EXHIBIT 4.2
STOCK SUBSCRIPTION AGREEMENT
DHB INDUSTRIES, INC.
This Stock subscription Agreement ("Agreement") is made and entered
into this 14th day of December, 2001 by and between DHB Industries, Inc. a
Delaware Corporation having its principal place of business at 555 Westbury
Avenue, Carle Place, New York 11554 ("DHB" or the "Company") and David H. Brooks
("Brooks") a principal Shareholder of DHB, residing at 20 Red Ground Road, Old
Westbury, New York 11568.
WHEREAS, DHB has applied for listing of its Common Stock for trading on
the American Stock Exchange (the "Exchange");
WHEREAS, the Exchange requirements for listing include, inter alia,
that DHB have minimum Shareholders Equity of not less than Four Million
($4,000,000) Dollars;
WHEREAS, DHB expects that it meets the minimum Shareholders Equity
requirement, and that such Equity will be reflected by its audited financial
statements as of December 31, 2001;
WHEREAS, DHB is indebted to Brooks to the extent of Ten Million Dollars
($10,000,000) constituting the remaining balance of a restated Promissory Note
dated September 24, 2001, (the "Note").
WHEREAS, Brooks is willing to subscribe to new Equity Securities of DHB
to the extent of Three Million ($3,000,000) of such Note amount.
WHEREAS, Brooks has received information from the Company which
describes the Company's offer to issue and sell shares of its no par value
Series A Convertible 12% Redeemable Preferred Stock ("Preferred Stock") to him;
WHEREAS, the terms and conditions of the Preferred Stock are set forth
in the Certificate of Designations and Preferences attached hereto as Exhibit A
(the "Certificate"); and
WHEREAS, the Preferred Stock will be convertible under certain
circumstances, into shares of the Company's $.001 value Common Stock ("Common
Stock") on a one to one basis.
AGREEMENT
In consideration of the foregoing and the representations, warranties,
conditions and covenants contained herein, the Company and Brooks hereby
mutually agree with one another as follows:
1. SALE AND PURCHASE OF THE SERIES A SHARES.
1.1 On the basis of the representations, warranties and covenants
contained herein, and subject to the terms and conditions of this Agreement, the
Company agrees to issue and sell to Brooks, and Brooks agrees to purchase from
the Company, 500,000 Shares of the Series A Preferred Stock for Three Million
($3,000,000) Dollars.
1.2 On the closing of the sale of the Series A Preferred Shares, Brooks
will surrender the Note to the Company, and receive (i) a new Note dated the
date of closing in the amount of Seven Million Dollars ($7,000,000); (ii) an
interest payment on the Note amount from September 24, 2001 to the date of
closing; and (iii) Five Hundred Thousand (500,000) Shares of Series A Preferred
Stock.
1.3 The closing of the transactions required hereunder shall take place
as promptly as practicable after the filing of the Certificate of Designations
and Preferences with the Secretary of State, State of Delaware reflecting the
designations and preferences of the Series A Preferred Stock, and in all events
not later than December 31, 2001 unless the parties shall otherwise agree.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents, warrants to Brooks, and agrees with Brooks as
follows:
2.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to carry on its business as
presently conducted and carry out the transactions contemplated hereunder. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction of the United States in which the failure so to qualify would have
a material adverse effect on its business or properties.
2.2 CAPITALIZATION. The authorized capital of the Company consists, or
will consist to the First Closing, of:
(a) Preferred Stock. 5,000,000 shares of par value $.001
Preferred Stock, 500,000 shares of which have been designated Series A
Convertible Preferred Stock, none of which have been issued or are
outstanding, prior to the transactions contemplated herein. The rights,
preferences and privileges of the Preferred Stock are as set forth in
the Amended and Restated Articles, Exhibit A hereto.
(b) Common Stock. 100,000,000 shares of Common Stock,of which
31,396,947 shares are issued and outstanding.
(c) All outstanding shares of Preferred Stock to be issued
to Brooks will be, when issued, duly authorized and validly issued, are
fully paid and nonassessable, and issued in compliance with all
applicable federal and state securities laws.
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(d) Except for the shares of Preferred Stock which will be
issued pursuant to this Agreement, which shares will be convertible
into 500,000 shares of Common Stock, there are no outstanding
conversion rights, rights of first refusal, preemptive rights or other
rights or agreements for the purchase or acquisition from the Company
of any of the securities of the Company or rights thereto, and no
outstanding options and warrants other than those which were
outstanding as of the 30th day of September, 2001.
2.3 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all obligations of the
Company hereunder including the issuance, sale and delivery of the Series A
Shares and the reservation of the Common Stock issuable upon conversion of the
Series A Shares (the "Conversion Shares") has been taken or will be taken prior
to the Closing. Upon execution and delivery, this Agreement will be a valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application relating to or affecting
enforcement of creditors' rights and by general equitable principles.
2.4 VALIDITY OF SECURITIES. The Series A Shares have been duly
authorized and reserved, and upon issuance in accordance with the terms of this
Agreement and the Amended and Restated Articles of Incorporation will be validly
issued and outstanding, fully paid and nonassessable. The Common Conversion
Shares have been duly authorized and reserved, and upon issuance in accordance
with the terms of the Certificate, will be validly issued and outstanding, fully
paid and nonassessable.
2.5 CONSENTS. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any third party on the part of
the Company is required in connection with the valid execution and delivery of
this Agreement, or the offer, sale or issuance of securities of the Company
hereunder, except as has already been obtained, or as is required to be obtained
as a condition to the Closing.
2.6 LITIGATION. To the best of the Company's knowledge, there is no
action, suit, proceeding or investigation pending or overtly threatened against
the Company which questions the validity of this Agreement or the right of the
Company to enter into it, or to consummate the transactions contemplated hereby,
or which might result, either individually or in the aggregate, in any material
adverse changes in the assets, condition, affairs or prospects of the Company,
financially or otherwise, nor is the Company aware that there is any basis for
the foregoing. The Company is not subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality which names the Company as a party.
3. REPRESENTATIONS AND WARRANTIES OF BROOKS.
Brooks hereby represents and warrants to the Company that:
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3.1 INVESTMENT REPRESENTATIONS.
(1) He is experienced in evaluating and investing in
securities.
(2) He has first hand knowledge of the Company's business,
management and financial affairs.
(3) He understands that no federal or state agency has passed
upon his investment in the Series A Shares or made any finding or
determination as to the advisability or fairness of an investment by
him in the Series A Shares.
(4) He may be required to bear the economic risk of investment
in the Series A Shares for an indefinite period of time because the
Series A Shares and the Common Conversion Shares have not been
registered under the Act and, therefore, cannot be sold unless they are
either subsequently registered under the Act or an exemption from such
registration is available.
(5) He understands that, upon issuance of the Series A Shares,
and any subsequent issuance of the Common Conversion Shares, the
Company will place a stop-transfer order in its stock books and direct
its transfer agent to place such an order in its books respecting
transfer of such shares and that the certificates representing such
shares shall bear the legends set forth in Section 3.3 hereinafter.
(6) He is acquiring the Series A Shares for investment for his
own account and not with the view to, or for resale in connection with,
any distribution thereof. He understands that the Series A Shares and
the Common Conversion Shares have not been registered under the Act by
reason of a specified exemption from the registration provisions of the
Act, which requires, among other things, the BONA FIDE nature of the
Investor's investment intent as expressed herein.
3.2 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, Brooks further agrees not to make any
disposition of all or any portion of the Series A Shares or the Common
Conversion Shares unless and until:
(1) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(2) Brooks shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition,
and counsel for the Company opines in writing to the Company, in form
and substance reasonably satisfactory to the Company, that such
disposition will not require registration of such securities under the
Act.
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3.3 LEGENDS. It is understood that the certificate(s) representing the
Series A Shares and the certificate(s) representing the Common Conversion Shares
may bear one or all of the following legend:
"These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged
or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required.
Brooks hereby understands and agrees that the Company
shall have no obligation to remove the legends set forth in this Section 3.3
unless and until the securities covered thereby have been registered or can be
sold pursuant to Rule 144(k) promulgated under the Act.
4. MISCELLANEOUS.
4.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the parties contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the respective Closing.
4.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
4.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York applicable to agreements between
residents of such state entered into and to be performed entirely within such
state.
4.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.6 NOTICES. Any notice required or permitted under this Agreement
shall be given in writing and shall be deemed effectively given upon personal
delivery to the party to be notified or telex, or seven (7) days after deposit
with a domestic Post Office, by registered mail, postage prepaid and addressed
to the party to be notified at the address indicated for such party herein, or
at such other address as such party may designate by ten (10) days' advance
written notice to the other party:
4.7 COUNSEL. The Company has employed legal counsel in connection with
the preparation of this Agreement. Brooks has been advised of the advisability
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to have the Agreement reviewed by counsel of his own choosing representing his
independent interests in the transaction.
4.8 ENTIRE AGREEMENT; AMENDMENT. This is the entire Agreement of the
parties with respect hereto, and the same may not be amended otherwise than by a
writing signed by the parties to be changed.
WHEREFORE, the parties hereto, have duly executed this Agreement as of
the date first above written, each intending that it be and become their full
and final agreement with respect hereto.
DHB INDUSTRIES, INC.
By: /s/ DAWN M. SCHLEGEL
_______________________
Dawn M. Schlegel,
Secretary, Treasurer &
Chief Financial Officer
By: /s/ DAVID H. BROOKS
_______________________
David H. Brooks,
Purchaser
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