally responsible for compliance with vehicular laws and the mechanical and cosmetic condition of the vehicle. Employer has developed company policies and procedures which are designed to prevent driver neglect. Whenever there is driver neglect, the employee assumes the financial responsibility associated with the damages. Employees who do not have an auto allowance and who use their personal vehicles for approved Employer business shall be reimbursed at the maximum deductible reimbursement rate allowed by the Internal Revenue Service at the time such approved business expense is incurred.

20.1.2 Rental Automobile. A rental automobile may be used only when approved in advance by the employee’s manager, because other means of transportation are unavailable, more costly, or impractical. Employees are to take advantage of the discounts or special rates available. The Corporate Administration Department will advise as to such vendors.

Compact or standard (intermediate) rate cars are to be rented wherever possible rather than premium rate cars. Advance reservations are to be made, as this will normally ensure compact or standard rates even though a compact or standard rate car is not available at check-in-time. If a premium rate car is used the reason for such is to be indicated on the expense account.

All reimbursement claims for use of rental automobiles must exclude charges resulting from personal use.

The major automobile rental agencies generally provide the lessee with public liability, comprehensive fire and theft, and $100 deductible collision insurance, the cost of which is included in the rental fee. For a slight additional charge the collision deductible can be removed. This additional collision protection should be purchased by the employee, since any claims will be the personal liability of the employee. Employer will reimburse the cost of the additional insurance.

It is recommended that, whenever possible, employees rent automobiles only from agencies which provide insurance as indicated above and which insurance will not be impaired by the intended use of the car (i.e., using two or more drivers, leaving the state, etc.).

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Some automobile rental agencies may not provide insurance for the benefit of the lessee. It is the employee’s responsibility to make sure that adequate insurance is provided. Where insurance is not included as part of the rental fee, the company will reimburse the employee for the additional charge to secure the following coverage: public liability - up to limits of $100,000 to $300,000.

In addition to the charge card and receipt, also attach the automobile rental company receipts (reflecting the kind of car, miles driven, etc.) to the expense account.

20.1.3 Commercial Air Travel. All airline travel reservations will be made by Corporate Administration. Only economy class accommodations (tourist fare, shuttle flights, etc.) are to be used. No first class travel is authorized.

All ticket stubs, including excess baggage charges and credit slips received are to be attached to the expense account. Any unused portion of a ticket, purchased by the employee for cash, should be returned by the employee to the airlines to obtain the refund and deducted from the expense account.

20.1.4 Carfare and Travel. Reasonable carfare expenses are reimbursable when their use is necessary. The most economical means of transportation should always be used (e.g. limousine service instead of a taxi).

20.1.5 Inconvenience Payments by Airlines or Car Rental Agencies. When checks or certificates are issued as an inconvenience payment by airlines or car rental agencies, they should be accounted for to Employer through the expense account procedure.

20.2 Expenses of Other Employees. Normally employees are not to include in their expense accounts meals for other employees. Except under the most unusual circumstances, requiring advance approval by the employee’s manager, or where non-Employer personnel are involved as provided under “business entertainment”, meals or entertainment provided to another employee are not reimbursable.

20.3 Trip Detail. When reporting expenses, the following information is required: (1) dates of departure and return for each trip; (2) the names and locations of departure points and designation or locality; and (3) the business reason for the travel or nature of the business must be indicated. For customer calls, customer’s name and address is required.

20.4 Substitution of Expenses. Reimbursement will not be made for any expenditure which is in lieu of the normally reimbursable type of expense (e.g., when an employee elected to stay at a relative’s or friend’s home instead of commercial lodging). In addition, the cost of any gift, meal or entertainment that may be provided to the employee as a token of appreciation is not reimbursable.

20.5 Tips. Reasonable tips for bellhops, chambermaid, porters, meals, taxis and the like are reimbursable. Tips for meals, entertainment and taxi are to be included with the cost of those items.

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20.6 Telephone and Telefaxes. Telephone and telefax expenses are reimbursable when incurred in connection with company business. Normally, this expense is supported by an entry on the hotel bill. When the employee charges business calls to his home telephone or personal credit card, the detailed bill is to be attached.

20.7 Local Travel. Lunches will not be reimbursed unless “business meal” requirements are met. See the business meals section.

20.8 Non-Local Travel. Reimbursement for reasonable actual meal expenses but not exceeding $25.00 per day, allocated as follows: $5.00 for Breakfast; $20.00 for Dinner. If any meal is provided in some other way, the Diem is reduced by that appropriate amount (e.g., conference fee included luncheon).

20.9 Alcoholic Beverages. Alcoholic beverage expenses are not reimbursable, except when incurred in connection with non-Employer personnel under the conditions covered by the business meals and other business entertainment section.

20.10 Business Meals. Business related expenses for food or beverages, furnished under circumstances which are generally considered to be conducive to a business discussion (taking into account the surroundings in which furnished and the relationship to Employer business of the persons to whom the fund or beverages are furnished), are reimbursable when authorized by the employee’s Manager. The following detail is required: (1) cost (including tips and tax, if any); (2) date; (3) name and location of restaurant; (4) indication of whether the meal is breakfast, lunch, or dinner; (5) names, titles, or other designations and business relationships; and (6) business reason.

20.11 Lodging. Commercial-type accommodations and rates are to be requested at all times when reservations are made; commercial or special (guaranteed) rates are available at certain hotels and motels and such accommodations should be selected. Room expenses, including tax, are to be entered by day and receipts are to be attached to the expense account. Charges to the hotel bill for other than lodging are to be entered by day under their proper classifications.

20.12 Receipts. All original receipts must substantiate each expenditure regardless of amount. The receipt(s) must show the amount, date, place, and nature of expenses. Since we must substantiate (bills or receipts) for tax purposes, the documents must be securely attached to and submitted with the expense account. If employees require copies of such documents for their personal use, they should arrange to have copies made before submitting the originals. Wherever possible, expenses should be charged to a charge card and the charge ticket used as a receipt. Restaurant bill stubs are unacceptable as receipts. If a meal could not be charged, obtain a full size receipt imprinted with the establishment’s name and date.

20.13 Approvals. Expense accounts are to be signed by the employee and approved by the employee’s manager or, in her absence, by the next higher level of management, in the line of authority that is properly concerned with, and has responsibility for the expenditure. It is the approving manager’s direct responsibility to thoroughly review all

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expenditures for appropriateness and reasonableness, and to ensure that all required supporting documents are attached. It is also her direct responsibility to ascertain that an adequate explanation is shown on the expense account for unusual items or charges in excess of normal. Executive shall have all expenses reimbursed within 30 days of receipt of expense report after received by employer.

21. Termination of Employment Period.

21.1 By Employer: Cause. Employer may, at any time during the Employment Period by notice to Executive, terminate the Employment Period “for cause” effective immediately. Such notice shall specify the cause of termination. For purposes of this Section 6.1, “for cause” means (i) willful and continued failure by Executive to perform her duties hereunder (other than as result of incapacity due to illness or injury), after a demand for performance is delivered to Executive by the Employer, which identifies the manner in which the Employer believes that Executive shall not have performed her duties, (ii) willful misconduct by Executive which is demonstrably and materially injurious to the Employer, monetarily or otherwise, (iii) commission by Executive of an act of fraud or embezzlement resulting in material economic harm to the Employer, (iv) the conviction of Executive of a felony involving moral turpitude (other than driving while intoxicated), (v) insubordination, and (vi) any violation of any rule or regulation that may be established from time to time for the conduct of Employer’s business.

21.2 By Executive: Good Reason. Executive may, at any time during the Employment Period by notice to Employer, terminate the Employment Period “for good reason” effective immediately. Such notice shall specify the cause of termination. For purposes of this Section 6.2, “for cause” means a material or significant change in Executive’s duties or responsibilities as a Sales Representative, or the position of employment with Employer held by Executive, without Executive’s prior written consent and which is not cured within 30 days after written notice therefore to Employer.

21.3 Disability. During the Employment Period, if, solely as a result of physical or mental incapacity or infirmity (other than alcoholism or drug addiction), Executive shall be unable to perform her substantial duties under his Agreement for (i) a continuous period of at least 90 days, or (ii) periods aggregating at least 180 days during any period of 24 consecutive months (each a “Disability Period”), and at the end of the Disability Period there is no reasonable probability that Executive can promptly resume his duties hereunder pursuant hereto, Executive shall be deemed disabled (“the Disability”) and Employer, by notice to Executive shall have the right to terminate the Employment Period for Disability at, as of or after the end of the Disability Period. The existence of the Disability shall be determined by a reputable licensed physician mutually selected by Employer and Executive, whose determination shall be final and binding on the parties, provided that if Employer and Executive cannot agree upon such physician, such physician shall be designated by the then acting President of the County Medical Society, and if for any reason such President shall fail or refuse to designate such physician, such physician shall, at the request of either party, be designated by American Arbitration Association. Executive shall cooperate in all reasonable respects to enable an examination to be made by such physician.

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21.4 Death. The Employment Period shall end on the date of Executive’s death.

21.5 Termination Compensation. Executive shall not be entitled to compensation following the termination of the Employment Period in accordance with this Section 6 (except for Base Salary through the date of termination of the Employment Period, and commissions on sales by Executive of merchandise or products of Employer through the date of termination of the Employment Period in accordance with Section 4.3 of this Agreement).

22. Location of Executive’s Activities

Executive’s principal place of business in the performance of her duties and obligations under this Agreement shall initially be at 2102 SW 2nd Street, Pompano Beach, Florida 33069 or thereafter at an alternate Employer location within reasonable commuting distance of such initial location. Notwithstanding the preceding sentence, Executive will engage in such travel and spend time in other places as may be necessary or appropriate in furtherance of her duties hereunder.

23. Miscellaneous

23.1 Notice. Any notice, consent or authorization required or permitted to be given pursuant to this Agreement shall be in writing and sent to the party for or to whom intended, at the address of such party set forth in the heading of this Agreement, by registered or certified mail (if available), postage paid, or at such other address as either party shall designate by notice given to the other in the manner provided herein. Any notice to Employer shall be marked and posted to the attention of Frank Irwin.

23.2 Taxes. Employer is authorized to withhold (from any compensation or benefits payable hereunder to Executive) such amounts for income tax, social security, unemployment compensation and other taxes as shall be necessary or appropriate in the reasonable judgment of Employer to comply with applicable laws and regulations.

23.3 Confidential Information. Executive shall not at any time whether during the Employment Period or thereafter, disclose or use (except in the course of her employment hereunder and in furtherance of the business of the Employer, or as required by applicable law) any confidential information, trade secrets or proprietary data of the Employer.

23.4 Restrictions on the Use of Confidential Information. Executive agrees and covenants as follows:

24.4.1 All documents and other material made or compiled by Executive during the Employment Term, and any copies thereof, whether or not containing Confidential Information, are and shall be the property of Employer and shall be delivered to Employer by Executive upon request by Employer. Executive will treat as trade secrets all Confidential Information acquired by him prior to or during the Employment Term, and will not use any such Confidential Information for her own benefit nor disclose it or any part of it to any person, firm or

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corporation (other than Employer) without the prior written consent of Employer unless such disclosure is required by law or in response to a legal order or unless such Confidential Information has become generally available to the public other than through the breach by Executive of the terms hereof.

24.4.2 All ideas, reports and other creative works conceived by Executive during the Employment Term and relating to Confidential Information shall be timely disclosed to Employer and shall be the sole property of Employer; and Executive4 shall execute and deliver any and all assignments and other agreements necessary or appropriate to effect the foregoing.

24.5 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of Tennessee applicable to agreements made and to be performed therein.

24.6 Headings. All descriptive headings in this Agreement are inserted for convenience only and shall be disregarded in construing or applying any provision of this Agreement.

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

24.8 Severability. If any provision of this Agreement or a part thereof is held to be unenforceable by a court of competent jurisdiction, the remainder of such provision and this Agreement, as the case may be, shall nevertheless remain in full force and effect.

24.9 Waiver of Compliance. The failure of a party to insist on strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of, or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing.

24.10 Entire Agreement. This Agreement contains the entire agreement and understanding between Employer and Executive with respect to the subject matter hereof. This Agreement supercedes any prior agreement between the parties relating to the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

EMPLOYER:		EXECUTIVE:
POINT BLANK SOLUTIONS, INC		/s/ Jennifer R. Coberly
By:	/s/ Larry Ellis
As its:	Chief Executive Officer

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EX-10.2

Exhibit 10.2

*** TEXT OMITTED AND FILED SEPARATELY, CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2

SUPPLY AGREEMENT

This agreement (“Agreement”) is made effective as of March 18, 2008, (the “Effective Date”) by and between LifeStone Materials, LLC, a Delaware limited liability company (“SUPPLIER”), and Point Blank Solutions, Inc., a Delaware corporation (“POINT BLANK”); (POINT BLANK and SUPPLIER may sometimes be referred to individually as a “Party” or collectively as the “Parties”).

NOW, THEREFORE, in consideration of the premises, the mutual promises, and the representations, warranties and covenants herein contained, the sufficiency of which is hereby mutually acknowledged, the Parties agree as follows:

ARTICLE 1

TERM

This Agreement shall be effective as of the Effective Date for an initial term of thirty-six (36) months (the “Initial Term”), and, unless earlier terminated as provided in Article 4, shall be automatically extended for indefinite additional one (1) year terms under the terms and conditions of this Agreement (each an “Extended Term”), terminable by either party by giving the other party an advance written notice of six (6) months prior to the expiration of the Initial Term or any Extended Term. For purposes of this Agreement, the Initial Term and any Extended Terms shall be collectively referred to as the “Term”.

In this Agreement the term “Affiliate” shall mean any Person directly or indirectly controlling, controlled by, or under common control with the Person in question; if the Person in question is a corporation, any executive officer or director of the Person in question or of any corporation directly or indirectly controlling the Person in question. As used in this definition of “Affiliate”, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. As used in this Agreement, the term “Person” means any individual, corporation, association, partnership, limited liability company, joint venture, trust, estate, or other entity or organization.

ARTICLE 2

SUPPLIER PRODUCT OBLIGATIONS

2.1 Products.

SUPPLIER agrees to sell to POINT BLANK the products described on Exhibit A attached hereto, conforming to the specifications described on Exhibit A attached hereto (the “Specifications”) or their equivalents or replacements as may be amended from time to time by agreement of the Parties (the “Products”). Upon POINT BLANK’s request, the Parties shall discuss in good faith any changes requested by POINT BLANK to any of the Products’ Specifications, and any required changes to the price of such Product resulting from the change in the Specifications, based on the principles set forth in Exhibit A and Exhibit B attached hereto.

2.2 Revised Products

(a) In the event that one or more POINT BLANK customers or prospective customers requests POINT BLANK to deliver equivalent or substitute woven products in place of the Products that require a change to the Specifications, but that are goods that would reasonably be expected to be provided by POINT BLANK (taking into consideration technological, economic and manufacturing advances) (a “Revised Product”), SUPPLIER shall provide such Revised Products, provided that POINT BLANK (i) order from SUPPLIER such quantities of the Revised Product such that it becomes commercially and technologically reasonable for the SUPPLIER to make such revisions to the Specifications; (ii) request from SUPPLIER such supply dates that will afford SUPPLIER sufficient time to prepare for and make the necessary arrangements for the production of the Revised Product (taking into account SUPPLIER’s existing production schedules, SUPPLIER’s need to make appropriate changes to the production process and equipment, SUPPLIER’s need to test-run the Revised Product, POINT BLANK’s reasonable undertakings towards its customers etc.); (iii) consult with SUPPLIER on the proposed contemplated specifications of the Revised Product prior to committing to supply it to its customer and (iv) to the extent practical, attempt in good faith to agree with the customer on changes to such specifications if SUPPLIER reasonably requests so. If all the above conditions are met, the revised Specifications shall be added to Exhibit A and the Revised Product shall be deemed a “Product”.

(b) In the event that SUPPLIER must make a capital investment in excess of [***] to provide Products meeting the revised Specifications, then POINT BLANK (in the event that POINT BLANK is then a Member of SUPPLIER) shall loan on a pro rata basis with the other Members of SUPPLIER, in accordance with Section 5.07 of the LLC Agreement, the funds determined by SUPPLIER (in its reasonable discretion) to be required, at an interest rate computed daily at [***] per annum (a “Capital Investment Loan”); provided, however, that POINT BLANK may, in its sole discretion, withdraw its request to amend Exhibit A once SUPPLIER has indicated the amount of the capital investment necessary in connection with such revised Specifications. In the event that POINT BLANK is no longer a Member, then SUPPLIER may not be required by POINT BLANK to make a capital investment in excess of [***] to comply with this section.

For purposes of this Agreement, (i) “LLC Agreement” means the Limited Liability Company Agreement of SUPPLIER of even date herewith, as amended, and (ii) “Prime” means the LaSalle Bank National Association (Chicago, Illinois) publicly announced prime rate in effect from time to time.

2.3 Product Delivery.

SUPPLIER will package Product for shipping from SUPPLIER’S plant located at Temple Building, 99 Roush Road, Anderson, South Carolina (the “Plant”) and POINT BLANK is responsible for transporting Product from the Plant within forty-eight (48) hours of notification by SUPPLIER that the order has been fulfilled. The risk of loss [***] shall have the responsibility of insuring the Products against transportation loss and any other loss or damage [***].

2

2.4 Delivery of Raw Materials.

(a) POINT BLANK shall deliver, or cause to be delivered, to SUPPLIER at the Plant not more than [***] days and not less than (i) for orders less than [***] pounds of Product, [***] days, (ii) for orders equal to or more than [***] and less than [***] pounds of Product, [***] days, and (iii) for orders equal to or more than [***] pounds of Product, [***] days, prior to the requested delivery date of the related Products the yarn necessary to manufacture the Products for POINT BLANK (the “Raw Materials”), at no charge to SUPPLIER. For purposes of the previous sentence the “yarn necessary to manufacture the Products” shall be an amount of yarn equal to the sum of [***]. Within ten (10) days of delivery of Raw Materials to SUPPLIER, SUPPLIER shall have the right to reject Raw Materials as defective, thereafter Raw Materials shall be deemed acceptable and free of defects for purposes of this Agreement, except for latent defects that cannot be determined by reasonable inspection (“Latent Defect”), in which case SUPPLIER shall notify POINT Blank as soon as practicable after discovery of such defect.

(b) Without the prior consent of POINT BLANK, SUPPLIER shall not (i) use any raw materials in the production of the Products other than those provided by POINT BLANK or as directed by POINT BLANK or (ii) use any of the Raw Materials POINT BLANK delivered, or caused to be delivered, for the production of Products other than for delivery to POINT BLANK pursuant to the Volume Forecast (defined below) and related purchase orders by POINT BLANK.

ARTICLE 3

PRODUCT OBLIGATIONS

3.1 Product Volume.

(a) Commencing on the Effective Date, SUPPLIER shall sell to POINT BLANK during the Term, such quantity of Products as shall be specified on POINT BLANK purchase orders addressed to SUPPLIER in writing from time to time provided that SUPPLIER shall not be required to fill orders of POINT BLANK that would require it to produce in any [***] more than [***] pounds of Products (“Maximum Monthly Capacity”). [***]. If POINT BLANK wishes to increase the Maximum Monthly Capacity, it will notify SUPPLIER and the parties shall negotiate in good faith a possible expansion of the Plant and the terms and conditions of such expansion. Once a capacity expansion is agreed to and completed a new Maximum Monthly Capacity will be set. POINT BLANK agrees that as of such time that SUPPLIER reaches Maximum Monthly Capacity (the “Start Date”), POINT BLANK will be obligated to purchase from SUPPLIER, at least, the lower of the following (the “Minimum Order”) (i) [***] pounds of Product over each [***] (or the pro rata amount thereof for the portion of the first [***] during the Term), subject always to the Maximum Monthly Capacity; or (ii) the quantity of Products equal to [***] of the needs of POINT BLANK and its Affiliates for woven fabrics for ballistic uses, over each [***] (or the pro rata amount thereof for the portion of the first [***] during the Term), that are to be manufactured using Kevlar or Twaron (except for any quantities of woven fabric ordered by POINT BLANK from third parties after SUPPLIER failed to

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manufacture such quantities on a timely basis). The commitment shall be reduced by any amounts less than the Maximum Monthly Capacity that POINT BLANK ordered and SUPPLIER was unable to deliver for any reason (excluding lack of Raw Materials) and by any amounts of Products rejected by POINT BLANK in accordance with the terms hereof.

3.2 Failure to Supply Volume Requirements.

If, in any month SUPPLIER fails to supply POINT BLANK’s binding orders (as set forth in Section 3.3 below) up to the Maximum Monthly Capacity (for any reason other than lack of Raw Materials), then POINT BLANK, in its sole and absolute discretion may purchase the volume represented by the SUPPLIER shortfall from third parties, in which case SUPPLIER shall pay POINT BLANK any incremental costs, including without limitation, cost of Products, freight and expediting charges. POINT BLANK shall be entitled to use quantities of Products that it has purchased from third parties prior to resuming purchases from SUPPLIER.

3.3 Monthly Estimates.

On or before the 15th day of each month during the Term, POINT BLANK shall provide SUPPLIER with POINT BLANK’s best estimate of POINT BLANK’s anticipated requirements under subsection 3.1 for Products during the immediately succeeding twelve (12) months listed by Product type and amount (the “Volume Forecast”). No forecasted quantity for any month shall exceed the Maximum Monthly Capacity. The requirements (type and amount) for each of the first three (3) months of each Volume Forecast shall be binding on the parties and shall be deemed as a binding order submitted by POINT BLANK for said three (3) months. POINT BLANK and SUPPLIER acknowledge that from time to time considerable variation will occur between the estimated requirements for the remaining nine (9) months of each Volume Forecast. Notwithstanding such variation, SUPPLIER shall use its commercially reasonable efforts to accommodate such delivery requirements (but not including any obligation of SUPPLIER to default in its commitments under other contractual obligations). SUPPLIER shall provide POINT BLANK with advance written notice, as soon as reasonably possible, of any anticipated inability to produce and deliver Products in such quantities as are necessary to meet POINT BLANK’s requirements.

3.4 Suspension of Work.

If, for reasons beyond POINT BLANK’s reasonable control, POINT BLANK no longer needs previously ordered Product, POINT BLANK may delay, reduce or suspend its purchase of Products hereunder, which production has not commenced at the time SUPPLIER receives the notice of delay, reduction or suspension, as POINT BLANK may determine to be appropriate for the convenience of POINT BLANK; provided that any delayed order shall not be used to satisfy the Minimum Order during the period of delay.

3.5 Unauthorized Distribution; Overruns and Second-Quality Goods.

No Products (including without limitation, production overruns, second-quality goods, and any Products rejected or returned by POINT BLANK) bearing any of POINT BLANK trademarks, trade names, or Intellectual Property (“Rejected Goods”) shall be sold, distributed or used in any manner to any Person other than POINT BLANK by SUPPLIER or any of its

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subcontractors without the prior written consent of POINT BLANK. The Parties shall endeavor to mutually agree in good faith upon the manner in which any, if any, Rejected Goods may be used, sold or distributed. In the event SUPPLIER and POINT BLANK cannot reach agreement within thirty (30) days concerning liquidation of the Rejected Goods, SUPPLIER shall destroy such Rejected Goods all at SUPPLIER’s cost and expense. SUPPLIER shall not deliver any Products that have been previously returned as Defective without first notifying the POINT BLANK representative. SUPPLIER shall be responsible for all production overruns of raw materials and finished Products outside SUPPLIER-quoted manufacturing tolerances.

ARTICLE 4

REPRESENTATIONS, WARRANTIES AND COVENANTS.

SUPPLIER hereby agrees, represents and warrants to POINT BLANK that:

4.1 Each Product shall meet the applicable Specifications set forth in Exhibit A as amended from time to time, be of even kind and quality, and packaged and labeled as the Specifications may require; provided, however, that any failure of Products to meet any of the above requirements attributable to a Latent Defect in Raw Materials which was not discovered by SUPPLIER prior to delivery to POINT BLANK shall not be deemed a breach of this warranty.

4.2 SUPPLIER shall convey good title to the Products and that the Products shall be delivered free of any lien or encumbrance, and free from defects in workmanship or (subject to Sections 2.4(a) and 4.7) materials; provided, however, that SUPPLIER makes no representation or warranty under this Section 4.2 applicable to the Raw Materials that are a part of such Product to the extent that such Raw Materials delivered, or caused to be delivered, by POINT BLANK to SUPPLIER for delivery of such Product, at the time of such delivery, were not conveyed with good title free and clear of any liens or encumbrances and free from Latent Defects in workmanship or material;

4.3 SUPPLIER has all approvals, consents and qualifications necessary to produce the Products and such production of the Products shall not contravene any applicable legal requirements of any governmental body.

4.4 SUPPLIER’s manufacture and delivery of the Products will not infringe on the Intellectual Property (as defined below) rights of any third party, and no claim has been made, notice given or dispute arisen to that effect or with regard to any Intellectual Property SUPPLIER intends, or is required, to use in such manufacture and delivery of the Products; provided, however, that SUPPLIER makes no such representation or warranty under this Section 4.4 applicable to the Raw Materials that are a part of such Product to the extent that such Raw Materials delivered, or caused to be delivered, by POINT BLANK to SUPPLIER for delivery of such Product, at the time of such delivery, were infringing on the Intellectual Property rights of any third party.

4.5 SUPPLIER warrants that all Products shall conform to a production sample that is approved by POINT BLANK, including without limitation that such Products shall be consistent with National Institute of Justice and First Article testing standards and the testing requirements

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provided on Exhibit C; provided, however, that SUPPLIER makes no representation or warranty under this Section 4.5 applicable to such Products to the extent that the Raw Materials delivered, or caused to be delivered, by POINT BLANK to SUPPLIER for delivery of such Product, at the time of such delivery, did not conform to the production samples previously approved by POINT BLANK as the result of a Latent Defect.

4.6 SUPPLIER is not subject to any restrictive obligations imposed by former or existing clients or any other Person that would impair its ability to perform its obligations and deliver the Products to be provided pursuant to this Agreement. SUPPLIER shall not place any other restrictive obligations or influence on other suppliers.

4.7 SUPPLIER hereby assigns, to the extent assignable by SUPPLIER, for the benefit of POINT BLANK warranties associated with the Products provided by any manufacturer, subcontractor or third party and SUPPLIER shall enforce such warranties on POINT BLANK’s behalf upon POINT BLANK’s written request. The warranties made or assigned by SUPPLIER pursuant to this Agreement or otherwise shall survive the acceptance of any payment for the Products by POINT BLANK. The warranties made or assigned to POINT BLANK by SUPPLIER pursuant to this Agreement or otherwise shall, to the extent SUPPLIER has power to do so, benefit POINT BLANK and its subsidiaries and affiliated companies and their respective employees, agents, representatives, assigns, subcontractors and customers. By assigning any warranty to POINT BLANK, SUPPLIER shall not be deemed to represent to POINT BLANK that such assignment is valid or the extent of the rights of POINT BLANK pursuant to such assignment.

4.8 In the event that (i) POINT BLANK has ordered an average of [***] pounds of Products per [***] over the previous [***] period (or such shorter period during the first [***] of the Initial Term) or (ii) POINT BLANK has ordered [***] over the previous [***] period (or such shorter period during the first [***] of the Initial Term), the Product Price or Adjusted Product Price, as then applicable, (excluding the cost of the yarn), the terms, representations, warranties and benefits granted to POINT BLANK herein are comparable to or better than the equivalent prices (excluding the cost of the yarn), terms, warranties and benefits offered by SUPPLIER to its other customers.

4.9 All Intellectual Property, Improvements and Derivative Work owned by or licensed to SUPPLIER as of the date hereof which is used for the production of the Products is sub-licensable by SUPPLIER in accordance with Section 9.2 hereof and any such sub-license will not be a violation or breach of any license or agreement to which SUPPLIER is a party or the rights to such Intellectual Property, Improvements or Derivative Work of a third party.

THE FOREGOING REPRESENTATIONS AND WARRANTIES ARE EXPRESSLY IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, AND ALL SUCH OTHER WARRANTIES AND REPRESENTATIONS OF WHATEVER KIND ARE HEREBY DISCLAIMED BY SUPPLIER AND ITS AFFILIATES AND WAIVED BY POINT BLANK. EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, SUPPLIER SHALL HAVE NO LIABILITY TO POINT BLANK OR ANY OF ITS AFFILIATES FOR ANY GENERAL, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFITS ARISING OUT OF THE MANUFACTURE, IMPORTATION, USE, OFFER FOR SALE OR SALE OF THE PRODUCT; PROVIDED, HOWEVER, THAT IN THE EVENT THAT PRODUCT IS

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DETERMINED TO BE DEFECTIVE (EITHER BY AGREEMENT OF THE PARTIES OR A DETERMINATION BY AN INDEPENDENT LABORATORY) AS A RESULT OF SUPPLIER’S HANDLING, STORAGE OR MANUFACTURING OF THE PRODUCT, THEN DAMAGES SHALL INCLUDE ANY AND ALL OF POINT BLANK’S DIRECT OUT-OF-POCKET COSTS (SPECIFICALLY EXCLUDING, LOST PROFITS AND REPUTATIONAL DAMAGES) INCURRED IN CONNECTION WITH THE DEFECTIVE PRODUCT, INCLUDING PRODUCTION COSTS, SCRAP MATERIAL AND SHIPPING AND ADMINISTRATIVE COSTS OF ANY RECALL. SUPPLIER MAKES NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE WITH RESPECT TO THE PRODUCT, EXCEPT AS THIS ARTICLE 4 EXPRESSLY PROVIDES.

ARTICLE 5

QUALITY AND SERVICE

5.1 If SUPPLIER identifies Products that do not meet or exceed POINT BLANK’s Specifications during their manufacturing process, SUPPLIER shall not ship such Products until the manufacturing process has been corrected and the Products conform to the Specifications, agreements, representations and warranties contained in this Agreement or as the Parties may otherwise agree.

5.2 Within fifteen (15) days of delivery of Products to POINT BLANK, POINT BLANK shall have the right to reject Products as Defective by delivery of a Notice of Defect (as defined below), thereafter and notwithstanding the warranties made by SUPPLIER under Section 4 above, Products shall be deemed accepted by POINT BLANK and free of Defects for purposes of this Agreement, except for Latent Defects, in which case POINT BLANK shall notify SUPPLIER as soon as practicable after discovery of such defect. POINT BLANK shall have no claim against SUPPLIER for any deficiency in the quantity or packaging of any Product supplied to it under this Agreement unless it gives SUPPLIER a notice of the deficiency within fifteen (15) days from receipt of the Product.

5.3 For the purposes of this Agreement a Product shall be deemed “Defective” if it does not conform to any representation or warranty under Sections 4.1, 4.2, 4.3, 4.4 and 4.5. If POINT BLANK believes that any Product is Defective it shall give SUPPLIER a notice describing the defect (a “Notice of Defect”) as soon as it discovers the defect. POINT BLANK may return any Product (and subject to receipt of the Defective Product, SUPPLIER shall reimburse POINT BLANK for the [***] with regard to which (i) SUPPLIER agrees to such return, (ii) SUPPLIER acknowledges that the Product is Defective, (iii) the Product is declared Defective by an Independent Laboratory, as described below, (iv) POINT BLANK has reason to suspect that such Products are Defective or (v) POINT BLANK has reason to believe that such Products are part of a lot or manufacturing run of Products that have Defective Products within the lot or run; provided that the maximum amount of Product that may be returned pursuant to clauses (iv) and (v), together, during any [***] period shall be not more than [***]. POINT BLANK will allow SUPPLIER to inspect the Product suspected to be Defective and take samples thereof. SUPPLIER will respond to the Notice of Defect within fifteen (15) days from receipt of the Notice. If SUPPLIER does not acknowledge that the Product is Defective then, except with regard to Products returned by POINT BLANK pursuant to clause (iv) or (v) hereof, POINT BLANK and SUPPLIER will deliver samples of the Product suspected to be defective for inspection by an independent laboratory (the “Independent Laboratory”) agreed to by the Parties. The decision of the Independent Laboratory will be final and binding and its costs will be paid by the party whose position regarding the product was rejected.

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5.4 In the event that POINT BLANK determines to return Product to SUPPLIER in accordance with Section 5.3 hereof, and SUPPLIER does not have readily available non-defective Product to replace the returned product, POINT BLANK shall have the immediate right (but not the obligation) for a period not to exceed forty-five (45) days from the date POINT BLANK notifies SUPPLIER in writing of its intention to return such Product (the “Alternate Supply Period”), to have replacement products (the “Replacement Products”) produced for POINT BLANK by an alternate supplier (the “Alternate Supplier”), which Alternate Supplier shall be determined in POINT BLANK’s sole and absolute discretion. If at any time during the Alternate Supply Period, POINT BLANK declares a breach under Section 11.1(a) hereof, the thirty (30) day cure period provided therein for breach shall run concurrently with the Alternate Supply Period. During the Alternate Supply Period, (i) all Replacement Products purchased by POINT BLANK from the Alternate Supplier shall, for purposes of the obligation pursuant to Section 3.1 hereof, be deemed to be Product purchased from SUPPLIER hereunder, (ii) upon POINT BLANK’s direction, SUPPLIER shall deliver, or cause to be delivered, to the Alternate Supplier (instead of to SUPPLIER) the Raw Material previously delivered to SUPPLIER by POINT BLANK necessary to manufacture the Replacement Products for POINT BLANK within fourteen (14) days of receipt of notice of POINT BLANK’s request to have such Raw Materials delivered to the Alternate Supplier, and (iii) for purposes of Article 9 hereof, SUPPLIER shall be deemed to no longer be able to produce and cause to be delivered to POINT BLANK the Product required to be produced hereunder, such that SUPPLIER shall be deemed to hereby grant to POINT BLANK the POINT BLANK License and the right to grant the Sublicense (without the obligation to make royalty payments) to the Alternate Supplier in accordance with Section 9.2 and with the restrictions provided therein.

ARTICLE 6

CONSIDERATION

6.1 Price.

(a) SUPPLIER shall invoice POINT BLANK in respect of each Product for [***] (“Product Price”).

(b) In the event that during any [***] POINT BLANK shall have purchased from SUPPLIER an aggregate of more than [***], then the Product Price of any additional [***] purchased during such [***] shall be based upon the Product Prices provided on Exhibit B-2, subject to adjustment as provided in subsection (c) below. In addition, not more than [***] following the date on which POINT BLANK purchases an aggregate during any [***] in excess of [***] of Fine Product, SUPPLIER shall deliver to Point Blank cash in the amount equal to [***] For purposes of this Section, [***].

(c) The Product Prices will be adjusted as follows:

(i) [***]

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(ii) [***]

6.2 Payment Terms and Invoices for Products.

SUPPLIER’s payment terms shall provide that invoices for Products that are received by POINT BLANK shall be paid [***]. Invoices shall be dated the date of shipment. [***]. SUPPLIER shall have [***] from the date that POINT BLANK received the Product invoiced within which to notify POINT BLANK in writing of any claims SUPPLIER might have for payment not made in accordance with the payment schedule outlined in this paragraph 6.2, or such claims shall be deemed waived by SUPPLIER, including but not limited to all claims for any interest accrued. All invoices for costs to be paid by POINT BLANK, including without limitation freight costs, must be accompanied with a copy of the invoice or bill for such costs, and backup documentation. In addition to invoices, monthly statements shall be submitted by SUPPLIER to POINT BLANK.

6.3 [***]

ARTICLE 7

STATUS OF PARTIES

7.1 Independent Contractor.

The Parties expressly understand and agree that SUPPLIER is acting as an independent contractor. Nothing in this Agreement is intended to create a relationship, express or implied, of employer-employee or principal-agent between POINT BLANK and SUPPLIER and any individual employed to work under this Agreement by SUPPLIER. SUPPLIER shall determine and have sole discretion over the manner and methods utilized to provide Products which comply with this Agreement. SUPPLIER shall be solely responsible for the direction, control and supervision of its and its subcontractors’ acts and the acts of its and its subcontractors’ employees incident to the performance of this Agreement. SUPPLIER shall not have nor shall it represent itself as having any authority to make contracts in the name of or on behalf of POINT BLANK or to pledge POINT BLANK’s credit or to extend credit POINT BLANK’s name, or to obligate POINT BLANK in any way.

7.2 Expenses.

Except as otherwise expressly provided herein, all expenses incurred by SUPPLIER in connection with this Agreement and the manufacture and delivery of the Products shall be the sole responsibility of SUPPLIER. In the event SUPPLIER makes unauthorized representations or incurs unauthorized expenses resulting in the assertion of a claim against POINT BLANK, SUPPLIER shall indemnify and hold harmless POINT BLANK against all such claims.

7.3 Subcontractor Approval.

SUPPLIER recognizes POINT BLANK has chosen it to perform the obligations of this Agreement because of the expertise of SUPPLIER and its employees. Any subcontractor or agent utilized by SUPPLIER for its performance under this Agreement to manufacture Products must be specifically identified to POINT BLANK by SUPPLIER and approved by POINT BLANK in writing prior to the provision of services or goods by such subcontractor or agent.

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7.4 Agreement Binding on Subcontractors.

Any subcontractors approved by POINT BLANK hereunder shall agree to be bound by all applicable provisions of this Agreement. SUPPLIER shall ensure that any approved agent, representative, assign or subcontractor has executed an appropriate agreement prior to the commencement of work. Without limiting SUPPLIER’s obligation to obtain an agreement with all approved subcontractors agreeing to be bound by all provisions of this Agreement, SUPPLIER shall provide evidence that all subcontractors are carrying and maintaining insurance policies with coverages, in the same manner and amounts as SUPPLIER is obligated to obtain and furnish pursuant to Section 10 below.

ARTICLE 8

COMPLIANCE

8.1 Government Regulations.

Unless otherwise exempt,

(a) the clauses required to be incorporated into government contracts under 41 C.F.R. sections 60-1.4, 60-250.5(a), 60-741.5(a), 48 C.F.R. 22.810, 48 C.F.R. 22.1310, and 48 C.F.R. 22.1408 are incorporated into this Agreement by reference;

(b) in addition to clauses required in (a) above, SUPPLIER shall comply with the following specific Federal Acquisition Regulation (“FAR”) and Defense Federal Acquisition Regulations Supplement (“DFARS”) clauses:

(i) 48 C.F.R. §52.219-8, Utilization of Small Business Concerns (May 2004);

(ii) 48 C.F.R. §52.203-6, Restrictions on Subcontractor Sales to the Government (SEP 2006), with Alternate I (OCT 1995);

(iii) 48 C.F.R. §52.222-3, Convict Labor (JUNE 2003);

(iv) 48 C.F.R. §52.225-13, Restrictions on Certain Foreign Purchases (FEB 2006)

(v) 48 C.F.R. §252.204-7000, Disclosure of Information (DEC 1991);

(vi) 48 C.F.R. §252.225-7014, Preference for Domestic Specialty Metals, Alternate I (APR 2003);

(vii) 48 C.F.R. §252.237-7019, Training for Contractor Personnel Interacting with Detainees (SEP 2006);

(viii) 48 C.F.R. §252.247-7023, Transportation of Supplies by Sea (MAY 2002);

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(ix) 48 C.F.R. § 252.247-7024, Notification of Transportation of Supplies by Sea (MAR 2000); and

(x) 48 C.F.R. § 252.222-50, Combating Trafficking in Persons (August 2007).

(c) SUPPLIER shall comply with all requirements of (i) Executive Order 11246, as amended, and applicable regulations issued thereunder, (ii) the requirements of Section 503 of the Rehabilitation Act of 1973 as amended, and the regulations issued thereunder, (iii) the requirements of Section 503 of the Vietnam Era Veterans’ Readjustment Assistance Act of 1972, as amended, 38 U.S.C. § 4212, (iv) the reporting requirements set forth in 41 C.F.R. 60-250.5 of the Americans with Disabilities Act of 1990, 42 U.S.C. § 12112; and (v) the requirements of 41 C.F.R. Chapter 60.

With respect to (v) above, SUPPLIER certifies that if it has fifty (50) or more employees and if it anticipates sales to POINT BLANK in connection with government contracts of $50,000 or greater, it will develop a written affirmative action compliance program for each of its establishments consistent with the rules and regulations by the Department of Labor at 41 C.F.R. Chapter 60.

8.2 General Laws and Permits.

With respect to this Agreement, SUPPLIER shall (i) comply with any and all applicable federal, state, local or agency laws, regulations, rules, ordinances or other directives, and (ii) obtain all releases, licenses, permits or other authorizations required by any governmental body or authority.

8.3 Diverse Suppliers (Minority or Women-Owned Business Enterprises).

POINT BLANK has a policy that requires SUPPLIER, whenever practicable, to use diverse suppliers, including contractors and subcontractors, if such suppliers are both qualified and competitive. A diverse supplier is a for-profit enterprise located in the United States or its trust territories, which is controlled, operated and 51 percent owned by a minority member or woman. Minority members are individuals who are African American, Hispanic American, Native American, Asian-Pacific American and Asian-Indian American. SUPPLIER will report expenditures on diverse suppliers quarterly.

8.4 Child Labor and Forced Labor.

SUPPLIER represents, warrants and covenants that SUPPLIER and its subcontractors do not and will not employ children, prison labor, indentured labor, bonded labor or use corporal punishment or other forms of mental and physical coercion as a form of discipline. In the absence of any national or local law, POINT BLANK and SUPPLIER agree to define “child” as less than 15 years of age. If local law sets the minimum age below 15 years of age, but is in accordance with exceptions under International Labor Organization Convention 138, the lower age will apply. POINT BLANK has the right to make unannounced inspections, and conduct

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appropriate audits of books and records, of all of SUPPLIER’s premises and any other premises employed in connection with SUPPLIER’s provision of Products or parts thereof hereunder, to ensure compliance with this Section. SUPPLIER shall, and shall cause each entity involved through SUPPLIER in the provision of Products or parts thereof hereunder, to comply with any code of conduct or similar policy statement promulgated by POINT BLANK from time to time.

8.5 Governmental Inspections/Findings.

SUPPLIER will immediately notify POINT BLANK of, and provide POINT BLANK with all documents relating to (including the results of), any non-routine inquiry, investigation, inspection, or any other action by any governmental body or unit thereof, with respect to the manufacture, storage, or delivery of the Product(s), or components thereof, which pertains to product quality and/or safety, unless not permitted to do so by such government body. In addition, SUPPLIER will immediately notify POINT BLANK in the event that it becomes aware or has reason to believe that there may be an issue of quality or safety, misbranding or adulteration relating to any Product or component thereof.

ARTICLE 9

INTELLECTUAL PROPERTY

9.1 Definitions.

For purposes of this Article 9:

(a) “POINT BLANK” in this Section 9 means POINT BLANK (excluding SUPPLIER and its subsidiaries) and its parents, subsidiaries, divisions and affiliates and each of their employees, officers and agents.

(b) “Intellectual Property” means (i) inventions, Improvements, discoveries, know how, concepts and ideas, whether patentable or not; (ii) patents, revalidations, industrial designs, industrial models and utility models, design patent rights, patent applications (including reissues, continuations, divisions, continuations-in-part and extensions) and patent disclosures; (iii) trade secrets and proprietary or confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any Person; (iv) copyrights, copyright registrations and applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof and any moral rights existing in connection therewith; and (v) all other intellectual property or industrial property rights recognized anywhere.

(c) “SUPPLIER” in this Section 9 means SUPPLIER and its parents, subsidiaries, divisions, affiliates, subcontractors (excluding POINT BLANK and its subsidiaries) and each of their employees and agents.

(d) “Improvements” in this Section 9 means any improvement, enhancement or refinement, whether patentable or unpatentable, which relates to, in whole or in part, any of the Intellectual Property and which is reasonably regarded as being primarily (or solely) valuable because it enables the Intellectual Property to be used in a more efficient manner. An improvement is not, by itself, a Derivative Work.

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(e) “Derivative Work” means an improvement, enhancement, refinement, derivative work, modification or other new invention or discovery, whether patentable or unpatenable, which relates to, in whole or in part, any of the Intellectual Property, and which is reasonably regarded as being potentially valuable because it constitutes a useful product or method unto itself, or because it enables the Intellectual Property to be used in connection with products or services other than the Products, and not merely because it enables the Intellectual Property to be used in connection with the Products in a more efficient manner.

(f) “Licensed Intellectual Property” means Intellectual Property, Improvements and Derivative Work owned by or licensed to SUPPLIER on the last day prior to the day on which POINT BLANK receives the right to the POINT BLANK License pursuant to Section 9.2 below, which is or has been used for the production of the Products, except for such licenses that prevent SUPPLIER from granting sub-licenses; provided that SUPPLIER shall provide written notice to POINT BLANK in the event that any such license is not sub-licensable pursuant to this Agreement prior to the use of such license in the production of Products.

9.2 License and Sublicense.

(a) (i) After termination of this Agreement (except for termination by SUPPLIER for cause) (ii) in the event that SUPPLIER can no longer produce and cause to be delivered to POINT BLANK any of the Products required to be so produced and delivered hereunder, or (iii) in the event that POINT BLANK has requested SUPPLIER to produce Product in excess of the Maximum Monthly Capacity and SUPPLIER is unable to satisfy such orders within a reasonable period of time, SUPPLIER hereby grants POINT BLANK a non-exclusive, AS IS, and without any warranties or representations of any kind (except the representation and warranty included in Section 4.9 hereof), license to exploit the Licensed Intellectual Property to make, have made for it by others, use and sell anywhere in the world soft body armor that utilizes such Licensed Intellectual Property (collectively, the “POINT BLANK License”). POINT BLANK shall have the right to sublicense said Licensed Intellectual Property to any third party manufacturer who makes soft body armor or Products for POINT BLANK (a “Sublicensee”) for the sole purpose of supplying POINT BLANK with Products (including Revised Products). Sublicensees shall not be permitted to grant a sublicense or assign their sublicense to any other Person. The license provided in this subsection 9.2 shall survive any termination of this Agreement unless otherwise agreed upon in writing by POINT BLANK and SUPPLIER.

(b) POINT BLANK shall pay SUPPLIER reasonable royalties for each product manufactured by it, any of its Affiliates or any Sublicensee, to the extent the Licensed Intellectual Property is used in such manufacturing. Under no circumstance shall POINT BLANK be required to pay royalties in respect of Intellectual Property independently owned by or licensed to POINT BLANK or developed by SUPPLIER with material technological assistance of POINT BLANK or material contribution of POINT BLANK personnel assigned to SUPPLIER. If the parties fail to agree on the rate of royalties, the matter will be referred to arbitration pursuant to Section 12.2; provided, that during the period that any such dispute has been referred to arbitration or is under review by an arbitrator pursuant to Section 12.2, POINT BLANK shall continue to have the right to use the Licensed Intellectual Property in accordance with the POINT BLANK License and provided further, that upon SUPPLIER’s request the arbitrator will set an interim rate of royalties. The royalties for each calendar year shall be paid

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within 90 days from the end of such year. At the time of payment, POINT BLANK shall provide SUPPLIER with a detailed report and set of calculations supporting the payment. Any amount of royalties which is not paid on time shall bear interest at the rate per annum of [***]. The license provided in this subsection 9.2 shall survive any termination of this Agreement unless otherwise agreed upon in writing by POINT BLANK and SUPPLIER. [***].

(c) Unless otherwise agreed by the Parties, in no event shall any such Sublicensee be granted or be deemed to have any right to exploit the POINT BLANK License to manufacture or produce any product for a party other than POINT BLANK or its Affiliates and prior to any sublicense of the Licensed Intellectual Property to any such Sublicensee, POINT BLANK shall obtain the right for itself and for SUPPLIER to have regular audits performed by an independent third party, appointed by SUPPLIER and reasonably acceptable to POINT BLANK, of the Sublicensee’s books and records and manufacturing and production facilities for the sole purpose of (i) insuring such Sublicensee’s compliance with such restriction on exploitation of the Sublicense and (ii) determining the quantities of products manufactured by the Sublicensee with the use of the Licensed Intellectual Property for the purpose of determining the royalties due to SUPPLIER. POINT BLANK will procure that the Sublicensee will cooperate with such auditor. SUPPLIER will bear the costs of the audit, unless the audit shows that the Sublicensee did not comply with this Section 9.2, in which case POINT BLANK shall procure that the Sublicensee bear the cost of the audit.

(d) POINT BLANK shall, prior to disclosing any information relating to Intellectual Property, Improvements and Derivative Work to any potential Sublicensee or any other third party, procure that an appropriate confidentiality agreement will be executed by such third party and such agreement will name SUPPLIER as a third party beneficiary and a copy thereof shall be delivered to SUPPLIER.

9.3 Invention and Nondisclosure Agreement.

When requested by POINT BLANK in writing, each of SUPPLIER’s employees, agents or subcontractors performing work in connection with the Products under this Agreement shall sign an Invention and Nondisclosure Agreement in a form reasonably required by POINT BLANK.

9.4 Record Keeping.

SUPPLIER and its employees and subcontractors shall keep written records of their activities relating to work performed or Products supplied to POINT BLANK pursuant to this Agreement and shall keep written records of all information, Intellectual Property, and work product originated or created or developed for POINT BLANK, if any. SUPPLIER shall promptly disclose to POINT BLANK upon its request all such records, and shall permit POINT BLANK to inspect, review and copy all such records.

9.5 Return of Documents and Things.

All work product, records, Intellectual Property and other materials, documents and things made available to SUPPLIER by POINT BLANK or created or developed by SUPPLIER for POINT BLANK shall be delivered to POINT BLANK upon written request by POINT BLANK or upon the expiration or earlier termination of this Agreement.

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9.6 Intellectual Property Indemnification by SUPPLIER.

SUPPLIER shall, at its sole expense, hold harmless, indemnify and defend POINT BLANK and its subsidiaries and affiliates (each, a “PB Indemnified Party”) against any and all claims or actions for the infringement of any Intellectual Property in and to the Products (collectively “POINT BLANK Action”). SUPPLIER shall indemnify each PB Indemnified Party against any and all (subject to the disclaimer below) damages, costs and expenses, including attorneys’ fees, arising from or relating to any POINT BLANK Action. SUPPLIER shall, at such PB Indemnified Party’s election and in its sole discretion, (1) defend such PB Indemnified Party against any POINT BLANK Action at SUPPLIER’s expense using counsel reasonably acceptable to such PB Indemnified Party or (2) reimburse such PB Indemnified Party for any and all costs, expenses and legal fees incurred by it in connection with any POINT BLANK Action. Notwithstanding any other provision of this Agreement, neither party shall enter into a settlement or compromise of any POINT BLANK Action without the other party’s prior written approval which shall not be unreasonably withheld. The PB Indemnified Party shall notify SUPPLIER of a POINT BLANK Action within a reasonable time after it has received written notification of such POINT BLANK Action.

If SUPPLIER fails, refuses or is unable to cure or resolve a POINT BLANK Action within forty-five (45) days of receipt of notice from a PB Indemnified Party or of the date SUPPLIER knew or should have known of the POINT BLANK Action, such PB Indemnified Party, in its sole discretion, and at SUPPLIER’s sole expense and risk of loss, may (1) procure the right to continue making, using, selling or otherwise exploiting any allegedly infringing, misappropriated or misused material, goods, apparatus, device, information, method, process, part or thing on terms acceptable to such PB Indemnified Party; (2) replace same with materials, goods, apparatus, devices, information, methods, processes, parts or things which are not alleged to be infringing, misappropriated or misused; (3) modify any allegedly infringing, misappropriated or misused material, goods, apparatus, device, information, method, process, part or thing to cease being not infringing or becomes properly used or (4) have any allegedly infringing, misappropriated or misused material, goods, apparatus, device, information, method, process, part or thing removed from such PB Indemnified Party’s premises. Upon receipt of a written request for reimbursement, SUPPLIER shall reimburse each PB Indemnified Party for any and all costs, expenses and fees actually arising from or relating to any such action by such PB Indemnified Party within thirty (30) days of such receipt.

EXCEPT AS SET FORTH IN THIS AGREEMENT, SUPPLIER SHALL HAVE NO LIABILITY TO POINT BLANK OR ANY OF ITS AFFILIATES FOR ANY GENERAL, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFITS ARISING OUT OF ANY CLAIM BASED ON THIS ARTICLE 9; PROVIDED, HOWEVER, THAT IN THE EVENT THAT PRODUCT DELIVERED TO POINT BLANK IS DETERMINED (EITHER BY AGREEMENT OF THE PARTIES OR RESOLUTION OF AN POINT BLANK ACTION AGAINST POINT BLANK OR SUPPLIER) TO INFRINGE ANY INTELLECTUAL PROPERTY, THEN DAMAGES SHALL INCLUDE ANY AND ALL OF POINT BLANK’S DIRECT OUT-OF-POCKET COSTS (SPECIFICALLY EXCLUDING LOST PROFITS AND REPUTATIONAL DAMAGE) INCURRED IN CONNECTION WITH ANY PRODUCT THAT CANNOT BE SOLD OR IN CONNECTION WITH WHICH POINT BLANK MUST

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INDEMNIFY A THIRD PARTY AND REPLACE SUCH PRODUCTS DELIVERED THERETO, INCLUDING, PRODUCTION COSTS, SCRAP MATERIAL AND SHIPPING AND ADMINISTRATIVE COSTS OF ANY RECALL.

9.7 Intellectual Property Indemnification by POINT BLANK.

POINT BLANK shall, at its sole expense, hold harmless, indemnify and defend SUPPLIER against any and all claims or action against SUPPLIER which relate to any infringement of Intellectual Property in and to the Products resulting from the use of any Intellectual Property that was provided in writing to SUPPLIER by POINT BLANK, its subsidiaries or affiliates (a “PB Indemnifying Party”) and which POINT BLANK directed SUPPLIER in writing to use in the manufacture of the Products sold to POINT BLANK or requirements made by any PB Indemnifying Party (collectively, “SUPPLIER Action”), unless SUPPLIER had actual knowledge that using such information or complying with such requirement will infringe the Intellectual Property of a third party. POINT BLANK shall indemnify the SUPPLIER against any and all (subject to the disclaimer below) damages, costs and expenses, including attorneys’ fees, arising from or relating to any SUPPLIER Action. POINT BLANK shall, at SUPPLIER’s election and in its sole discretion, (1) defend SUPPLIER against any SUPPLIER Action at POINT BLANK’s expense using counsel reasonably acceptable to SUPPLIER or (2) reimburse SUPPLIER for any and all costs, expenses and legal fees incurred by it in connection with any SUPPLIER Action. Notwithstanding any other provision of this Agreement, neither party shall enter into a settlement or compromise of any SUPPLIER Action without the other party’s prior written approval which shall not be unreasonably withheld. SUPPLIER shall notify POINT BLANK of an SUPPLIER Action within a reasonable time after it has received written notification of such Action.

EXCEPT AS SET FORTH IN THIS AGREEMENT, POINT BLANK SHALL HAVE NO LIABILITY TO SUPPLIER FOR ANY GENERAL, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFITS ARISING OUT OF ANY CLAIM BASED ON THIS ARTICLE 9.

ARTICLE 10

INSURANCE

10.1 Insurance.

Prior to commencing any work in connection with the supply of Products hereunder, SUPPLIER shall secure and shall maintain during the performance of its obligations under this Agreement and throughout the Term, at least the following types of insurance and minimum coverage: [***]. SUPPLIER shall furnish to POINT BLANK evidence of such insurance coverage in the form of Certificates of Insurance. POINT BLANK shall be named as an additional insured on SUPPLIER’s Commercial General Liability, Automobile Liability and excess liability umbrella insurance policies. All Certificates of Insurance shall provide that POINT BLANK shall be provided thirty (30) days written notice prior to any change, substitution or cancellation of such policies of insurance. [***]. The foregoing requirements as to the types and limits of insurance coverage to be maintained by the Parties SUPPLIER, and any

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approval or waiver of said insurance by POINT BLANK is not intended to and shall not in any way or manner limit or qualify the liabilities and obligations of SUPPLIER pursuant to this Agreement.

ARTICLE 11

BREACH, REMEDIES AND TERMINATION

11.1 Breach.

The occurrence of any one or more of the following events shall constitute a breach and default of this Agreement:

(a) Failure by SUPPLIER to observe or perform any of the obligations, covenants, conditions, representations or warranties required of SUPPLIER pursuant to this Agreement, where such failure is not remedied within thirty (30) days after receipt of a written notice thereof from POINT BLANK to SUPPLIER; or

(b) Failure by POINT BLANK to observe or perform any of the obligations, covenants, conditions, representations or warranties required of POINT BLANK pursuant to this Agreement, where such failure is not remedied within thirty (30) days after receipt of a written notice thereof from SUPPLIER to POINT BLANK;

(c) Failure by POINT BLANK to make any payments totaling in excess of $5,000 due from POINT BLANK to SUPPLIER as required by this Agreement and such breach continues for a period of thirty (30) days after written notice thereof from SUPPLIER;

(d) Failure by SUPPLIER to make any payments totaling in excess of $5,000 due from SUPPLIER to POINT BLANK as required by this Agreement and such breach continues for a period of thirty (30) days after written notice thereof from POINT BLANK; or

(e) If a Party is insolvent, seeks protection from creditors, makes a general assignment for the benefit of creditors, or if a bankruptcy receiver is appointed for its business.

With regard to subsections (a), (b), (c) and (d) above, such failures shall not constitute a “breach” or “default” for purposes of this Section 11.1 until the non-defaulting party provides the written notice required thereunder in accordance with Section 14.13 (the “Notice of Default”). Such written notice, in order to be effective, shall be prominently titled “NOTICE OF DEFAULT AND RIGHT TO TERMINATE” and shall inform the defaulting party of the action, or failure to act, causing such default and the provision of this agreement which has been breached.

11.2 Force Majeure.

Each Party shall be excused from performance under this Agreement while and to the extent that it is unable to perform, for a cause beyond its reasonable control. Force majeure shall not include any failure resulting from poor maintenance of the Plant, SUPPLIER’s mechanical failure or failures or work stoppages. In the event either Party is rendered unable wholly or in part by force majeure to carry out its obligations under this Agreement, then the Party affected

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by force majeure shall give written notice with explanation to the other Party immediately. Following such notice, the affected obligations of the Party giving notice shall be suspended only during the continuance of the events giving rise to the force majeure provided that the affected Party is acting with due diligence to remedy the events giving rise to the force majeure. Notwithstanding the foregoing, however, if SUPPLIER is unable to perform for a period of more than ninety (90) days due to any delay, POINT BLANK may terminate this Agreement.

11.3 Remedies.

(a) In addition to any remedies available to POINT BLANK under law or as provided herein, SUPPLIER shall implement overtime, dedicated shipping and additional personnel to avoid any delay in delivery or Defective Products (as defined in Section 5.3). However, in the event there are delayed or Defective Products (which have been acknowledged as Defective by SUPPLIER or found Defective by the Independent Laboratory pursuant to the procedure contained in Section 5.3), POINT BLANK shall be entitled to exercise the following remedies: Any Products not delivered to POINT BLANK in accordance with this Agreement or the Specifications set forth in Exhibit A attached hereto, as it may be amended from time to time, may, at POINT BLANK’s sole option: 1) be accepted as is, with an equitable adjustment in price; 2) be corrected by POINT BLANK or another party under POINT BLANK’s direction at SUPPLIER’s expense; 3) be corrected by SUPPLIER at SUPPLIER’s expense; or 4) reject and returned to SUPPLIER without charge to POINT BLANK and with SUPPLIER paying all applicable freight charges; provided, however, POINT BLANK shall give SUPPLIER at least 24 hours advance notice of its intention to return any Products.

(b) In the event of a breach by SUPPLIER, POINT BLANK shall have, in addition to any applicable right to terminate this Agreement pursuant to subsection 11.4, and any other remedies specified herein or available at law or equity, the following remedies:

(i) The right to withhold all or part of any remaining payments for Defective Product until such breach is cured to POINT BLANK’s reasonable satisfaction; and

(ii) The right to contract with an Alternative Supplier. In such case, SUPPLIER shall be liable to POINT BLANK for all additional costs incurred by POINT BLANK to complete the work or procure the Products, but no other damages or injury caused by SUPPLIER’s breach.

11.4 Termination.

Except as otherwise provided herein, this Agreement may be terminated only under the following circumstances:

(a) By POINT BLANK, if SUPPLIER has committed a material breach of its obligations, covenants, conditions, representations or warranties pursuant to this Agreement, and such failure is not remedied within thirty (30) days after receipt of a written notice thereof from POINT BLANK to SUPPLIER (unless cure of such material breach, by its nature, cannot be cured in such a 30-day period, in which case cure must occur as soon as possible after the end of such 30-day period, but in no event longer than sixty (60) days), which notice will advise SUPPLIER of the intention of POINT BLANK to terminate the Agreement unless the breach is cured.

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(b) By SUPPLIER, if POINT BLANK has committed a material breach of its obligations, covenants, conditions, representations or warranties pursuant to this Agreement, and such failure is not remedied within thirty (30) days after receipt of a written notice thereof from SUPPLIER to POINT BLANK (unless cure of such material breach, by its nature, cannot be cured in such a 30-day period, in which case cure must occur as soon as possible after the end of such 30-day period, but in no event longer than sixty (60) days), which notice will advise POINT BLANK of the intention of SUPPLIER to terminate the Agreement unless the breach is cured. If termination is without cause and not in accordance with Article 1, the Parties agree that the damages that POINT BLANK may suffer are difficult to ascertain and are not capable of a reasonable estimation at the time of contracting. In POINT BLANK’s sole discretion, for a period not to exceed 12 months, POINT BLANK may require SUPPLIER to continue to supply Products until POINT BLANK is able to qualify an alternative supplier.

For purposes of this section 11.4, a breach shall be a “material breach” if the non-breaching party determines in its reasonable commercial discretion that such breach (or series of breaches) is material, including, by way of example and not limitation, a breach (or series of breaches) that (i) causes the non-breaching party to incur costs, fees or penalties in excess of [***], (ii) causes the non-breaching party to fail to materially fulfill a material obligation to a third party, or (iii) causes the non-breaching party to forgo reasonably certain sales of its products or services with a projected sale price in excess of [***].

11.5 Effects of Termination.

Upon termination, SUPPLIER shall, unless the notice directs otherwise, immediately discontinue all work relating to the manufacture and delivery of the Products and make all Raw Materials delivered, or caused to be delivered, by POINT BLANK available for pick-up by POINT BLANK within forty-eight hours of termination; provided that POINT BLANK shall have satisfied any remaining payment obligations to SUPPLIER. In the event of termination by POINT BLANK hereunder, SUPPLIER shall refund to POINT BLANK the amount of any advance payment made by POINT BLANK for any performance, conduct or act to occur after the date of termination. In addition, SUPPLIER shall pay to POINT BLANK or POINT BLANK shall pay to SUPPLIER, as applicable, amounts due under Exhibit B hereto. All final payments to SUPPLIER are contingent upon the return to POINT BLANK or its designee of any information and materials required to be returned to POINT BLANK as specified herein. POINT BLANK has no obligation to pay for any finished Products at SUPPLIER’s facility as of the date of the notice to terminate, which was not previously ordered by POINT BLANK.

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ARTICLE 12

DISPUTE RESOLUTION PROCEDURES

12.1 Disputes. The Parties shall attempt in good faith to resolve all claims, disputes and controversies of whatever nature, including in contract, tort or equity, that arise out of or relate to this Agreement or the relationship of the Parties (collectively “Dispute”) promptly by negotiation between chief executive officers of the Parties (except that the Parties may immediately file for a preliminary injunction, temporary restraining order or other provisional relief to enforce its respective rights under this Agreement). If the Dispute has not been resolved by negotiation within 21 (twenty-one) days of the disputing Party’s notice to the other Party of such Dispute, or if the Parties’ chief executive officers fail to meet within twenty (20) days, the Parties shall resolve the Dispute in accordance with Section 12.2 below.

12.2 Arbitration. Except as provided in Section 12.3 below, all Disputes shall be subject to arbitration if good faith negotiations among the Parties as provided in Section 12.1 above does not resolve such Dispute. Such arbitration shall proceed in accordance with the Commercial Arbitration Rules of the American Arbitration Association, unless the parties mutually agree otherwise, and pursuant to the following procedures:

12.1.1 Reasonable discovery shall be allowed in arbitration.

12.1.2 All proceedings before the arbitrators shall be held in New York, New York. The governing law shall be as specified in Section 14.12.

12.1.3 The costs and fees of the arbitration, including attorney’s fees, shall be allocated by the arbitrators.

12.1.4 The award rendered by the arbitrators shall be final and judgment may be entered in accordance with applicable law and in any court having jurisdiction thereof.

12.1.5 The existence and resolution of the arbitration shall be kept confidential by the by the Parties and shall also be kept confidential by the arbitrators.

12.2 Equitable Relief.

Nothing herein shall preclude either party from seeking equitable relief to enforce the provisions of Article 9.

ARTICLE 13

TTILE TO RAW MATERIALS

13.1 Title to Raw Materials and Products.

POINT BLANK shall at all times retain title to all POINT BLANK Raw Materials. SUPPLIER agrees that under no circumstances shall it hold itself out as being the owner of any Raw Materials on its premises, including, without limitation, on SUPPLIER’s books and records.

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13.2 UCC Filings.

Notwithstanding Section 13.1 hereof, the parties hereto intend to create in SUPPLIER the relationship of bailee and processor with respect to any Raw Materials in the possession of SUPPLIER and agree that upon the request of POINT BLANK, an informational or precautionary filing shall be made pursuant to the Uniform Commercial Code in effect in each jurisdiction where any Raw Materials are being held by SUPPLIER. Following any such request, POINT BLANK and SUPPLIER shall execute and file such instruments, including financing statements and related amendments or continuation statements, and take such other actions as may be deemed by either of them to be necessary or desirable in order to fully protect the rights of POINT BLANK in and to the Raw Materials. Nothing in this Section 13.2 or in any instrument executed, delivered or filed pursuant hereto, and no action or omission on the part of any party hereto, shall change the fact than the Raw Material is legally and equitably owned by POINT BLANK and is held by SUPPLIER as a bailee and processor only. SUPPLIER shall inform POINT BLANK, in writing and within thirty (30) days of becoming so aware, of any financing statement filed by a creditor of SUPPLIER against the Raw Materials held by SUPPLIER.

13.3 Liens.

The parties understand and agree that SUPPLIER shall have a processor’s and bailee’s lien on all Product that is located at the Plant and has been processed under this Agreement to secure the payment of any and all amounts due from POINT BLANK or any of its Affiliates hereunder; provided, however, that SUPPLIER hereby waives any lien rights it may have with respect to Products located at the Plant until such time as it is processed under this Agreement.

ARTICLE 14

MISCELLANEOUS

14.1 Authority.

Each party warrants that it has the full authority and power to enter into and perform under this Agreement and to make all representations, warranties and grants as set forth herein. Each party represents that it is not subject to any restrictive obligations imposed by former clients or any other Person that would impair its ability to exercise its best efforts in connection with its respective obligations to be performed pursuant to this Agreement.

14.2 Survivability.

All covenants, indemnities, guarantees, representations and warranties by SUPPLIER and any undischarged obligations of POINT BLANK arising prior to the expiration or termination of this Agreement (whether by completion or earlier termination) shall survive such expiration or termination.

14.3 Enforceability.

Either Party’s failure in any one or more instances to insist upon strict performance of any of the terms and conditions of this Agreement or to exercise any right herein conferred shall

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not be construed as a waiver or relinquishment of that right or of that Party’s right to assert or rely upon the terms and conditions of this Agreement. Any express waiver of a term of this Agreement shall not be binding and effective unless made in writing and properly executed by the waiving Party.

14.4 Amendments.

This Agreement may not be amended except in writing properly executed by both Parties. Except as specifically amended, this Agreement shall remain in full force and effect as written.

14.5 Assignment.

Neither party shall have the right or power to assign its rights or delegate its obligations hereunder without the express written consent of the other party. Any attempt to do so without such consent shall be null and void and shall permit the other party the right to cancel and terminate this Agreement. In the event this Agreement is properly assigned, the provisions of this Agreement shall bind and benefit the Parties hereto and their representatives, successors and assigns.

14.6 Severability.

Any invalid or unenforceable provision shall be deemed severed from this Agreement to the extent of its invalidity or unenforceability, and the remainder of this Agreement shall remain in full force and effect.

14.7 Complete Agreement.

This Agreement and all exhibits thereto constitute the complete and exclusive agreement between the Parties. It supersedes all prior written and oral statement, condition, obligation, representation or warranty. In the event of any inconsistency between this Agreement and any Exhibit, the provisions of this Agreement shall take precedence. The Parties shall not be bound by any past or future terms, conditions, or course of conduct not set forth herein, unless set forth in writing and signed by an authorized representative of SUPPLIER and POINT BLANK. Any additional or inconsistent terms not so agreed by SUPPLIER and POINT BLANK in writing shall be null and void. Acceptance of any purchase order, confirmation, or work order, invoice or other form of any kind shall not modify the terms of this Agreement.

14.8 Audit and Inspection Rights.

(a) Either party (the “Auditing Party”) shall have the right to examine, either directly or through its authorized representatives or agents (subject to execution by non-party employees of non-disclosure undertakings as may be reasonably requested by the other party), during business hours and for a reasonable period of time, all books, records, accounts, correspondence, instructions, specifications, plans, drawings, receipts, manuals and memoranda of the other party (the “Audited Party”) and its affiliates pertinent to this Agreement. SUPPLIER’s audit rights of POINT BLANK’s records shall be for the sole purpose of verifying (i) royalties payable under Section 9.2(b), (ii) the annual needs of POINT BLANK and it Affiliates for Products manufactured with Kevlar and Twaron under Section 3.1(a) or (iii) [***].

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The Audited Party will cooperate with the auditor. The Auditing Party will bear the costs of the audit, unless the audit shows that the Audited Party or any of its affiliates did not comply with this its obligations under this agreement, in which case the Audited Party shall bear the cost of the audit.

(b) POINT BLANK may, at its option, inspect and test any Products at any time and place to the extent practicable, including during the period of manufacture and prior to delivery. SUPPLIER agrees to permit reasonable access to its facilities or the facilities of any subcontractor during normal business hours for such inspections and tests; provided, however, that POINT BLANK shall not materially interfere with the operations of SUPPLIER during the course of any such inspections or tests.

14.9 Counterparts.

This Agreement may be executed simultaneously in two or more counterparts which, when taken together, shall be deemed an original and constitute one and the same document. The signature of any Party to the counterpart shall be deemed a signature to the Agreement, and may be appended to, any other counterpart. Facsimile transmission of executed signature pages shall be sufficient to bind the executing Party.

14.10 Headings.

The headings to the various sections and paragraphs of this Agreement are solely for the convenience of the Parties, are not part of the Agreement and shall not be used for the interpretation of the validity of the Agreement or any provision hereof.

14.11 Indemnification and Defense. (a) Without limiting the obligations set forth above and as a separate obligation under this Agreement, SUPPLIER agrees to indemnify POINT BLANK for any third party claims which may be brought against POINT BLANK arising out of or in connection with any breach by SUPPLIER of its warranties, representations or obligations under this Agreement.

(b) Without limiting the obligations set forth above and as a separate obligation under this Agreement, POINT BLANK agrees to indemnify SUPPLIER for any third party claims which may be brought against SUPPLIER arising out of or in connection with any breach by POINT BLANK of its warranties, representation or obligations under this Agreement.

(c) If any third Person shall make a claim or commence an action against POINT BLANK or SUPPLIER, as the case may be (an “Indemnified Party”) with respect to any matter (a “Third Party Action”) which may give rise to a claim for indemnification under this Section 14.11, then the Indemnified Party shall notify the other Party (the “Indemnifying Party”) in writing promptly after becoming aware of such Third Party Action describing in reasonable detail the Third Party Action (such notice being hereinafter called a “Third Party Action Notice”), which notice shall include an estimate of the damages, if known, the method of computation thereof, and a reference to the specific provisions of this Agreement in respect of which it seeks indemnification. It is agreed that a delay on the part of any Indemnified Party in notifying the Indemnifying Party hereunder for a period of up to 90 days shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent the Indemnifying Party is

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prejudiced by such failure to give notice. The Indemnifying Party will have ten (10) days from the delivery of such Third Party Action Notice, to determine whether or not (i) the Indemnifying Party will, at its sole cost and expense, defend against such Third Party Action and/or (ii) the Indemnifying Party is disputing the claim for indemnity hereunder.

(d) If the Indemnifying Party (i) does not respond to the Third Party Action Notice by the close of business on the last day of the ten (10) day period set forth in subparagraph (c) above, or (ii) responds to the Third Party Action Notice, but disputes the claim for indemnity hereunder and elects not to assume the defense, the Indemnified Party shall have the right to defend against any such Third Party Action by appropriate proceedings or to settle or pay any such Third Party Action for such an amount as the Indemnified Party shall deem appropriate and the Indemnifying Party shall promptly pay all costs and damages resulting from such Third Party Action in accordance with subparagraph (e) below; provided that in the case of clause (ii), any right of the Indemnified Party to recover from the Indemnifying Party shall depend on the resolution of the dispute as to the right of indemnity.

(e) If the Indemnifying Party affirmatively disputes the right to indemnity, but nevertheless elects to defend against any such Third Party Action or settle or pay any such Third Party Action, any right of the Indemnified Party to recover from the Indemnifying Party shall depend on the resolution of the dispute as to the right of indemnity.

(f) Notwithstanding anything herein to the contrary, if the Indemnifying Party notifies the Indemnified Party that it will defend against or settle any Third Party Action:

(i) such defense or settlement shall be at the sole cost and expense of the Indemnifying Party, except for costs and expenses of the Indemnified Party’s counsel, if any, pursuant to items (v) and (vi) below;

(ii) the Indemnifying Party and its counsel shall conduct such defense or settlement at all times in good faith;

(iii) the Indemnifying Party and its counsel shall, at the reasonable request of the Indemnified Party, provide periodic updates to the Indemnified Party in order to keep the Indemnified Party informed as to its conduct of such defense or settlement, and shall not compromise or settle such Third Party Action without the prior written consent of the Indemnified Party (not to be unreasonably withheld or delayed); unless such settlement or compromise (i) includes a complete, unconditional release of the Indemnified Party from all liability with respect to such Third Party Action; (ii) could not reasonably be expected to lead to liability or create any financial or other obligation on the part of the Indemnified Party for which the Indemnified Party is not entitled to indemnification hereunder; (iii) would not require the Indemnified Party to change in any material respect the way it conducts business; and (iv) would not require any admission of wrongdoing by the Indemnified Party;

(iv) the Indemnified Party shall reasonably cooperate with the Indemnifying Party, including making available to the Indemnifying Party, all relevant witnesses and pertinent documents and information and appropriate personnel;

(v) the Indemnified Party may elect to employ its own counsel and participate in such defense or settlement at the Indemnified Party’s sole cost and expense, but the control of such defense and the settlement shall rest with the Indemnifying Party;

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(vi) notwithstanding the Indemnifying Party’s election to defend against or settle the Third Party Action, the Indemnified Party may, upon written notice to the Indemnifying Party, elect to employ its own counsel (who shall be reasonably acceptable to the Indemnifying Party) at the Indemnifying Party’s expense (except that the Indemnifying Party shall not be obligated to pay the fees of more than one separate counsel for all Indemnified Parties, taken together) if (A) the Indemnifying Party is also a Person against whom the Third Party Action is made and the Indemnified Party has been advised by counsel that (x) representation of both parties by the same counsel would be inappropriate under applicable standards of professional conduct or (y) the Indemnified Party has available to it one or more defenses or counterclaims that are inconsistent with, different from, or in addition to one or more of those that may be available to the Indemnifying Party with respect to such Third Party Action; or (B) the Indemnifying Party shall not in fact have employed counsel reasonably satisfactory to the Indemnified Party for the defense or settlement of such Third Party Action; provided, however, that the assumption of control of the defense or settlement of a Third Party Action by the Indemnified Party pursuant to this item (vi) shall not relieve the Indemnifying Party of its obligation to indemnify and hold the Indemnified Party harmless; and

(vii) in no event shall the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to such Third Party Action without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed).

(g) Subject to the other provisions of this Section 14.11, if the Indemnifying Party:

(i) does not respond to a Third Party Action Notice by close of business on the last day of the ten (10) day period set forth in subparagraph (c) above;

(ii) does not elect to defend against any Third Party Action for which it disputes the Indemnified Party’s right to indemnity, and such dispute is resolved, in accordance with this Agreement, in a manner affirming the Indemnified Party’s right to indemnity;

(iii) elects to defend against any Third Party Action for which it does not dispute the Indemnified Party’s right to indemnity hereunder; or

(iv) elects to defend against any Third Party Action for which it does dispute the right to indemnity, to the extent the dispute is resolved in a manner affirming the Indemnified Party’s right to indemnity; then:

the Damages resulting from the settlement or the adjudication of such Third Party Action, or that portion thereof as to which the defense is unsuccessful, shall promptly be paid by the Indemnifying Party to the Indemnified Party.

14.12 Governing Law; Jurisdiction. This Agreement shall be governed in all respects by the laws of New York without regard to provisions regarding choice of laws. The parties

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agree to submit to the exclusive jurisdiction and venue of the United States Federal District Court for the Southern District of New York, for purposes of enforcing any equitable relief under Section 12.3 or any arbitration awards under Section 12.2.

14.13 Notice.

Any notice, demand, consent, election, offer, approval, request, invoice backup documentation or other communication (collectively, a “notice”) required under or provided pursuant to this Agreement must be in writing and either delivered personally, sent by overnight delivery courier, or sent by certified or registered mail, postage prepaid, return receipt requested to the person designated below (the “Designated Representative”). Notice shall be deemed given when received. A notice sent by facsimile will be deemed given when receipt by the receiving facsimile machine has been confirmed.

A notice must be addressed as follows:

To SUPPLIER:	LifeStone Materials, LLC
	Temple Building
	99 Roush Road
	Anderson, South Carolina 29625
	Attention:
	Telephone number:
	Facsimile number:
With a copy, which shall not constitute notice, to:
	Meitar Liquornik Geva & Leshem Brandwein, Law Offices 16 Abba Hillel Rd.
	Ramat Gan 52506, Israel
	Attention: Dr. Israel Leshem
	Telephone number: 972-3-6103100
	Facsimile 972-3-6103111
To POINT BLANK:	Point Blank Solutions, Inc.
	2102 SW 2nd Street,
	Pompano Beach, Florida 33069
	United States of America
	Attention: Larry R. Ellis
	Telephone number: 954-630-0900
	Facsimile number: 954-630-0980
With a copy, which shall not constitute notice, to:
	Venable LLP
	2 Hopkins Plaza, Suite 1800
	Baltimore, Maryland 21201
	United States of America
	Attention: Thomas D. Washburne, Jr.
	Telephone number: 410-244-7744
	Facsimile: 410-244-7742

26

14.14 Defined Terms. Solely for convenience of reference, Exhibit D attached hereto sets forth a list of defined terms used in this Agreement and the Article or Section hereof in which each term is defined.

27

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

SUPPLIER:		POINT BLANK:
LIFESTONE MATERIALS, LLC		POINT BLANK SOLUTIONS, INC.
By:	/s/ Craig Trask	By:	/s/ Larry R. Ellis
Name:	Craig Trask	Name:	Larry R. Ellis
Title:	Production Manager	Title:	Chief Executive Officer and President
Date:		Date:
By:	/s/ Julian Crawford
Name:	Julian Crawford
Title:	Controller
Date:

{Signature Page to Supply Agreement}

EXHIBIT A

[***]

EXHIBIT B

[***]

EXHIBIT C

[***]

EXHIBIT D

(Index of Defined Terms)

Term	Article/Section
Affiliate	Art. I
Agreement	Preamble
Alternate Supplier	5.4
Alternate Supply Period	5.4
Audited Party	14.8	(a)
Auditing Party	14.8	(a)
Capital Investment Loan	2.2	(b)
Carry-Over Grace Period	3.1	(a)
Child	8.4
Contract Price	6.1
Defective	5.3
Derivative Work	9.1	(e)
Designated Manufacturer	2.4	(a)
Designated Representative	14.13
DFARS	8.1	(b)
Dispute	12.1
Dollars	6.4	(b)
Effective Date	Preamble
Extended Term	Art. I
FAR	8.1	(b)
Final Year	3.1	(a)
Improvements	9.1	(d)
Indemnified Party	14.11	(c)
Indemnifying Party	14.11	(c)
Independent Laboratory	5.3
Initial Term	Art. I
Intellectual Property	9.1	(b)
[***]	9.2	(b)
Licensed Intellectual Property	9.1	(f)
LLC Agreement	2.2	(b)
Maximum Monthly Capacity	3.1	(a)
Minimum Inventory	3.4
Minimum Order	3.1	(a)
Notice of Default	11.1
Notice of Defect	5.3
Parties	Preamble
PB Indemnified Party	9.6
PB Indemnifying Party	9.7
Person	Art. I
Plant	2.2

POINT BLANK	Preamble
POINT BLANK (purposes of Article 9 only)	9.1	(a)
POINT BLANK Action	9.6
POINT BLANK Business	2.2	(b)
POINT BLANK License	9.2	(a)
Prime	2.2	(b)
Products	2.1
Rejected Goods	3.6
Replacement Products	5.4
Revised Product	2.2	(a)
Specifications	2.1
Start Date	3.1	(a)
Sublicensee	9.2	(a)
SUPPLIER	Preamble
SUPPLIER (purposes of Article 9 only)	9.1	(c)
SUPPLIER Action	9.7
Term	Art. I
Third Party Action Notice	14.11	(c)
Volume Forecast	3.3

EX-10.3

Exhibit 10.3

*** TEXT OMITTED AND FILED SEPARATELY, CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2

LIMITED LIABILITY COMPANY AGREEMENT

OF

LIFESTONE MATERIALS, LLC

March 18, 2008

TABLE OF CONTENTS

		Page
ARTICLE I	– CERTAIN DEFINITIONS	1
ARTICLE II	– RECITALS; FORMATION; NAME; PLACE OF BUSINESS	1
2.01	Recitals	1
2.02	Formation of Company; Certificate of Formation	1
2.03	Name of Company	2
2.04	Place of Business	2
2.05	Registered Office and Registered Agent	3
ARTICLE III	– PURPOSES AND POWERS OF COMPANY	3
3.01	Purposes	3
3.02	Powers	3
ARTICLE IV	– TERM OF COMPANY	3
ARTICLE V	– CAPITAL	4
5.01	Initial Capital Contributions of the Members	4
5.02	Capital Commitments	4
5.03	Additional Capital Contributions of the Members	5
5.04	Defaulting Member	5
5.05	Capital Accounts	6
5.06	No Interest on Capital Contributions or Capital Accounts	6
5.07	Advances to Company	6
5.08	Liability of Members and the Board of Managers	8
5.09	Return of Capital	8
ARTICLE VI	– ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS; TAXES	8
6.01	Allocation of Net Income or Net Loss	8
6.02	Allocation of Income and Loss With Respect to Company Interests Transferred	8
6.03	Distributions	8
6.04	Taxes	9
ARTICLE VII	– MANAGEMENT	11
7.01	Management of the Company by the Board of Managers	11
7.02	Officers	17
7.03	Other Activities of Members or Affiliates; Restrictions on Competition	17
7.04	Indemnification of the Members, Managers, Officers and any Affiliate	18
ARTICLE VIII	– DEADLOCK	19
8.01	Deadlock	19

ARTICLE IX	– BANK ACCOUNTS; BOOKS AND RECORDS; STATEMENTS; TAXES, FISCAL YEAR	21
9.01	Bank Accounts	21
9.02	Books and Records	21
9.03	Financial Statements and Information	21
9.04	Accounting Decisions	22
9.05	Where Maintained	22
9.06	Fiscal Year	22
ARTICLE X	– TRANSFERS AND CONVERSION OF COMPANY INTERESTS AND THE ADDITION, SUBSTITUTION AND WITHDRAWAL OF MEMBERS	22
10.01	Transfer of Company Interests	22
10.02	Restrictions on Transfers	23
10.03	Rights of First Refusal	24
10.04	Bankruptcy, Dissolution or Liquidation of a Member	25
10.05	Call Right	26
10.06	No Right to Withdraw	28
ARTICLE XI	– DISSOLUTION AND LIQUIDATION	28
11.01	Events Causing Dissolution	28
11.02	Cancellation of Certificate	30
11.03	Distributions Upon Dissolution	30
11.04	Reasonable Time for Winding Up	30
ARTICLE XII	– STANDSTILL AGREEMENT	30
12.01	Standstill	30
12.02	Restricted Period	31
ARTICLE XIII	– REPRESENTATIONS AND WARRANTIES	32
13.01	Representations and Warranties of FMSS	32
13.02	Representations and Warranties of PBSS	33
ARTICLE XIV	– MISCELLANEOUS PROVISIONS	35
14.01	Compliance with Delaware LLC Act	35
14.02	Additional Actions and Documents	35
14.03	Notices	35
14.04	Severability	36
14.05	Survival	37
14.06	Waivers	37
14.07	Exercise of Rights	37
14.08	Binding Effect	37
14.09	Limitation on Benefits of this Agreement	37
14.10	Amendment Procedure	37
14.11	Entire Agreement	38
14.12	Pronouns	38
14.13	Headings	38
14.14	Governing Law; Jurisdiction	38

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14.15	Execution in Counterparts	38
14.16	Announcements	38
14.17	Arbitration	39
14.18	Weaving For FMS	39

-iii-

LIMITED LIABILITY COMPANY AGREEMENT

OF

LIFESTONE MATERIALS, LLC

THIS LIMITED LIABILITY COMPANY AGREEMENT (“Agreement”) is entered into as of March 18, 2008, (the “Effective Date”) by and among PBSS, LLC, a Delaware limited liability company (“PBSS”) and FMS Technologies LLC, a South Carolina limited liability company (“FMSS”). PBSS and FMSS and any other persons or entities who shall in the future execute and deliver this Agreement pursuant to the provisions hereof shall hereinafter collectively be referred to as the “Members.”

PBSS and FMSS agree to form a joint venture to engage in the business of designing, developing, manufacturing, and selling woven fabric (excluding unidirectional fabric) for use in soft body armor and subject to the unanimous written consent of the Members also in other applications (the “Business”). PBSS and FMSS further agree that the joint venture take the form of a limited liability company organized pursuant to the provisions of the Delaware Limited Liability Company Act (the “Delaware LLC Act”) under the name “LifeStone Materials, LLC” or any other name mutually agreed by all of the Members (the “Company”).

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Members hereby agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

Unless the context otherwise specifies or requires, capitalized terms used herein shall have the respective meanings assigned thereto in Addendum A, attached hereto and incorporated herein by reference, for all purposes of this Agreement (such definitions to be equally applicable to both the singular and the plural forms of the terms defined). Unless otherwise specified, all references herein to Articles or Sections are to Articles or Sections of this Agreement.

ARTICLE II

RECITALS; FORMATION; NAME; PLACE OF BUSINESS

2.01 Recitals

The above recitals and statements are hereby made a part of this Agreement.

2.02 Formation of Company; Certificate of Formation

The Members of the Company hereby:

(a) authorize the formation of the Company by the Members as a limited liability company under and pursuant to the Delaware LLC Act, and further authorize the filing of the Certificate with the Recording Office as required under the Delaware LLC Act;

(b) confirm and agree to their status as Members of the Company;

(c) execute this Agreement for the purpose of confirming the existence of the Company as a joint venture and establishing the rights, duties and relationship of the Members; and

(d) (i) agree that if the laws of any jurisdiction in which the Company transacts business so require, the Board of Managers also shall file, with the appropriate office in that jurisdiction, any documents necessary for the Company to qualify to transact business under such laws; and (ii) agree to execute, acknowledge, and cause to be filed, in the place or places and manner prescribed by law, any amendments to the Certificate as may be required, either by the Delaware LLC Act, by the laws of any jurisdiction in which the Company transacts business or by this Agreement, to reflect changes in the information contained therein or otherwise to comply with the requirements of law for the continuation, preservation, and operation of the Company as a limited liability company under the Delaware LLC Act.

2.03 Name of Company

The name under which the Company shall conduct its business is “LIFESTONE MATERIALS, LLC.” The business of the Company may be conducted under any other name permitted by the Delaware LLC Act that is selected by the Board of Managers, in its sole and absolute discretion. The Board of Managers promptly shall execute, file, and record any assumed or fictitious name certificates required by the laws of the State of Delaware or any state in which the Company conducts business.

2.04 Place of Business

The location of the principal place of business of the Company shall be in Anderson, South Carolina. The Board of Managers may change the principal place of business of the Company to such other place or places within the United States of America as the Board of Managers may from time to time determine, in its sole and absolute discretion, provided that the Board of Managers shall give written notice of the change to the Members within thirty (30) days after the effective date of the change and, if necessary, the Board of Managers shall amend the Certificate in accordance with the applicable requirements of the Delaware LLC Act. The Board of Managers may, in its sole and absolute discretion, establish and maintain such other offices and additional places of business of the Company, either within or without the State of Delaware, as it deems appropriate.

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2.05 Registered Office and Registered Agent

The street address of the initial registered office of the Company shall be 160 Greentree Drive, Suite 101, Dover, Delaware 19904, and the Company’s registered agent at such address shall be National Registered Agents, Inc.

ARTICLE III

PURPOSES AND POWERS OF COMPANY

3.01 Purposes

The purposes of the Company shall be:

(a) to engage in the business of designing, developing, manufacturing and selling woven fabric (excluding unidirectional fabric) for use in soft body armor and subject to the unanimous written consent of the Members also in other applications;

(b) to acquire, hold, own, operate, manage, finance, encumber, sell, or otherwise dispose of and otherwise use the Company Assets; and

(c) to enter into any lawful transaction and engage in any lawful activities in furtherance of the foregoing purposes and as may be necessary, incidental or convenient to carry out the business of the Company as contemplated by this Agreement.

3.02 Powers

The Company shall have the power to do any and all acts and things necessary, appropriate, advisable, or convenient for the furtherance and accomplishment of the purposes of the Company, including, without limitation, to engage in any kind of activity and to enter into and perform obligations of any kind necessary to or in connection with, or incidental to, the accomplishment of the purposes of the Company, so long as said activities and obligations may be lawfully engaged in or performed by a limited liability company under the Delaware LLC Act.

ARTICLE IV

TERM OF COMPANY

The Company is a separate legal entity whose existence commenced upon the filing of the Certificate and will continue until dissolution and termination of the Company and cancellation of the Certificate at the time and in the manner prescribed by Section 18-801 of the Act or as prescribed in Article XI hereof.

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ARTICLE V

CAPITAL

5.01 Initial Capital Contributions of the Members

(a) FMSS Initial Capital Contribution. Concurrently with the execution of this Agreement, FMSS shall contribute an amount in Cash equal to Two-Hundred-Fifty Thousand Dollars ($250,000) to the Company by immediately available wire transfer payable to the order of the Company or its designated agent to be used for the commencement of operations of the Company (the “FMSS Initial Cash Contribution”); and

(b) PBSS Initial Capital Contribution. Concurrently with the execution of this Agreement, PBSS shall contribute an amount in Cash equal to Two-Hundred-Fifty Thousand Dollars ($250,000) to the Company by immediately available wire transfer payable to the order of the Company or its designated agent to be used for the commencement of operations of the Company (the “PBSS Initial Cash Contribution”); and

The FMSS Initial Cash Contribution and the PBSS Initial Cash Contribution are sometimes collectively referred to herein as the “Initial Contributions” and individually as an “Initial Contribution.” The Members shall not be required to make any Capital Contributions to the Company other than as set forth in this Section 5.01, in Section 5.02 or 5.03.

5.02 Capital Commitments

(a) General. Each Member agrees to make a Capital Contribution to the Company at any time or from time to time up to the amount of its Remaining Capital Commitment. Such Capital Contributions shall be made in the amounts and in the manner set forth below:

(i) (A) at any time prior to the one (1) year anniversary of the Effective Date, upon the determination by the Production Manager that such contribution is required by the Company in accordance with an Approved Budget, or (B) at any time, upon the agreement of at least one of the Managers appointed by each Member, the Controller shall cause a notice (“Funding Notice”) to be delivered to the Members that Capital Contributions are to be made to the Company (a “Drawdown”) at least seven (7) days prior to the date of such Drawdown, which Funding Notice shall be in accordance with Section 5.02(b);

(ii) each Member’s required Capital Contribution to the Company shall be an amount equal to the lesser of (A) such Member’s Remaining Capital Commitment and (B) such Member’s pro rata share (based on the percentage such Member’s respective Remaining Capital Commitments constitutes at such time out of the then total aggregate Remaining Capital Commitments of all the Members to the Company) of aggregate

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capital commitments called for by the Funding Notice. The Remaining Capital Commitment of each Member shall be reduced by the amount of Capital Contributions contributed by such Member; and

(iii) each Member shall contribute its required Capital Contribution to the Company, in cash or by wire transfer of immediately available funds, in each case in U.S. Dollars and in the case of wire transfer, to the bank account of the Company as shall be designated in the Funding Notice for such Drawdown.

(b) Funding Notice. All Funding Notices shall contain statements, which specify or describe:

(i) the U.S. Dollar amount of such Member’s proportionate share of such Drawdown, which shall be calculated in the manner described in Section 5.02(a);

(ii) the date of such Drawdown; and

(iii) the bank account of the Company to which such Drawdown is to be paid.

5.03 Additional Capital Contributions of the Members

Upon the written agreement of all of the Members, the Members shall make an additional Capital Contribution (an “Additional Capital Contributions”). Any Additional Capital Contributions to the Company shall be made by the Members by immediately available wire transfer payable to the order of the Company or its designated agent.

5.04 Defaulting Member

(a) Event of Default. The failure by a Member to make, within five (5) Business Days after the date it is due, any portion of a Capital Contribution required to be contributed by such Member pursuant to Section 5.02 or 5.03 hereof (the “Default Amount”), shall be an “Event of Default.” Upon the occurrence of an Event of Default, such Member shall be deemed a “Defaulting Member” and the provisions of this Section 5.04 shall apply to such Member.

(b) Additional Contributions by Non-Defaulting Member. In the event that there is a Defaulting Member, any Member that has made all required Capital Contributions pursuant to Section 5.02 and 5.03 (a “Non-Defaulting Member”) may, but shall not be required to, at its sole and absolute discretion, make a loan to the Company in exchange for a promissory note (“Additional Contribution Promissory Note”) issued by the Company to such Non-Defaulting Member as provided below in Section 5.04(c).

(c) Additional Contribution Promissory Note. Each Additional Contribution Promissory Note shall be dated as of the date the Non-Defaulting Member delivers the subject funds to the Company and shall be in an initial principal amount equal to such

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amount of funds delivered to the Company. The Additional Contribution Promissory Note shall be unsecured and shall be subordinate to all creditors of the Company, provided, that such Additional Contribution Promissory Note shall be repaid to such Non-Defaulting Member by the Company prior to repayment of any other loans or advances made by the Defaulting Member to the Company. The Additional Contribution Promissory Note shall bear interest computed daily at Prime plus twenty-five one-hundredths percent (0.25%) per annum and shall be repayable by the Company as provided in Section 6.03 below. Each Additional Contribution Promissory Note shall mature and become due and payable on the date that the Company is dissolved pursuant to Article XI and shall be re-paid in accordance with such Article, provided that any and all amounts due thereunder shall be paid prior to re-payment of any other loans or advances made by the Defaulting Member to the Company.

5.05 Capital Accounts

(a) A separate capital account (a “Capital Account”) shall be established and maintained for each Member. The Capital Account of each Member shall be (i) credited with the Member’s Capital Contributions, the amount of any Company liabilities assumed by the Member (or which are secured by Company property distributed to the Member), the Member’s distributive share of Net Income and any item in the nature of income or gain specially allocated to such Member pursuant to the provisions of Section VI (other than Section 6.04(b)(iii)); and (ii) debited with the amount of money and the fair market value of any Company property distributed to the Member, the amount of any liabilities of the Member assumed by the Company (or which are secured by property contributed by the Member to the Company), the Member’s distributive share of Net Loss and any item in the nature of expenses or losses specially allocated to the Member pursuant to the provisions of Section VI (other than Section 6.04(b)(iii)).

(b) If a Member’s interest in the Company is transferred pursuant to the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent the Capital Account is attributable to the transferred interest. If the book value of Company property is adjusted pursuant to Section 6.04(b)(iii), the Capital Account of each Member shall be adjusted to reflect the aggregate adjustment in the same manner as if the Company had recognized gain or loss equal to the amount of such aggregate adjustment. It is intended that the Capital Accounts of all Members shall be maintained in compliance with the provisions of Regulation Section 1.704-1(b), and all provisions of this Agreement relating to the maintenance of Capital Accounts shall be interpreted and applied in a manner consistent with that Regulation.

5.06 No Interest on Capital Contributions or Capital Accounts

No Member shall be entitled to receive any interest on its Capital Contributions or its outstanding Capital Account balance.

5.07 Advances to Company

(a) Initial Loans.

(i) FMSS Initial Loan. Concurrently with the execution of this Agreement, FMSS shall loan an amount in Cash equal to Two Million Five-Hundred Thousand Dollars ($2,500,000) to the Company by immediately available wire transfer payable to the order of the Company or its designated agent to be used for the operations of the Company (the “FMSS Initial Loan”).

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(ii) PBSS Initial Loan. Concurrently with the execution of this Agreement, PBSS shall loan an amount in Cash equal to Two Million Five-Hundred Thousand Dollars ($2,500,000) to the Company by immediately available wire transfer payable to the order of the Company or its designated agent to be used for the operations of the Company (the “PBSS Initial Loan”).

The FMSS Initial Loan and the PBSS Initial Loan are sometimes collectively referred to herein as the “Initial Loans” and individually as an “Initial Loans.” Any Initial Loans made pursuant to this Section 5.07(a) shall bear interest computed daily at Prime plus twenty-five one-hundredths percent (0.25%) per annum and shall be repayable by the Company as provided in Section 6.03 below.

(b) Loans and Advances. Except as provided for in Section 5.04 and Section 5.07(a), (c) and (d) hereof, no Member shall advance funds or make loans to the Company in excess of the amounts required hereunder to be contributed by it to the capital of the Company without the express written consent of all the Members. Any such approved advances or loans by a Member shall not result in any increase in the amount of such Member’s Capital Account or entitle it to any increase in its Percentage Interest. The amounts of such advances or loans shall be a debt of the Company to such Member and shall be payable or collectible only out of the Company Assets in accordance with terms and conditions agreed upon by all Members.

(c) Capital Investment Loans. Notwithstanding the restriction on making loans and advances to the Company provided in Section 5.07(a), each Member may provide funds to the Company in accordance with Section 2.2(b) of the Supply Agreement to fund Capital Investment Loans (as defined in Section 2.2(b) of the Supply Agreement).

(d) Cancellation of Member Loans. In the event that a Member sells its entire Company Interests and Percentage Interest to the other Member, any and all outstanding Member Loans shall be cancelled and be deemed to have been repaid in full, except that if the percentage of the Member Loans of any Member constitute out of the then aggregate outstanding Member Loans amount of all Members is greater than such Member’s Percentage Interest, then a loan amount out of such Member’s Member Loans equal to: the difference between such Member’s total Member Loans and the other Member’s total Member Loans (the “Member’s Excess Loan Amount”) shall not be cancelled and shall be repaid by the Company to such Member upon the transfer of the Company Interest and Percentage Interest to the other Member.

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5.08 Liability of Members and the Board of Managers

Except as otherwise provided in the Delaware LLC Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and none of the Members or the Managers shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member or a Manager. The failure of the Company to observe any formalities or requirements relating to the exercise of its powers or management of its business or affairs under the Delaware LLC Act or this Agreement shall not be grounds for imposing personal liability on the Members or the Managers for liabilities of the Company.

5.09 Return of Capital

Except upon the dissolution of the Company or as may be specifically provided in this Agreement, no Member shall have the right to demand or to receive the return of all or any part of its Capital Account or its Capital Contributions to the Company.

ARTICLE VI

ALLOCATION OF PROFITS AND LOSSES;

DISTRIBUTIONS; TAXES

6.01 Allocation of Net Income or Net Loss

Except as otherwise provided in Section 6.04, the Net Income or Net Loss, other items of income, gains, losses, deductions and credits, and the taxable income, gains, losses, deductions and credits of the Company, if any, for each Fiscal Year (or portion thereof) shall be allocated to the Members in proportion to their Percentage Interests.

6.02 Allocation of Income and Loss With Respect to Company Interests Transferred

If any Company Interest is transferred during any Fiscal Year, the Net Income or Net Loss (and other items referred to in Section 6.01) attributable to such Company Interest for such Fiscal Year shall be allocated between the transferor and the transferee by closing the books of the Company as of the date of the transfer.

6.03 Distributions

Distributions to the Members of cash held in the Company’s Bank Accounts (“Available Cash”) shall be made not less frequently than thirty (30) days after the end of each Fiscal Quarter as follows:

(a) First, out of the Company’s Available Cash, if any, to each Member, based on such Member’s pro rata share of the aggregate outstanding Capital Investment Loans, until all amounts owed to the Members in repayment of such Capital Investment Loans have been paid;

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(b) Second, forty percent (40%) out of the remaining amount of the Company’s Available Cash, if any pro rata to the Members in proportion to their Percentage Interests;

(c) Third, out of the remaining amount of the Company’s Available Cash, if any, to each Member, based on such Member’s pro rata share of the aggregate outstanding Member Loans, until all amounts owed to the Members in repayment of such Member Loans has been paid;

(d) Fourth, out of the remaining amount of the Company’s Available Cash, if any, to such Members which Capital Account Percentage is higher than their Percentage Interest in the amounts necessary to cause their Capital Account Percentages to be reduced down to their Percentage Interests; and

(e) Fifth, the remaining amount of the Company’s Available Cash, if any, to the Members in proportion to their Percentage Interests (collectively, “Distributions”);

provided, that Distributions of any amount out of the Available Cash in accordance with this Section 6.03 shall only be made to extent that a majority of the members of the Board of Managers determine that such amount is not required for the operation of the Company for the twelve (12) months following such Distribution and for any other contingent liability that may become payable following such twelve (12) month period, and such determination shall be based upon the approval by a majority of the members of the Board of Managers of the reasonable projections of the need for Available Cash to operate the Company during such period. Except to the extent specifically provided otherwise herein, Distributions to Members other than as provided in this Section 6.03, shall require the prior written approval of a majority of the Board of Managers in accordance with Section 7.01(e)(xxii).

6.04 Taxes

(a) Reports. As soon as practicable after the end of each Fiscal Year, the Company shall prepare and mail to each Member a report containing all information necessary for the Member to include its share of taxable income or loss (or items thereof) in its income tax return.

(b) Regulatory Allocations.

(i) Qualified Income Offset. No Member shall be allocated Net Loss or deductions if the allocation causes a Member to have an Adjusted Capital Account Deficit. If a Member receives (1) an allocation of Net Loss or deduction (or item thereof) or (2) any distribution, which causes the Member to have an Adjusted Capital Account Deficit at the end of any taxable year, then all items of income and gain of the Company (consisting of a pro rata portion of each item of Company income, including gross

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income and gain) for that taxable year shall be allocated to that Member, before any other allocation is made of Company items for that taxable year, in the amount and in proportions required to eliminate the deficit as quickly as possible. This Section 6.04(b)(i) is intended to comply with, and shall be interpreted consistently with, the “qualified income offset” provisions of the Regulations promulgated under Code Section 704(b).

(ii) Minimum Gain Chargeback. Except as set forth in Regulation Section 1.704-2(f)(2), (3) and (4), if, during any taxable year, there is a net decrease in Minimum Gain, each Member, prior to any other allocation pursuant to this Article VI, shall be specially allocated items of gross income and gain for such taxable year (and, if necessary, subsequent taxable years) in an amount equal to that Member’s share of the net decrease of Minimum Gain, computed in accordance with Regulation Section 1.704-2(g). Allocations of gross income and gain pursuant to this Section 6.04(b)(ii) shall be made first from gain recognized from the disposition of Company assets subject to Nonrecourse Liabilities (within the meaning of the Regulations promulgated under Code Section 752), to the extent of the Minimum Gain attributable to those assets, and thereafter, from a pro rata portion of the Company’s other items of income and gain for the taxable year. It is the intent of the parties hereto that any allocation pursuant to this Section 6.04(b)(ii) shall constitute a “minimum gain chargeback” under Regulation Section 1.704-2(f).

(iii) Contributed Property and Book-Ups. In accordance with Code Section 704(c) and the Regulations thereunder, as well as Regulation Section 1.704-1(b)(2)(iv)(d)(3), income, gain, loss, and deduction with respect to any property contributed (or deemed contributed) to the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of the property to the Company for federal income tax purposes and its fair market value at the date of contribution (or deemed contribution). If the adjusted book value of any Company asset is adjusted as provided herein, subsequent allocations of income, gain, loss, and deduction with respect to the asset shall take account of any variation between the adjusted basis of the asset for federal income tax purposes and its adjusted book value in the manner required under Code Section 704(c) and the Regulations thereunder.

(iv) Code Section 754 Adjustment. To the extent an adjustment to the tax basis of any Company asset pursuant to Code Section 734(b) is required, pursuant to Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of the adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases basis), and the gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to that Section of the Regulations.

(v) Nonrecourse Deductions. Nonrecourse Deductions for a taxable year or other period shall be specially allocated among the Members in proportion to their Percentage Interests.

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(vi) Member Loan Nonrecourse Deductions. Any Member Loan Nonrecourse Deduction for any taxable year or other period shall be specially allocated to the Member who bears the risk of loss with respect to the loan to which the Member Loan Nonrecourse Deduction is attributable in accordance with Regulation Section 1.704-2(b).

(c) Tax Matters Partner. The “Tax Matters Partner” of the Company shall be PBSS, unless otherwise designated by the Members. The Tax Matters Partner shall not extend the statute of limitations on behalf of the Company, submit any written material to any taxing authority, settle or offer to settle any controversy, select the Company’s choice of litigation forum in a tax controversy, or take any other action in its capacity as Tax Matters Partner without the consent of the Board of Managers. The Tax Matters Partner shall keep the Board of Managers fully advised of the progress of any audit and shall supply the Board of Managers with copies of any written communications received from the Internal Revenue Service or other taxing authority relating to any audit within ten (10) days of receipt thereof, and shall at least ten (10) business days prior to submitting any materials to the Internal Revenue Service, or other taxing authority, provide such materials to the Board of Managers. The Tax Matters Partner shall be reimbursed by the Company for any reasonable expenses incurred in its capacity as Tax Matters Partner.

(d) Modifications. If the Board of Managers determines that any of the provisions of this Section 6.04 do not comply with the rules of Treas. Reg. § l.704-1(b)(3) for allocating income, gain, loss, and deductions of the Company in accordance with the Members’ interests in the Company, the Board of Managers may make any modifications required to cause such provisions to comply with such rules.

(e) Withholding. All amounts required to be withheld pursuant to Section 1446 of the Code or any other provision of United States federal, state, or local tax law shall be treated as amounts actually distributed to the affected Members pursuant to this Article VI for all purposes under this Agreement or, upon approval by a majority of the Managers, to the extent such withholding has not reduced the amounts actually distributed to an affected Member, as a demand loan to such Member, which demand loan shall bear interest at a rate of 10% per annum for all purposes of this Agreement.

ARTICLE VII

MANAGEMENT

7.01 Management of the Company by the Board of Managers

(a) Management by the Board of Managers. The Members hereby unanimously agree that the responsibility for management of the business and affairs of the Company shall be delegated to a board of managers pursuant to Section 18-402 of the Delaware LLC Act (the “Board of Managers”), subject to the limitations set forth in this Section 7.01.

(b) Composition of Board Managers: Appointment and Removal

(i) The Board of Managers shall at all times be composed of four (4) Managers (each, a “Manager”), who initially shall be Larry Ellis, John Siemer, Daniel Blum and Avi Blum.

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(ii) Each Member shall appoint two individuals to serve as its initial representatives on the Board of Managers. Any Manager may be removed with or without cause by the Member who appointed such Manager. Upon the resignation, retirement, death or removal of any Manager, the Member who appointed such Manager shall designate the replacement Manager.

(c) Meetings and Actions

(i) The Board of Managers shall meet (w) at least once a month in the first three month period after the Effective Date and thereafter at least once every three months, at the principal offices of the Company or at such other place as may be agreed upon from time to time by the Board of Managers (unless such meeting shall be waived by all of the Managers); (x) at such other times as may be determined by the unanimous agreement of the Board of Managers; (y) upon the request of at least two Managers upon ten (10) days’ notice to all Managers; or (z) in accordance with Section 8.01. Meetings may be held by telephone if at least two Managers so request upon five (5) days’ written notice to all Managers, with a copy to each Member.

(ii) No action may be taken at a meeting of the Board of Managers unless a quorum consisting of at least one Manager appointed by each Member is present.

(iii) Each Manager shall be entitled to cast one vote with respect to any decision made by the Board of Managers, except with respect to a determination to seek indemnification pursuant to Section 7.05 hereof, in which event a Manager seeking indemnification hereunder shall have no vote with respect to his indemnification. Any action to be taken by the Board of Managers shall require at least three affirmative votes, except that (a) any determination to grant indemnification to a Manager pursuant to Section 7.05 hereof shall only require two (2) affirmative votes, and (b) any action to be taken by the Board of Managers in connection with any dispute between the Company and one of the Members or any of its Affiliates (the “Member Dispute”) shall only require the affirmative vote of one of the Managers appointed by the other Member; provided that, prior to calling a meeting of the Managers to consider such Member Dispute, the parties shall attempt in good faith to resolve the Member Dispute promptly by negotiation between the chief executive officers of each Member, but if such Member Dispute has not been resolved by negotiation between the chief executive officers of each Member within forty-five (45) days of delivery of notice from the Member proposing the action to the other Member or if the Member’s chief executive officers fail to meet within twenty (20) days of delivery of such notice, then a meeting of the Board of Managers to take such action against a Member may be called, but shall not happen without 10 days prior written notice to each of the Managers (the “Meeting Notice”). Approval or action by the Board of Managers shall constitute approval or action by the Company and shall be binding on the Members. A Manager may grant a proxy entitling the other Manager appointed by the same Member to exercise his voting rights. Such proxy shall be in

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writing and shall specify a termination date. The Managers appointed by the other Member shall be entitled to inspect the proxy on demand. In the event that the pursuit of an action to resolve a Member Dispute is approved only by Managers appointed by the Member proposing to pursue such action (the “Acting Member”), the Acting Member shall be responsible for paying the Company’s expenses and fees to pursue a resolution of such Member Dispute, provided that if the Company is successful in obtaining a final judgment or order resolving such Member Dispute in favor of the Company, the non-Acting Member shall reimburse such Acting Member for all direct expenses and fees incurred by such Acting Member in connection with the pursuit of such action.

(iv) Any action to be taken by the Board of Managers may be taken without a meeting if consents in writing setting forth the action so taken are signed by at least three Managers.

(v) Unless otherwise agreed upon by three or more of the Managers, at each meeting of the Board of Managers, the Production Manager and Controller shall report to the Board of Managers regarding the activities, strategies and plans of the Company and any other items about which a Manager requests information or a report.

(d) Subcommittees. The Board of Managers may designate a subcommittee consisting of at least one Manager appointed by each Member. Any subcommittee, to the extent provided by the Board of Managers, shall have and may exercise all the power and authority of the Board of Managers. Any action to be taken by a subcommittee shall require the affirmative votes of at least one Manager appointed by each Member

(e) Power and Authority of the Board of Managers. The Board of Managers (acting on behalf of the Company), by its own action, or by a subcommittee of the Board of Managers, but not by delegation to officers or other employees of the Company, shall have the right, power and authority to take the following actions, and no such action will be taken without the prior approval of the Board of Managers (unless such action has been approved by unanimous consent of the Members):

(i) Selection, appointment, entering into any agreement with, and dismissal of the Production Manager and Controller, without derogating from and as provided in Section 7.02;

(ii) The design, development, manufacture or sale by the Company of any non-woven or unidirectional fabric;

(iii) The sale, of any woven fabric products for ballistic uses, which are substantially similar to or competing with the products sold by the Company to Point Blank, (A) to any person or entity other than Point Blank, or (B) to FMS for any use other than in hard armor applications anywhere or, in soft armor application outside the United States, provided that if Point Blank’s purchases of such products from the Company were in the then preceding [***], the Company shall take the necessary actions to use its manufacturing capacity to produce and sell any and all of its products to third parties and the aforesaid shall not apply; It is hereby agreed by the Parties that upon FMSS request,

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the Company shall use its manufacturing capacity in excess of the capacity required for the supply of Point Blank’s Products (as defined in the Supply Agreement) requirements (based on the forecasts submitted by Point Blank to the Company pursuant to the Supply Agreement) to supply FMSS’ and its Affiliates requirements of the Products and similar products for use in hard armor applications in or out of the United States and, outside the United States, also in soft armor applications, under supply terms equivalent to the supply terms to Point Blank.

(iv) making overall policy decisions with respect to the business and affairs of the Company, including, but not limited to, engaging in any business other than the Business;

(v) annual review and approval of an annual budget and operating guidelines (the “Annual Budget,” and together with the Initial Budget, the “Approved Budget”); The Parties agree that each proposed Annual Budget shall be presented by the Board of Managers to the Members for their review and comment not less than thirty (30) days prior to the last day of each Fiscal Year.

(vi) approving any contract, agreement, commitment or expenditure not provided for in the approved annual budget with a value in excess of [***];

(vii) approval of any capital expenditure in excess of [***], whether or not such item(s) appear in the Approved Budget;

(viii) approval of borrowing money, guaranteeing obligations, issuing securities, or subjecting Company assets to liens or encumbrances, whether or not such item(s) appear in the Approved Budget;

(ix) approving all agreements and transactions that are proposed to be entered into between the Company and any Member or Affiliate of a Member (other than the Asset Purchase Agreement of even date herewith among the Company and PAMAS U.S. Inc., a South Carolina corporation, the Supply Agreement, the Non-Compete/ Non-Solicitation Agreement by and among PBSS, FMSS and the Company of even date herewith (the “Non-Compete/ Non-Solicitation”), the Indemnification Agreement by and among the Company, FMS and FMS Enterprises USA, Inc. of even date herewith, which are hereby approved by the Members and the Indemnification Agreement by and among the PBSS, Point Blank, FMS and FMS Enterprises USA, Inc. of even date herewith, which are hereby approved by the Members);

(x) entering into an agreement having a term in excess of one (1) year or involving the receipt or expenditure of in excess of [***] (except for the purchase of raw materials used in the production of the Products (as defined in the Supply Agreement), in which case the approval shall be required when entering into an agreement involving any expenditure in excess of [***]), whether or not such item(s) appear in the Approved Budget;

(xi) making a decision to change the capital structure of the Company or authorizing a Capital Contribution other than as provided for herein;

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(xii) approval of Additional Capital Contributions;

(xiii) approving the transfer or sale of any assets of the Company, or any interest therein, other than in the ordinary course of business, the Fair Market Value of which may reasonably be expected to exceed [***];

(xiv) admitting a new Member to the Company (except in case of purchase of Company Interest in compliance with the provisions of Article 10 or Sections 8.01(b) or 11.01(b));

(xv) the creation of an affiliate or subsidiary to conduct or expand a portion of the Business;

(xvi) except as otherwise specifically provided for herein, taking any action not in the ordinary course of business;

(xvii) making significant public announcements or communicating with the media as provided in Section 14.16, except as permitted by Section 14.16;

(xviii) approving any tax elections of the Company;

(xix) approving signatory rights in the Company and approving the choice of bank depositories, and approving arrangements relating to signatories on bank accounts;

(xx) approving the choice of the Company’s attorneys, independent accounts, and any other consultants, including but not limited to market consultants, leasing agents, management agents, and advertising and public relations agents, where it is contemplated that such consultants will provide services with a value in excess of [***], or for a period longer than six (6) months;

(xxi) approving any change of the Company’s fiscal year;

(xxii) approving all distributions to the Members (except if made pursuant to Section 6.03);

(xxiii) approving any amendment to an Annual Budget that on its own, or in combination with all previous amendments to such Annual Budget, exceeds ten percent (10%) of the total approved expenses in such Annual Budget;

(xxiv) approving the conveyance, sale, transfer, assignment, pledge, encumbrance, or disposal of, or the granting of a security interest in, any assets of the Company;

(xxv) incurring indebtedness or loaning any sum or extending credit to any Person in an amount in excess of [***], or for a period in excess of six (6) months, that is not included in the Approved Budget;

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(xxvi) guaranteeing any indebtedness of any other Person in any amount in excess of [***] or for a period in excess of six (6) months, or guaranteeing any contractual obligations of any other Person with a value in excess of [***] or for a period in excess of six (6) months, that is not included in the Approved Budget;

(xxvii) entering into any real estate lease with a value in excess of [***] or a term greater than six (6) months, or the acquisition by the Company of any real estate that is not in the Approved Budget;

(xxviii) employing, appointing and removing of any Company employee who will be involved in the day to day management of the business of the Company, and who will receive compensation in excess of [***] per year, that is not in the Approved Budget;

(xxix) changing any accounting principles used by the Company, except to the extent required by generally accepted accounting principles;

(xxx) conducting litigation to which the Company is a party;

(xxxi) approving the acquisition of any business or a business division from any Person, whether by asset purchase, stock purchase, merger or other business combination;

(xxxii) approving the merger of the Company or the sale of all or substantially all of the assets of the Company; and

(xxxiii) the transfer or out-licensing of Company’s Intellectual Property (other than in accordance with the Supply Agreement).

(f) Third Party Reliance. Third parties dealing with the Company shall be entitled to rely conclusively upon the power and authority of the Board of Managers and the officers of the Company as set forth herein.

(g) Fiduciary Relationship. No Manager shall be liable to the Company or its Members for monetary damages for breach of fiduciary duty as a Manager or otherwise liable, responsible or accountable to the Company or its Members for monetary damages or otherwise for any acts performed, or for any failure to act; provided, however, that this provision shall not eliminate or limit the liability of a Manager (i) for any breach of the Manager’s duty of loyalty to the Company or its Members, (ii) for acts or omissions which involve intentional misconduct or a knowing violation of law, or (iii) for any transaction from which the Manager received any improper personal benefit.

(h) Reimbursement. All expenses incurred with respect to the organization, operation, and management of the Company shall be borne by the Company. The Managers shall be entitled to reimbursement from the Company for direct expenses allocable to the organization, operation, and management of the Company. None of the Managers, in their capacity as such, shall be entitled to any fees for services rendered for or on behalf of the Company.

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(i) No Individual Authority. Except as otherwise expressly provided in this Agreement, no Member, acting alone, shall have any obligation to act for, or undertake or assume any obligation or responsibility on behalf of, the other Member or the Company.

7.02 Officers

(a) Production Manager. The Board of Managers shall appoint a production manager (the “Production Manager”), who shall initially be Craig Trask. Subject to the supervision and authority of the Board of Managers, the Production Manager (i) shall have responsibility and authority for management of the day-to-day operations of the Company, (ii) may execute agreements and contracts on behalf of the Company, and (iii) may delegate matters to other Company officers and employees. Upon the decision of the Board of Managers, the Production Manager shall be removed from office and terminated from employment with the Company. The Production Manager may be a dual employee of the Company and one of the Members or a Member’s Affiliate.

(b) Controller. The Board of Managers shall appoint a controller of the Company (the “Controller”), who shall initially be Julian Crawford. Subject to the supervision and authority of the Board of Managers, the Controller shall have primary responsibility for the Company’s financial accounting systems and reporting, the preparation and filing of all tax returns for the Company and overall management of the Company’s accounting and financial reporting system and shall perform such other duties and have such other responsibilities as may from time to time be assigned by the Board of Managers. Upon the decision of the Board of Managers, the Controller shall be removed from office and terminated from employment with the Company. The Controller may be a dual employee of the Company and one of the Members or a Member’s Affiliate.

(c) Other Officers. The Board of Managers may appoint other officers of the Company (including, but not limited to, one or more vice presidents, a treasurer, and a secretary) upon terms and conditions the Board of Managers deems necessary and appropriate. Any such officer shall hold his or her respective office unless and until such officer is removed by the Board of Managers or upon the request of any Member.

7.03 Other Activities of Members or Affiliates; Restrictions on Competition

Except as set forth in the Non-Compete/ Non-Solicitation Agreement, any Member or any Affiliate thereof may have other business interests or may engage in other business ventures of any nature or description whatsoever, whether currently existing or hereafter created. No Member or Affiliate thereof shall incur any liability to the Company as a result of its pursuit of such other permitted business interests, ventures and activity, and neither the Company nor the other Members shall have any right to participate in such other business ventures or to receive or share in any income or profits derived therefrom.

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7.04 Indemnification of the Members, Managers, Officers and any Affiliate

(a) Right of Indemnification. In accordance with Section 18-108 of the Delaware LLC Act, the Company shall indemnify and hold harmless any Member, Manager, officer, and Affiliate thereof (individually, in each case, an “Indemnitee”) to the fullest extent permitted by law from and against any and all losses, claims, demands, costs, damages, liabilities joint or several), expenses of any nature (including attorneys’ fees and disbursements), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which the Indemnitee may be involved or threatened to be involved, as a party or otherwise, arising out of or incidental to the business or activities of or relating to the Company, regardless of whether the Indemnitee continues to be a Member, a Manager, an officer or any Affiliate thereof at the time any such liability or expense is paid or incurred; provided, however, that this provision shall not eliminate or limit the liability of an Indemnitee (i) for any breach of the Indemnitee’s duty of loyalty to the Company or its Members, (ii) for acts or omissions which involve intentional misconduct or a knowing violation of law, or (iii) for any transaction from which the Indemnitee received any improper personal benefit; provided, further, that the provisions of this Section 7.04(a) shall not apply to disputes among Members and Managers.

(b) Advances of Expenses. Expenses incurred by an Indemnitee in defending any claim, demand, action, suit, or proceeding subject to this Section 7.04 shall, from time to time, upon request by the Indemnitee, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined in a judicial proceeding or a binding arbitration that such Indemnitee is not entitled to be indemnified as authorized in this Section 7.04.

(c) Other Rights. The indemnification provided by this Section 7.04 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, vote of the Board of Managers as a matter of law or equity, or otherwise, both as to an action in the Indemnitee’s capacity as a Member, a Manager, an officer or any Affiliate thereof, and as to an action in another capacity, and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns, and administrators of the Indemnitee.

(d) Insurance. The Company may purchase and maintain insurance on behalf of the Board of Managers and such other Persons as the Board of Managers shall determine against any liability that may be asserted against or expense that may be incurred by such Persons in connection with the offering of interests in the Company or the business or activities of the Company, regardless of whether the Company would have the power to indemnify such Persons against such liability under the provisions of this Agreement.

(e) Effect of Interest in Transaction. An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.04 or otherwise by reason of the

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fact that the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted or not expressly prohibited by the terms of this Agreement.

(f) No Third Party Rights. The provisions of this Section 7.04 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.

ARTICLE VIII

DEADLOCK

8.01 Deadlock

(a) Occurrence of Deadlock. A “Deadlock” shall occur where all of the following steps have been taken:

(i) First, a Member (the “Proposing Member”) delivers to the other Member (the “Non-Proposing Member”) a Deadlock Meeting Notice (as defined below) at least ten (10) days prior to a proposed meeting (a “Deadlock Meeting”);

(ii) Second, in the event that a Person authorized to act on behalf of the Non-Proposing Member does not attend the first Deadlock Meeting called pursuant to subsection (i) above, then the Proposing Member shall send a second Deadlock Meeting Notice at least ten (10) days prior to a second proposed Deadlock Meeting;

(iii) Third, in the event that either (A) the Non-Proposing Member does not attend two or more Deadlock Meetings regarding the same Proposals in connection with which Deadlock Meeting Notices were delivered or (B) Persons authorized to act on behalf of all Members attend a Deadlock Meeting and the Proposals are not approved in writing by all of the Members or withdrawn in writing by the Proposing Member (an “Unresolved Proposal”), then during the thirty day (30) period following the occurrence of such Unresolved Proposal (the (“CEO Meeting Period”), the chief executive officers of each Member shall meet and make a good faith effort to resolve the Unresolved Proposal (the “CEO Meeting”);

(iv) Fourth, in the event that either (A) the CEO Meeting has occurred and the Unresolved Proposal has not been withdrawn in writing by the Proposing Member or approved in writing by all the Members or (B) during the CEO Meeting Period the CEO Meeting does not occur and the Unresolved Proposal has not been withdrawn in writing by the Proposing Member or approved in writing by all the Members, and after which a written notice (the “Deadlock Notice”) has been provided by the Proposing Member to the Non-Proposing Member (prior to sixty (60) days following the earlier of the CEO Meeting and the end of the CEO Meeting Period), and such Unresolved Proposal has not been withdrawn in writing by the Proposing Member or approved in writing by all the Members during the thirty (30) days following the date of the Deadlock Notice.

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A “Deadlock Meeting Notice” shall (A) provide a brief summary of one or more proposals with respect to the Company (the “Proposals”) to be considered, (B) indicate that if the Proposal is not resolved, the Proposals may be the basis for a Deadlock, (C) provide the date, time and location for the Deadlock Meeting and (D) provide the Non-Proposing Member with the option to attend such meeting via teleconference and include the information necessary to attend such meeting via teleconference. The “Deadlock Notice” shall include a summary of the Proposals and the first date (and, if applicable, second date) on which the requisite vote to approve such action was not received.

(b) Resolution of Deadlock.

(i) At any time between commencement of the CEO Meeting Period and thirty (30) days after the occurrence of Deadlock, the Member that sent the Deadlock Notice (the “First Member”) may serve a written notice requesting the determination of the Deadlock Offer Price, and the Parties will then determine the Deadlock Offer Price in accordance with Section 8.01(c) below and as set forth in the definition of “Fair Market Value” below.

(ii) The First Member may, at any time during the ten (10) days following the later to occur of Deadlock or determination of the Deadlock Offer Price, serve a written notice (the “Offer Notice”) of its offer to purchase the entire Company Interest and Percentage Interest of the other Member (the “Second Member”) for the price provided for in Section 8.01(c) below (the “Deadlock Offer Price”). Such offer contained in the Offer Notice shall lapse forty-five (45) days after the Offer Notice is delivered to the Second Member.

(iii) If the offer contained in the Offer Notice is not accepted before it lapses, the Second Member will be deemed to have served an Offer Notice to the First Member indicating the Second Member’s offer to purchase the First Member’s entire Company Interests and Percentage Interest at the Deadlock Offer Price, and the First Member shall be deemed to have accepted such offer at the end of the forty-five (45) day period after the Offer Notice was delivered to the Second Member under (i) above.

(iv) Any sale of Company Interests and Percentage Interest pursuant to this Section 8.01(b) shall be effective within thirty (30) days of the date of acceptance or deemed acceptance and the Member acquiring Company Interests and Percentage Interest from the selling Member shall deliver and pay to such selling Member (in U.S. Dollars) the Deadlock Offer Price for such Company Interests and Percentage Interest pursuant to this Section 8.01(b) and the selling Member shall deliver to the purchasing Member evidence of receipt of such payment and evidence of sale of such Company Interests as is reasonably satisfactory to the purchasing Member, and the Company shall pay any amount due under Section 5.07(d).

(v) Offer Notice. The Offer Notice shall identify the matter pursuant to which a Deadlock has been reached, a summary of the pertinent dates relating to such Deadlock and an indication of the First Member’s offer to purchase the Second Member’s Company Interests and Percentage Interest.

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(c) Valuation of Company Interest. The “Deadlock Offer Price” shall be equal to the Fair Market Value of the Company Interests and Percentage Interest being purchased by one Member from the other Member under Section 8.01(b) above, provided that if any Member or any Affiliate thereof is in breach of any of its agreements with or obligations towards the Company, then the Fair Market Value shall be adjusted in a manner which would neutralize the effect of any such breach on the Fair Market Value (i.e., the Fair Market Value will be increased accordingly in case such Member is selling its interest in the Company and the other Member is in breach and decreased accordingly if it is selling its interests in the Company and such Member is in breach).

ARTICLE IX

BANK ACCOUNTS; BOOKS AND RECORDS;

STATEMENTS; TAXES; FISCAL YEAR

9.01 Bank Accounts

All funds of the Company shall be deposited in its name in such checking and savings accounts, time deposits, certificates of deposit or other accounts (the “Bank Accounts”) at such banks as shall be designated by the Board of Managers from time to time, and the Board of Managers shall arrange for the appropriate conduct of such account or accounts.

9.02 Books and Records

The Board of Managers shall keep, or cause to be kept, accurate, full and complete books and accounts showing assets, liabilities, income, operations, transactions and the financial condition of the Company. Such books and accounts shall be prepared on the accrual basis of accounting. Any Member or its designee shall have access thereto at any reasonable time during regular business hours and shall have the right to copy said records at its expense.

9.03 Financial Statements and Information

(a) Preparation in Accordance with Generally Accepted Accounting Principles. All financial statements prepared pursuant to this Section 9.03 shall present fairly the financial position and operating results of the Company and shall be prepared in accordance with generally accepted accounting principles on the accrual basis for each Fiscal Year of the Company during the term of this Agreement.

(b) Unaudited Quarterly Financial Statements. Within twenty (20) days after the end of each quarterly period (the “Fiscal Quarter”) of each Fiscal Year, commencing with the first Fiscal Quarter after the date of this Agreement, the Board of Managers shall prepare and submit or cause to be prepared and submitted to the Members an unaudited statement of profit and loss for the Company for such Fiscal Quarter and an unaudited balance sheet of the Company dated as of the end of such Fiscal Quarter, in each case prepared in accordance with generally accepted accounting principles consistently applied.

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(c) Audited Annual Financial Statements. Within sixty (60) days after the end of each Fiscal Year during the term of this Agreement, the Board of Managers shall prepare and submit or cause to be prepared and submitted to the Members an audited balance sheet, together with audited statements of profit and loss, Members’ equity and changes in financial position for the Company during such Fiscal Year (the “Audited Financial Statements”).

(d) Other Reports. The Board of Managers shall provide to the Members such other reports and information concerning the business and affairs of the Company as may be required by the Delaware LLC Act or by any other law or regulation of any regulatory body applicable to the Company.

9.04 Accounting Decisions

All decisions as to accounting matters, except as specifically provided to the contrary herein, shall be made by the Board of Managers.

9.05 Where Maintained

The books, accounts and records of the Company at all times shall be maintained at the Company’s principal office.

9.06 Fiscal Year

The fiscal year of the Company for financial, accounting, Federal, state and local income tax purposes shall initially be the fiscal year commencing on January 1 and ending on December 31 (the “Fiscal Year”). The Board of Managers shall have authority to change the beginning and ending dates of the Fiscal Year if the Board of Managers, in its sole and absolute discretion, deems such change to be necessary or appropriate to the business of the Company, and shall give written notice of any such change to the Members within thirty (30) days after the occurrence thereof.

ARTICLE X

TRANSFERS AND CONVERSION OF COMPANY INTERESTS

AND THE ADDITION, SUBSTITUTION

AND WITHDRAWAL OF MEMBERS

10.01 Transfer of Company Interests

(a) Definition of Transfer. The term “transfer,” when used in this Article X with respect to a Company Interest or Percentage Interest, shall include any direct or indirect sale, assignment, gift, pledge, hypothecation, mortgage, exchange, transfer or other disposition, disposal or delivery to a party which is not (directly or indirectly) wholly-owned by Point Blank or FMS; except that such term shall not include any

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pledge, mortgage or hypothecation of or granting of a security interest in a Company Interest or Percentage Interest in connection with any financing obtained on behalf of the Company. Notwithstanding the foregoing and for the avoidance of any doubt, a Change of Control in FMS or in Point Blank shall not be considered as a “transfer” for purposes of this Article 10.

(b) Notwithstanding any other provision in this Agreement (including, but not limited to, the restrictions on transfer contained in Section 10.02 below), PBSS shall be entitled to pledge, directly or indirectly, its Company Interests and Percentage Interest to, and otherwise grant a lien and security interest in its Company Interests and Percentage Interests and all of its right, title and interest under this Agreement in favor of, PBSS’s and/or Point Blank’s lenders (or an agent on behalf of such lenders) without any further consents, approvals or actions required by such lenders (or agent), any Member, the Company or any other person under this Agreement or otherwise, provided such pledgee provides the Company, prior to the grant of such pledge, with a written acknowledgement of Section 10.04(iii). So long as any such pledge of or security interest in any PBSS Company Interest and Percentage Interest is in effect, no consent of the Company or any Member shall be required to permit a pledgee thereof to be substituted for PBSS under this Agreement upon the exercise of such pledgee’s rights with respect to such Company Interests and Percentage Interests. As of the date hereof, PBSS has indirectly pledged its Company Interests and Percentage Interests to LaSalle Business Credit, LLC, as agent (in such capacity, together with its successors, assigns and designated agents, the “Agent”) on behalf of itself and various lenders from time to time party to certain financing documents with the Point Blank and PBSS. Upon the exercise of the Agent’s rights in respect of such pledge and security interest, the Agent, or any purchaser of PBSS’s Company Interests and Percentage Interests from the Agent, shall be substituted for PBSS as a Member under this Agreement, and such substituted Member shall have all rights and powers as a Member under this Agreement. So long as any pledge of PBSS’s Company Interests and Percentage Interests is in effect, this provision shall inure to the benefit of such pledgee and its successors, assigns and designated agents, as an intended third-party beneficiary, and no amendment, modification or waiver of, or consent with respect to this provision shall in any event be effective without the prior written consent of such pledgee.

(c) Void Transfers. No Company Interest or Percentage Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article X. Any transfer or purported transfer of any Company Interest or Percentage Interest not made in accordance with this Article X shall be void ab initio.

10.02 Restrictions on Transfers

(a) Consent Required. No Member may transfer all or any portion of its Company Interest or Percentage Interest without the express written consent of the nontransferring Member, except a transfer occurring after the fourth anniversary of the Effective Date of all, but not less than all, of such Member’s Company Interest and Percentage Interest, and provided that such transfer is to a transferee who is not engaged in the business of designing, developing, manufacturing, or selling in the U.S. woven fabric for use in soft body armor in the U.S. or who sells soft body armor in the U.S., which transfer is made in accordance with and subject to the terms of Section 10.03.

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(b) Substitution. Any transferee of a Company Interest shall become a substituted Member upon (i) transfer of Company Interests and Percentage Interest in compliance with Section 10.03 or (ii) the express written consent of the nontransferring Members in the exercise of their sole and absolute discretion; and (A) the transferee agreeing to be bound by all the terms and conditions of the Certificate and this Agreement and all other agreements between the Members relating to the Company as then in effect; and (B) receipt of any necessary regulatory approvals. Unless and until a transferee is admitted as a substituted Member, the transferee shall have no right to exercise any of the powers, rights, and privileges of a Member hereunder. A Member who has transferred its Company Interest and Percentage Interest shall cease to be a Member upon transfer of such Member’s entire Company Interest and Percentage Interest and thereafter shall have no further powers, rights, and privileges as a Member hereunder except as provided in Section 7.05.

(c) Dealing with Members. The Company, each Member, the Board of Managers, the Production Manager, the Controller, and any other Person or Persons having business with the Company need deal only with Members who are admitted as Members or as substituted Members of the Company, and they shall not be required to deal with any other Person by reason of transfer by a Member or by reason of the death of a Member, except as otherwise provided in this Agreement. In the absence of the substitution (as provided herein) of a Member for a transferring or a deceased Member, any payment to a Member or to a Member’s executors or administrators shall acquit the Company and the Board of Managers of all liability to any other Persons who may be interested in such payment by reason of an assignment by, or the death of, such Member.

10.03 Right of First Refusal

(a) If at any time after the fourth anniversary of the Effective Date, a Member (the “Offering Member”) desires to effect a transfer of all, but not less than all, of its Company Interests and Percentage Interest and the Offering Member receives from or otherwise negotiates with a third party that is not an Affiliate of the Offering Member (a “Third Party”) a bona fide offer (an “Offer”) for the transfer of all such Company Interests and Percentage Interest (whether for cash, securities or a combination of both), the Offering Member shall serve the other Member (the “Offer Recipient”) with written notice of such Offer (the “First Refusal Offer Notice”), identifying the Third Party making the Offer, the Company Interests and Percentage Interest covered by the Offer (the “Offered Interests”), the price at which such transfer is proposed to be made (the “Offer Price”), and the other material terms and conditions of the proposed transfer. In the event any portion of the purchase price of the Company Interests and Percentage Interest to be paid by the proposed purchaser is to be paid in non-cash consideration, the value of any such noncash consideration shall be the Fair Market Value thereof.

(b) Upon receipt of the First Refusal Offer Notice, the Offer Recipient shall have the option to purchase at the Offer Price all, but not less than all, of the Offered

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Interests (the “First Offer”). The Offer Recipient shall, within fifteen (15) days from receipt of the First Refusal Offer Notice (the “Offer Period”), indicate to the Offering Member whether it has accepted the First Offer, by sending irrevocable written notice of such acceptance (an “Acceptance Notice”) to the Offering Member.

(c) If effective acceptances shall not have been received from the Offer Recipient pursuant to Sections 10.03(b), then the Offering Member may, at its election, either (i) transfer the Offered Interests to the Third Party purchaser referred to in Section 10.03(a) or (ii) rescind the First Refusal Offer Notice, which rescission shall be effected by notice in writing delivered to the Offer Recipient within ten (10) days after the expiration of the Offer Period, and keep all, but not less than all, of the Offered Interests. In the event that the Offering Member elects to sell all, but not less than all, of Offered Interests pursuant to clause (i) of this Section 10.03(c), the Third Party purchasing the Offered Interests must purchase such Offered Interests no more than sixty (60) days (or longer, if the HSR Act so requires) after the expiration of the Offer Period strictly in accordance with the terms and conditions of the First Refusal Offer Notice.

(d) In the event that the Offering Member shall not have transferred all of the Offered Interests within sixty (60) days (or longer, if the HSR Act so requires) after the expiration of the Offer Period, then the provisions of this Section 10.03 shall again apply, and such Offering Member shall not thereafter transfer or offer to transfer such Company Interests without again complying with this Section 10.03.

10.04 Bankruptcy, Dissolution or Liquidation of a Member

(a) In the event:

(i) of (A) the entry of a decree or order for relief of a Member by a court of competent jurisdiction in any involuntary case involving the Member under any bankruptcy, insolvency or other similar law now or hereafter in effect; (B) the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar agent for the Member or for any substantial part of the Member’s assets or property; (C) the ordering of the winding up or liquidation of the Member’s affairs; (D) the filing with respect to the Member of a petition in any such involuntary bankruptcy case, which petition remains undismissed for a period of ninety (90) days or which is dismissed or suspended pursuant to Section 305 of the Federal Bankruptcy Code (or any corresponding provision of any future United States bankruptcy law); (E) the commencement by the Member of a voluntary case under any bankruptcy, insolvency or other similar law now or hereafter in effect; (F) the consent by the Member to the entry of an order for relief in an involuntary case under any such law or to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar agent for the Member or for any substantial part of the Member’s assets or property; (G) the making by the Member of any general assignment for the benefit of creditors; or (H) the failure by the Member generally to pay its debts as such debts become due;

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(ii) of the voluntary or involuntary dissolution or liquidation of a Member; then, in any such event, the other Member (the “Continuing Member”) shall (i) have the right to purchase the entire Company Interest and Percentage Interest of the first Member (the “Withdrawing Member”) for an amount in U.S. Dollars equal to the total Capital Account of such Withdrawing Member, plus [***] per annum on such Capital Contributions calculated for each Capital Contribution from the date it was made by the Withdrawing Member; provided that in connection with, or prior to, such purchase by the Continuing Member of the Withdrawing Member’s Company Interest and Percentage Interest, the Company shall repay any and all amounts outstanding under any loans or advances made by the Withdrawing Member to the Company (including, but not limited to, any amounts outstanding under any Initial Loans, any Additional Contribution Promissory Note and any other advance or loan made pursuant to Section 5.07 hereof), or (ii) at the option of the Continuing Member, cause a dissolution of the LLC and the Board of Managers shall liquidate the LLC in accordance with the terms hereof. The rights of the Continuing Member shall become exercisable as of the date of any such event and shall be exercisable, within sixty (60) days after the Continuing Member receives notice of such event; or

(iii) a pledgee or Agent of any PBSS Company Interest and Percentage Interest is substituted for PBSS pursuant to Section 10.01(b) of this Agreement, FMSS shall (i) have the right to purchase such PBSS Company Interest and Percentage Interest for an amount in U.S. Dollars equal to the total Capital Account of PBSS, plus six percent (6%) per annum on such Capital Contributions calculated for each Capital Contribution from the date it was made by PBSS; provided that in connection with, or prior to, such purchase by FMSS of PBSS’s Company Interest and Percentage Interest, the Company shall repay any and all amounts outstanding under any loans or advances made by PBSS to the Company (including, but not limited to, any amounts outstanding under any Initial Loans, any Additional Contribution Promissory Note and any other advance or loan made pursuant to Section 5.07 hereof), or (ii) at the option of FMSS, cause a dissolution of the LLC and the Board of Managers shall liquidate the LLC in accordance with the terms hereof. The rights of FMSS pursuant to this Subsection 10.04(a)(iii) shall become exercisable as of the date of any such event and shall be exercisable, within sixty (60) days after FMSS receives notice of such event.

10.05 Call Right

(a) Call Rights.

(i) In the event that FMSS, its Affiliate or successor undergoes a Change in Control resulting in FMSS or its successor (holding its Company Interest or Percentage Interest) being directly or indirectly Controlled by a Person that is a Direct Competitor of PBSS (as defined on Addendum C), or which subsequently becomes a Direct Competitor of PBSS, then in each such event PBSS, its Affiliate or successor may, at its election, purchase all, but not less than all, of FMSS’s, its Affiliate’s or successor’s Company Interests and Percentage Interests (the “PBSS COC Call Right”) for [***]. If FMSS, its Affiliate or successor has undergone a Change of Control resulting in FMSS being

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Controlled by a Direct Competitor of PBSS as aforesaid, it shall notify in writing PBSS within five (5) days after it undergoes such Change of Control. In addition: (i) in the event that PBSS, its Affiliate or successor undergoes a Change in Control resulting in PBSS or its successor (holding its Company Interest or Percentage Interest) being directly or indirectly Controlled by a Person that is a Direct Competitor of FMSS (as defined on Addendum C), or which subsequently becomes a Direct Competitor of FMSS, then in each such event FMSS, its Affiliate or successor may, at its election, purchase all, but not less than all, of PBSS’s, its Affiliate’s or successor’s Company Interests and Percentage Interests (the “FMSS COC Call Right”) for [***]. If PBSS, its Affiliate or successor has undergone a Change of Control resulting in PBSS being Controlled by a Direct Competitor of FMSS as aforesaid, it shall notify in writing FMSS within five (5) days after it undergoes such Change of Control; (ii) in the event that Point Blank or any of its Affiliates sells or otherwise transfer or dispose of (including by way of grant of an exclusive license) a significant portion of its assets used in its business of manufacturing and marketing soft protective body armor, resulting in a significant decrease (i.e., a decrease of more than [***]) in Point Blanks’ annual need for the Products (as defined in the Supply Agreement), then FMSS, its Affiliate or successor may, at its election, purchase all, but not less than all, of PBSS’s, its Affiliate’s or successor’s Company Interests and Percentage Interests (the “FMSS Asset Sale Call Right”) for [***], and (iii) in the event that, at any time during the term of the Supply Agreement, Point Blank is unable to [***] as a result of [***] then FMSS, its Affiliate or successor may, at its election, purchase all, but not less than all, of PBSS’s, its Affiliate’s or successor’s Company Interests and Percentage Interests [***] for a sum equal to [***]

(ii) In the event that FMSS or any other Company controlled by FMS or any of their respective successors, assigns or transferees of all or substantially all of their respective assets, that become a Member of the Company (the “FMSS Party”), engage in the manufacturing in the U.S. of woven fabric for use in soft body armor for sale in the U.S., then PBSS, may, at its election, purchase all, but not less than all, of FMSS’s Company Interests and Percentage Interests (the “PBSS Competitor Call Right,”) for [***]. FMSS, or its successor and assigns (as applicable), shall notify in writing PBSS, or its successors and assigns (as applicable), within five (5) days after the occurrence of any of the events described in this Subsection (ii).

The PBSS COC Call Right, PBSS Competitor Call Right, FMSS COC Call Right, the FMSS Asset Sale Call Right, and the [***], may each be referred to herein as a “Call Right”.

(b) Procedure. If a Member that has the right to exercise a Call Right (the “Purchasing Member”) desires to exercise such Call Right, then the Purchasing Member shall provide written notice (the “Call Exercise Notice”) to the other Member (the “Selling Member”), by no later than thirty (30) days after he receives notice regarding its Call Right from the other Member, stating that it desires to purchase all (but not less than all) of such Selling Member’s Company Interests and Percentage Interest. The purchase price determined above shall, be paid by the Purchasing Member to the Selling Member in cash or other immediately available funds and the consummation of the transfer of

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Company Interests and Percentage Interest by the Selling Member to the Purchasing Member shall occur within thirty (30) days after the Selling Member receives the Call Exercise Notice, provided that the Selling Member does not dispute the Purchasing Member’s claim that the Purchasing Member has an exercisable Call Right, or if such right is disputed, then as soon as such dispute is finally resolved and determined in accordance with Section 14.17 below.

10.06 No Right to Withdraw

No Member shall have any right to resign or otherwise withdraw from the Company without the express written consent of all the other Members.

ARTICLE XI

DISSOLUTION AND LIQUIDATION

11.01 Events Causing Dissolution

(a) Dissolution. The Company shall be dissolved and its affairs wound up only upon the occurrence of any of the following events:

(i) the unanimous consent in writing to dissolve and wind up the affairs of the Company by all of the Members;

(ii) the sale or other disposition by the Company of all or substantially all of the Company Assets and the collection of all amounts derived from any such sale or other disposition, including all amounts payable to the Company under any promissory notes or other evidences of indebtedness taken by the Company and the satisfaction of contingent liabilities of the Company in connection with such sale or other disposition (unless the Members shall elect to distribute such indebtedness to the Members in liquidation); or

(iii) the occurrence of any event that, under the Delaware LLC Act, would cause the dissolution of the Company or that would make it unlawful for the business of the LCC to be continued.

(iv) Upon the written notice to the Board of Managers requesting such dissolution provided by a Nonbreaching Member (as defined below) in case the Breaching Member fails to cure its material breach of this Agreement within thirty (30) days from its receipt of a Notice of Breach (as defined below), provided, however that if the Breaching Member disputes the claim that it is in material breach of this Agreement, then this right of the Nonbreaching Member to dissolve the Company shall apply only if such dispute is finally resolved and determined in accordance with Section 14.17 below in favor of the Nonbreaching Party (so that the arbitrators determine that the Breaching Member has indeed breached the Agreement), and only if the Breaching Member failed to cure such breach within thirty (30) days following the resolution of such dispute as aforesaid.

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(b) Default. If a Member (a “Breaching Member”) fails to perform any of its material obligations under this agreement (a “Breach”) then the other Member (a “Nonbreaching Member”), shall have the right to give the Breaching Member notice (a “Notice of Breach”). The Notice of Breach shall set forth the nature of the obligations which the Breaching Member has failed to perform. If the Breaching Member fails to cure the Breach within thirty (30) days, and the Nonbreaching Member has given Notice of Breach in compliance with this section, the Nonbreaching Member may cause the determination of Fair Market Value and purchase the Breaching Member’s entire Company Interest and Percentage Interests at a price equal to the Fair Market Value of such interest. The rights of the Nonbreaching Members to purchase the Breaching Member’s interest shall be exercised, if at all, within sixty (60) days after (x) the determination of Fair Market Value, provided, however that if the Breaching Member disputes the claim that it is in material breach of this Agreement, then the right of the Nonbreaching Member to purchase the Breaching Member’s interest in the Company shall apply only if such dispute is finally resolved and determined in accordance with Section 14.17 below in favor of the Nonbreaching Party (so that the arbitrators determine that the Breaching Member has indeed breached the Agreement), and only if the Breaching Member failed to cure such breach within thirty (30) days following the resolution of such dispute as aforesaid. The fees of any and all Appraisers used to determine Fair Market Value under this Section 11.01(b) shall be borne by the Breaching Member. The rights granted in this Section 11.01(b) above shall not be deemed the exclusive remedy of a Nonbreaching Member, but all other rights and remedies, legal and equitable, shall be available to it.

11.02 Cancellation of Certificate

Upon the dissolution of the Company, the Certificate shall be canceled in accordance with the provisions of Section 18-203 of the Delaware LLC Act, and the Board of Managers (or any other person or entity responsible for winding up the affairs of the Company) shall promptly notify the Members of such dissolution.

11.03 Distributions Upon Dissolution

(a) Upon the dissolution of the Company, the Board of Managers (or any other person or entity responsible for winding up the affairs of the Company) shall proceed without any unnecessary delay to sell or otherwise liquidate the Company Assets and pay or make due provision for the payment of all debts, liabilities and obligations of the Company.

(b) The Board of Managers (or any other person or entity responsible for winding up the affairs of the Company) shall distribute the net liquidation proceeds and any other liquid assets of the Company, after the payment of all debts, liabilities and obligations of the Company (including, without limitation, all amounts owing to a Member under this Agreement or under any agreement between the Company and a Member, the payment of expenses of liquidation of the Company, and the establishment of a reasonable reserve in an amount estimated by the Board of Managers to be sufficient to pay any amounts reasonably anticipated to be required to be paid by the Company, to

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the Members first, to the Members in the amounts necessary to cause such Members’ Capital Accounts Percentage to be equal to their Percentage Interests, Second, pro rata, in proportion to the positive balances, if any, in their respective Capital Accounts until such Capital Accounts are reduced to zero sums, and, third, pro rata, in accordance with the Members respective Percentage Interests.

11.04 Reasonable Time for Winding Up

A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Company and the liquidation of its assets pursuant to Section 11.03 in order to minimize any losses otherwise attendant upon such a winding up.

ARTICLE XII

STANDSTILL AGREEMENT

12.01 Standstill.

PBSS and FMSS agree that during the Restricted Period (as defined below), neither such party nor any Affiliate thereof will, without the prior written consent of the other party:

(a) acquire, offer to acquire, or agree to acquire, or encourage or suggest to any third party that they acquire, offer to acquire, or agree to acquire, directly or indirectly, by purchase or otherwise, an aggregate of two and one-half percent (2 ¹/ 2%) or more (including any such securities held prior to such acquisition by such party or Affiliate of such party) of any voting securities or direct or indirect rights to acquire any voting securities of the other party hereto or its Affiliates (other than the Company);

(b) make, or in any way participate, directly or indirectly, or encourage or suggest to any third party that they make, or in any way participate, in any “solicitation” of “proxies” to vote (as such terms are used in the rules of the Securities and Exchange Commission), or seek to advise or influence any person or entity with respect to the voting of any voting securities of the other party hereto, or its Affiliates (other than the Company), with respect to (i) any extraordinary transaction, such as a merger, reorganization or liquidation involving such other party hereto, or its Affiliates (other than the Company), (ii) any material change in the present board of directors or management of such other party hereto, or its Affiliates (other than the Company), including, but not limited to, any plans or proposals to change the number or the term of directors, to remove any director or to fill any existing vacancies on the board, or to change any material term of the employment contract of any executive officer, (iii) the opposition of any person nominated by such other party’s, or its Affiliates’ (other than the Company), nominating committees, or (iv) any material change in such other party hereto’s, or its Affiliates’ (other than the Company), capital structure or business;

(c) make any public announcement with respect to any matter described in subparagraphs (a) and (b) above;

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(d) form, join or in any way participate in a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, in connection with any of the foregoing; or

(e) take any action that could reasonably be expected to require such other party hereto, or its Affiliates (other than the Company), to make a public announcement regarding the possibility of any of the events described in clauses (a) or (b) above.

12.02 Restricted Period

The “Restricted Period” shall commence as of the Effective Date and shall continue until the earliest to occur of:

(a) the mutual written consent of PBSS and FMSS;

(b) the dissolution of the Company in accordance with the terms and conditions of this Agreement; and

(c) twelve (12) months after the transfer by PBSS or FMSS of all, but not less than all, of such party’s Company Interest and Percentage Interest to the other party, or its Affiliates, or a Third Party in accordance with the terms and conditions of the Agreement.

ARTICLE XIII

REPRESENTATIONS AND WARRANTIES

13.01 Representations and Warranties of FMSS

FMSS hereby represents and warrants to the Company and PBSS that:

(a) Organization of FMSS; Power and Authority. FMSS is a limited liability company duly organized, validly existing and in good standing under the laws of the state of Delaware. FMSS has all requisite power and authority to own and operate its properties and assets, to execute and deliver this Agreement and all other agreements contemplated hereby, and to carry on its business as presently conducted and as presently proposed to be conducted. FMSS is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties makes such qualification necessary, except for those jurisdictions in which the failure to do so would not have a Material Adverse Effect on FMSS.

(b) Due Authorization. The execution, delivery and performance of this Agreement and all other agreements contemplated hereby have been duly authorized by FMSS and any required approvals have been obtained except where the failure to obtain such approval would not have a Material Adverse Effect on FMSS.

(c) Binding Obligation. This Agreement has been duly executed and

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delivered by FMSS and is a valid and binding obligation of FMSS, enforceable in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or similar laws affecting creditors’ rights generally, and (ii) general principles of equity, including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits on the availability of equitable remedies, whether such principles are considered at law or in equity.

(d) Conflicts. Neither the execution and delivery of this Agreement or any of the agreements contemplated hereby nor the consummation of the transactions contemplated hereby or thereby will: (i) conflict with or violate any provision of the Certificate or operating agreement of FMSS, (ii) conflict with or violate any law, ordinance or regulation or any decree or order of any court or administrative or other governmental body which is either applicable to, binding upon or enforceable against FMSS or (iii) subject to obtaining the consents and waivers set forth in Schedule 13.01(d) hereto, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any mortgage, contract, agreement, indenture, will, trust or other instrument which is either binding upon or enforceable against FMSS or its assets and properties.

(e) Consents. Other than as set forth in Schedule 13.01(e) hereto, no registration or filing with, or consent or approval of or other action by, any federal, state or other governmental agency or instrumentality is or will be necessary for the valid execution, delivery and performance by FMSS of this Agreement or any agreement or transaction contemplated by this Agreement.

(g) Securities Representations.

(i) FMSS is purchasing the Company Interests for FMSS’s own account, with the intention of holding the Company Interests for investment, with no present intention of dividing, or allowing others to participate in, this investment, or of reselling, or otherwise participating directly or indirectly in a distribution of, the Company Interests. FMSS will not, directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of any of the Company Interests (or solicit any offers to buy or otherwise acquire any of the Company Interests), except in compliance with the Securities Act of 1933, as amended (the “Securities Act”).

(ii) FMSS, by reason of its business and financial experience, declares and confirms that it has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of the prospective investment and is able to bear the economic risk of such investment, including the ability to afford holding the Company Interest for an indefinite period or to afford a complete loss of this investment.

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(iii) FMSS understands that no federal or state agency has made any finding or determination regarding the fairness of the offering of the Company Interests for investment, or any recommendation or endorsement of the offering of the Company Interests.

13.02 Representations and Warranties of PBSS

PBSS hereby represents and warrants to the Company and FMSS that:

(a) Organization of PBSS; Power and Authority. PBSS is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. PBSS has all requisite power and authority to own and operate its properties and assets, to execute and deliver this Agreement and all other agreements contemplated hereby, and to carry on its business as presently conducted and as presently proposed to be conducted. PBSS is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties makes such qualification necessary, except for those jurisdictions in which the failure to do so would not have a Material Adverse Effect on PBSS.

(b) Due Authorization. The execution, delivery and performance of this Agreement and all other agreements contemplated hereby have been duly authorized by PBSS.

(c) Binding Obligation. This Agreement has been duly executed and delivered by PBSS and is a valid and binding obligation of PBSS, enforceable in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and similar laws affecting creditors’ rights generally, and (ii) general principles of equity, including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits on the availability of equitable remedies, whether such principles are considered at law or in equity.

(d) Conflicts. Neither the execution and delivery of this Agreement or any of the agreements contemplated hereby nor the consummation of the transactions contemplated hereby or thereby will: (i) conflict with or violate any provision of the Certificate or operating agreement of PBSS, (ii) conflict with or violate any law, ordinance or regulation or any decree or order of any court or administrative or other governmental body which is either applicable to, binding upon or enforceable against PBSS or (iii) subject to obtaining the consents and waivers set forth in Schedule 13.02(d) hereto, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any mortgage, contract, agreement indenture, will, trust or other instrument which is either binding upon or enforceable against PBSS or its assets and properties.

(e) Consents. Other than as set forth in Schedule 13.02(e) hereto, no

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registration or filing with, or consent or approval of or other action by, any federal, state or other governmental agency or instrumentality is or will be necessary for the valid execution, delivery and performance by PBSS of this Agreement or any agreement or transaction contemplated by this Agreement.

(f) Securities Representations.

(i) PBSS is purchasing the Company Interests for PBSS’s own account, with the intention of holding the Company Interests for investment, with no present intention of dividing, or allowing others to participate in, this investment, or of reselling, or otherwise participating directly or indirectly in a distribution of, the Company Interests. PBSS will not, directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of any of the Company Interests (or solicit any offers to buy or otherwise acquire any of the Company Interests), except in compliance with the Securities Act.

(ii) PBSS, by reason of its business and financial experience, declares and confirms that it has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of the prospective investment and is able to bear the economic risk of such investment, including the ability to afford holding the Company Interest for an indefinite period or to afford a complete loss of this investment.

(iii) PBSS understands that no federal or state agency has made any finding or determination regarding the fairness of the offering of the Company Interests for investment, or any recommendation or endorsement of the offering of the Company Interests.

ARTICLE XIV

MISCELLANEOUS PROVISIONS

14.01 Compliance with Delaware LLC Act

Each Member agrees not to take any action or fail to take any action, which, considered alone or in the aggregate with other actions or events, would result in the termination of the Company under the Delaware LLC Act.

14.02 Additional Actions and Documents

Each of the Members hereby agrees to take or cause to be taken such further actions, to execute, acknowledge, deliver and file or cause to be executed, acknowledged, delivered and filed such further documents and instruments, and to use best efforts to obtain such consents, as may be necessary or as may be reasonably requested to fully effectuate the purposes, terms and conditions of this Agreement, whether before, at or after the date of this Agreement.

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14.03 Notices

All notices, demands, requests or other communications which may be or are required to be given, served or sent by a Member pursuant to this Agreement shall be in writing and shall be hand delivered (including delivery by courier), mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telex or facsimile transmission, addressed as follows:

If to PBSS:

PBSS, LLC

2102 SW 2nd Street,

Pompano Beach, Florida 33069

United States of America

Attention: Larry R. Ellis

Telephone number: 954-630-0900

Facsimile number: 954-630-0980

With a copy, which shall not constitute notice, to:

Venable LLP

2 Hopkins Plaza, Suite 1800

Baltimore, Maryland 21201

United States of America

Attention: Thomas D. Washburne, Jr.

Telephone number: 410-244-7744

Facsimile: 410-244-7742

If to FMSS:

FMS Enterprises Migun Ltd.

27 Imber Street

Kiryat Arye, Petach Tikva, Israel

Facsimile 972-3-2995414

Attention: Daniel Blum

With a copy, which shall not constitute notice, to:

Meitar Liquornik Geva & Leshem Brandwein, Law Offices

16 Abba Hillel Rd.

Ramat Gan 52506, Israel

Attention: Dr. Israel Leshem

Telephone number: 972-3-6103100

Facsimile 972-3-6103111

Each Member may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent.

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Each notice, demand, request or communication which shall be delivered, mailed or transmitted in the manner described above shall be deemed sufficiently given, served, sent or received for all purposes at such time as it is delivered to the addressee (with an affidavit of personal delivery, the return receipt, the delivery receipt or (with respect to a telex) the answer back being deemed conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation.

14.04 Severability

The invalidity of any one or more provisions hereof or of any other agreement or instrument given pursuant to or in connection with this Agreement shall not affect the remaining portions of this Agreement or any such other agreement or instrument or any part thereof, all of which are included subject to the condition that they are held valid in law; and in the event that one or more of the provisions contained herein or therein should be invalid, or should operate to render this Agreement or any such other agreement or instrument invalid, this Agreement and such other agreements and instruments shall be construed as if such invalid provisions had not been inserted.

14.05 Survival

It is the express intention and agreement of the Members that all covenants, agreements, statements, representations, warranties and indemnities made in this Agreement shall survive the execution and delivery of this Agreement.

14.06 Waivers

Neither the waiver by a Member of a breach of or a default under any of the provisions of this Agreement, nor the failure of a Member, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right, remedy or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights, remedies or privileges hereunder.

14.07 Exercise of Rights

No failure or delay on the part of a Member or the Company in exercising any right, power or privilege hereunder and no course of dealing between the Members or between a Member and the Company shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any other rights or remedies which a Member or the Company would otherwise have at law or in equity or otherwise.

-36-

14.08 Binding Effect

Subject to any provisions hereof restricting assignment, this Agreement shall be binding upon and shall inure to the benefit of the Members and their respective heirs, devises, executors, administrators, legal representatives, successors and assigns.

14.09 Limitation on Benefits of this Agreement

Subject to Section 7.04, it is the explicit intention of the Members that no person or entity other than the Members and the Company is or shall be entitled to bring any action to enforce any provision of this Agreement against any Member or the Company, and that the covenants, undertakings and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the Members (or their respective successors and assigns as permitted hereunder) and the Company.

14.10 Amendment Procedure

Except for adjustments to the Member’s Percentage Interests as a result of purchase of such interest as set forth in this Agreement, this Agreement may only be modified or amended by the unanimous written consent of the Members.

14.11 Entire Agreement

This Agreement contains the entire agreement between the Members with respect to the transactions contemplated herein and the operation of the Company, and supersedes all prior oral or written agreements, commitments or understandings with respect to the matters provided for herein and therein.

14.12 Pronouns

All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or entity may require.

14.13 Headings

Article, Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.

-37-

14.14 Governing Law; Jurisdiction

This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of the State of New York (but not including the choice of law rules thereof). The parties agree to submit to the exclusive jurisdiction and venue of the appropriate State and Federal courts in the State of New York, for purposes of enforcing any arbitration awards under Section 14.17.

14.15 Execution in Counterparts

To facilitate execution, this Agreement may be executed in as many counterparts as may be required; and it shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each party, or that the signatures of the persons required to bind any party, appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto.

14.16 Announcements

Except as required by law or applicable stock exchange regulation (including without limitation pursuant to Israeli stock exchange regulations and securities law, neither the Company or any Member shall make any announcement, press release or other public statement relating in any manner to this Agreement, the terms hereof, the relationship of the parties hereto or the Company without first obtaining the consent of the other Member to the disclosure proposed to be made. The Members shall not unreasonably withhold their consent to any request made by a party pursuant to this Section 14.16. The Members shall use their best efforts to consult and coordinate with each other before making any announcement, press release or other public statement relating to the Company as required by law or applicable stock exchange regulation.

14.17 Arbitration

All claims, disputes and other matters in question arising out of, or relating to, this Agreement or the performance thereof, including but not limited to questions as to whether a matter if governed by this arbitration clause, shall be subject to arbitration (provided that this section shall not preclude injunctive relief for claims under Section 7.03) if good faith negotiations among the parties does not resolve such claim, dispute or other matter within 60 days. Such arbitration shall proceed in accordance with the Commercial Arbitration Rules of the American Arbitration Association, unless the parties mutually agree otherwise, and pursuant to the following procedures:

(a) Reasonable discovery shall be allowed in arbitration.

-38-

(b) All proceedings before the arbitrators shall be held in New York, New York. The governing law shall be as specified in Section 14.14.

(c) The costs and fees of the arbitration, including attorney’s fees, shall be allocated by the arbitrators.

(d) The award rendered by the arbitrators shall be final and judgment may be entered in accordance with applicable law and in any court having jurisdiction thereof.

(e) The existence and resolution of the arbitration shall be kept confidential by the Members in the same manner as confidential information is required to be kept under Confidentiality Agreement, and shall also be kept confidential by the arbitrators.

14.18 Weaving for FMS

As of the Effective Date, the Company agrees to weave, pursuant to FMS’ orders to be submitted to the Company from time to time, up to [***] without charge to FMS and to make such [***] available for pick-up by FMS at the Plant; provided that (i) FMS shall be responsible for delivery of all yarn required by the Company to weave such [***] and delivery of such yarn shall be made not less than [***] and not more than [***] prior to the date on which FMS requests that the Company make the [***] available for delivery to FMS and (ii) the Company shall not be required under this Section 14.18 to weave in excess of [***] pounds in any [***]. The Parties agree and acknowledge that a quantity of [***] pounds of [***] products are on the Effective Date already being produced at the Plant and are and shall remain the sole and exclusive property of FMS, and the Company shall complete, as soon as possible, the manufacture of such products and supply them, free of charge, to FMS.

-39-

IN WITNESS WHEREOF, the undersigned have duly executed this Limited Liability Company Agreement or have caused this Limited Liability Company Agreement to be duly executed on their behalf as of the day and year first set forth above.

PBSS
By:	/s/ John C. Siemer
Name:	John C. Siemer
Title:	President
FMSS
By:
Name:
Title:
FMS
(Executed by FMS solely to evidence FMS’s acknowledgement of, and agreement to, the provisions contained in Section 14.18 and the dispute resolution and governing law sections contained herein which shall be applicable to such section)
By:
Name:
Title:

{Signature Page to JV Operating Agreement}

ADDENDUM A

DEFINITIONS

“Adjusted Capital Account Deficit”: With respect to any Member, the deficit balance, if any, in the Member’s Capital Account as of the end of the relevant taxable year, after giving effect to the following adjustments:

(i) the deficit shall be decreased by the amounts which the Member is deemed obligated to restore pursuant to Regulation Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and 1.704-2(i)(5); and

(ii) the deficit shall be increased by the items described in Regulation Section 1.704-1(b)(2)(ii)(d)(4),(5), and (6).

“Affiliate”: Any Person directly or indirectly controlling, controlled by, or under common control with the Person in question; if the Person in question is a corporation, any executive officer or director of the Person in question or of any corporation directly or indirectly controlling the Person in question. As used in this definition of “Affiliate”, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

“Agreement”: This Limited Liability Company Agreement, as it may be further amended or supplemented from time to time.

“Appraiser”: An independent appraiser to be selected from the appraisers listed on Addendum D; provided that in the event that at the time the Members are to choose an Appraiser, the Members cannot agree on an Appraiser provided on Addendum D, then each Member shall alternate in “striking” one appraiser from such list (with the Member that will have the first opportunity to purchase a Company Interest based on the appraisal to be performed having the first “strike”), until only one appraiser remains and such remaining appraiser shall be the Appraiser appointed to perform the current appraisal. Neither Member or its Affiliates shall engage any of the appraisers listed on Addendum D such that a conflict of interest will be created.

“Business Day”: Monday through Friday of each week, except that a legal holiday recognized as such by the Government of the United States shall not be regarded as a Business Day.

“Capital Account Percentage”: The percentage determined by dividing the dollar value of a Member’s Capital Account by the aggregate total dollar value of all Member’s Capital Accounts.

“Capital Commitment”: For each of PBSS and FMSS the Capital Commitments shall be Two-Hundred-Fifty Thousand Dollars ($250,000).

“Capital Contribution”: Any property (including cash) contributed to the Company by or on behalf of a Member.

A-1

“Certificate”: The Certificate of Formation of the Company, and any and all amendments thereto, filed on behalf of the Company with the Recording Office as required under the Delaware LLC Act.

“Change of Control”: A change in the Person that has direct or indirect Control of a Person.

“Code”: The Internal Revenue Code of 1986, as in effect and hereafter amended. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.

“Company Assets”: All assets and property, whether tangible or intangible and whether real, personal, or mixed, at any time owned by or held for the benefit of the Company.

“Company Interest”: As to any Member, all of the interest of that Member in the Company, including, without limitation (i) such Member’s ownership and equity interest in the Company, (ii) such Member’s right to a distributive share of the income, gain, losses and deductions of the Company in accordance with this Agreement, and (iii) such Member’s right to a distributive share of Company Assets.

“Control”: Control includes, without limitation, the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Delaware LLC Act”: The Delaware Limited Liability Company Act, as amended from time to time.

“Event of Default”: As defined in Section 5.04.

“Fair Market Value”: With respect to any property or asset, the dollar value of the property or asset determined (i) by mutual agreement of the Members, or (ii) if the Members cannot so agree within twenty (20) days after one Member first proposes in writing to the other Member that Fair Market Value be determined, by an independent Appraiser. The Appraiser’s determination of Fair Market Value of applicable Company Interests and Percentage Interests shall be made (i) by averaging the appraised value using each of the following three methods of appraisal (A) market value, (B) book value (determined in accordance with GAAP as a “going concern”) and (C) discounted cash flows, assuming, if the Supply Agreement is in effect, that the Supply Agreement will continue through and until the expiration of the Initial Term or Extended Term (as defined in the Supply Agreement) then in effect and (ii), treating the amounts of any then existing Member Loans (other than any Member’s Excess Loan Amount, which will be treated as debt payable pursuant to Section 5.07(d) above) as though such amounts are Capital Contributions. The Appraiser’s appraisal shall constitute a final determination of Fair Market Value of the property or asset and shall be binding upon the Members.

“FMS”: means FMS Enterprises Migun Ltd., a limited liability company organized under the laws of the State of Israel.

A-2

“GAAP”: Generally accepted accounting principles in the United States of America.

“HSR Act”: The United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder.

“Initial Budget”: The Initial Budget, attached hereto as Addendum B.

“Intellectual Property”: Means (i) inventions, improvements, discoveries, know how, concepts and ideas, whether patentable or not; (ii) patents, revalidations, industrial designs, industrial models and utility models, design patent rights, patent applications (including reissues, continuations, divisions, continuations-in-part and extensions) and patent disclosures; (iii) trade secrets and proprietary or confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any person; (iv) copyrights, copyright registrations and applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof and any moral rights existing in connection therewith; and (v) all other intellectual property or industrial property rights recognized anywhere.

“Manager”: Any member of the Board of Managers.

“Member”: PBSS and FMSS and any other Person who shall in the future execute and deliver this Agreement pursuant to the provisions hereof.

“Member Loan”: All outstanding loans and accrued interest owed by the Company to a Member.

“Member Loan Nonrecourse Deductions”: Any Company deduction that would be Nonrecourse Deductions if they were not attributable to a loan made or guaranteed by a Member within the meaning of Regulation Section 1.704-2(i).

“Minimum Gain”: The meaning set forth in Regulation Section 1.704-2(d). Minimum Gain shall be computed separately for each Member in a manner consistent with the Regulations under Code Section 704(b).

“Net Income and Net Loss”. means, for each taxable year of the Company (or other period for which Net Income or Net Loss must be computed) the Company’s taxable income or loss determined in accordance with Code Section 703(a), with the following adjustments:

(a) all items of income, gain, loss, deduction, or credit required to be stated separately pursuant to Code Section 703(a)(1) shall be included in computing taxable income or loss;

(b) any tax-exempt income of the Company, not otherwise taken into account in computing Net Income or Net Loss, shall be included in computing taxable income or loss;

A-3

(c) any expenditures of the Company described in Code Section 705(a)(2)(B) (or treated as such pursuant to Regulation Section 1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in Net Income or Net Loss, shall be subtracted from Net Income or Net Loss;

(d) gain or loss resulting from any taxable disposition of Company property shall be computed by reference to the adjusted book value of the property disposed of, notwithstanding the fact that the adjusted book value differs from the adjusted basis of the property for federal income tax purposes;

(e) in lieu of the depreciation, amortization, or cost recovery deductions allowable in computing taxable income or loss, there shall be taken into account the depreciation computed based upon the adjusted book value of the asset; and

(f) notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Section 6.04(b) hereof shall not be taken into account in computing Net Income or Net Loss.

“Nonrecourse Liability”: Any liability of the Company with respect to which no Member or no Person related to a Member has personal liability determined in accordance with Code Section 752 and the Regulations promulgated thereunder.

“Nonrecourse Deductions”: The meaning set forth in Regulation Section 1.704-2(b)(1). The amount of Nonrecourse Deductions for a taxable year of the Company equals the net increase, if any, in the amount of Minimum Gain during that taxable year, determined according to the provisions of Regulation Section 1.704-2(c).

“Percentage Interest”: The percentage the Company Interest owned by each Member constitutes out of the total Company Interests owned by all Members (i.e., which together constitute 100% of the ownership, equity and other interests in the Company). The Percentage Interest of each of PBSS and FMSS is 50% (as may be amended in accordance with the terms of this Agreement).

“Person”: Any individual, corporation, association, partnership, limited liability company, joint venture, trust, estate, or other entity or organization.

“Point Blank”: means Point Blank Solutions, Inc., a Delaware corporation.

“Prime”: LaSalle Bank National Association (Chicago, Illinois) publicly announced prime rate in effect from time to time.

“Recording Office”: The office of the Secretary of State of the State of Delaware.

“Regulation”: The income tax regulations, including any temporary regulations, from time to time promulgated under the Code.

A-4

“Remaining Capital Commitment”: As to each Member, on any date, the amount equal to the positive excess, if any, of (a) such Member’s Capital Commitment, over (b) such Member’s aggregate Capital Contributions (excluding and disregarding for purposes of determining the amount in (b), such Member’s respective Initial Contributions made by such Member to the Company in accordance with the provisions of Section 5.01).

“Supply Agreement”: That certain Supply Agreement made by and between the Company and Point Blank dated March 18, 2008.

“Tax Matters Partner”: That person required by Section 6231(a)(7) of the Code.

Each of the following terms is defined in the Section set forth opposite such term:

Term	Section
Acceptance Notice	10.03	(b)
Acting Member	7.01	(c)(iii)
Additional Capital Contributions	5.03
Additional Contribution Promissory Note	5.04	(b)
Annual Budget	7.01	(e)(iv)
Approved Budget	7.01	(e)(iv)
Audited Financial Statements	9.03	(c)
Available Cash	6.03
Bank Accounts	9.01
Board of Managers	7.01	(a)
Breach	11.01	(b)
Breaching Member	11.01	(b)
Business	Preamble
Call Exercise Notice	10.05	(b)
Call Right	10.05	(a)(iv)
Capital Account	5.05	(a)
Capital Investment Loans	5.07	(c)
CEO Meeting	8.01	(a)(iii)
CEO Meeting Period	8.01	(a)(iii)
Company	Preamble
Continuing Member	10.04	(a)(ii)
Controller	7.02	(b)
Deadlock	8.01
Deadlock Meeting	8.01	(a)(i)
Deadlock Meeting Notice	8.01	(a)
Deadlock Notice	8.01	(a)(iv)
Deadlock Offer Price	8.01	(c)
Default Amount	5.04	(a)
Default Call Right	10.05	(a)
Defaulting Member	5.04	(a)
Distributions	6.03	(e)

A-5

Drawdown	5.02	(a)(i)
Effective Date	Preamble
Event of Default	5.04	(a)
First Member	8.01	(b)(i)
First Offer	10.03	(b)
First Refusal Offer Notice	10.03	(a)
Fiscal Quarter	9.03	(b)
Fiscal Year	9.06
FMSS	Preamble
FMSS COC Call Right	10.05	(a)(ii)
FMSS Initial Cash Contribution	5.01	(a)
FMSS Initial Loan	5.07	(a)(i)
FMSS Intellectual Property	13.01	(e)
FMSS Party	10.05	(a)(iii)
Funding Notice	5.02	(a)(i)
Indemnitee	7.04	(a)
Initial Contribution	5.01
Initial Loan	5.07	(a)
Liens	5.01	(a)
Member Dispute	7.01	(c)(iii)
Meeting Notice	7.01	(c)(iii)
Nonbreaching Member	11.01	(b)
Non-Competitor Call Right	10.05	(a)(iv)
Non-Defaulting Member	5.04	(b)
Non-Proposing Member	8.01	(a)(i)
Notice of Breach	11.01	(b)
Offer	10.03	(a)
Offer Notice	8.01	(b)(ii)
Offer Period	10.03	(b)
Offer Price	10.03	(a)
Offer Recipient	10.03	(a)
Offered Interests	10.03	(a)
Offering Member	10.03	(a)
PBSS	Preamble
PBSS Call Rights	10.05	(a)(iii)
PBSS COC Call Right	10.05	(a)(ii)
PBSS Competitor Call Right	10.05	(a)(iii)
PBSS Initial Cash Contribution	5.01	(b)
PBSS Initial Loan	5.07	(a)(iii)
Production Manager	7.02	(c)
Products	7.01	(e)(ix)
Proposals	8.01	(a)
Proposing Member	8.01	(a)(i)
Purchasing Member	10.05	(b)
Restricted Period	12.02
Second Member	8.01	(b)(ii)

A-6

Securities Act	13.01	(g)(i)
Selling Member	10.05	(b)
Term	10.05	(a)(ii)
Third Party	10.03	(a)
Unresolved Proposal	8.01	(a)(iii)
Withdrawing Member	10.04	(a)(ii)

A-7

ADDENDUM B

INITIAL BUDGET

[***]

B-1

ADDENDUM C

DIRECT COMPETITORS

[***]

C-1

ADDENDUM D

APPRAISERS

[***]

D-1

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER

I, Larry Ellis, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2008 of Point Blank Solutions, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Larry Ellis
Date: May 12, 2008	Larry Ellis
	President and Chief Executive Officer

26

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, James F. Anderson, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2008 of Point Blank Solutions, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ James F. Anderson
Date: May 12, 2008	James F. Anderson
	Chief Financial Officer

27

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Point Blank Solutions, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2008, as filed with the Securities and Exchange Commission (the “Report”), I, Larry Ellis, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 12, 2008	By:	/s/ LARRY ELLIS
		Larry Ellis President and Chief Executive Officer

This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

28

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Point Blank Solutions, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2008, as filed with the Securities and Exchange Commission (the “Report”), I, James F. Anderson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 12, 2008	By:	/s/ JAMES F. ANDERSON
		James F. Anderson Chief Financial Officer

This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.