DHB Settles Class and Derivative Litigation for $40 Million

DHB Industries, Inc. (OTC: DHBT) has announced the settlement of both the securities class action and derivative suits pending in the United States District Court for the Eastern District of New York before Judge Joanna Seybert.

The class action will be settled for $34.9 million in cash, plus 3,184,713 shares of DHB common stock. The derivative action will be settled in consideration of DHB adopting certain corporate governance provisions and paying $300,000, as attorneys' fees and expenses to lead counsel in the derivative action.

According to this Reuters article, "the settlement also includes the removal of Chief Executive David Brooks and other executives from the company's board." It is not clear if these removals are the "corporate governance" changes that result from the settlement of the derivative action.

Brooks was placed on leave earlier this week and according to the Reuters article "is expected to help fund DHB's payments by exercising 3 million warrants. Additionally, DHB can require Brooks to purchase 3 million shares of its common stock to finance the remaining portion of the company's cash settlement."

Lead plaintiffs in the class action are RS Holdings, the NECA-IBEW Pension Trust Fund, and George Baciu. Co-Lead Counsel in the class action are Labaton Sucharow & Rudoff LLP and Lerach Coughlin Stoia Geller Rudman & Robbins LLP.

From a review of the docket, it appears that the settlement comes after the motions to dismiss were fully briefed, but before the Court had ruled on those motions.

DHB is a manufacturer of:

technically advanced bullet and projectile resistant garments, bullet resistant and fragmentation vests, bomb projectile blankets, and related ballistic accessories and technologies for the United States Military and Law Enforcement Agencies.

Wearing them instead of selling them might have been a good idea for Mr. Brooks, if you ask me.

ADDITION: An alert reader (is there any other type?) pointed out this article which dubs Mr. Brooks a "War Profiteer" and indicates that the bat mitzvah Mr. Brooks threw for his daughter in late 2005 cost an estimated $10 million. Flown in by private jet to perform for the affair - Aerosmith, Tom Petty, Don Henley and Joe Walsh, who performed with Fleetwood Mac's Stevie Nicks, Kenny G, 50 Cent, and Ciara. He apparently can afford it, having received more than $70 million in compensation in 2004 alone.

ADDITION: The 10b-5 Daily and the WSJ Law Blog have posts on the settlement, here and here, respectively.