USA DETERGENTS INC, 10-K, 1997-03-31

USA DETERGENTS INC
10-K, 1997-03-31
SOAP, DETERGENTS, CLEANG PREPARATIONS, PERFUMES, COSMETICS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from _______________ to ___________________

Commission File No. 0-26568

USA DETERGENTS, INC.
(Exact name of registrant as specified in its charter)

Delaware 11-2935430
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1735 Jersey Avenue
North Brunswick, New Jersey 08902
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(Address of principal (Zip Code)
executive offices)

Registrant's telephone number, including area code: (908) 828-1800
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<S> <C>
Securities registered pursuant to Section 12(b) of the Act: Name of each exchange
Title of each class on which registered
--------------------------------------------------------------------------------

None Not Applicable
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Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value
----------------------------
(Title of Class)

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 a check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The number of shares outstanding of the Registrant's Common Stock, as of March
14, 1997, was 13,790,717 shares. The aggregate market value of the
Registrant's Common Stock held by non-affiliates of the Registrant (based upon
the closing price of such stock on the Nasdaq National Market on March 14,
1997 and the assumption for this computation only that all directors and
executive officers are affiliates) was $163,457,730.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive proxy statement for the Annual Meeting
of Stockholders scheduled to be held on May 20, 1997, to be filed pursuant to
Regulation 14A of the Securities Exchange Act of 1934 with the Securities and
Exchange Commission, are incorporated by reference into this Annual Report
(Part III).

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Unless otherwise indicated, all information in this Form 10-K has been
adjusted to reflect (i) a reorganization of the company into a Delaware
corporation effected in August 1995, (ii) the issuance of approximately 88,167
shares of Common Stock for each share of Common Stock of the Company's
predecessor in connection with the reorganization and (iii) a 3-for-2 stock
split effected in the form of a 50% stock dividend paid on February 9, 1996
(the "Stock Split"). Unless the context otherwise requires, the "Company" or
"USA Detergents" shall mean USA Detergents, Inc., its wholly-owned
subsidiaries and its predecessor to the reorganization.

When used in this report, the words "believes," "anticipates," "expects,"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which could
cause actual results to differ materially from those projected. In addition to
seasonal fluctuations, the Company's operating results are affected by a wide
variety of other factors that could materially and adversely affect actual
results, including competition; difficulties associated with rapid growth;
dependence on certain customers, key products or limited sources of supply;
and reliance on certain manufacturing facilities. As a result of these and
other factors, the Company may experience material fluctuations in future
operating results on a quarterly or annual basis, which could materially and
adversely affect its business, financial condition, operating results, and
stock price. These forward-looking statements speak only as of the date
hereof. The Company undertakes no obligation to publicly release the results
of any revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.

PART I

ITEM 1. BUSINESS

GENERAL

USA Detergents is a leading manufacturer and marketer of quality
nationally distributed value brand laundry and household cleaning products.
The Company currently markets its products in eight laundry and household
product categories and features twelve distinct value brands. Two of the
Company's brands, XTRA(R) and Nice'n FLUFFY(R), currently rank among the ten
largest brands in their respective product categories in terms of total retail
sales in the United States. XTRA(R) and Nice'n FLUFFY(R) represented 60% and
21%, respectively, of the Company's net sales in 1996. The Company sells its
products to large and small retailers throughout the United States including
supermarkets, mass merchandisers, variety and dollar stores, drug stores and
small grocery stores, such as Wal-Mart, Consolidated Stores, K-Mart,
Walgreens, Super Value and Waldbaum's.

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HOUSEHOLD PRODUCTS MARKET OVERVIEW

The Company believes the market for laundry and household cleaning
products ("Household Products") in which it competes or intends to compete
consists of the following eleven product categories: liquid laundry detergent,
powder laundry detergent, liquid fabric softener, fabric softener sheets,
household cleaners, dish detergent, personal soap products, air fresheners,
bleaches, rug and upholstery cleaners and floor cleaners.

While the leading supplier varies among different Household Products
categories, the overall market for Household Products is dominated by two
principal suppliers: Procter & Gamble Co. and Unilever N.V. The Company
believes these two premium-priced brand suppliers accounted for approximately
54%, in the aggregate, of retail sales of Household Products in 1996.

The Company views the market for Household Products as being segmented
into four types of brands: value brands, store brands, mid-priced brands and
premium-priced brands. The Company believes that consumer purchases of laundry
and household cleaning products are determined, in large part, by price, with
certain consumers willing to pay a premium for leading national brand names
and the latest packaging and technology and other consumers demanding
value-priced brands incorporating certain features found in premium-priced
products. The Company believes the primary characteristics of each of these
types of brands are as follows:

Value Brands. Value brands are sold to retailers and consumers at prices
significantly below most other brands of Household Products. Value brands
generally incorporate packaging features and product quality comparable to
premium-priced and mid-priced brands and typically are offered with only the
most popular product features and in only the most popular sizes. Value brands
are not advertised or promoted directly to the consumer by the value brand
supplier.

Store Brands. Store brands are marketed through various retail outlets
under retailer-affiliated (private) labels and are typically manufactured to
the specifications of individual retailers. Store brands typically are
supported by limited retailer advertising, do not incorporate state-of-the-art
packaging and are priced below mid-priced brands.

Mid-Priced Brands. Mid-priced brands generally attempt to capitalize on
their existing or historical brand equity, are supported by limited consumer
advertising and are positioned as comparable but less expensive alternatives
to premium-priced brands.

Premium-Priced Brands. Premium-priced brands focus on promoting brand
loyalty and consumer awareness of product features through significant
national advertising. Premium-priced brands are supported by extensive
research and development to design state-of-the-art packaging and product
features and to develop new products.

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BUSINESS STRATEGY

The Company's objective is to be the leading supplier of value brand
Household Products. The Company's business strategy is to enable retailers to
increase sales and realize attractive profit margins on the Company's products
while providing value to consumers. There can be no assurance that the Company
will be successful in meeting its objectives or in successfully pursuing its
strategies. The key elements of the Company's business strategy are described
below:

Value to Retailers

The Company focuses on assisting the retailer to profitably optimize its
retail space in traditionally low margin Household Products categories. The
Company provides retailers with merchandising support relating to product mix,
shelf display and pricing strategies, and promotional programs which are
designed to increase sales of the Company's products. The Company's emphasis
on being a low-cost supplier allows it to sell its Household Products to
retailers at prices which enable these retailers to offer a lower price to
consumers while realizing relatively attractive margins. The Company also
seeks to build strong relationships with retailers by providing them with a
high level of customized service including direct shipments, electronic data
interchange, mixed product pallets and flexible, prompt delivery.

Value to Consumers

The Company offers consumers attractively packaged, quality brand name
products at prices significantly below most other brands. This combination of
high product quality and low prices offers consumers an attractive alternative
to other brands. The Company emphasizes cost reduction and has historically
passed substantially all of its savings on to retailers and consumers. The
Company maintains a low-cost structure by eliminating consumer advertising and
coupon programs, employing efficient manufacturing and packaging techniques
and limiting corporate overhead.

Brand and Corporate Identification

The Company seeks to develop strong brand and corporate name recognition
among retailers and strong brand recognition and brand loyalty among
consumers. The Company believes that colorful and graphic packaging combined
with recognizable product names and the Company's commitment to quality and
low price, contribute to strong brand awareness and purchaser confidence at
the consumer level, and generate increased product sales. The Company further
believes that development of corporate and brand name recognition of the
Company and its products among retailers enables the Company to introduce new
products more effectively.

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Further Market Penetration

The Company focuses its sales efforts on supermarkets, mass
merchandisers, variety and dollar stores, drug stores and small grocery
stores, particularly those whose retailing philosophy closely corresponds to
the Company's high value, low cost marketing philosophy. The Company intends
to continue increasing its market penetration by distributing its products
through additional supermarkets, as well as other retail outlets. For 1996,
Information Resources, Inc. Retail Review data indicates that the Company's
XTRA(R) liquid laundry detergent and Nice'n FLUFFY(R) liquid fabric softener
were sold to retailers representing 63.6% and 64.0%, respectively, of all
commodity volume ("ACV") distribution within the food, drug and mass merchants
sector, up from 46.0% and 44.6%, respectively, in 1995. ACV distribution for a
product represents the percentage of food, drug and mass merchant retail
outlets (as measured by aggregate retail sales) which sold that product during
a specified time period in the United States. The Company intends to use the
access to retailers it has gained through the success of its XTRA(R) and
Nice'n FLUFFY(R) brands to increase the penetration of its other products
through these existing retail outlets.

Expand Product Line

The Company introduced 15 new products in 1995 and 38 new products in
1996, including re-formulations and alternate sizes. Net sales of products
introduced in 1996 were $37 million or 21% of net sales for the year ended
December 31, 1996.

PRODUCTS

The Company currently sells its products, representing approximately 500
stock keeping units ("SKUs"), in eight Household Product categories under
twelve distinct brand names. The Company also sells a line of automotive care
products, first introduced in 1995. The Company's products include the
following:

PRODUCT CATEGORY Primary Company Brands
- ---------------- ----------------------
<S> <C>
Liquid Laundry Detergent XTRA(R)
Powder Laundry Detergent XTRA(R)
Liquid Fabric Softener Nice'n FLUFFY(R)
Fabric Softener Sheets Nice'n FLUFFY(R)
Household Cleaners Captain Shine(R),Touch of Glass(R), Swiss Pine(R),
Tile Action(TM), Fabulous(TM), Plumber's Aid(TM)

Dish Detergent XTRA(R) Plus, Crystal Shine(R)
Personal Soap Products Fine Care(R)

Air Fresheners Country Air(TM)
Automotive Products Speedway(R)

</TABLE>

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The Company's laundry detergents and fabric softeners accounted for an
aggregate of approximately 81% and 85% of the Company's net sales in 1995 and
1996, respectively, with XTRA(R) liquid laundry detergent accounting for 52%
and 47% of net sales in these periods, respectively. The Company's financial
results and condition are substantially dependent on the continued success and
growth of sales of these products. A number of factors could limit sales by
the Company of these products, or the profitability of such sales, including
competitive efforts by other manufacturers of similar products, shifts in
consumer preferences or introduction and acceptance of alternative product
offerings.

PRODUCT DESIGN AND DEVELOPMENT

The Company consistently seeks to enhance the value of its products by
either improving their performance and packaging or lowering their cost and
has historically passed substantially all cost savings on to the retailer. The
Company places considerable emphasis on package quality and uses premium
quality materials and appealing, colorful graphic designs with the objective
of providing its products with the same or better shelf appeal than premium
and mid-priced brands.

Most of the important product enhancements in the Household Products
industry during the past several years have been developed by the research and
development departments of the premium-priced brand companies and the chemical
companies that supply the Household Products industry. Rather than maintain a
large research and development department, the Company works closely with its
suppliers, distributors and other industry participants to identify, and in
some cases anticipate, technological and design innovations which may be
incorporated into the Company's products. Generally, the Company adopts
product and packaging features after they have gained general market
acceptance and believes that it has typically been one of the first value
brand suppliers to incorporate features comparable to the successful
innovations of these larger competitors. The Company only incorporates
features which it believes are valued by its consumer base. The Company
believes that its approach to product design and development minimizes costs
associated with significant research and development, limits the introduction
of unproven innovations and features, and reduces the need to spend heavily to
advertise new product developments or to educate consumers.

MARKETING AND DISTRIBUTION

The Company sells its products to large and small retailers throughout
the United States. The Company's various branded products have historically
been sold primarily to supermarkets, mass merchandisers, variety and dollar
stores, drug stores and small grocery stores. Significant customers of the
Company include Wal-Mart, Consolidated Stores, K-Mart, Walgreens, Super Value
and Waldbaum's. The following table sets forth the Company's net sales for
fiscal 1994, 1995 and 1996 by retail distribution channel:

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Percentage of Net Sales
Distribution Channel 1994 1995 1996
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<S> <C> <C> <C>
Supermarkets 25.4% 32.1% 40.6%
Mass Merchandisers 20.8 29.0 27.5
Variety and Dollar Stores 34.2 24.5 16.8
Drug Stores 10.5 8.8 9.8
Small Grocery and Other 9.1 5.6 5.3
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Total 100.0% 100.0% 100.0%
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The Company's largest customer, Wal-Mart, accounted for approximately 17%
of net sales in 1995 and 1996. No other customer of the Company accounted for
more than 5% of the Company's net sales during 1995 or 1996. As is customary
in the Household Products industry, the Company does not have long-term
contracts with its customers. A significant reduction of purchases by any of
the Company's largest customers could have a material adverse effect on the
Company's business and results of operations.

As of December 31, 1996, the Company sold its products through its own 62
person national sales department, which included seven regional offices,
supported by a network of 104 independent brokers and sales representatives.
In fiscal 1996, approximately 55% of the Company's net sales were generated by
its internal sales force with independent broker assistance, with the
remaining 45% of net sales generated without broker assistance. Each
salesperson is compensated by salary and commissions.

The Company seeks to provide retailers with high levels of sales and
merchandising support and delivery services. The Company's sales and
merchandising support and delivery services are designed to assist retailers
in increasing sales of the Company's products through development of improved
packaging, product mix, shelving and pricing strategies, and effective
promotional programs. To provide better delivery service to its customers, the
Company is flexible as to the amounts and combinations of products it will
deliver and generally strives to deliver products within one to seven business
days of receiving an order. With certain retailers, the Company uses
electronic data interchange ("EDI") systems that interface directly with the
customer's product ordering process. EDI, combined with the Company's internal
computerized management information and control system, improves inventory and
cost management and facilitates rapid delivery to retailers.

Substantially all product distribution is centralized at the Company's
facilities in New Jersey and in Missouri, with the exception of subcontracted
products which are usually distributed directly to retailers from the
subcontractors by freight companies selected by the Company. Products are
generally delivered to a retailer's distribution center, although the Company
distributes products representing a limited amount of

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net sales directly to retail outlets. Substantially all of the Company's
products are delivered by independent trucking companies, with the remainder
delivered by nine trucks and 25 trailers leased by the Company. The Company is
currently exploring opportunities to move inter-plant transfers via rail.

Beginning in the latter part of the third quarter of 1996, the Company
experienced distribution difficulties and late customer deliveries primarily
attributable to the Company's continuing rapid growth in sales and the
assimilation of three new manufacturing and distribution facilities. The
effect of these factors was to increase the costs associated with plant
integration, distribution and customer returns and allowances, and had
a material adverse effect on the results of the Company's operations for
fiscal 1996. While the Company is working with its customers to establish and
assure efficient distribution, there can be no assurance that such efforts
will be successful or that similar or new problems with distribution will not
occur in the future.

MANUFACTURING AND SUPPLY

During 1996, the Company manufactured substantially all of its liquid
products at its facility in North Brunswick, New Jersey. The manufacturing
process at the Company's facility consists of blending liquid chemicals and
fragrance, which the Company purchases from independent suppliers, and
packaging such blends to create finished products. Blending is done according
to or by modifying formulas provided by the Company's chemical suppliers. The
Company conducts quality control tests on raw materials on a regular basis and
also conducts stringent quality control tests on its products during and after
the manufacturing process. The Company believes that as it generally
manufactures one primary brand in each of its product categories, it is able
to lengthen manufacturing runs, reduce manufacturing costs and sell products
to retailers at prices which enable retailers to sell products to consumers at
lower prices and/or achieve higher profit margins. Any extended interruption
of operations at the Company's manufacturing facilities could have a material
adverse effect on the Company's business and results of operations.

For the year ended December 31, 1996, the Company purchased approximately
52% of its liquid chemicals from two suppliers, Stepan Company and Henkel
Corporation, and purchased 27% of its powder detergent from Cap City Products
Company, Inc. The balance of the Company's powder detergent was produced at a
facility in Chicago with respect to which the Company has entered into a
management agreement pursuant to which the Company maintains manufacturing
control, and a supply agreement pursuant to which the Company has the right to
purchase all of the supplier's output. Under the Company's supply and
management agreements, the Company, by its purchases of products, funds
operations of the supplier's facility. See Note 5 to "Notes to Consolidated
Financial Statements."

Substantially all of the bottles used by the Company during 1996 at its
manufacturing facility were purchased from Owens-Illinois Closure Inc.
("Owens-Illinois"). The Owens-Illinois plant used in connection with the
manufacture of such

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bottles is located near the Company's manufacturing facility and the majority
of the Owens-Illinois plant's production is dedicated to the Company. The
Company has entered into a supply agreement expiring January 31, 2001 with
Owens-Illinois pursuant to which the Company has agreed to purchase
substantially all of its plastic bottle packaging requirements from
Owens-Illinois in return for Owens-Illinois' agreement to dedicate certain of
its machinery to meet the Company's packaging requirements and provide
additional machinery if necessary. Owens-Illinois has also agreed to use its
best efforts to expand its capacity to meet the Company's continued growth in
exchange for the Company's continuing commitment to purchase bottles from
Owens-Illinois. Certain molds used to manufacture the Company's packaging are
not owned by the Company.

In January 1996, the Company entered into a lease for a facility located
contiguous to Owens-Illinois' facility in Edison, New Jersey. The Company uses
this facility for the manufacture of its scented candle air freshener products
and additional warehouse and distribution capacity. In addition, the Company
recently entered into a contract to purchase a new facility adjacent to its
existing North Brunswick, New Jersey facility to consolidate its East Coast
warehousing operations. See Item 2. "Properties."

The Company also has certain products manufactured to the Company's
specifications by independent contractors and intends to expand its capacity
to produce non-liquid products by continuing to outsource manufacturing. The
Company subcontracts the manufacture of products based on cost-effectiveness,
manufacturing capacity and a desire to avoid large capital commitments
associated with manufacturing before the Company can determine the long-term
success of such products. The Company remains actively involved with each of
its principal subcontractors and seeks to promote efficiencies and
cost-savings at the subcontractor level by offering continuing technical,
manufacturing and managerial advice. The Company's purchases from
subcontractors are generally made pursuant to purchase orders.

To support anticipated demand for its products, the Company expects to
expand its manufacturing capacity by continuing to improve manufacturing
efficiency, installing new manufacturing equipment during 1997, and
selectively outsourcing production. The Company anticipates that it will spend
between $19 million and $22 million in 1997 to fulfill its current expansion
plans. See Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity."

The Company's reliance on a sole supplier or limited group of suppliers
and subcontractors involves several risks, including increased risk of
inability to obtain adequate supplies, and reduced control over pricing and
timely delivery. Although the timeliness, quality and pricing of deliveries
from the Company's suppliers have been acceptable to date and the Company
believes that additional sources of supply are generally available, there can
be no assurance that supplies will be available on an acceptable basis or that
delays in obtaining new suppliers, particularly of plastic bottles, will not
have an adverse effect on the Company. The Company's inability to obtain

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adequate supplies of chemicals, packaging materials, manufacturing equipment
or finished products at acceptable prices could have a material adverse effect
on the Company's business.

INVENTORY PRACTICE AND ORDER BACKLOG

The Household Products industry is generally characterized by prompt
delivery of products by suppliers. The Company strives to maintain the time
between the Company's receipt of a customer's order and shipment to the
customer at one to seven business days. The Company generally maintains
between two and ten days of finished product inventory. As a result of the
short lead time between the order and delivery of its products, the Company
does not maintain a significant backlog. The Company recently experienced
distribution difficulties attributable to the Company's continuing rapid
growth in sales. See "-- Marketing and Distribution."

INTELLECTUAL PROPERTY

Brand identification is an important element in marketing the Company's
products and the Company recognizes the importance of its trademarks to the
success of its business. The Company obtains trademarks for certain of its
brands and has registered or has applications pending to register certain
trademarks with the United States Patent and Trademark Office. In addition,
the Company has registered or applied for registration of certain of its
trademarks in a number of foreign countries. Due to the importance of package
design, labels, trademarks and trade dress to its business, the Company has
taken, and expects to continue to take, vigorous action to protect against
infringement of its trademarks and copyrights.

Although the Company considers certain of its packaging, labels,
trademarks and designs to be proprietary, certain of such packaging, labels,
trademarks and designs are not protected by copyright or trademark
registration. In addition, the Company from time to time has received, and may
receive in the future, communications from third parties asserting and
challenging intellectual property rights relating to the Company's products,
labels, trademarks and packaging. There can be no assurance that third parties
will not successfully assert claims against the Company with respect to
existing or future products or packaging. Should the Company be found to
infringe upon the intellectual property rights of others, the Company could be
required to cease use of certain products, trademarks, labels or packaging or
pay damages to the affected parties, either of which could have a material
adverse effect on the business and operations of the Company. Substantial
costs also may be incurred by the Company in redesigning its labels or
packaging, in selecting and clearing a new trademark or in defending any legal
action taken against it. Packaging, labels, trademarks and designs are
generally reviewed by the Company's intellectual property counsel prior to
their general adoption and usage.

Manufacturers normally seek United States and foreign patent protection
for the chemical formulations that they develop and numerous third party
patents that relate

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to laundry and household cleaning products are on file with the United States
Patent and Trademark Office. Formulations of the products produced by the
Company are generally provided by the Company's third party chemical suppliers
who are responsible for the intellectual property, if any, in such
formulations. The Company believes it has been able to introduce products
comparable to those introduced by most of its competitors by using
manufacturing methods or materials that are not protected by patents or by
acquiring patented formulations.

COMPETITION

The Company experiences substantial competition from a number of
suppliers of laundry and household cleaning products, including larger
premium-priced, mid-priced and private label suppliers. Many of these
suppliers have substantially greater financial, technical, marketing,
distribution and other resources than the Company. In addition, there are
several value brand suppliers which compete directly with the Company. The
Company believes its products compete primarily on the basis of price and
customer service and the Company does not intend to compete on the basis of
premium-priced brand product features.

The Company estimates, based on Information Resources, Inc. Retail Review
data for the year ended December 31, 1996, that the two largest suppliers in
the laundry and household cleaning products industry held approximately 54%,
in the aggregate, of the domestic market for such products. These two
suppliers, Procter & Gamble Co. and Unilever N.V., accounted for an aggregate
of approximately 72% and 85% of 1996 domestic retail sales of liquid laundry
detergents and liquid fabric softeners, respectively. These two product
categories accounted for 47% and 21%, respectively, of the Company's net sales
in 1996.

The laundry and household cleaning products industry is characterized by
substantial price competition which is effected through changes in price,
product size and promotions. The Company believes it typically is not affected
by price changes initiated by larger premium-priced or mid-priced suppliers
whose pricing is substantially higher than the Company's pricing. Some
suppliers of value brands or store brands compete directly with the Company as
low price suppliers. Competitors may attempt to gain market share by offering
products at prices at or below those typically offered by the Company. Such
competitive pricing has in certain cases necessitated and may continue to
necessitate price reductions by the Company and has and may continue to result
in lost orders. Although the Company has not suffered significantly as a
result of competitive pricing, there can be no assurance that future price or
product changes by the Company's competitors will not have a material adverse
effect on the Company or that the Company will be able to react with price or
product changes of its own to maintain its current market position.

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EMPLOYEES

As of December 31, 1996, the Company had 562 full-time employees, of whom
40 worked in executive, administrative or clerical capacities, 352 worked in
design and manufacturing, 108 worked in warehouse facilities and 62 worked in
sales. The Company believes that its relations with its employees are good.
The Company has never experienced any interruption of any of its operations
due to a labor disagreement with its employees.

ENVIRONMENTAL REGULATION

The Company is subject to various federal, state and local environmental
laws and regulations, including those relating to wastewater discharge, air
quality and the storage, handling and disposal of a variety of substances.
Some of the chemicals used by the Company and stored at its manufacturing
facility are materials regulated by federal or state environmental protection
agencies. While the Company has not had to make significant capital
expenditures for environmental compliance, the Company cannot predict with any
certainty its future capital expenditure requirements for environmental
compliance because of continually changing compliance standards and
technology. Consequently, unforeseen expenditures required to comply with such
laws and regulations, including unforeseen environmental liabilities, could
have a material adverse effect on the Company's business. The Company
maintains $6.0 million of insurance coverage for environmental liabilities.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information with respect to the
executive officers and significant employees of the Company:

NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Uri Evan 60 Chairman of the Board; Chief Executive Officer
Joseph S. Cohen 46 Vice Chairman of the Board
Frederick J. Horowitz 32 Executive Vice President; Chief Administrative
Officer; Director
Frank Corella 52 Vice President of Sales and Marketing
Harold J. Macsata 53 Vice President of Finance; Chief Financial Officer;
Treasurer
Daniel Bergman 39 Vice President; Director of New York Metro Sales;
Secretary; Director
Mark Antebi 43 Vice President; Director of International Sales;
Director

</TABLE>

URI EVAN has been Chairman of the Board of the Company since 1989 and
Chief Executive Officer since 1993. Since 1993, Mr. Evan has been Vice
Chairman and Chief

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Executive Officer of American Value Brands Inc., a food marketing company of
which he was a co-founder. From 1991 to 1992, he served as Chairman and Chief
Executive Officer of I. Rokeach & Sons Inc., a kosher food manufacturing and
marketing company. From 1988 to 1990, Mr. Evan was Chairman and Chief
Executive Officer of Newrock Development Inc., a real estate development
company. From 1969 to 1986, Mr. Evan was President and Chief Executive Officer
of Engineering Services Group, a Tel Aviv-based international engineering,
printing and publishing conglomerate of which he was a co-founder. From 1970
to 1982, he served as Chairman of Organization and Management Sciences
Consultants Ltd., an Israeli management and computer sciences firm of which he
was a co-founder.

JOSEPH S. COHEN was a founder of the Company and has been Vice Chairman
of the Board of the Company since 1988. From 1981 to 1988, Mr. Cohen was
President of Michael Brooke Accessory, a jewelry accessory company, of which
he was the founder. From 1976 to 1981, Mr. Cohen was President and Chief
Executive Officer of Pam Lauren, a jewelry retailer, of which he was the
founder.

FREDERICK J. HOROWITZ has been Executive Vice President and Chief
Administrative Officer of the Company since June 1995, having served as
Managing Director of the Company since January 1995 and a director of the
Company since 1989. From 1991 through 1994, Mr. Horowitz was President and
Chief Operating Officer of the Company. From 1990 to 1991, he served as Vice
President of Operations. From 1988 to 1991, Mr. Horowitz was a Senior Vice
President of Newrock Development Inc., a real estate development company. Mr.
Horowitz is the son of Dinah Evan, who is married to Uri Evan.

FRANK CORELLA has been Vice President of Sales and Marketing of the
Company since 1991. From 1990 to 1991, he was President and Principal of
Paperoni, Inc., a party supply company. From 1988 to 1990, he served as
President of US1 Auto Parts. From 1984 to 1988, Mr. Corella served as
President of American Discount Auto Parts, a division of Rite Aid. From 1962
to 1984, he held various positions at SupeRx Drugs, a division of Kroger
Foods, including Vice President of Marketing.

HAROLD J. MACSATA has been Vice President of Finance and Chief Financial
Officer of the Company since January 1994 and Treasurer since June 1995. From
1987 to 1993, he served as Vice President of Finance and Chief Financial
Officer for Roller Bearing Company of America, a roller bearing company. From
1966 to 1987, he served in various management positions at Torrington Company,
a roller bearing company.

DANIEL BERGMAN was a founder of the Company, has been a Vice President of
the Company since June 1995 and has been Director of New York Metro Sales,
Secretary and a director of the Company since 1988. Between 1987 and 1991, Mr.
Bergman was President of Carnegie International Inc., a retail and export
electronics company, and between 1984 and 1987, Mr. Bergman was a Vice
President of Nikora International Inc., a retail and export electronics
company.

-12-

<PAGE>

MARK ANTEBI was a founder of the Company, has been a Vice President of
the Company since June 1995 and has been Director of International Sales of
the Company and a director of the Company since 1988. Between 1987 and 1991,
Mr. Antebi was Vice President of Carnegie International Inc., a retail and
export electronics company, and between 1985 and 1988, Mr. Antebi was
President of Nikora International Inc., a retail and export electronics
company.

ITEM 2. PROPERTIES

The Company currently conducts its operations from a 360,000 square foot
facility located in North Brunswick, New Jersey. The Company's executive
offices and its manufacturing, office support, and receiving and shipping
departments are all located in that facility. The lease relating to such
facility expires in 2004, subject to two five-year extensions. For the fiscal
year ended December 31, 1996, the Company recorded rent expense of
approximately $1.3 million. In January 1996, the Company entered into a lease
for a 175,000 square foot facility located in Edison, New Jersey. The Company
uses this facility for the manufacture of its scented candle air freshener
products and for additional warehouse and distribution capacity. The lease
relating to such facility expires in 2001, subject to one five-year extension,
and provides for an annual rental of $568,750. In August 1996, the Company
purchased a 360,000 square foot facility located near Kansas City, Missouri
for the production of additional liquid laundry products and distribution. The
Company also leases seven additional sales offices throughout the United
States. In addition, on January 22, 1997, the Company entered into a contract
to purchase a 650,000 square foot facility in North Brunswick, New Jersey,
adjacent to the Company's existing facility for a purchase price of $7.2
million. The Company expects to consolidate its entire East Coast warehousing
and distribution operation at this new facility. The purchase is expected to
occur in the near future and to be funded by an increase in the Company's
credit facility. See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources." The property is currently the subject of an Administrative
Consent Order issued by the New Jersey Department of Environmental
Protection (the "NJDEP") relating to the remediation of certain
hazardous wastes which were discharged onto the property by the seller.
The seller has undertaken substantial remediation efforts to date to
clear the property of these hazardous wastes and has posted a bond
with the NJDEP to secure the costs to continue such clean up activities.
In addition, at the time the Company acquires this property, the seller
will provide the Company with an undertaking to complete the clean up of
the property to the standards required by the NJDEP and will provide the
Company with a complete indemnity against any claims or obligations to
clean up the property which may be asserted against the Company and which
arise from any hazardous wastes that existed on the property on the date
the Company acquires the property. While the Company believes it has taken
adequate steps to protect its interests, there can be no assurance that the
Company will not incur costs in connection with environmental matters
concerning the property.

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any legal proceeding other than such
proceedings which it believes will not have a material adverse effect on the
Company.

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

None

-13-

<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's shares of common stock (the "Common Stock") are quoted on
The Nasdaq National Market under the symbol "USAD." The Common Stock was
initially offered to the public on August 7, 1995 at $9.67 per share (the
"1995 IPO"). The following table sets forth for the periods indicated the high
and low reported last sale prices per share for the Common Stock as reported
by The Nasdaq National Market. All last sale prices for periods prior to
February 9, 1996 have been divided by 1.5, the assumed effect of the Stock
Split.

HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1995
Third Quarter (commencing August 7) $14.75 $11.50
Fourth Quarter 18.17 13.67

Fiscal 1996
First Quarter $38.00 $22.00
Second Quarter 48.00 30.25
Third Quarter 42.25 25.00
Fourth Quarter 42.25 30.50

Fiscal 1997
First Quarter (through March 14) $45.25 $20.38

</TABLE>

The number of stockholders of record of Common Stock on March 14, 1997
was 87. On March 14, 1997, the last reported sale price of the Common Stock as
reported by The Nasdaq National Market was $24.13 per share.

-14-

<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)

The following selected financial data are derived from the audited
consolidated financial statements of the Company. The consolidated financial
statements for the years ended December 31, 1994, 1995 and 1996 have been
audited by Deloitte & Touche LLP, and their report dated February 17, 1997
(March 3, 1997 and March 24, 1997 as to Note 4) appears elsewhere herein. The
selected financial data for the years ended December 31, 1992 and 1993 was
derived from financial statements audited by Goldstein Golub Kessler &
Company, P.C. and the balance sheet data for the year ended December 31, 1994
were derived from financial statements audited by Deloitte & Touche LLP. The
report of Goldstein Golub Kessler & Company for 1993 and 1992 does not appear
in this Annual Report. No cash dividends, other than S corporation
distributions, were paid for any years presented.

YEAR ENDED DECEMBER 31,
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $21,860 $46,939 $68,663 $104,878 $174,031
Cost of goods sold 16,941 36,896 51,588 72,921 115,338
------- ------- ------- -------- --------
Gross profit 4,919 10,043 17,075 31,957 58,693
Selling, general and administrative expenses 3,893 8,445 12,182 22,232 43,046
Non-recurring expenses(1) 398 893 -- -- --
------- ------- ------- -------- --------
Income from operations 628 705 4,893 9,725 15,647
Interest expense-net 192 383 543 544 868
------- ------- ------- -------- --------
Earnings before income tax 436 322 4,350 9,181 14,779
Income tax provision -- 22 83 2,156 5,912
------- ------- ------- -------- --------
Net income $ 436 $ 300 $ 4,267 $ 7,025 $ 8,867
======== ======= ======= ======== ========
Net income per share $ .65
========
Weighted average number of shares outstanding 13,589
========

PRO FORMA INCOME STATEMENT DATA(2):
Earnings before income tax as reported $ 4,350 $ 9,181
Pro forma income tax provision 1,689 3,756
------- --------
Pro forma net income $ 2,661 $ 5,425
======= ========
Pro forma net income per share $ .22 $ .43
======= ========
Weighted average number of shares outstanding 11,915 12,494
======= ========

DECEMBER 31,
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Working capital (deficit) $ 1,192 $ (30) $ 5,154 $ 11,132 $ 40,562
Total assets 9,308 19,718 24,449 40,590 98,904
Short-term debt 1,893 4,425 3,860 7,320 4,318
Long-term debt 2,142 4,563 6,180 1,830 30,812
Stockholders' equity 1,050 1,850 5,880 20,292 41,259

</TABLE>

- -------------
(1) Consists of loss on theft of inventory of $398,000 in 1992, and plant
relocation expense of $474,000 and loss on theft of inventory of $419,000 in
1993.
(2) Pro forma net income represents net income less a provision for income
taxes that would have been required had the Company been taxed as a C
corporation during the entire period presented. The Company elected to be
treated as a Subchapter S corporation until August 10, 1995 (one day prior to
the closing of the 1995 IPO), and, as a result, was not subject to federal and
certain state income taxes prior to that time. No pro forma adjustments have
been made for additional compensation expense paid to the existing
stockholders of the Company who are officers of the Company associated with
the termination of the Company's S corporation status in connection with the
1995 IPO or for a reduction in interest expense relating to the assumed pay
down of borrowings under the Company's then existing working capital line of
credit with the net proceeds of the 1995 IPO, because the net effect of such
adjustments is not material. See Note 1 of "Notes to Consolidated Financial
Statements" for the years ended December 31, 1994, 1995 and 1996.

-15-

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL

The Company's net sales in the year ended December 31, 1996 totalled
174.0 million, representing an increase of 66.0% over net sales of $104.9
million in the year ended December 31, 1995. The Company's growth has been
achieved primarily through increases in market penetration of the Company's
products, particularly laundry detergents and liquid fabric softeners, and the
introduction of new products, including re-formulations and alternate sizes.
Net sales of the Company's liquid laundry detergent and liquid fabric
softeners totaled $151.9 million or 84.1% of net sales in the year ended
December 31, 1996, and $75.6 million or 72.1% of net sales in the year ended
December 31, 1995. Net sales of products introduced in 1996 were $37.4 million
or 20.9% of net sales for the year ended December 31, 1996. Since 1993, gross
margins have improved due to (i) sales increases of laundry products which
generally have higher gross margins than the Company's other products, (ii)
the relocation by the Company of its manufacturing operations to its current,
more efficient North Brunswick, New Jersey facility in 1993 and (iii)
efficiencies in purchasing packaging supplies and raw materials. As the
Company has increased sales through supermarkets, it has increased payments of
"slotting fees" (fees which are generally required to be paid in advance to
supermarkets in order to obtain shelf space and are accounted for by the
Company as selling, general and administrative expenses). The Company intends
to continue increasing sales to supermarkets. The growth of the Company has
been, and will continue to be, dependent upon a number of factors, including
the ability of the Company to successfully introduce new products, to increase
sales to existing retail customers, to sell its products to new retail
customers and to manage its growth. If products introduced by the Company are
discontinued or encounter production or formulation problems, or the Company
experiences difficulties with distribution or late customer deliveries such as
occurred during the last half of 1996, the Company's results of operations
could be materially, adversely affected. There can be no assurance that the
Company will be able to maintain its present rate of growth.

From its organization through August 9, 1995, the Company operated as an
S corporation and, as a result, liability for the Company's net income for
federal and certain state income tax purposes was borne directly by the
Company's stockholders. The Company paid or accrued 75.8% ($6.9 million) of
its earnings before income taxes from inception through August 9, 1995 in the
form of S corporation distributions to stockholders. One day prior to the
closing of the 1995 IPO, the Company became a taxable C corporation for income
tax reporting purposes. The Company has incurred increased salary expenses of
approximately $375,000 for certain members of senior management in connection
with the termination of its S corporation status.

-16-

<PAGE>

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain income
statement data expressed as a percentage of net sales. Certain column totals
set forth may not add due to rounding.

YEAR ENDED DECEMBER 31,
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 75.1 69.5 66.3
----- ----- -----

Gross profit 24.9 30.5 33.7
Selling, general and administrative expenses 17.7 21.2 24.7
Non-recurring expenses -- -- --
----- ----- -----
Income from operations 7.1 9.3 9.0
Interest expense-net 0.8 0.5 0.5
----- ----- -----
Earnings before income taxes 6.3 8.8 8.5
Income tax provision 0.1 2.1 3.4
----- ----- -----
Net income 6.2% 6.7% 5.1%
===== ===== =====

</TABLE>

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Net sales in the year ended December 31, 1996 increased 65.9% to $174.0
million from $104.9 million in the year ended December 31, 1995. The increase
was primarily the result of an increase in unit sales of laundry products and,
to a lesser extent, the introduction of new products and additional product
sizes.

Gross profit increased 83.4% to $58.7 million in the year ended December
31, 1996 from $32.0 million in the prior year. Gross profit increased as a
percentage of net sales to 33.7% in 1996 from 30.5% in the prior year,
primarily as a result of continued improvement in labor efficiencies and
purchasing improvements, and an increase as a percentage of net sales in unit
sales of higher margin laundry products, offset in part by higher costs
associated with integrating the Company's Chicago, Kansas City and Edison, New
Jersey facilities.

Selling, general and administrative expenses increased 93.7% to $43.0
million in the year ended December 31, 1996 from $22.2 million in the prior
year. As a percentage of net sales, selling, general and administrative
expenses increased to 24.7% in 1996 from 21.2% in the prior year. The increase
as a percentage of net sales was due primarily to a 1.6% increase in freight
costs arising out of distribution inefficiencies, an increase of 1.5% in
slotting fees resulting from increased penetration into supermarkets, and, an
increase of 0.4% in write-offs from customer charge-backs caused by
distribution inefficiencies. For a description of the problems experienced by
the

-17-

<PAGE>

Company with respect to distribution, see Item 1. "Business--Marketing and
Distribution."

Income from operations increased 60.9% to $15.6 million in the year ended
December 31, 1996 from $9.7 million in the prior year. As a percentage of net
sales, income from operations decreased to 9.0% in 1996 from 9.3% in the prior
year as a result of higher selling, general and administrative expenses,
offset in part by improved gross profit as a percentage of sales.

Interest expense-net increased to $868,000 in the year ended December 31,
1996 from $544,000 in the prior year due to increased borrowings to fund
higher levels of inventories and accounts receivable resulting from increased
sales. As a percentage of sales, interest expense-net was unchanged at 0.5%.

Earnings before income taxes increased to $14.8 million in the year ended
December 31, 1996 from $9.2 million in the prior year. As a percentage of net
sales, earnings before income taxes decreased to 8.5% in 1996 from 8.8% in the
prior year.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Net sales in the year ended December 31, 1995 increased 52.7% to $104.9
million from $68.7 million in the year ended December 31, 1994. The increase
was primarily the result of an increase in unit sales of laundry products,
reflecting the addition of new customers and sales of additional products to
existing customers. The increase in net sales was facilitated by an increase
in the number of salespersons who joined the Company in the fourth quarter of
1994.

Gross profit increased 87.2% to $32.0 million in the year ended December
31, 1995 from $17.1 million in the prior year. Gross profit increased as a
percentage of net sales to 30.5% in the year ended December 31, 1995 from
24.9% in the prior year. The increase as a percentage of net sales was
primarily attributable to the installation, in January 1995, of improved
manufacturing equipment, which had a positive impact on labor efficiency and
reduced product over-fills, and an increase as a percentage of net sales in
unit sales of higher margin laundry products.

Selling, general and administrative expenses increased 82.5% to $22.2
million in the year ended December 31, 1995 from $12.2 million in the prior
year. As a percentage of net sales, these expenses increased to 21.2% in the
year ended December 31, 1995 from 17.7% in the prior year. The increase as a
percentage of net sales was primarily due to increases as a percentage of net
sales of 2.2% in merchandising allowances and co-op advertising, 0.4% in
selling commissions, 0.2% in slotting fees resulting from increased
penetration into supermarkets and 0.2% in bad debt expenses.

-18-

<PAGE>

Income from operations increased 98.8% to $9.7 million in the year ended
December 31, 1995 from $4.9 million in the prior year. As a percentage of net
sales, income from operations increased to 9.3% in the year ended December 31,
1995 from 7.1% in the prior year.

Interest expense-net increased to $544,000 in the year ended December 31,
1995 from $543,000 in the prior year.

Earnings before income taxes increased 111.1% to $9.2 million in the year
ended December 31, 1995 from $4.4 million in the prior year. As a percentage
of net sales, earnings before income taxes increased to 8.8% in the year ended
December 31, 1995 from 6.3% in the prior year.

Seasonality

The Company has experienced, and may experience in the future,
quarter-to-quarter fluctuations in its operating results. The Company's
financial performance has been somewhat weaker in the fourth quarter than in
other fiscal quarters, primarily as a result of promotion-oriented retailers
providing reduced or less desirable display space for the Company's products
during the holiday shopping season. The Company expects that this trend will
be somewhat mitigated as anticipated sales from supermarkets, which are less
promotion- oriented during the holiday shopping season, increase as a
percentage of total net sales. The timing and introduction of new products and
other factors may also cause quarterly fluctuations in the Company's results
of operations.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1996, the Company's working capital increased to $40.6
million from $11.1 million at December 31, 1995. The primary reasons for the
increase include higher levels of inventory and accounts receivable, as
discussed below, and the Company no longer being subject to an asset-based
lending facility which required the automatic payment of all cash to
outstanding borrowings. At December 31, 1996 accounts receivable was $28.2
million, an increase of $12.9 million from December 31, 1995 primarily
attributable to increased sales volume in 1996. At December 31, 1996 inventory
was $27.0 million, an increase of $18.6 from December 31, 1995, primarily
attributable to increased sales volume and inventory imbalances caused by
problems in distribution. As a result of the change to the lending facility,
cash at December 31, 1996 was $2.4 million, an increase of $2.3 million from
the prior year. These changes were partially offset by an increase in accounts
payable and accrued expenses to $20.1 million at December 31, 1996 from $8.8
million at December 31, 1995. Net cash used in operating activities in 1996
and 1995 was ($15.3) million and ($412,000), respectively. Decreases in cash
provided by operating activities in 1996 relate primarily to the increase in
inventory and accounts receivable. The decrease in cash provided by operating
activities in 1995 was primarily due to an increase in accounts receivable.

-19-

<PAGE>

The Company's 1995 IPO provided net proceeds to the Company of
approximately $12.7 million. Approximately $8.3 million was used by the
Company to repay amounts outstanding under its then existing line of credit.
The Company consummated a sale of 300,000 shares of Common Stock in June 1996,
providing net proceeds to the Company of $11.7 million. The net proceeds from
the June 1996 offering were used to pay down the Company's then existing line
of credit. Historically, the Company has financed its operations from capital
provided by existing stockholders, funds generated by operations, bank lines
of credit, the proceeds of the Company's loan from the New Jersey Economic
Development Authority (the "EDA Loan") and capitalized lease obligations. The
Company has used cash provided by operating activities to fund capital
expenditures, operations and S corporation distributions.

Net cash used in investing activities in 1996 and 1995 was $20.5 million
and $6.1 million, respectively. Cash used in investing activities in 1996
relates to purchases of property and equipment. Cash used in investing
activities in 1995 relates primarily to purchases of production equipment and
a loan of approximately $2.3 million to an unaffiliated third party supplier
of powder laundry detergent. The Company has an option to purchase the
supplier's facility for the outstanding principal amount of the loan. See Item
1. "Business--Manufacturing and Supply" and Note 5 of "Notes to Consolidated
Financial Statements."

Net cash provided by financing activities in 1996 and 1995 was $38.0
million and $6.5 million, respectively. Cash provided by financing activities
in 1996 was primarily proceeds from sales of Common Stock and a bank line of
credit. Cash provided by financing activities in 1995 was primarily proceeds
from sales of Common Stock, the bank lines of credit and the EDA Loan, offset
primarily by S corporation distributions to stockholders. At December 31,
1996, the Company had short-term debt of $4.3 million and long-term debt of
$30.8 million as compared to short-term debt of $7.3 million and long-term
debt of $1.8 million at December 31, 1995. The increase in overall debt was
primarily attributable to increases in inventory and accounts receivable
levels.. Short-term debt consisted of borrowings under the Line of Credit,
current portions of long-term debt and current portions of capitalized lease
obligations. Long-term debt consisted of the long-term portion of bank lines
of credit, borrowings under the EDA Loan and capitalized lease obligations.

The Line of Credit

In December 1996, the Company entered a credit facility with PNC Bank,
N.A. ("PNC") replacing the Company's then existing line of credit. The new
credit facility consists of a $20 million capital expenditure facility for the
purchase of capital assets and/or leasehold improvements and a $10 million
traditional revolving facility. Borrowings under the credit facility bear
interest at LIBOR plus .50% to 1.5% (6.08% as of December 31, 1996) or one
percent below the prime rate of PNC, at the Company's election. All amounts
outstanding as of December 31, 1996 were subject to the 6.08% LIBOR-based
interest rate. Unused portions of the revolving facility are subject to a
commitment fee of .25% on such unused amounts. All amounts

-20-

<PAGE>

outstanding under the capital expenditure facility at September 30, 1998 will
be converted to a five year term note. The revolving facility becomes due and
payable at April 30, 2000, subject to one-year extensions at the option of
PNC. PNC also provides the Company with a $3 million letter of credit
facility. Amounts drawn on the letter of credit facility are subject to an
annual fee of 0.5% of the face amount of each standby letter of credit. Each
standby letter of credit issued will have a stated term of no more than one
year. The credit facility contains various restrictions which include, among
other things, limiting the incurrence of additional indebtedness and requiring
specified debt to equity and current ratios and a minimum consolidated
tangible net worth. At December 31, 1996, the Company did not meet the debt to
equity level required pursuant to the credit facility. On March 24, 1997, the
Company received a waiver of the violation and the Company and PNC have agreed
to amend the facility, as discussed below. On December 31, 1996, the Company
also obtained a 60-day $4 million bridge loan, bearing interest at one percent
below the lender's prime rate (7.25%). As of December 31, 1996, approximately
$33.3 million was outstanding under the credit facility and the bridge loan
facility. On March 3, 1997, the Company repaid the bridge loan facility with
funds generated from working capital.

On March 24, 1997, the Company obtained a commitment from PNC and a
second lender to amend the Company's existing credit facility with PNC (the
"New Facility"). The New Facility, as outlined in the commitment letter, is
expected to provide for, among other things, an increase in the revolving
credit facility from $10 million to $20 million, an increase in the capital
expenditure facility from $20 million to $35 million and a $10 million bridge
loan which will be repaid at the closing of the New Facility from the proceeds
of the capital expenditure facility. The revolving credit facility expires
three years from the closing of the New Facility and the capital expenditure
facility matures on May 31, 1999, at which time the then outstanding balance,
if any, will be converted to a five-year term loan. Borrowings under the New
Facility bear interest at rates which approximate the existing credit facility
with PNC. The commitment provides that all of the assets of the Company will
be pledged as collateral for the New Facility. The New Facility is conditional
upon, among other things, the finalization of a loan agreement acceptable to
PNC.

The EDA Loan

The following is a description of the material terms of the EDA Loan of
$2.75 million received by the Company in 1993 from the New Jersey Economic
Development Authority. As of December 31, 1996, the Company had used
approximately $2.5 million of the EDA Loan for purchases of machinery and
equipment and improvements to the Company's manufacturing facility. The
remainder is restricted for the duration of the EDA Loan. The EDA Loan is
payable in monthly installments of approximately $26,000 through November 1,
2002. Interest on the EDA Loan is payable at a variable rate (4.2% at December
31, 1996). The EDA Loan is collateralized by all assets purchased with the
proceeds of the EDA Loan. The EDA Loan contains various restrictions on the
Company which preclude the Company, without first obtaining consent, from
taking certain actions including making capital expenditures in excess of

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<PAGE>

$7.25 million, transferring or making other dispositions of any material
property of the Company, engaging in any business not incidental to the
Company's present business, incurring additional indebtedness, paying
dividends, making changes in the management of the Company or merging or
consolidating with another entity. In connection with the EDA Loan, the
Company also executed a Reimbursement Agreement with Banque Nationale de
Paris, Houston Agency ("Banque Nationale"), pursuant to which Banque Nationale
agreed to issue a letter of credit to ensure payment when due of the bonds
issued in connection with the EDA Loan. The Company also entered into a
Security Agreement with Banque Nationale pursuant to which Banque Nationale
and the New Jersey Economic Development Authority were granted a security
interest in all assets of the Company.

Capital Expenditures

Capital expenditures were $20.5 million in 1996 and $3.9 million in 1995.
Historically, capital expenditures have related principally to increasing
manufacturing capacity. The Company anticipates that capital expenditures in
1997 will be between $19 million and $22 million, which includes expenditures
for a new distribution facility, a high speed trigger line, and a new computer
system, as well as expenditures associated with expanding the Company's
manufacturing and distribution capabilities. The Company is in the process of
expanding its credit facility to fund such capital expenditures. See "--The
Credit Line." The Company believes its existing sources of liquidity, cash
provided by operations and the anticipated increase in its credit facility
with PNC will satisfy the Company's anticipated working capital and capital
expenditure requirements for the foreseeable future.

EFFECTS OF INFLATION

The Company believes that the relatively moderate rate of inflation over
the past few years has not had a significant impact on the Company's results
of operations.

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<PAGE>

ITEM 8. FINANCIAL STATEMENTS

See financial statements and supplementary data required pursuant to this
Item beginning on page F-1 of this Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING FINANCIAL AND DISCLOSURE

None

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<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information contained under the heading "Proposal No. 1 - Election of
Directors" in the Company's definitive Proxy Statement (the "Proxy Statement")
relating to the Company's Annual Meeting of Stockholders scheduled to be held
on May 13, 1997, to be filed pursuant to Regulation 14A of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, is
incorporated herein by reference. For information concerning the executive
officers and other significant employees of the Company, see
"Business--Executive Officers of the Registrant" in Item 1 above of this
Report.

ITEM 11. EXECUTIVE COMPENSATION

The information contained under the heading "Executive Compensation" in
the Company's Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information contained under the heading "Beneficial Ownership of
Common Stock" in the Company's Proxy Statement is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained under the headings entitled "Executive
Compensation--Compensation Committee Interlocks and Insider Participation"
and "Certain Transactions" in the Company's Proxy Statement is incorporated
herein by reference.

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<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements.

The Financial Statements and Financial Statement Schedules are
listed in the accompanying index to financial statements beginning
on page F-1 of this report.

2. Financial Statement Schedule.

Schedule II - Valuation and Qualifying Accounts

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
3.1 Certificate of Incorporation.1

3.2 Form of By-Laws of the Registrant.1

4.1 See Exhibits 3.1 and 3.2 for provisions of the Certificate of
Incorporation and By-Laws of the Registrant defining the rights of
holders of Common Stock of the Registrant.1

4.2 Specimen Common Stock Certificate.1

4.3 Form of Registration Rights Agreements between the Registrant,
Frederick R. Adler and Blair Effron.1

10.1 Lease Agreement dated January 15, 1993 between Maurice M. Weill,
Trustee for GEEMAC Property, and Registrant.1

10.2 Supply Agreement dated November 29, 1994 between Owens-Illinois
Plastic Products Inc., Owens-Illinois Closure Inc. and Registrant.1

10.3 Amendment No. 1 dated December 1995 to Supply Agreement,
dated November 29, 1994, between Owens-Illinois Plastic Products
Inc., Owens-Illinois Plastic Products Inc., Owens-Illinois Closure
Inc. and Registrant.2 (confidentiality note)*

10.4 Amended and Restated Employment Agreement with Uri Evan
dated January 1996.2**

10.5 Employment Agreement for each of Joseph Cohen, Frederick J.
Horowitz, Daniel Bergman, and Mark Antebi.1**

10.6 Forms of Employment Agreement for each of Frank Corella and
Harold J. Macsata.1**

</TABLE>

-25-

<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.7 Loan Agreement dated April 15, 1993 between the New Jersey
Economic Development Authority and Registrant.1

10.8 Reimbursement Agreement dated April 15, 1993 between Banque
Nationale de Paris, Houston Agency and the Registrant.1

10.9 Security Agreement dated April 15, 1993 between the New Jersey
Economic Development Authority and the Registrant.1

10.10 Loan Agreement dated December 17, 1996 between PNC Bank, N.A.
and the Registrant.

10.11 1995 Stock Option Plan.1**

10.12 Stock Option Plan for Non-Employee Directors.1**

10.13 Form of Directors and Officers Indemnity Agreement.1

10.14 Lease Agreement dated January 26, 1996 between M&E Co. and the
Company.2

10.15 Purchase and Sale Agreement dated January 22, 1997 between The
Okonite Company, Inc. and the Company.

21 Subsidiaries of the Company.2

23 Consent of Deloitte & Touche LLP.

27 Financial Data Schedule.

</TABLE>

(b) Reports on Form 8-K:

None.

- --------------------------
* Confidentiality Requested, confidential portions have been omitted and
filed separately with the Commission, as required by Rule 406(b) of the
Securities Act of 1933.

** Management contract, or compensatory plan or arrangement.

1. Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 (No. 33-93488), which exhibit is incorporated herein by
reference.

2. Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 (No. 333-1386), which exhibit is incorporated herein by
reference.

-26-

<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----
<S> <C>
Independent Auditors' Reports F-2
Consolidated Balance Sheets at December 31, 1995 F-3
and 1996
Consolidated Statements of Income for the years F-4
ended December 31, 1994, 1995 and 1996
Consolidated Statements of Cash Flows for the F-5
years ended December 31, 1994, 1995 and 1996
Consolidated Statements of Stockholders' Equity F-6
for the years ended December 31, 1994, 1995 and 1996
Notes to Consolidated Financial Statements for the F-7
years ended December 31, 1994, 1995 and 1996

</TABLE>

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
USA Detergents, Inc.:

We have audited the accompanying consolidated balance sheets of USA
Detergents, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, retained earnings and cash
flows for the three years then ended. Our audits also included the financial
statement schedule listed in the index at Item 14(a)(2). These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

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

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of USA Detergents, Inc. and
subsidiaries at December 31, 1995 and 1996, and the results of its operations
and its cash flows for the three years then ended in conformity with generally
accepted accounting principles. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

/s/ Deloitte & Touche LLP

New York, New York
February 17, 1997
(March 3, 1997 and March 24, 1997 as to Note 4)

F-2

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Current assets:
Cash ................................................ $ 61 $ 2,373
Accounts receivable, net of allowance for doubtful .. 15,278 28,196
accounts of $276 and $1,349, respectively
Inventories ......................................... 8,448 26,989
Prepaid expenses and other current assets ........... 2,989 5,668
Income taxes receivable ............................. -- 752
Deferred income taxes receivable .................... 630 998
------- -------
Total current assets ............................ 27,406 64,976
Property and equipment--net ......................... 10,404 28,603
Restricted funds .................................... 275 275
Other assets ........................................ 255 2,800
Note receivable ..................................... 2,250 2,250
------- -------
Total assets .................................... $40,590 $98,904
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Note payable bank ................................... $ -- $ 4,000
Accounts payable .................................... 4,830 13,725
Accrued expenses .................................... 3,942 6,371
Current portion of long-term debt ................... 7,320 318
Income taxes payable .............................. 182 --
------- -------
Total current liabilities ....................... 16,274 24,414
Long-term debt--net of current portion .............. 1,830 30,812
Deferred rent payable ............................... 1,204 1,284
Deferred income taxes payable ....................... 990 1,135
------- -------
Total liabilities ............................... 20,298 57,645

Commitments and Contingencies

Stockholders' equity:
Preferred Stock--no par value; authorized ........... -- --
1,000,000 shares, none issued
Common stock--$.01 par value; authorized ............ 134 138
30,000,000 shares, issued and outstanding
13,392,390 and 13,752,570 shares, respectively
Additional paid-in capital .......................... 15,499 27,595
Retained earnings ................................... 4,659 13,526
------- -------
Total stockholders' equity ...................... 20,292 41,259
------- -------
Total liabilities and stockholders' equity ...... $40,590 $98,904
======= =======

</TABLE>

See Notes to Consolidated Financial Statements.

F-3

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)

1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Net sales........................... $68,663 $104,878 $174,031
Cost of goods sold.................. 51,588 72,921 115,338
------ ------- --------

Gross profit........................ 17,075 31,957 58,693

Selling, general and
administrative...................... 12,182 22,232 43,046
------ -------- --------

Income from operations.............. 4,893 9,725 15,647
Interest expense - net.............. 543 544 868
----- -------- --------
Income before income 4,350 9,181 14,779
tax provision.......................
Income tax provision................ 83 2,156 5,912
------ -------- --------

Net income.......................... $ 4,267 $ 7,025 $ 8,867
======= ======== ========
Net income per share................ $ .65
========
Weighted average number of
common shares outstanding.......... 13,589
========

Pro Forma Income Statement
Data:
Earnings before income tax
provision, as reported.............. $ 4,350 $ 9,181
Pro forma income tax
provision........................... 1,689 3,756
------- --------
Pro forma net income............... $ 2,661 $ 5,425
======= ========
Pro forma net income per
share.............................. $ .22 $ .43
======= ========
Weighted average number of
common shares outstanding
used in the pro forma per
share calculation................... 11,915 12,494
======= =======

</TABLE>

See Notes to Consolidated Financial Statements.

F-4

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)

1994 1995 1996
---- ---- ----
<S> <C><C><C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,267 $ 7,025 $ 8,867
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 762 1,006 2,302
Change in the provision for bad debts and sales
allowances 157 192 1,073
Increase/(decrease) in deferred rent 416 (3) 80
Changes in operating assets and liabilities:
(Increase) in accounts receivable (384) (8,806) (13,991)
(Increase) in inventories (2,346) (549) (18,541)
(Increase) in prepaid expenses
and other current assets (1,250) (1,293) (2,679)
(Increase)/decrease in other assets (34) 22 (2,545)
Decrease/(increase) in accounts payable (2,962) 966 8,895
Increase in accrued expenses 2,158 543 2,429
Decrease in restricted funds 141 -- --
(Increase) in income taxes receivable -- -- (752)
Increase/(decrease) in deferred income taxes -- 360 (223)
payable
Increase/(decrease) in income taxes payable 38 125 (182)
------- ------- --------
Net cash provided by (used in) operating
activities: 963 (412) (15,267)
------- ------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,651) (3,851) (20,501)
Increase in note receivable -- (2,250) --
------- ------- --------
Net cash used in investing activities: (1,651) (6,101) (20,501)
------- ------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Stockholder distributions (1,612) (5,331) --
Repayment of stockholders loans (82) -- --
Proceeds from common stock subscription 1,375 -- --
Repayment of EDA debt (334) (305) (305)
Net proceeds from initial public offering -- 12,718 --
Net proceeds from sale of common stock -- -- 11,736
Net proceeds from exercise of options -- -- 364
Increase in note payable bank -- -- 4,000
Increase/(decrease) in revolving credit line-net 1,394 (517) 22,322
Capitalized lease repayments (22) (68) (37)
------- ------- --------
Net cash provided by financing activities 719 6,497 38,080
------- ------- --------
Net increase/(decrease) in cash 31 (16) 2,312
Cash, January 1, 46 77 61
------- ------- --------
Cash, December 31, $ 77 $ 61 $ 2,373
======= ======= ========

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for: $ 520 $ 539 $ 834
======= ======= ========
Interest
Income taxes $ 45 $ 1,671 $ 7,059
======= ======= ========

</TABLE>

See Notes to Consolidated Financial Statements.

F-5

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCK TOTAL
--------------- ---------------- PAID-IN RETAINED SUBSCRIPTIONS STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL RECEIVABLE EQUITY
------ ------ ------ ------ ------- -------- ----- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993.... -- $ -- 7,943,000 $ 79 $ 2,836 $ 310 $ 3,225 $(1,375) $ 1,850
Net income................... 4,267 4,267 4,267
Stockholder distributions.... (1,612) (1,612) (1,612)
Collection of common stock
subscription receivable..... 1,375 1,375
------ ------ ---------- ---- ------- ------- ------- ------- -------
BALANCE, December 31, 1994.... -- -- 7,943,000 79 2.836 2,965 5,880 -- 5,880
Net income................... 7,025 7,025 7,025
Stockholder distributions.... (5,331) (5,331) (5,331)
Net proceeds from initial
public offering............. 985,260 10 12,708 12,718 12,718
Three-for-two stock split..... -- -- 4,464,130 45 (45) -- -- -- --
------ ------ ---------- ---- ------- ------- ------- ------- -------
BALANCE, December 31, 1995.... -- -- 13,392,390 134 15,499 4,659 20,292 -- 20,292
Net income................... 8,867 8,867 8,867
Stock options exercised...... 60,180 1 363 364 364
Net proceeds from sale of
common stock................. -- -- 300,000 3 11,733 11,736 11,736
------ ------ ---------- ---- ------- ------- ------- ------- -------
BALANCE, December 31, 1996.... -- $ -- 13,752,570 $138 $27,595 $13,526 $41,259 $ -- $41,259
====== ====== ========== ==== ======= ======= ======= ======= =======

</TABLE>

See Notes to Consolidated Financial Statements.

F-6

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USA Detergents, Inc. (the "Company") manufactures and markets nationally
distributed value brand laundry and household cleaning products.

Basis of Presentation--The accompanying Financial Statements include the
accounts of the Company and its wholly-owned subsidiaries. All intercompany
accounts and transactions have been eliminated in consolidation.

Inventories--Inventories are stated at the lower of cost, determined by
using the first-in, first-out and average methods, or market. The Company
periodically reviews inventory for slow moving or obsolete items. Such items
are written down to net realizable value and have not been material for any
period presented.

Slotting fees--The Company incurs certain costs in connection with
placing its products. These costs are known in the trade as "slotting fees."
The Company is amortizing these fees over a one year period from the date
incurred. Deferred slotting fees are included in prepaid expenses and other
current assets.

Long-Lived Assets--In March 1995, the Financial Accounting Standards
Board issued Statement Number 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement
is effective for fiscal years beginning after December 15, 1995. The Company
has adopted this statement and the impact has not been significant.

Depreciation and Amortization--Depreciation of property and equipment
is provided for by using the straight-line method over the estimated useful
lives of the respective assets. Amortization of leasehold improvements is
provided for by the straight-line method over the lease term.

Trademark and Deferred Loan Costs--Other assets include trademark
costs, which are being amortized using the straight-line method over a period
of 10 years, and loan closing costs, which are being amortized over the life
of the loan.

Income Taxes--Prior to August 10, 1995 (one day prior to the completion
of the Company's initial public offering), the Company elected to be treated
as an S corporation ("S corporation") under the applicable sections of the
Internal Revenue Code. Accordingly, during the "S Corporation Period" there
was no provision for federal income taxes as such earnings of the Company
flowed through directly to the stockholders. The Company was subject to state
and local taxes in certain states during the S Corporation Period.

F-7

<PAGE>

Deferred taxes on income are provided to reflect the tax effect of
temporary differences between financial statement income and taxable income.
The principal items giving rise to deferred taxes are the use of accelerated
depreciation methods for tax purposes, straight-lining of step rental
increases and differences in the timing of the deductibility of certain
expenses between income tax and financial reporting.

Fair Value of Financial Instruments--The following disclosure of the
estimated fair value of financial instruments is made in accordance with the
requirements of Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments". The estimated fair
values of financial instruments have been determined by the Company using
available market information and appropriate valuation methodologies. However,
considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.

The carrying amounts and estimated fair values of financial instruments
at the end of the respective years are summarized as follows (in thousands):

December 31, 1995 December 31, 1996
----------------- -----------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Assets:
Cash...................... $ 61 $ 61 $ 2,373 $ 2,373
Trade accounts receivable..... 15,554 15,554 29,545 29,545
Note receivable............... 2,250 2,250 2,250 2,250
Liabilities:
Accounts payable,
accrued expenses
and taxes................. 8,954 8,954 20,096 20,096

Revolving line of
credit.................... 6,983 6,983 33,305 33,305
Capitalized lease
obligations............... 56 56 19 19
Economic Development
Authority loan............ 2,111 1,946 1,806 1,712

</TABLE>

F-8

<PAGE>

The following methods and assumptions were used to estimate the fair value of
the financial instruments presented above:

Cash -- The carrying amount is a reasonable approximation of fair value.

Trade accounts receivable, note receivable, accounts payable, accrued expenses
and taxes. The fair value of receivables and payables are assumed to equal
their carrying value because of their short maturities.

Revolving Credit Line -- Fair value is estimated by discounting the future
stream of payments using the incremental borrowing rate of the Company, which
represents its primary source of recourse financing.

Economic Development Authority Loan -- Interest rates that are currently
available to the Company for issuance of debt with similar terms and remaining
maturities are used to estimate fair value for debt issues for which no market
quotes are available.

Use of estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Revenue Recognition -- Revenue is recognized at the time the merchandise
is shipped.

Stock-Based Compensation -- Stock-based compensation is recognized using
the intrinsic value method. For disclosure purposes, pro forma net income and
pro forma net income per share are provided as if the fair value method was
applied.

Pro forma Earnings Per Share and Pro forma Information -- Pro forma net
income per share is computed by dividing pro forma net income by the weighted
average number of shares outstanding. The dilutive effect of stock options
have not been included as the impact is not material. Shares outstanding have
been retroactively adjusted for the recapitalization.

Pro forma net income has been adjusted to reflect a tax provision which
reflects the actual taxes that would have been paid had the Company been a C
corporation for all of 1995 and 1994.

Reclassifications -- Certain reclassifications have been made to prior
year amounts to conform with the presentation for the current year.

New Accounting Standard --

In October, 1996, the Accounting Standards Executive Committee issued
Statement of Position 96-1, "Environmental Remediation Liabilities." The
statement provides guidance on accounting for environmental remediation
liabilities and is effective for fiscal years beginning after December 15,
1996. Adoption of this statement is not expected to have any significant
impact on the Company.
F-9

<PAGE>

2. INVENTORIES

Inventories consist of the following:

DECEMBER 31,
1995 1996
---- ----
(in thousands)
<S> <C> <C>
Raw material......................... $ 3,816 $ 9,972
Finished goods....................... 4,632 17,017
------- -------
$ 8,448 $26,989
======= =======

</TABLE>

3. PROPERTY AND EQUIPMENT

Property and equipment, at cost, consists of the following:

DECEMBER 31, ESTIMATED
1995 1996 USEFUL LIFE
---- ---- -----------
(in thousands)
<S> <C> <C> <C>
Machinery and equipment............... $ 7,672 $22,855 6 to 10 years
Furniture and fixtures................ 1,382 2,608 5 to 7 years
Leasehold improvements................ 2,563 3,381 Term of lease
Construction in progress.............. 1,423 1,601
Land.................................. -- 1,376
Building.............................. -- 1,652 25 years
------- -------
13,040 33,473

Less accumulated depreciation and
amortization.......................... 2,636 4,870
------- -------
$10,404 $28,603
======= =======

</TABLE>

F-10

<PAGE>

4. LONG TERM DEBT

1995 1996
---- ----
<S> <C> <C>
Revolving credit facility (i)..................... $6,983 $33,305
New Jersey EDA loan (ii).......................... 2,111 1,806
Capitalized lease obligations (iii)............... 56 19
----- -------
9,150 35,130
Less amount due in one year.................... 7,320 4,318
----- -------
$1,830 $30,812
====== =======

</TABLE>

Annual maturities of bank and other long-term debt, including capitalized
leases, are as follows:

<S> <C>
1997 $ 4,318
1998 311
1999 305
2000 10,305
2001 310
Thereafter 19,581
-------
$35,130
=======
</TABLE>

(i) The Line of Credit

In December 1996, the Company entered into a credit facility with PNC
Bank, N.A. ("PNC") replacing the Company's old line of credit. The new credit
facility consists of a $20,000,000 capital expenditure facility for the
purchase of capital assets and/or leasehold improvements and a $10,000,000
traditional revolving facility. Borrowings under the credit facility bear
interest at LIBOR plus .50% to 1.5% (6.08% as of December 31, 1996) or one
percent below the prime rate of PNC, at the Company's election. All amounts
outstanding as of December 31, 1996 were subject to the 6.08% LIBOR-based
interest rate. Unused portions of the revolving facility are subject to a
commitment fee of .25% on such unused amounts. All amounts outstanding under
the capital expenditure facility at September 30, 1998 will be converted to a
five year term note. The revolving facility becomes due and payable at April
30, 2000, subject to one-year extensions at the option of PNC. PNC also
provides the Company with a $3,000,000 letter of credit facility. Amounts
drawn on the letter of credit facility are subject to an annual fee of .5% of
the face amount of each standby letter of credit. Each standby letter of
credit issued will have a stated term of no more than one year. The credit
facility contains various restrictions which include, among other things,
limiting the incurrence of additional indebtedness and requiring specified
debt to equity and current ratios and a minimum consolidated tangible net
worth. At December 31, 1996, the Company did not meet the debt to equity level
required

F-11

<PAGE>

pursuant to the credit facility. On March 24, 1997, the Company received a
waiver of the violation and the Company and PNC have agreed to amend the
facility. On December 31, 1996, the Company also obtained a 60-day $4,000,000
bridge loan, bearing interest at one percent below the lender's prime rate
(7.25%). As of December 31, 1996, approximately $33,300,000 was outstanding
under the credit facility and the bridge loan facility. On March 3, 1997, the
Company repaid the bridge loan facility with funds generated from working
capital.

On March 24, 1997, the Company obtained a commitment from PNC and a
second lender to amend the Company's existing credit facility with PNC (the
"New Facility"). The New Facility, as outlined in the commitment letter, is
expected to provide for, among other things, an increase in the revolving
credit facility from $10,000,000 to $20,000,000, an increase in the capital
expenditure facility from $20,000,000 to $35,000,000 and a $10,000,000 bridge
loan which will be repaid at the closing of the New Facility from the proceeds
of the capital expenditure facility. The revolving credit facility expires
three years from the closing of the New Facility and the capital expenditure
facility matures on May 31, 1999, at which time the then outstanding balance,
if any, will be converted to a five-year term loan. Borrowings under the New
Facility bear interest at rates which approximate the existing credit facility
with PNC. The commitment provides that all of the assets of the Company will
be pledged as collateral for the New Facility. The New Facility is conditional
upon, among other things, the finalization of a loan agreement acceptable to
PNC.

(ii) During 1993, the Company received a loan of $2,750,000 from the New
Jersey Economic Development Authority ("EDA"). Proceeds from this loan were to
be used solely for machinery and equipment and improvements to the Company's
manufacturing facility in North Brunswick, New Jersey. As of December 31,
1995, the Company had used $2,474,775. From the remaining $275,225 classified
as restricted funds, $275,000 must remain restricted through the duration of
the loan. The loan is payable in monthly installments of $25,416 from January
1, 1995 through November 1, 2001 and $25,833 from December 1, 2001 through
November 1, 2002. Interest on the loan is payable at a variable rate (4.2% at
December 31, 1996).

The agreement contains, among other items, restrictions relating to the
payment of dividends.

The loan is collateralized by all assets purchased with the proceeds of
the loan.

(iii) The Company has acquired equipment under leases that have been accounted
for as capital leases.

F-12

<PAGE>

Aggregate future minimum lease payments are as follows (in thousands):

YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997..................................... 25
1998..................................... 6
---
31
Less amount representing
interest................................. 12
---
Present value of minimum
lease payments........................... 19
Current portion.......................... 13
---
Long-term portion........................ $ 6
===

</TABLE>

5. COMMITMENTS AND CONTINGENCIES

Note Receivable

In December 1995, the Company loaned approximately $2.3 million to an
unaffiliated third party in connection with such third party's acquisition of
a powder detergent manufacturing facility. Amounts outstanding under such loan
bear interest at 10.0% per annum and are payable on demand. The loan is
secured exclusively by the stock and assets of the borrower. The Company has
an option to purchase the manufacturing facility for the amount of the loan.

Leases

The Company is committed under various operating leases which expire at
varying dates through the year 2004. Aggregate minimum future lease payments,
exclusive of payments for real estate taxes and operating costs, are as
follows (in thousands):

YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997..................................... 2,527
1998..................................... 2,477
1999..................................... 2,059
2000..................................... 1,745
2001..................................... 1,269
Thereafter............................... 2,250
-------
$12,327
=======

</TABLE>

F-13

<PAGE>

Rent expense charged to operations amounted to $1,099,000, $1,043,000 and
$1,702,000 for the years ended December 31, 1994, 1995 and 1996, respectively,
including real estate taxes and operating escalations.

Rent expense recognized annually differs from actual rent paid as a
result of free rent periods and escalations in base rent provided in the
leases. Accordingly, the Company has recorded deferred rent of $1,284,000 at
December 31, 1996. This amount is being amortized by the straight-line method
over the life of the lease.

Servicing Agreement

The Company entered into an exclusive use agreement with a vendor whereby
the vendor has committed the use of certain machines for the production of
packaging materials for the Company. The monthly payment is $965,666, subject
to maximum annual increases of 2%, through January 31, 2001, which will be
applied against the purchase price of the packaging materials.

Profit Sharing Plan

The Company has a profit sharing plan based on the amount by which the
Company's operating gross margin (the "OGM"), as defined, exceeds ten percent.
If the Company's OGM exceeds ten percent, a percentage of that excess is
placed in a bonus pool based on a predetermined formula provided that the
total amount available for distribution shall not be based on annual gross
sales in excess of $200 million. Fifty-two percent of the bonus pool is
allocated for distribution to senior executives. Of the remainder of the bonus
pool, no participant can currently receive a distribution greater than 50% of
his or her base salary. Amounts not allocated for distribution under the bonus
pool will not be distributed. The Company did not make payments under the plan
through December 31, 1994, as amounts would have been immaterial and were
waived. For the years ended December 31, 1995 and 1996, approximately $231,000
and $410,000, respectively, was distributed under the plan.

Employment Agreements

The Company is obligated under various employment agreements expiring in
1999. The minimum future annual amounts payable under these agreements are as
follows (in thousands):

<S> <C>
1997..................................... 1,000
1998..................................... 1,000
1999..................................... 200
------
$2,200
======

</TABLE>

F-14

<PAGE>

Environmental Regulation

New Facility

On January 22, 1997, the Company entered into a contract to purchase a
650,000 square foot facility in North Brunswick, New Jersey, adjacent to the
Company's existing facility for a purchase price of $7,200,000. The Company
expects to consolidate its entire East Coast warehousing and distribution
operation at this new facility. The purchase is expected to be funded by an
increase in the Company's credit facility.

6. INCOME TAXES

Components of income taxes are as follows:

YEAR ENDED DECEMBER 31,
1994 1995 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................ $-- $1,403 $5,143
State and local........................ 83 393 992
Deferred............................... -- 360 (223)
--- ------ ------
$83 $2,156 $5,912
=== ====== ======

Temporary differences which give rise to net deferred tax liabilities at
December 31, 1995 and 1996 are as follows:

</TABLE>
<TABLE>
<CAPTION>

1995 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities
Depreciation.................................. $990 $1,135
---- ------
Deferred tax assets
Straight-lining of step rental increases...... 466 502
Allowance for bad debts....................... 107 527
Inventory capitalization...................... 37 15
Miscellaneous................................. 20 (46)
---- ------
630 998
---- ------

Net deferred tax liabilities..................... $360 $ 137
==== ======

</TABLE>

F-15

<PAGE>

A reconciliation of income taxes at the Federal statutory rate to amounts
provided is as follows:

<TABLE>
<CAPTION>
1995 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Tax provision computed at statutory rate.................... $3,122 $5,073
State and local income taxes................................ 264 652
Non taxable earnings during period prior to conversion to
C corporation status..................................... (1,522) --
Recognition of deferred taxes upon conversion
to C corporation status.................................. 227 --
Other--net.................................................. 65 187
------ ------
$2,156 $5,912
====== ======

</TABLE>

Prior to August 10, 1995, the Company was taxed as an S corporation.
Accordingly, no reconciliation for 1994 has been provided as taxes on earnings
of the Company were the responsibility of the stockholders.

7. SIGNIFICANT CUSTOMERS AND SUPPLIERS

The Company's largest customer, Wal-Mart, accounted for 10.0%, 17.2% and
16.8% of sales, respectively, in 1994, 1995 and 1996. No other customer of the
Company accounted for more than 10.0% of the Company's net sales. As is
customary in the industry, the Company does not have long-term contracts with
its customers.

Certain chemical plastic bottles, packaging materials and manufacturing
equipment used in connection with the manufacture of the Company's products as
well as certain finished products sold by the Company are obtained from a sole
or a limited group of suppliers and subcontractors. The Company's reliance on
a sole supplier or limited groups of suppliers and subcontractors involves
several risks, including increased risk of inability to obtain adequate
supplies, and reduced control over pricing and timely delivery. Although the
timeliness, quality and pricing of deliveries from the Company's suppliers
have been acceptable to date and the Company believes that additional sources
of supply are generally available, there can be no assurance that supplies
will be available on an acceptable basis or that delays in obtaining new
suppliers, particularly of plastic bottles, will not have an adverse effect on
the Company.

8. STOCKHOLDERS' EQUITY

Organization, Recapitalization and Sale of Common Stock -- The Company
was organized in New Jersey and commenced operations effective October 25,
1988. On August 2, 1995, the Company was reincorporated in Delaware. In
connection with the

F-16

<PAGE>

reincorporation, the Company became authorized to issue up to 30,000,000
shares of Common Stock, $.01 par value per share, and up to 1,000,000 shares
of Preferred Stock, no par value. As part of the reincorporation each share of
the predecessor corporation's common stock was converted into 88,167 shares of
Common Stock of the Company. All applicable share data have been retroactively
adjusted to reflect the reincorporation and share conversion.

In August 1995, the Company completed an initial public offering of
3,622,500 shares of Common Stock, including 1,477,890 shares of Common Stock
sold by the Company (the remainder being sold by certain stockholders of the
Company) which provided net proceeds to the Company of approximately
$12,718,000.

On January 18, 1996, the Company declared a three-for-two stock split
effected in the form of a 50% stock dividend to holders of record of the
Company's Common Stock at the close of business on January 30, 1996 and paid
February 9, 1996. Shares outstanding and per share amounts have been
retroactively adjusted to reflect the three-for-two stock split.

In June 1996, the Company completed an additional public offering of
300,000 shares of Common Stock which provided net proceeds to the Company of
approximately $11,736,000.

1995 Stock Option Plan. Effective in August 1995, the Company adopted the
USA Detergents, Inc. 1995 Stock Option Plan (the "1995 Plan"), pursuant to
which options to acquire an aggregate of 388,935 shares of Common Stock may be
granted to key employees and consultants of the Company or any of its
subsidiaries. The 1995 Plan authorizes the Board to issue incentive stock
options ("ISO's"), as defined in Section 422A(b) of the Internal Revenue Code
(the "Code"), and stock options that do not conform to the requirements of
that Code section ("Non-ISO's"). The exercise price of each ISO may not be
less than 100% of the fair market value of the Common Stock at the time of
grant, except that in the case of a grant to an employee who owns 10% or more
of the outstanding stock of the Company or any subsidiary ("10% Stockholder"),
the exercise price shall not be less than 110% of such fair market value. The
exercise price of each Non-ISO may not be less than the par value of the
Common Stock. Generally, options will vest over a three to five year period
and may not be exercised after the tenth anniversary (fifth anniversary in the
case of an ISO granted to a 10% Shareholder) of their grant. Options may not
be transferred during the lifetime of an optionholder. No stock options may be
granted under the 1995 Plan after 2005.

Non-Employee Directors' Plan. Effective in August 1995, the Company
adopted a Stock Option Plan for Non-Employee Directors (the "Directors'
Plan"), pursuant to which options to acquire an aggregate of 75,000 shares of
Common Stock may be granted to non-employee directors. The Directors' Plan
provides for the automatic grant to each of the Company's non-employee
directors of (1) an option to purchase 4,500 shares of Common Stock on the
later of the date of such director's initial election or appointment to the
Board of Directors or the date of adoption of the Directors' Plan,

F-17

<PAGE>

and (2) an option to purchase 4,500 shares of Common Stock on each annual
anniversary of such election or appointment, provided that such individual is
on that anniversary date a non-employee director. The options will have an
exercise price of 100% of the fair market value of the Common Stock on the
date of grant, have a ten-year term and become exercisable in four equal
quarterly installments commencing on the date which is three months after the
date of the grant thereof, subject to acceleration in the event of a change of
control (as defined in the Directors' Plan). The options may be exercised by
payment in cash, check or shares of Common Stock.

Activity in the 1995 Plan and the Directors' Plan since inception is as
follows:

NUMBER OF EXERCISE PRICE
OPTIONS RANGE
--------- ------------------
<S> <C> <C> <C>
Granted in 1995........................... 154,650 $ 9.67 $12.67
Canceled.................................. (7,500) 9.67 12.67
-------
Options outstanding, December 31, 1995.... 147,150 9.67 12.67
Granted in 1996........................... 140,250 15.75 37.00
Cancelled................................. (1,125) 9.67 9.67
-------
Options outstanding, December 31, 1996.... 272,775 9.67 37.00
=======

</TABLE>

As of December 31, 1996, there were 191,160 options available for future
grant under the Plans and 16,500 outstanding options were exercisable.

In December 1993, the Company granted an option to an executive covering
119,145 shares of common stock exercisable in four annual installments
beginning December 31, 1995. This option is exercisable at $2.00 per share.
Through December 31, 1996, 29,786 shares have been purchased pursuant to the
exercise of this option.

The Company applies the provisions of APB Opinion 25 and related
interpretations in accounting for its stock options. Accordingly, no
compensation cost has been recognized for the foregoing options. The excess,
if any, of the fair market value of shares on the measurement date over the
exercise price is charged to operations each year as the options become
exercisable. Had compensation cost for these options been determined using the
Black-Scholes option-pricing model described in FASB Statement 123, the
Company would have recorded aggregate compensation expense of approximately
$1,272,865 which would be expensed at the rate of 33% per annum over the
option's vesting period. The assumptions used in the option-pricing model
include a risk-free interest rate of 5.2%-6.1%, expected life of 3 years and
expected volatility of 49.45%-73.07%. The pro forma impact of following the
provisions of FASB Statement No. 123 on the Company's net income and income
per share would be as follows:

F-18

<PAGE>

Year Ended December 31,
------------------------------
1996 1995
(in thousands, except per
share data)
<S> <C> <C>
Net income (1995 reflects pro
forma net income) - as reported $ 8,867 $ 5,425
======= =======

- pro forma $ 8,398 $ 5,350
======= =======

Net income per common share
(1995 reflects pro forma net
income per common share) - as reported $ .65 $ .43

- pro forma $ .62 $ .43

</TABLE>

Net income per share has been calculated using the weighted average
shares outstanding during the periods.

F-19

<PAGE>

9. SELECTED QUARTERLY DATA (UNAUDITED)

The following table sets forth selected quarterly financial information
for the fiscal years 1996 and 1995 (in thousands of dollars, except per
share amounts):

Net Income
Net Gross Per
Quarter Ended Sales Profit Amount Share
- ------------- ------- -------- -------- --------
<S> <C> <C> <C> <C>
3/31/96 $ 34,067 $11,542 $2,088 $.16
6/30/96 42,915 14,564 2,703 .20
9/30/96 48,105 16,387 3,152 .23
12/31/96 48,944 16,200 924 .07
-------- ------- ------ ----
Year $174,031 $58,693 $8,867 $.65
======== ======= ====== ====

</TABLE>

Pro-forma Net Income
Net Gross Per
Quarter Ended Sales Profit Amount Share
- ------------- ------- -------- -------- --------
<S> <C> <C> <C> <C>

3/31/95 23,255 6,426 968 .08
6/30/95 25,652 7,277 1,192 .10
9/30/95 27,120 8,770 1,616 .13
12/31/95 28,851 9,484 1,649 .12
-------- ------- ------ ----
Year $104,878 $31,957 $5,425 $.43
======== ======= ====== ====

</TABLE>

Beginning in the latter part of the third quarter through the end of
1996, the Company experienced distribution difficulties and late customer
deliveries attributable primarily to the Company's continued rapid growth in
sales and the assimilation of three new manufacturing and distribution
facilities. The effect of these factors was to increase the costs associated
with plant integration, distribution and customer returns and allowances.
Aggregate costs absorbed in the fourth quarter of 1996 associated with
these inefficiencies approximated $2,000,000.

F-20

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

USA DETERGENTS, INC.

Dated: March 28, 1997 By: /s/ Uri Evan
-----------------------------
Name: Uri Evan
Title: Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.

Signature Title Date
- --------- ----- ----

/s/ Uri Evan Chief Executive Officer and March 28, 1997
- -------------------------- Chairman of the Board of
Uri Evan Directors

/s/ Harold J. Macsata Chief Financial Officer March 28, 1997
- -------------------------- (Principal Financial Officer
Harold J. Macsata and Principal Accounting
Officer)

/s/ Joseph S. Cohen Director March 28, 1997
- -------------------------
Joseph S. Cohen

/s/ Frederick J. Horowitz Director March 28, 1997
- -------------------------
Frederick J. Horowitz

/s/ Daniel Bergman Director March 28, 1997
- -------------------------
Daniel Bergman

/s/ Mark Antebi Director March 28, 1997
- -------------------------
Mark Antebi

/s/ Frederick R. Adler Director March 28, 1997
- ------------------------
Frederick R. Adler

/s/ Richard A. Mandell Director March 28, 1997
- ------------------------
Richard A. Mandell

/s/ Dr. Shlomo Kalish Director March 28, 1997
- ------------------------
Dr. Shlomo Kalish

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS (000'S)

ADDITIONS DEDUCTIONS
--------- ----------
BALANCE AT CHARGED BALANCE
BEGINNING TO PROFIT AT END OF
DESCRIPTION OF PERIOD AND LOSS (A) PERIOD
----------- --------- -------- --- ------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL
ACCOUNTS:

Year ended December 31, 1994 $ 84 $ 130 $130 $ 84

Year ended December 31, 1995 $ 84 $ 421 $229 $ 276

Year ended December 31, 1996 $276 $1,421 $348 $1,349

</TABLE>

(A) Represents write-offs of uncollectible accounts receivable.

<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
3.1 Certificate of Incorporation.(1)

3.2 Form of By-Laws of the Registrant.(1)

4.1 See Exhibits 3.1 and 3.2 for provisions of the Certificate of
Incorporation and ByLaws of the Registrant defining the
rights of holders of Common Stock of the Registrant.(1)

4.2 Specimen Common Stock Certificate.(1)

4.3 Form of Registration Rights Agreements between the Registrant,
Frederick R. Adler and Blair Effron.(1)

10.1 Lease Agreement dated January 15, 1993 between Maurice M. Weill,
Trustee for GEEMAC Property, and Registrant.(1)

10.2 Supply Agreement dated November 29, 1994 between Owens-Illinois
Plastic Products Inc., Owens-Illinois Closure Inc. and Registrant.(1)

10.3 Amendment No. 1 dated December 1995 to Supply Agreement, dated
November 29, 1994, between Owens-Illinois Plastic Products Inc.,
Owens-Illinois Plastic Products Inc., Owens-Illinois Closure Inc.
and Registrant.(2) (confidentiality note)(*)

10.4 Amended and Restated Employment Agreement with Uri Evan dated
January 1996.(2)(**)

10.5 Employment Agreement for each of Joseph Cohen, Frederick J. Horowitz,
Daniel Bergman, and Mark Antebi.(1)(**)

10.6 Forms of Employment Agreement for each of Frank Corella and
Harold J. Macsata.(1)(**)

10.7 Loan Agreement dated April 15, 1993 between the New Jersey Economic
Development Authority and Registrant.(1)

10.8 Reimbursement Agreement dated April 15, 1993 between Banque
Nationale de Paris, Houston Agency and the Registrant.(1)

10.9 Security Agreement dated April 15, 1993 between the New Jersey
Economic Development Authority and the Registrant.(1)

10.10 Loan Agreement dated December 17, 1996 between PNC Bank and the
Registrant.

10.11 1995 Stock Option Plan.(1**)

10.12 Stock Option Plan for Non-Employee Directors.(1**)

10.13 Form of Directors and Officers Indemnity Agreement.(1)

10.14 Lease Agreement dated January 26, 1996 between M&E Co. and the
Company.(2)

10.15 Purchase and Sale Agreement dated January 22, 1997 between The
Okonite Company, Inc. and the Company.

21 Subsidiaries of the Company.(2)

23 Consent of Deloitte & Touche LLP

27 Financial Data Schedule

</TABLE>

- --------------------------
(*) Confidentiality Requested, confidential portions have been omitted
and filed separately with the Commission, as required by Rule 406(b)
of the Securities Act of 1933.

(**) Management contract, or compensatory plan or arrangement.

(1) Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 (No. 33-93488), which exhibit is incorporated herein by
reference.

(2) Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 (No. 333-1386), which exhibit is incorporated herein by
reference.

<PAGE>

LOAN AGREEMENT

This is a Loan Agreement made as of December 17, 1996, between PNC
BANK, N.A., a banking association organized and existing under the laws of the
United States of America ("Lender"), having an address at Two Tower Center
Boulevard, East Brunswick, New Jersey 08816, and USA DETERGENTS, INC., a
corporation organized under the laws of the State of Delaware, having its
principal place of business at 1735 Jersey Avenue, North Brunswick, New Jersey
08902 ("Borrower").

RECITAL:

WHEREAS, Borrower and Lender are about to enter into a commercial
lending arrangement whereby Lender has agreed to make loans to Borrower and
Borrower has agreed to repay same; and

WHEREAS, Borrower and Lender have negotiated the terms and conditions
of their agreements pursuant to which Lender has agreed to, inter alia,
provide Borrower with (i) a Ten Million ($10,000,000) Dollar Revolving Line of
Credit; and (ii) a Twenty Million ($20,000,000) Dollar Capital Expenditures
Facility; and

WHEREAS, Borrower and Lender wish to set forth the terms and
conditions of their lending arrangements by this writing.

NOW, THEREFORE, in consideration of the Recitals and the mutual
covenants herein contained, the parties agree as follows:

1. DEFINITIONS:

For the purposes of this Loan Agreement, the following definitions
shall apply to the terms set forth below:

A. The term "Advance Limit" shall mean the sum of Ten Million
($10,000,000.00) Dollars, which is the maximum amount
available to be borrowed by the Borrower under the Revolver.

B. The term "Advances" shall mean each of the Revolving Loans
and Capital Facility Loans made to Borrower.

C. The term "Affiliate" shall mean and include any Person in
which one or more of the stockholders owning ten (10%)
percent or more of Borrower, anysubsidiary and/or any
parent, now or at any time or times hereafter hold,
individually, jointly or severally, an equity or other
ownership interest in excess of ten (10%) percent of the
total equity or ownership interest in such Person.

<PAGE>

D. The term "Banking Day" shall mean any day other than a
Saturday, Sunday or other day on which Lender is closed for
a United States of America or any state declared bank
holiday and on which commercial banks in the City of London,
England are open for dealings in U.S. dollar deposits in the
London Interbank Market.

E. The term "Base LIBOR Rate" shall mean a rate per annum equal
to the product arrived at by multiplying the thirty (30) or
ninety (90) day Fixed LIBOR Rate applicable to the Interest
Period in question by a fraction (expressed as a decimal),
the numerator of which shall be the number one (1) and the
denominator of which shall be the number one (1) minus the
aggregate reserve percentages (expressed as a decimal) from
time to time established by the Board of Governors of the
Federal Reserve System of the United States and any other
banking authority to which the Lender is now or hereafter
subject, including, but not limited to any reserve on
"Eurocurrency Liabilities" (as such term is defined in
Regulation D of the Board of Governors of the Federal
Reserve System of the United States) at the ratios provided
in such Regulation from time to time, it being agreed that
any LIBOR Loan shall be deemed to constitute a Eurocurrency
Liability as defined by such Regulation, and it being
further agreed that such Eurocurrency Liabilities shall be
deemed to be subject to such reserve requirements without
benefit of or credit for prorations, exceptions or offsets
that may be available to the Lender from time to time under
such Regulation and irrespective of whether the Lender
actually maintains all or any portion of such reserve.

F. The term "Borrower" shall mean USA Detergents, Inc., a
corporation organized under the laws of the State of
Delaware.

G. The term "Capital Expenditures" shall mean all expenditures
by the Borrower for fixed or capital assets that have a
useful service life of one year or more at the time the
asset is acquired by the Borrower and any obligation of the
Borrower under capital leases (that is, Borrower's
obligation to pay rent and other amounts under any lease of
real or personal property, or any other arrangement to use
such property, or any combination thereof, which are
required to be classified and accounted for as capital
leases under GAAP).

H. The term "Capital Expenditures Facility" shall mean the line
of credit available to Borrower for the purchase of capital
assets and/or leasehold improvements pursuant to Section 3
hereof.

I. The term "Capital Facilities Loan" shall mean each and any
loan made pursuant to the Capital Expenditures Facility.

<PAGE>

J. The term "Consolidated Current Assets" shall mean those
assets of the Borrower and its Subsidiaries that are treated
as current assets in accordance with GAAP, applied on a
consistent basis.

K. The term "Consolidated Current Liabilities" shall mean those
liabilities of the Borrower and its Subsidiaries that are
treated as current liabilities in accordance with GAAP,
applied on a consistent basis.

L. The term "Consolidated Tangible Net Worth" shall mean as of
the time of any determination thereof, the difference
between (A) the sum of (i) the par value (or the value
stated on the books of Borrower and its Subsidiaries) of the
capital stock of all classes of Borrower and its
Subsidiaries, plus (or minus in the case of a deficit), (ii)
the amount of the surplus, whether capital or earned of
Borrower and its Subsidiaries, plus (iii) subordinated debt
(i.e all debt subordinated to the Obligations), less (B) the
sum of treasury stock, unamortized debt discount and
expense, goodwill, trademarks, trade names, patents, and
other similar intangible assets and any write-up after the
date hereof of the value of any assets, all determined for
Borrower and its Subsidiaries in accordance with GAAP,
applied on a consistent basis.

M. The term "Consolidated Total Liabilities" shall mean, as of
the time of any determination thereof, with respect to
Borrower and its Subsidiaries the aggregate sum of the
following items as such items appear on their balance
sheet(s): (i) the unpaid principal balance of all
indebtedness or liability for money borrowed or owed to any
Person from time to time (including any renewals and
extensions120308A22021197 thereof), whether or not the
indebtedness was heretofore or hereafter created, issued,
incurred or assumed, as determined in accordance with GAAP;
(ii) the unpaid principal balance of all indebtedness or
liability for the deferred purchase price of property or
services incurred (including trade obligations); (iii) all
obligations as lessee under leases which have been or should
be, in accordance with GAAP, recorded as capitalized lease
liabilities; and (iv) all Current Liabilities in respect of
unfunded vested benefits under any Plan covered by Title IV
of ERISA.

N. The term "Debt Service Coverage" shall mean, for the four
(4) previous fiscal quarters of Borrower at the time of
determination thereof on a consolidated basis, and all as
determined in accordance with GAAP, the result of the
following calculation:

(i) earnings before interest, taxes, depreciation and
amortization minus dividends, unfunded Capital
Expenditures and taxes, divided by

(ii) the sum of the following: interest expense, current
portion of capital leases and current portion of
long term debt. For the purposes of this

<PAGE>

Subsection N, "unfunded" shall mean Capital
Expenditures which are not offset by corresponding
borrowings.

O. The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.

P. The term "ERISA Affiliate" shall mean any trade or business
(whether or not incorporated) that together with Borrower
would be treated as a single entity employer under Section
4001 of ERISA.

Q. The term "Event of Default" shall mean a default as set
forth in Section 9 of this Loan Agreement after applicable
notice, grace and cure periods provided herein.

R. The term "Fixed LIBOR Rate" shall mean, as to a particular
Interest Period, a rate per annum equal to the rate for
United States dollar deposits with maturities comparable to
such Interest Period which appears on Telerate Page 3750 as
of 11:00 a.m., London time, two (2) Banking Days prior to
the commencement of such Interest Period, provided, however,
that if such rate does not appear on Telerate Page 3750, the
Fixed LIBOR Rate applicable to a particular Interest Period
shall mean a rate per annum equal to the rate at which
United States dollar deposits in an amount approximately
equal to the LIBOR Loan in question, and with maturities
comparable to such Interest Period with respect to which
such Fixed LIBOR Rate is applicable, are offered in
immediately available funds in the London interbank market
to the London office of the Lender by leading banks in the
Eurodollar market at 11:00 a.m., London time, two (2)
Banking Days prior to the commencement of the Interest
Period to which such Fixed LIBOR Rate is applicable, and
provided also, however, the Fixed LIBOR Rate is subject to
correction if any correction is made in such rate and
displayed by the Associated Press-Dow Jones Telerate Service
within one (1) hour of the time when such rate is first
displayed.

S. The term "GAAP" shall mean United States generally accepted
accounting principles.

T. The term "Guarantor" or "Guarantors" shall mean any Person
who at any time shall agree to be a guarantor or surety for
Borrower, which must include, however, any Subsidiary of
Borrower formed after the date of this Loan Agreement.

U. The term "Interest Period" shall mean the thirty (30) or
ninety (90) day periods of time during which a Prime Rate or
Base LIBOR Rate will be applicable to all or a particular
portion of the Loans, in accordance with the terms set forth
herein for each such rate.

<PAGE>

V. The term "Interest Rate Option" shall mean the option of
Borrower to choose a rate of interest for each Interest
Period based upon the Prime Rate or the LIBOR Rate, each as
adjusted herein.

W. The term "Lender" shall mean PNC BANK, N.A., a banking
association organized and existing under the laws of the
United States of America, its successors and assigns.

X. The term "Letter of Credit shall mean a letter or letters of
credit issued by Lender at the request and account of
Borrower pursuant to section 4 hereof.

Y. The term "LIBOR Loan" shall mean any one or more Loans for
which interest is determined based upon the LIBOR Rate.
Nothing herein shall be deemed to limit the number of LIBOR
Loans Borrower may have outstanding at any one time.

Z. The term "LIBOR Rate" shall mean a rate per annum equal to
the Base LIBOR Rate plus the applicable margin which shall
be determined based upon the ratio of Borrower's
Consolidated Total Liabilities to Consolidated Tangible Net
Worth as of the last day of each fiscal quarter of Borrower
(the "Applicable Margin"). The Applicable Margin shall be
determined as soon after the end of each fiscal quarter as
shall be practical but in no event more than 30 days after
the date the financial statements of Borrower are to be
delivered to Lender pursuant to ss.7.5 hereof, as follows:

Consolidated Total Liabilities to
Consolidated Tangible Net Worth Applicable Margin

Above 1.0:1.0 150 basis points
Above .76 and at and below 1.0:1.0 100 basis points
Above .25 and at and below 76:1.0 75 basis points
At and below .25:1.0 50 basis points

Upon determination of the Applicable Margin the rate shall
be adjusted for the period accordingly and any interest
adjustment shall be made on the date the next interest
payment is due. Anything herein to the contrary
notwithstanding, until the quarter ending March 31, 1997 the
LIBOR Rate shall be deemed to be 50 basis points over the
Base LIBOR Rate and thereafter shall float as herein
provided.

AA. The term "Loan" or "Loans" shall mean any Advances made to
Borrower under the Revolver and/or Capital Expenditures
Facility.

BB. The term "Loan Agreement" shall mean this Loan Agreement and
any extension or renewal thereof or modification or
amendment thereto.

<PAGE>

CC. The term "Maturity Date" shall mean April 30, 2000 or any
extension of such date.

DD. The term "Obligation" or "Obligations" shall mean all
indebtedness, obligations, liabilities, and agreements of
every kind and nature of Borrower to or with Lender, or to
or with any affiliate of Lender, or any guaranty of Borrower
of any other Person's indebtedness, liabilities and
agreements to or with Lender, or to or with any affiliate of
Lender, now existing or hereafter arising, and now or
hereafter contemplated, pursuant to this Loan Agreement, the
Relevant Documents or otherwise, whether in the form of
refinancing, letters of credit, bankers' acceptances,
guarantees, loans, interest, charges, expenses or otherwise,
direct or indirect, acquired outright, conditionally or as
collateral security from another, absolute or contingent,
joint or several, liquidated or unliquidated, secured or
unsecured, arising by operation of law or otherwise,
including without limitation any future advances, renewals,
extensions or changes in form of, or substitutions for, any
of said indebtedness, obligations or liabilities, the other
sums and charges to be paid to Lender pursuant to Section 2
or 3 hereof, and all interest and late charges on any of the
foregoing.

EE. The term "Permitted Lien" shall mean (a) purchase money
liens created in the ordinary course of business for the
acquisition of machinery and equipment to be utilized in
Borrower's business; (b) liens of warehousemen, mechanics,
common carriers and landlords arising by operation of law
and incurred in the ordinary course of business, for amounts
that are not yet due and payable or which are being
diligently contested in good faith by Borrower or a
Subsidiary by appropriate proceedings promptly instituted,
provided that in any such case an adequate reserve is being
maintained on the books of Borrower or the Subsidiary in
accordance with GAAP; (c) liens of judgment creditors not
otherwise constituting an Event of Default under Section 9.;
(d) pledges or deposits under worker's compensation,
unemployment insurance and other social security
legislation; and (e) deposits to secure the performance of
bids, trade contracts, leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business.
Anything herein to the contrary notwithstanding the liens
referred to in (a) above shall not exceed, in the aggregate,
the sum of $750,000.00 plus the amount of liens referred to
in (a) above existing as of the date hereof.

FF. The term "Person" shall mean any individual, sole
proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation,
institution, entity, party or government (including any
political subdivision thereof).

GG. The term "Plan" shall mean any plan established or
maintained, or to which contributions have been or are
required to be made, by Borrower or any ERISA

<PAGE>

Affiliate that is subject to the minimum funding
requirements of Section 412 of the Internal Revenue Code of
1986, as amended from time to time.

HH. The term "Prime Rate" shall mean the rate of interest
established from time to time by Lender as its "Prime Rate".
This rate of interest is determined from time to time by
Lender as a means of pricing some loans to its customers and
is neither tied to any external rate of interest or index,
nor does it necessarily reflect the lowest rate of interest
actually charged by Lender to any particular class or
category of customers of Lender.

II. The term "Relevant Documents" shall mean any and all
documents and instruments executed or delivered by Borrower
or any Guarantor to Lender pursuant or incident to this Loan
Agreement, or heretofore executed or delivered by Borrower
with respect to the Revolver and/or the Capital Expenditure
Facility.

JJ. The term "Revolving Loan" or "Revolving Loans" shall mean
Loans made pursuant to the provisions of Section 2 of the
Agreement.

KK. The term "Revolving Note" shall mean the Revolving Note in
the face amount of Ten Million ($10,000,000.00) Dollars, to
be executed contemporaneously herewith and any renewal,
extension, modification or amendment thereto or substitution
therefor.

LL. The term "Revolver" shall mean the Revolving Line of Credit
facility in an amount up to the Advance Limit made available
to the Borrower by the Lender hereunder.

MM. The term "Roll Over Date" shall mean the end of an
applicable Interest Period.

NN. The term "Subsidiary" shall mean any corporation at least a
majority of whose issued and outstanding equity now or at
any time or times hereafter is owned by the Borrower and/or
one or more Subsidiaries thereof.

OO. The term "Telerate Page 3750" shall mean the display
designated as "Page 3750" on the Associated Press-Dow Jones
Telerate Service (or such other page as may replace Page
3750 on the Associated Press-Dow Jones Telerate Service or
such other service as may be nominated by the British
Bankers' Association as the information vendor for the
purpose of displaying British Bankers' Association interest
settlement rates for U.S. Dollar deposits).

PP. The term "Termination Date" shall mean the date upon which
the Loan Agreement or the Revolving Loan is terminated.

QQ. The term "Variable Rate Loan" shall mean any Loan for which
interest is determined based upon the Prime Rate.

<PAGE>

2. REVOLVER:

2.1 Revolver. (a) Amount. (i) During the term of this Loan Agreement,
provided no Event of Default has occurred and is continuing and provided this
Agreement has not been terminated, Lender will provide, at one time or from
time to time, at the request of Borrower, Loans to Borrower which Borrower may
borrow, repay and reborrow as it may elect, in an aggregate principal amount
up to but not in excess of the Advance Limit of Ten Million ($10,000,000.00)
Dollars outstanding at any time, on a revolving loan basis, which shall be due
and payable in full on April 30, 2000, together with all accrued and unpaid
interest fees and charges; provided however, the Lender shall have the right,
but not the obligation and in its sole discretion, to extend the Revolving
Loan on or before April 30th of each year during the term hereof for an
additional one year period. For the purposes of determining the Advance Limit
the amount of Revolving Loans outstanding shall include all amounts of issued
and undrawn upon standby letters of credit as described in Section 4.

(ii) Anything herein to the contrary notwithstanding,
Borrower shall, on or after May 1, 1998, reduce the outstanding principal
balance of the Revolver to Zero ($0) Dollars and maintain the outstanding
principal balance at Zero ($0) Dollars for thirty (30) consecutive days, and
thereafter do so at least once each year for so long as this Agreement is in
effect.

(b) TERMINATION DATE. THE OUTSTANDING PRINCIPAL BALANCE, TOGETHER
WITH ACCRUED AND UNPAID INTEREST AND COSTS, UNDER THE REVOLVER SHALL BE DUE
AND PAYABLE, IN FULL, ON THE TERMINATION DATE. LENDER SHALL HAVE NO OBLIGATION
TO EXTEND, RENEW OR REFINANCE SUCH OUTSTANDING PRINCIPAL BALANCE AT SUCH TIME.

(c) Use of Loan Proceeds. The proceeds of the Revolver are to be
utilized for the future general working capital needs of the Borrower and
standby letters of credit.

(d) Borrowing Procedures and Requirements and Election of Interest
Rates and Periods. For each new Loan, or the conversion or continuation of an
existing Loan hereunder, the following shall apply:

(i) Borrower shall give Lender not less than three (3) Banking
Days prior written notice of any requested Advance as to LIBOR Loans and
written notice, not later than 11:00 a.m. Eastern Time on the date a Variable
Rate Loan is requested, which notice(s) shall: (i) specify the amount of the
Advance requested and if a LIBOR Loan, the Interest Period selected and (ii)
the date the Advance is to be made. Any such notice(s) shall be deemed
irrevocable upon receipt by Lender;

(ii) Each Variable Rate Loan shall be in amount of not less than
One Hundred Thousand ($100,000.00) Dollars;

<PAGE>

(iii) Each LIBOR Loan shall be in an amount of not less than
Five Hundred Thousand ($500,000.00) Dollars with increments of One Hundred
Thousand ($100,000.00) Dollars in excess of such sum and each LIBOR Loan shall
be elected for an Interest Period of either thirty (30) or ninety (90) days,
provided that no Interest Period for a LIBOR Loan may expire after the
Maturity Date;

(iv) On or prior to the date which is three (3) Banking Days
before a Roll-Over Date as to the continuation of existing LIBOR Loans and at
any time on or prior to three (3) Banking Days before a requested conversion
of an existing Variable Rate Loan to a LIBOR Loan, the Borrower may exercise
its options as to the Interest Periods of such LIBOR Loan by providing Lender
with a completed and signed Notice of Conversion/Continuation substantially in
the form of Exhibit A attached hereto and made a part hereof;

(v) In the event the Borrower fails to elect a LIBOR Rate or
Interest Period either when requesting an Advance or three (3) Banking Days
before any RollOver Date, such new Advance shall automatically bear interest
at the LIBOR Rate for a thirty (30) day Interest Period;

(vi) All Variable Rate Loans shall continue as such unless and
until the Borrower seeks to convert them to LIBOR Loans pursuant to the terms
hereof.

3. CAPITAL EXPENDITURE FACILITY:

(a) Amount. (i) Until September 30, 1998 or such earlier date as
Borrower shall elect (the "Conversion Date"), provided there has not occurred
and is not continuing an Event of Default or an event which, with the giving
of notice or the lapse of time, or both, would become an Event of Default,
Lender will provide, at one time or from time to time, at the request of
Borrower, Loans for the purpose of Capital Expenditures up to but not in
excess of the aggregate sum of Twenty Million ($20,000,000.00) Dollars.

(b) Borrowing Procedures and Requirements and Election of Interest
Rates and Periods. For each new Loan, or the conversion or continuation of an
existing Loan hereunder, the following shall apply:

(i) With respect to each Capital Expenditure Loan the Borrower
shall give Lender three (3) Banking Days prior written notice of its request
for such Loan. The notice shall specify the purpose of the Loan, the proposed
date of the Loan, the interest rate option selected and present to the Lender
a true copy of the invoice of the manufacturer, distributor or supplier from
whom the items are being or have been purchased, within twelve (12) months prior
to the date hereof, and within thirty (30) days after the Loan is made proof
of payment thereof. Upon receipt of the request for a Capital Expenditure Loan
the Lender shall make a Loan to Borrower for the full amount of the invoice,
including soft costs such as delivery expense and sales tax;

<PAGE>

(ii) Each Variable Rate Loan shall be in amount of not less
than One Hundred Thousand ($100,000.00) Dollars;

(v) In the event the Borrower fails to elect a LIBOR Rate or
Interest Period either when requesting a Loan or three (3) Banking Days before
any RollOver Date, such new Loan shall automatically be a Variable Rate Loan
and the LIBOR Loan for which the Interest Period is to expire shall
automatically bear interest at the LIBOR Rate for a thirty (30) Interest
Period;

(vi) All Variable Rate Loans shall continue as such unless and
until the Borrower seeks to convert them to LIBOR Loans pursuant to the terms
hereof.

(c) Use of Loan Proceeds: The proceeds of the Capital Expenditures
Facility shall be used for Capital Expenditures provided however, until March
31, 1997, up to Seven Million ($7,000,000.00) Dollars of such proceeds may
also be used for general working capital needs. On or before March 31, 1997
Borrower shall, with out demand, repay to Lender all outstanding Loans made
under the Capital Expenditure Facility for expenditures other than Capital
Expenditures.

(d) Repayment: The Capital Expenditure Loan shall be evidenced by
the Capital Expenditure Note and until the Conversion Date Borrower shall pay
Lender interest only on the Capital Expenditure Loan. On the Conversion Date
the then outstanding principal balance of the Capital Expenditure Loan shall
be converted to a five (5) year term loan with a balloon payment due at final
maturity of the lesser of Four Million ($4,000,000.00) Dollars or twenty
percent (20%) of the unpaid principal balance as of the Conversion Date. The
Term Loan, excluding the balloon payment will be repaid in fifty nine (59) as
nearly equal consecutive monthly installments as shall be practicable and then
a sixtieth (60th) and final balloon payment of the unpaid principal balance
plus interest. In addition to principal, Borrower shall pay interest, at the
calculated based upon the Interest Rate Option elected by Borrower. Payments
of principal

<PAGE>

and interest after conversion shall begin on the first Banking
Day of the second month following the Conversion Date.

(e) Prepayment. The Capital Expenditure Loan may be prepaid in full
or in part at any time without premium or penalty. However, in the event the
Capital Expenditure Loan is prepaid as a result of refinancing by another
lender, Borrower shall be deemed to have terminated this Agreement and the
terms of Section 16.2 below shall apply. Any partial prepayment made pursuant
to this section shall be applied in the inverse order of its maturity.

4. LETTERS OF CREDIT: (a) Letters of Credit. Between the date hereof and
the Maturity Date of the Revolving Loan, so long as no Event of Default or
event which, but for the elapse of time or the giving of notice would
constitute an Event of Default has occurred and subject to the satisfaction by
Borrower of the terms and conditions hereinafter set forth, Lender shall issue
requested Letters of Credit for the account of the Borrower. Each Letter of
Credit shall be in form and substance satisfactory to Lender and without
limiting the generality of the foregoing, issuance of all Letters of Credit
shall be on the following terms and conditions:

(i) Maximum Amount. The aggregate outstanding undrawn upon face
amount of all Letters of Credit, including unreimbursed drawings thereunder
and banker's acceptances related thereto shall not exceed the sum of Three
Million ($3,000,000.00) Dollars.

(ii) Term. No Letter of Credit shall have a stated term of more
than one (1) year but in any event a stated expiration date which is later
than five (5) Banking Days prior to the Termination Date.

(iii)Application. The Letter of Credit and each renewal
thereof shall be issued in accordance with Lender's then current practices
relating to the issuance of Letters of Credit, and only after receipt by
Lender of its then current application and agreement for a Letter of Credit
properly completed and executed by Borrower and delivered to Lender at least
three (3) Banking Days prior to the requested reissuance date.

(iv) Fees and other charges. Borrower shall pay to Lender, a
nonrefundable fee to be established by the Lender from time to time at the
time of the issuance or reissuance of each Letter of Credit for the issuance,
administration, amendment, extension, replacement, reissuance and transfer of
Letter of Credit, including but not limited to, any amendment, extension,
replacement, substitution, modification, renewal, reissuance or assignment
thereof, along with any incidental expenses incurred by Lender in connection
therewith (such as overnight delivery charges). In addition Borrower shall pay
Lender an annual fee equal to 1/2 of 1% of the face amount of each standby
Letter of Credit which fee shall be payable in quarterly installments, in
advance.

(b) Payments upon Draw. Upon any draw upon a Letter of Credit,
Borrower hereby agrees to repay immediately to Lender on the same day such
draw is honored by Lender,

<PAGE>

the amount of such draw, together with any and all costs or expenses which
Lender may incur in connection therewith, without any requirement of notice,
presentment or demand by Lender, all of which are hereby waived by Borrower.
In order to implement the foregoing, unless Lender is immediately reimbursed
with other funds, notwithstanding the provisions of Section 2.1(d) hereof,
Borrower hereby irrevocably authorizes and directs Lender to (a) treat such
draw as a request for a Revolving Loan in the amount of such draw; (b) make a
Revolving Variable Rate Loan in the aggregate amount of such draw; and (c)
retain the proceeds of such Revolving Loan as reimbursement of such draw.

(c) Payment Upon Bankruptcy, Etc. If an Event of Default pursuant to
Section 9, specifically including those under subsection 9.4, should occur
when there are unexpired Letters of Credit, Borrower hereby irrevocably
authorizes and directs Lender to make a Revolving Loan in the amount of the
aggregate undrawn face amount of such unexpired Letters of Credit, the
proceeds of which Revolving Loan shall be placed in a deposit account known as
the Reimbursement Deposit Account, for the sole benefit of and under the sole
dominion and control of Lender, which shall be used to reimburse Lender for
draws upon such Letters of Credit. If from time to time outstanding Letters of
Credit expire, so that funds remain in the Reimbursement Deposit Account which
exceed the then aggregate undrawn face amount of the remaining Letters of
Credit, such excess funds shall be applied by Lender to reduce the outstanding
Obligations.

(d) Payments After Termination of Facility. If all Revolving Loans
have been paid and this Agreement is terminated for any reason, whether on or
prior to the Maturity Date, Borrower shall immediately, upon demand, deposit
into, and keep on deposit in, the Reimbursement Deposit Account, for the sole
benefit of and under the sole dominion and control of Lender, an amount equal
to at least 105% of the aggregate undrawn face amounts of all outstanding
Letters of Credit, for the purpose of providing Lender with reimbursement of
draws under the Letters of Credit and of fees or other expenses due and owing
to Lender. At such time as Lender shall have no further obligations under and
pursuant to any Letter of Credit and after reimbursing itself for all draws
under any Letter of Credit and any fees or other expenses due and owing in
connection therewith, Lender shall remit the balance of the Reimbursement
Deposit Account, if any, to the order of Borrower.

(e) Conditions Precedent to Loans Pursuant to Section 4.b. All
Revolving Loans made pursuant to Section 4.b shall be made whether or not at
the time of such Revolving Loan all conditions precedent to the making of
Revolving Loans have been met. For the sole purpose of implementing Section
4.e, any provisions of this Agreement which are inconsistent herewith are
superseded.

(f) Letter of Credit Indemnification. The Revolving Loans
contemplated by Section 4.f, (hereinafter referred to as "Letter of Credit
Advances") shall in no event be deemed to be discretionary or voluntary.
Borrower covenants and agrees to pay, protect, indemnify and hold harmless
Lender from and against any and all costs and expenses, including, but not
limited to, reasonable attorneys' fees and experts' costs and expenses,
incurred by Lender as a

<PAGE>

result of the allegation by any Person that the Letter of Credit Advance in
question was discretionary or voluntary on the part of Lender.

(g) Uniform Customs and Practices for Documentary Credits. Each
Letter of Credit shall be governed by and construed and enforced in accordance
with the Uniform Custom and Practices for Letters of Credit (the "UCP") and if
and to the extent there is any conflict or inconsistency between the UCC and
the UCP, the UCP shall govern. In no event shall Lender have any obligation to
issue (a) a "Revolving Documentary Credit," as defined in the UCP; (b) a "Red
Clause Documentary Credit," as defined in the UCP; (c) an authenticated
teletransmission or pre-advice of any Letter of Credit; or (d) any Letter of
Credit if Lender determines, which determination shall be final, conclusive
and binding on Borrower, that the terms and conditions of the Letter of Credit
sought by Borrower and/or the use of the proceeds of such Letter of Credit are
not in compliance with the internal policies of Lender.

(h) Payment Obligations. The payment obligations of Borrower under
this section 4 shall be absolute, unconditional and irrevocable and shall be
paid strictly in accordance with the terms of the Letter of Credit and this
Agreement under all circumstances, including, without limitation, the
following circumstances: (i) the existence of any claim, set-off, defense or
other right which Borrower may have at any time against any beneficiary or
transferee of the Letter of Credit, or Lender or any other Person, whether or
not in connection with this Agreement; (ii) any statement or document
presented under the Letter of Credit proving to be forged, fraudulent, invalid
or insufficient or any statement therein being untrue or inaccurate; and (iii)
payment by Lender under the Letter of Credit against presentation of a draft
or certificate which does not comply with the terms of the Letter of Credit,
unless a Court of competent jurisdiction determines in a final, non-appealable
judgment, such payment to have resulted primarily and directly from the gross
negligence or willful misconduct of Lender.

(i) Supplemental Provisions. The provisions of any application or
agreement related to the Letter of Credit are supplemental to, and not in
derogation of, any rights and remedies of Lender under this Agreement, the
Relevant Documents, at law, in equity, by arbitration or otherwise.

(j) Suspension of Commitment to Issue Letter of Credit. If any
restrictions are imposed by any governmental rule preventing Lender from
issuing letters of credit, the commitment of Lender to issue the Letter of
Credit hereunder shall immediately be suspended.

5. INTEREST AND OTHER CHARGES / SPECIAL PROVISIONS:

5.1 Interest Rate. Except as herein provided, the Revolver and the
Capital Expenditure Facility shall bear interest as follows:

(a) As to Variable Rate Loans, during each calendar month at a
fluctuating interest rate per annum equal at all times to one percentage point
per annum below the Prime

<PAGE>

Rate, as such Prime Rate may change from time to time without notice to
Borrower. Interest shall be calculated, on a daily basis, with each day
representing 1/360th of a year;

(b) As to LIBOR Loans, at the applicable Fixed LIBOR Rate per annum
applicable to such LIBOR Loan which interest shall be calculated, on a daily
basis, with each day representing 1/360th of a year;

(c) The LIBOR Rate for each Loan and Interest Period shall be
adjusted (up or down) on the next interest due date after the Applicable
Margin is determined, but until so determined interest shall be calculated
based upon the last determined Applicable Margin.

5.2 Payment of Interest. All accrued and unpaid interest on Variable Rate
Loans and LIBOR Loans shall be charged by Lender to Borrower's operating
account with Lender on the first Banking Day of each calendar month.

5.3 Default Rate. Anything herein to the contrary notwithstanding, upon
the occurrence and during the continuance of an Event of Default hereunder,
the interest rate charged to Borrower on the Loans shall, at Bank's
discretion, be increased by two (2) percentage points per annum in excess of
the then applicable rate.

5.4 Maximum Rate. In no event shall the interest rate charged under this
Loan Agreement be higher than the maximum lawful rate. In the event the
interest received by the Lender exceeds the maximum lawful rate such excess
shall be credited to Borrower.

5.5 Unused Commitment Fee. The Borrower shall pay to the Lender
quarterly, in arrears, a fee calculated as one-quarter of one (.25%) percent
per annum, calculated on the basis of a 360-day year, of the average daily
unused portion of the Revolver, which fee shall be charged by Lender to
Borrower's operating account with Lender on the last day of each calendar
quarter.

5.6 Special Provisions Relating to LIBOR Loans.

(a) If the last Interest Period during the term of the Revolver
shall end prior to the Termination Date, the entire outstanding principal
balance of the Revolver shall, for the remainder of the term of the Revolver,
bear interest at the Variable Rate.

(b) In the event the Borrower should seek to elect the LIBOR Rate,
and in the event and on each occasion that on the day which is three (3)
Banking Days prior to a particular Interest Period, the Lender shall have
determined in good faith (which determination shall be conclusive and binding
upon the Borrower) that U.S. Dollar deposits in an amount approximately equal
to the requested LIBOR Loan are not generally available at such time in the
London Interbank Market, or reasonable means do not exist for ascertaining the
LIBOR Rate for such LIBOR Loan for such Interest Period, the Lender shall so
notify Borrower (telephonic notice being deemed sufficient), and with respect
to existing LIBOR Loans the interest rate applicable to such LIBOR Loan shall
automatically convert to the Variable Rate as of the impending Roll

<PAGE>

Over Date for such LIBOR Loan (whether or not such notice has been previously
provided to the Borrower) and with respect to any new Advance such Loan shall
be a Variable Rate Loan, it being understood and agreed that the Variable Rate
shall remain in effect thereafter with respect to such Loan unless and until
the Lender shall have determined in good faith (which determination shall be
conclusive and binding upon the Borrower) that the aforesaid circumstances no
longer exist, whereupon such Loan may be converted, upon notice to and consent
of Borrower, to a LIBOR Loan, with the LIBOR Rate determined in the manner
specified in the definitions of Fixed LIBOR Rate and Base LIBOR Rate and LIBOR
Rate set forth in Sections 1.Q, 1.E and 1.Y above, within ten (10) Banking
Days of Lender's making such determination.

(c) Each determination of a LIBOR Rate, the Fixed LIBOR Rate and the
Base LIBOR Rate applicable to a particular Interest Period shall be made by
the Lender and shall be conclusive and binding upon the Borrower, absent
manifest error.

(d) If any change in any law or regulation or in the interpretation
thereof by any governmental authority charged with the administration or
interpretation thereof shall make it unlawful for the Lender to make or
maintain a LIBOR Rate with respect to any Loan or to fund any Loan at a Rate
related to LIBOR in the London Interbank Market or to give effect to its
obligations as contemplated hereby, then, upon notice by the Lender to the
Borrower, the interest rate applicable to all new Advances shall be the
Variable Rate and the interest rate applicable to all LIBOR Loans shall be
automatically converted to the Variable Rate, it being agreed that any
notice given by the Lender to the Borrower pursuant to this section
shall, such change in law, regulation or interpretation permitting, be
effective on the impending Roll Over Date(s) as to such LIBOR Loan(s), or,
shall such change not be so permitting, be effective immediately upon notice
being given by the Lender to the Borrower, and that the Variable Rate shall
thereafter remain in effect with respect to all affected LIBOR Loans unless
and until the Lender shall have determined, in good faith (which determination
shall be conclusive and binding upon the Borrower) that the aforesaid
circumstances no longer exist, whereupon Loans may be converted to LIBOR
Loans, upon notice to and consent by Borrower (unless such conversion is
mandated by law or regulation, whereupon no such notice or consent shall be
required) with the LIBOR Rate determined in the manner specified in the
definitions of the LIBOR Rate, Fixed LIBOR Rate and Base LIBOR Rate set forth
in Sections 1.Y, 1.Q. and 1.E above, within ten (10) Banking Days after such
good faith determination by the Lender. If, as a result of such determination,
the interest rate is converted to the Variable Rate on a date other than a
Roll Over Date, the Borrower shall pay to Lender, on demand, an amount equal
to the prepayment premium (i.e. breakage fee) which would have n the date the
interest rate was converted to the Variable Rate.

6. REPRESENTATIONS AND WARRANTIES:

6.1 Organization and Qualification. Borrower hereby represents and
warrants to Lender, knowing and intending that Lender shall rely thereon in
making the loans contemplated hereby, that:

<PAGE>

(a) Borrower has been and will continue to be a corporation duly
organized and validly existing and in good standing under the laws of the
State of Delaware and is and will continue to be qualified and in good
standing in all jurisdictions wherein the character of the property owned or
the nature of the business transacted by Borrower makes licensing or
qualification as a foreign entity necessary and wherein the result of a
failure to maintain such good standing would be material and adverse to the
Borrower.

(b) A true, accurate and complete copy of Borrower's valid
resolution authorizing the transaction contemplated herein, and Borrower's
certificate of incorporation all as in effect on the date hereof and certified
by the Secretary of the Borrower have heretofore been delivered to Lender.

6.2 Due Authorization; No Default. (a) The execution, delivery and
performance of this Loan Agreement and the Relevant Documents has been duly
authorized by all necessary action on the part of Borrower; is not
inconsistent with its certificate of incorporation, by-laws and other
governing documents; does not contravene any law, governmental rule,
regulation or order applicable to Borrower; and does not and will not
contravene any provision of, or constitute a default under, any material
indenture, mortgage, contract or other instrument or any order, writ,
injunction or decree to which Borrower is a party or by which it or its
properties or assets are bound.

(b) This Loan Agreement and the Relevant Documents, upon their
execution and delivery, and assuming due execution and delivery by Lender,
will constitute the legal, valid and binding agreements of Borrower,
enforceable in accordance with their terms except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
at the time in effect.

6.3 No Governmental Consent Necessary. No consent or approval of, giving
of notice to, registration with or taking of any other action in respect of
any governmental authority or agency, except the New Jersey Economic
Development Authority, is required with respect to the execution, delivery and
performance by Borrower of this Loan Agreement and the Relevant Documents.

6.4 No Proceedings. There are no actions, suits, or proceedings pending
or to Borrower's knowledge, threatened against or affecting Borrower in any
court or before any governmental commission, board or authority which, if
adversely determined, will have an adverse effect on the ability of Borrower
to perform its responsibilities under this Loan Agreement or the Relevant
Documents; the Borrower is not in default with respect to any order of any
court, arbitrator or governmental or non-governmental body; and the Borrower
is not subject to or a party to any order of any court or governmental or
non-governmental body arising out of any action, suit or proceeding under any
statute or other law respecting anti-trust, monopoly, restraint of trade,
unfair competition or similar matters.

<PAGE>

6.5 Financial Statements. (a) Subject to any limitation stated therein,
all balance sheets, income statements and other financial data (as set forth
in Borrower's December 31, 1995 10K, March 31, 1996 10Q, June 30, 1996 10Q and
September 30, 1996 10Q, all as filed with the Securities and Exchange
Commission) fairly present the financial condition and results of operations
of Borrower in all material respects as at the respective dates thereof and
the results of its operations for the periods for which the same are furnished
to Lender. All other information, reports and other papers and data furnished
to Lender are, or will be at the time the same are so furnished, true,
accurate and complete in all material respects. All such financial statements
and other information have been, or will have been at the time of issuance,
(i) as to Borrower's annual financial statements, prepared by certified public
accountants in accordance with GAAP consistently applied and (ii) as to
interim statements, will fairly present the financial condition and results of
operations of Borrower in all material respects.

(b) Except as shown on the most recent financial statements which
have been delivered to Lender and which are specified on Schedule 2 annexed
hereto and made part hereof, Borrower has no other liabilities as of the date
hereof which would materially and adversely affect the financial condition of
Borrower.

6.6 Changes in Financial Condition. (a) Except as disclosed in Schedule
2, there has been no material adverse change in Borrower's financial condition
since the date of its last financial statements identified on such Schedule 2.

(b) Borrower's assets, at fair valuation, exceed Borrower's
liabilities (including without limitation contingent liabilities); Borrower is
paying its debts as they become due; and Borrower has capital and assets
sufficient to carry on its business.

6.7 Taxes and Assessments. Borrower has paid and discharged when due all
taxes (as reflected on its filed tax returns), assessments and other
governmental charges which may lawfully be levied or assessed upon its income
and profits, or upon all or any portion of any property belonging to it,
whether real, personal or mixed, to the extent that such taxes, assessments
and other charges have become due, except those being contested in good faith
and for which sufficient reserves have been set aside or which would not have
a material adverse effect upon the Borrower. Borrower has filed all tax
returns, federal, state and local, and all related information, required to be
filed by it.

6.8 ERISA. Borrower is in compliance in all material respects with the
provisions of ERISA, and the related provisions of the Internal Revenue Code,
and with all regulations and published interpretations issued thereunder by
the United States Treasury Department, the United States Department of Labor
and the Pension Benefit Guaranty Corporation ("PBGC"). There has occurred no
transaction that is prohibited by Section 406 of ERISA or that constitutes a
"prohibited transaction" under Section 4975(c) of the Internal Revenue Code
and with respect to which a prohibited transaction exemption has not been
granted and is not currently in effect. No reportable event as defined in
Section 4043 of ERISA has occurred with respect to Plan. No notice of
intention to terminate a Plan has been filed nor has any Plan been terminated;
the PBGC has not instituted proceedings to terminate, or to appoint a trustee
to administer, any Plan,

<PAGE>

nor do circumstances exist that could reasonably be expected to constitute
grounds for any such proceedings; and neither Borrower nor any ERISA Affiliate
has completely or partially withdrawn from any multiemployer Plan described in
Section 4001(a)(3) of ERISA. Borrower and each ERISA Affiliate have met the
minimum funding standards under ERISA with respect to each of its Plans; no
Plan has an accumulated funding deficiency or waived funding deficiency within
the meaning of ERISA; and no material liability to the PBGC under ERISA has
been incurred by Borrower or any ERISA Affiliate.

6.9 O.S.H.A./E.P.A. Except as set forth on Schedule 6.9, to the best of
Borrower's knowledge, Borrower has duly complied, in all material respects,
with, and its facilities, business assets, property, leaseholds and equipment
are in compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act and the Environmental Protection Act, and
all rules and regulations thereunder and all similar state and local laws,
rules and regulations; and there are no outstanding citations, notices or
orders of noncompliance issued to Borrower or relating to its business,
assets, property, leaseholds or equipment under any such laws, rules or
regulations.

6.10 Environmental Matters. No property owned or used by Borrower and
located in the State of New Jersey is an "industrial establishment" within the
meaning of the New Jersey Industrial Site Recovery Act ("ISRA") or is or, to
the best of Borrower's knowledge, has been used for the generation,
manufacture, refining, transportation, treatment, storage, handling or
disposal of any "hazardous substances" or "hazardous wastes" within the
meaning of ISRA. The following are all of the Standard Industrial
Classification Codes applicable to the properties and operations of Borrower:
2841.

(b) To the best of Borrower's knowledge, Borrower is in compliance
in all material respects with all applicable federal, state and local
statutes, rules, regulations, orders and other provisions of law relating to
air emissions, water discharge, noise emissions, solid and liquid disposal,
hazardous waste and substances, and other environmental, health and safety
matters.

6.11 No Other Violation. Borrower is not in violation of any term of its
certificate of incorporation or by-laws and no event or condition has occurred
and is continuing which constitutes or results in, (or would constitute or
result in, with the giving of notice, lapse of time or other condition):

(a) A breach of or a default under any material agreement,
undertaking or instrument to which Borrower is a party or by which it may be
affected; or

(b) The imposition of any lien, encumbrance or restriction on any
property of Borrower, except as noted in Schedule 3 hereof.

6.12 Margin Stock. No part of the proceeds of any Loan will be used,
directly or indirectly, to purchase or carry any "margin stock" (as defined in
Regulation U issued by the Board of Governors of the Federal Reserve System),
to extend credit to others for the purpose of

<PAGE>

purchasing or carrying any such margin stock, or for any purpose that violates
any provision of Regulations G, T, U or X issued by the Board of Governors of
the Federal Reserve System.

6.13 Other Liens. Borrower has good and marketable title to and owns all
of its assets free and clear of any and all liens, encumbrances or security
interests whatsoever, except (i) those encumbrances created pursuant to this
Loan Agreement; and (ii) those encumbrances set forth on Schedule 3 annexed
hereto and made a part hereof. None of the assets are subject to any
prohibition against encumbering, pledging, hypothecating or assigning the same
or requires notice or consent prior to Borrower's doing of the same.

6.14 Books and Records. Borrower maintains its books and records at 1735
Jersey Avenue, North Brunswick, New Jersey 08902.

6.15 Representations and Warranties True, Accurate, and Complete.

(a) None of the representations, warranties or statements made to
Lender pursuant hereto or in connection with this Loan Agreement or the
transactions contemplated hereby contains any untrue statement of a material
fact, or omits or will omit to state a material fact necessary in order to
make the statements contained herein and therein, in light of the
circumstances in which they are made, not misleading.

(b) All warranties and representations made herein or in the
Relevant Documents by Borrower will be true and accurate, in all material
respects, at the time it requests Lender to make Advances to it hereunder.

6.16 Names; Location of Office. Schedule 6 annexed hereto and made part
hereof sets forth a complete and accurate list of:

(a) All names by which the Borrower is known or under which the
Borrower is conducting business, including, without limitation, its corporate
names and all trade names;

(b) All offices and locations at or out of which the Borrower
conducts any of its business or operations; and

7. AFFIRMATIVE COVENANTS:

Until payment in full of all Obligations and the termination of this
Loan Agreement, Borrower covenants and agrees that it will:

7.1 Notify Lender. Promptly inform Lender if any one or more of the
representations and warranties made by Borrower in this Loan Agreement or in
any Relevant Document shall no longer be true, accurate and complete in all
material respects.

<PAGE>

7.2 Pay Taxes and Liabilities; Comply with Agreements. Except those being
contested in good faith and for which adequate reserves have been set aside or
which will not have a material adverse effect on Borrower, promptly pay, when
due, all indebtedness, sumsand liabilities of any kind now or hereafter owing
by Borrower to any party however created, incurred, evidenced, acquired,
arising or payable, including without limitation the Obligations, income and
excise taxes and taxes with respect to any of the Collateral, or any wages or
salaries paid by Borrower or otherwise.

7.3 Observe Covenants, etc. Observe, perform and comply, in all material
respects, with the covenants, terms and conditions of this Loan Agreement, the
Relevant Documents and any other agreement or document entered into between
Borrower and Lender.

7.4 Maintain Corporate Existence and Qualifications. Maintain and
preserve, and cause any Subsidiary to maintain and preserve, in full force and
effect, its corporate existence and rights, franchises, licenses and
qualifications necessary to continue its businesses and comply in all material
respects with all applicable statutes, rules and regulations pertaining to the
operation, conduct and maintenance of its existence and business including,
without limitation, all federal, state and local laws relating to Benefit
Plans, environmental, safety, or health matters, and hazardous or liquid waste
or chemicals or other liquids (including use, sale, transport and disposal
thereof).

7.5 Information and Documents to Be Furnished to Lender. Borrower shall
furnish to Lender:

(a) Annual Consolidated Financial Statements. As soon as delivered
to any other creditor, but in no event later than ninety (90) days after the
end of each fiscal year, on a consolidated basis with all of Borrower's
consolidated Subsidiaries, Borrower's balance sheet as at the end of such
year, Borrower's statements of cash flow for such fiscal year and Borrower's
statements of income for such fiscal year, all in reasonable detail, all
prepared in accordance with GAAP consistently applied, and all audited without
qualification by independent certified public accountants of recognized
standing selected by Borrower and reasonably satisfactory to Lender, which
accountants shall state that said statements fairly present, in all material
respects, the financial condition and results of operations of Borrower as at
the end of each such fiscal year and were prepared in accordance with GAAP,
and, together with such statements, (i) the certificate of such certified
public accountants, stating that, based upon their examination of the affairs
of the Borrower performed in connection with such statements, they are not
aware of the occurrence or existence of any condition or event which
constitutes an Event of Default or, if they are aware thereof, the nature
thereof, and (ii) a written acknowledgment by such accountant of Lender's
reliance upon such financial statement in form and substance reasonably
acceptable to Lender, and (iii) in addition to such statements, any
supplementary information to the financial reports as Lender shall reasonably
require.

(b) Quarterly Consolidated and Consolidating Financial Statements.
As soon as delivered to any other creditor but in no event later than
forty-five (45) days after the end of

<PAGE>

each quarter-annual fiscal period of Borrower except the fourth, on a
consolidated and consolidating basis with all of Borrower's consolidated
subsidiaries, Borrower's balance sheets as at the end of such period, and
Borrower's cumulative income and surplus statements for the period beginning
on the first day of such fiscal year and ended on the date of such balance
sheet, all in reasonable detail all prepared by Borrower's management and
certified to by Borrower's chief financial officer, treasurer or controller as
being prepared in accordance with GAAP consistently applied, subject to the
usual and ordinary year end adjustments and absence of footnotes, and, in
addition to such statements, any supplementary information to the financial
reports as Lender shall reasonably require.

(c) Monthly Agings. As soon as delivered to any other creditor but
in no event later than thirty (30) days after the end of each month, summary
aging reports of accounts receivable and accounts payable shown on Borrower's
books as of the close of the preceding month, all in form and substance
satisfactory to Lender.

(d) Officer Certification. With each annual and quarterly financial
statement, a certification by Borrower's chief financial officer, treasurer or
controller, stating that, to the best of said person's knowledge, there has
occurred no Event of Default or event which, but for the lapse of time or
giving of notice or both, would constitute an Event of Default hereunder or
under any Relevant Document, as of the date of such statement, and providing
evidence of the method of calculating compliance with covenants 8.12 through
8.15.

(e) Management Letters. Promptly upon receipt, a copy of each
management letter, if any, provided to Borrower by its certified public
accountants at any time.

(f) Notice of Environmental, Health or Safety Complaints.
Immediately, notice or copies if written of all material claims, complaints,
orders, citations or notices, whether formal or informal, written or oral,
from any governmental body or private person or entity, relating to air
emissions, water discharge, noise emission, solid or liquid waste disposal,
hazardous waste or materials, or any other environmental, health or safety
matter. Such notices shall include, among other information, the name of the
party who filed the claim, the potential amount of the claim, and the nature
of the claim.

(g) Other Information. Immediately upon request:

(i) Certificates of insurance for all policies of insurance to
be maintained by Borrower pursuant hereto;

(ii) ERISA Documents. All ERISA reports, notices, returns and
all other documents filed as required by or in compliance with ERISA, whether
to the Internal Revenue Service, the Department of Labor, the Pension Benefit
Guaranty Corporation or any other appropriate agency, and all documents and
information distributed to participants in any Plan;

<PAGE>

(iii) Any notice of a default under the Loan Agreement between
Borrower and the New Jersey Economic Authority, the Reimbursement Agreement
between Borrower and Banque Nationale De Paris, Houston Agency, both dated
April 15, 1993 or any other documents executed in conjunction with the sale of
the New Jersey Economic Development Authority Economic Growth Bonds (Composite
Issue-1992 Second);

(iv) From time to time, such other information as Lender may
reasonably request with respect to the Borrower or any Guarantor.

7.6 Access to Records and Property. At any time and from time to time,
upon request by and not less than twenty-four (24) hours notice from Lender,
give any representatives of Lender access during normal business hours to, and
permit any of them to examine, audit, copy or make extracts from, any and all
books, records and documents in the possession of Borrower or any independent
contractor relating to Borrower's affairs, and to inspect any of its
properties wherever located. Lender agrees to keep and hold all non-public
information obtained from Borrower confidential (except to the extent that
Lender becomes legally compelled to disclose such information.)

7.7 Comply With Laws. Comply with the requirements of all applicable
laws, rules, regulations and orders of any governmental authority, compliance
with which is necessary to maintain its corporate existence or the conduct of
its business in all material respects or non-compliance with which would
materially and adversely affect its ability to perform its responsibilities or
any security given to secure its Obligations.

7.8 Insurance Required. (a) Cause to be maintained, in full force and
effect on all property given as collateral security for all Obligations,
insurance in such amounts and against such risks as is reasonably satisfactory
to Lender, including, but without limitation, product liability, fire, boiler,
theft, burglary, pilferage, loss in transit, business interruption, credit
insurance and hazard insurance. Said insurance policy or policies shall:

(i) Be in a form and with insurers which are reasonably
satisfactory to Lender;

(ii) Be for such risks and for such insured values as Lender or
its assigns may reasonably require in order to replace the property in the
event of actual or constructive total loss;

(iii) Designate Lender and its assignees, as additional loss
payees and insureds as their interests may from time to time appear;

(iv) Contain a "Breach of Warranty" clause whereby the insurer
agrees that a breach of the insuring conditions or any negligence by Borrower
or any other Person shall not invalidate the insurance as to Lender and its
assignees; and

<PAGE>

(v) Provide that they may not be canceled or materially altered
without thirty (30) days prior notice to Lender and its assignees.

(b) Additional Insurance. Obtain such additional insurance as Lender
may reasonably require.

(c) Notice of Loss. In the event of loss or damage, forthwith notify
Lender and file proofs of loss with the appropriate insurer.

(d) No Duty for Lender. In no event shall Lender be required either
to (i) ascertain the existence of or examine any insurance policy or (ii)
advise Borrower in the event such insurance coverage shall not comply with the
requirements of this Loan Agreement.

7.9 Bank Accounts. At all times, maintain its primary operating
account(s) with Lender.

7.10 Further Assurances. At any time or from time to time upon request of
Lender, execute and deliver such further documents and do such other acts and
things as Lender may reasonably request in order to effectuate more fully the
purposes of this Loan Agreement, the Relevant Documents and any other
instruments, documents and agreements which shall be executed simultaneously
herewith, or which may hereafter be executed by Borrower with regard to the
transactions contemplated hereby.

7.11 Pay Legal Fees and Expenses. Pay to Lender, upon demand, together
with interest at the rate set forth in Section 5.3 hereof, from the date when
incurred or advanced by Lender until repaid by Borrower all costs, expenses or
other sums incurred or advanced by Lender (including reasonable legal fees and
disbursements) to collect the Obligations, or to preserve and protect its
interests, or to enforce Lender's rights as against Borrower or any Guarantor,
or in the prosecution or defense of any action or proceeding related to the
subject matter of this Loan Agreement or the Relevant Documents, including
without limitation reasonable legal fees, expenses and disbursements. All such
expenses, costs and other sums shall be deemed Obligations.

8. NEGATIVE COVENANTS:

Until payment in full of all Obligations, Borrower covenants and
agrees that it and its consolidated Subsidiaries, (unless such entity is
specifically excepted), will not:

8.1 No Consolidation, Merger, Acquisition. Consolidate with, merge with,
acquire the stock or assets of any Person, firm, joint venture, partnership,
corporation, or other entity, whether by merger, consolidation, purchase of
stock or otherwise, except mergers, acquisitions and consolidations which,
after giving effect to such merger, acquisition and consolidation will not
cause any violation of the covenants and agreements contained in this Loan
Agreement and

<PAGE>

so long as the Lender is given prior notice of the merger, acquisition or
consolidation and with respect to a merger, Borrower, or if applicable a
Subsidiary, is the surviving entity of the merger.

8.2 Disposition of Assets. Sell, lease, transfer, convey or otherwise
dispose of all or substantially all of its assets, other than in the ordinary
course of business or the sale or other disposition of unusable or obsolete
equipment.

8.3 Liens. Incur, create or permit to exist any mortgage, assignment,
pledge, hypothecation, security interest, lien or other encumbrance on any of
its property or assets, whether now owned or hereafter acquired, except (a)
liens for taxes not delinquent; (b) those liens in favor of Lender created by
this Loan Agreement and Relevant Documents; (c) those existing liens set forth
on Schedule 3 annexed hereto and made part hereof and (d) Permitted Liens.

8.4 Negative Pledges. Incur, create or permit to exist any negative
pledge with respect to its assets or properties in any other mortgage,
security agreement, pledge, hypothecation or other agreement entered into with
any other Person.

8.5 Other Liabilities. Incur, create, assume or permit to exist any
indebtedness or liability on account of either borrowed money or the deferred
purchase price of property, except (a) Obligations to Lender; (b) indebtedness
subordinated to payment of the Obligations on terms approved by Lender in
writing; (c) those liabilities existing on the date hereof and (d) liabilities
for Permitted Liens.

8.6 Loans. Make loans to any Person, except loans to employees or loans
to Subsidiaries, not to exceed $300,000.00 and $500,000.00, respectively, in
aggregate outstanding principal balances at any time.

8.7 Guarantees. Except for the benefit of Lender (or its Subsidiaries up
to the sum of $1,000,000.00 in the aggregate at any time outstanding,
inclusive of loans to such Subsidiaries permitted pursuant to ss.8.6), assume,
guarantee, endorse, contingently agree to purchase or otherwise become liable
upon the obligation of any Person except (a) by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business or (b) contingent obligations under letters of credit
entered into in the ordinary course of business for the purchase of
merchandise for resale.

8.8 Change Business. Materially change or alter the nature of its
business.

8.9 Dividends: At any time there shall have occurred and be continuing an
Event of Default or event which but for the lapse of time or the giving of
notice or both would constitute an Event of Default, declare or pay any cash
dividend or make distribution on, or redeem, retire or otherwise acquire,
directly or indirectly, any share of its stock, or make any distribution of
assets to stockholders.

<PAGE>

8.10 Change Location or Name. Change the place where its books and
records are maintained or change its name or transact business under any other
names without prior written notice to Lender.

8.11 Transactions With Affiliates. Enter into any transaction with an
Affiliate or Subsidiary on terms less advantageous to Borrower than those that
could be obtained from any other Person in an arms-length transaction.

8.12 Consolidated Tangible Net Worth. Cause, suffer or permit its
Consolidated Tangible Net Worth to be or become less than the following as at
the end of any fiscal quarter:

(a) as at December 31, 1996 until December 30, 1997, Forty
Million ($40,000,000.00) Dollars; and then

(b) from December 31, 1997 and annually thereafter the tangible
net worth of Borrower shall increase by a sum equal to Ten Million
($10,000,000.00) Dollars plus one hundred (100%) percent of the Net Proceeds
of any future equity offerings by the Borrower less all treasury stock. For
the purposes of this Agreement the term "Net Proceeds" shall mean the gross
proceeds of any equity offering less the normal and customary costs and
expenses of the offering.

8.13 Debt to Net Worth Ratio. Cause, suffer or permit the ratio of
Consolidated Total Liabilities to Consolidated Tangible Net Worth to be or
become more than the following as at the end of any fiscal quarter:

(a) As at December 31, 1996 until December 30, 1997: 1.25:1.0;
and then

(b) from December 31, 1997 through December 30, 1998: 1.0:1.0;
and then

8.14 Current Ratio. Cause, suffer or permit its Consolidated Current
Ratio, which shall be calculated as the ratio of its Consolidated Current
Assets to the total of its Consolidated Current Liabilities plus the
outstanding principal balance under the Revolver, all on a consolidated basis
with its Subsidiaries, to be or become less than 2.0:1.0 as at the end of any
fiscal quarter.

8.15 Debt Service Ratio. Cause, suffer or permit its Debt Service Ratio
to be less than 5.0:1.0 as at the end of any quarter based on a quarterly
rolling average of the prior four (4) quarters through December 31, 1998 and
thereafter 3.5:1.0.

8.16 Investments: Purchase or acquire the obligations, securities or
stock of, or make capital contributions to, any Person, except:

<PAGE>

(a) Marketable direct obligations of the United States of
America;

(b) Bonds, bills or notes of any State, County or municipality
of the United States of America, (w) which mature withi two years from the
date of acquisition thereof, (x) which are not in default as to principal or
interest and (y) which are rated AA or better by Moody's Investors Service or
if same is not available or no longer in existence a similar service
acceptable to Lender;

(c) Customer's notes, chattel paper or the like received as
non-cash proceeds of the sale of inventory of the Borrower in the ordinary
course of its business;

(d) Certificates of deposit and Repurchase Agreements; and

(e) Any obligation iss ed by Lender or any affiliate of Lender.

9. DEFAULT:

The occurrence of any of the following shall constitute an Event of
Default:

9.1 If any representation or warranty made by the Borrower and/or any
Subsidiary in the Relevant Documents furnished in connection with the Loan,
shall prove to have been false, incorrect or misleading in any substantial and
material respect on the date as of which made;

9.2 The Borrower shall have failed to make any payment of interest or
principal on the Loans on a due date or within ten (10) days thereafter;

9.3 The Borrower and/or any Subsidiary shall have failed to duly observe
or perform any covenant, condition or agreement on the part of the Borrower
and/or any Subsidiary to be observed or performed pursuant to the terms of the
Relevant Documents other than the payment of moneys which shall be governed by
9.2 above, and such default shall have remained uncured for a period of thirty
(30) days after written notice thereof to the Borrower and/or any Subsidiary
by the Lender;

9.4 The Borrower and/or any Subsidiary shall have applied for or
consented to the appointment of a custodian, receiver, trustee or liquidator
of all or a substantial part of their respective assets; a custodian shall
have been appointed with or without consent of the Borrower and/or any
Subsidiary; the Borrower and/or any Subsidiary shall generally not be paying
their respective debts as they become due; the Borrower and/or any Subsidiary
shall have made a general assignment for the benefit of their respective
creditors; the Borrower and/or any Subsidiary shall have filed a voluntary
petition in bankruptcy, or a petition or an answer seeking reorganization or
an arrangement with their respective creditors, or shall have taken advantage
of any insolvency law, or shall have filed an answer admitting the material
allegations of a petition in bankruptcy, reorganization or insolvency
proceeding; or a petition in bankruptcy shall have

<PAGE>

been filed against the Borrower and/or any Subsidiary and shall not have been
stayed or dismissed within sixty (60) days of such filing, or if an Order for
Relief has been entered under the Bankruptcy Code; or an order, judgment, or
decree shall have been entered without the application, approval or consent of
the Borrower and/or any Subsidiary by any court of competent jurisdiction
appointing a receiver, trustee, custodian or liquidator of the Borrower and/or
any Subsidiary of a substantial part of their respective assets and such
order, judgment or decree shall have continued unstayed and in effect for any
period of sixty (60) consecutive days;

9.5 The failure of Uri Evan to be Chief Executive Officer or to otherwise
be involved in the management of the Borrower occurs without the express
written consent of the Lender;

9.6 A writ of execution or attachment or any similar process shall be
issued or levied against all or any part of or interest in any of the
properties or assets of the Borrower and/or any Subsidiary or any judgment
involving monetary damages shall be entered against the Borrower and/or any
Subsidiary which shall become a lien on the Borrower's and/or any Subsidiary's
respective properties or assets or any portion thereof or interest therein and
such execution, attachment or similar process is not released, bonded,
satisfied, vacated or stayed within thirty (30) days after its entry or levy,
and said writ of execution, attachment, levy or judgment shall involve
monetary damages aggregating more than Two Hundred Thousand ($200,000.00)
Dollars;

9.7 Seizure or foreclosure of any of the properties or assets of the
Borrower and/or any Subsidiary pursuant to process of law or by respect of
legal self-help, involving monetary damages aggregating more than Two Hundred
Thousand ($200,000.00) Dollars, unless said seizure or foreclosure is stayed
or bonded within thirty (30) days after the occurrence of same;

9.8 The voluntary and permanent closing of business or ceasing of
operations of the Borrower;

9.9 Default by the Borrower and/or any Subsidiary in any of the terms or
conditions of any agreement covering the payment of borrowed money from the
Lender and/or any other lender, if such a default would permit (after any
applicable grace and cure periods) the Lender and/or other lender, as the case
may be, to accelerate the payment of the debt irrespective of whether the
default is waived or not waived by the Lender;

9.10 The filing of any Federal tax lien against the Borrower or any
Subsidiary and the same is not discharged of record within thirty (30) days
after the same is filed; or

9.11 Failure of the Borrower to keep the insurance required by the
Relevant Documents in full force and effect.

<PAGE>

10. REMEDIES/RIGHTS OF LENDER:

10.1 Acceleration; Proceed Against Collateral. Upon the occurrence and
during the continuance of an Event of Default the total amount (the "Default
Amount") of (i) the aggregate amount of all Obligations for principal and
interest, including late charges thereon, and all other sums which are then
due and unpaid; and (ii) an amount equal to the aggregate amount of all
principal remaining to be repaid on all Obligations; and (iii) interest on the
foregoing sums, at the rate provided for in Section 5.3 hereof, from said
occurrence until paid in full shall become immediately due and payable without
notice or demand.

10.2 Set-off.

(a) Upon the occurrence and during the continuance of an Event
of Default, Lender shall have the right, immediately and without notice or
other action to set-off against any of the Borrower's liabilities to Lender
any money owed by Lender (or any affiliate of Lender) in any capacity to
Borrower, whether or not due, and Lender shall be deemed to have exercised
such right of set-off and to have made a charge against any such money
immediately upon the occurrence of such Event of Default even though the
actual book entries may be made at a time subsequent thereto.

(b) If other lenders have participated with the Lender with
respect to the Lender's making loans to the Borrower pursuant to the terms
hereof, then, Borrower hereby authorizes such other participating lenders,
upon the occurrence and during the continuance of an Event of Default,
immediately and without notice or other action, at the request of Lender, to
set off against any of the Borrower's liabilities to Lender any money owed by
such participating lenders in any capacity to Borrower, whether or not due,
and to remit the monies set off to the Lender.

10.3 Cumulative Remedies; Waivers. No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lender at law or in
equity. No express or implied waiver by Lender of any default or Event of
Default hereunder shall in any way be, or be construed to be, a waiver of any
future or subsequent default or Event of Default. The failure or delay of
Lender in exercising any rights granted it hereunder upon any occurrence of
any of the contingencies set forth herein shall not constitute a waiver of any
such right upon the continuation or recurrence of any such contingencies or
similar contingencies and any single or partial exercise of any particular
right by Lender shall not exhaust the same or constitute a waiver of any other
right provided herein. The Events of Default and remedies thereon are not
restrictive of and shall be in addition to any and all other rights and
remedies of Lender provided for by this Loan Agreement and applicable law.

10.4 WAIVER OF JURY TRIAL. BORROWER ABSOLUTELY, UNCONDITIONALLY AND
IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY LITIGATION WITH THE
LENDER RELATING TO THIS LOAN AGREEMENT OR THE OBLIGATIONS.

<PAGE>

10.5 Costs and Expenses. Borrower shall be liable for all costs, charges
and expenses, including reasonable attorney's fees and disbursements, incurred
by Lender by reason of the occurrence of any Event of Default or the exercise
of the Lender's remedies with respect thereto.

10.6 Miscellaneous Rights of Lender. Upon the occurrence and continuance
of an Event of Default Lender, without demand, may charge and withdraw from
any credit balance which Borrower may then have with Lender or any of its
branches, any amount which shall become due from Borrower to the Lender under
this Loan Agreement.

11. CONDITIONS TO INITIAL ADVANCE:

The making of the initial Advance hereunder by the Lender is
conditioned upon the Lender's receipt of the following, which shall be in form
and substance acceptable to Lender and its counsel:

11.1 Resolutions: Corporate resolutions authorizing the execution and
delivery of the Loan Agreement and all of the Relevant Documents by the Lender
and the Guarantors.

11.2 Relevant Documents. All the Relevant Documents, which shall be
executed, attested and acknowledged, as applicable, including, without
limitation, the guaranty agreements of the Guarantors and the Uniform
Commercial Code Termination Statements.

11.3 Searches. Uniform Commercial Code, Federal Tax Lien, Franchise Tax
Lien, Judgment and Good Standing searches as Lender shall require with respect
to the Borrower and the Guarantors.

11.4.Opinion of Counsel. An opinion of Borrower's counsel.

11.5 Insurance. Verification of satisfactory insurance coverage and of
the issuance of the certificates and endorsements required by this Loan
Agreement.

11.6 Other Documents/Information. Such other documents, instruments or
information as the Lender shall reasonably require in order to enter into this
Loan Agreement.

11.7 Expenses. Payment of Lender's expenses as set forth in Section 17.6.

12. WAIVERS:

Borrower waives demand, presentment, notice of dishonor or protest of
any instruments either of Borrower or others which may be included in the
Collateral or which may evidence the Obligations.

<PAGE>

13. SURVIVAL:

All representations and warranties made herein or in any certificate or
instrument contemplated hereby shall survive any independent investigation
made by Lender and the execution and delivery of this Loan Agreement, and said
certificates or instruments and shall continue so long as any Obligations are
outstanding and unsatisfied, applicable statutes of limitation to the contrary
notwithstanding.

14. EFFECT OF HOLIDAYS:

If any payment pursuant to this Loan Agreement becomes due and payable on
a Saturday, Sunday or legal holiday under the laws of the State of New Jersey,
the maturity thereof shall be extended to the next succeeding Banking Day.

15. NOTICES:

15.1 Written; Effective Date. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
sent, postage prepaid, by registered or certified mail, return receipt
requested. Any notification of a sale or other disposition of Collateral or
any other action by Lender required to be given by Lender shall be sufficient
if given not less than ten (10) days prior to the date on which such sale or
other disposition would be made, and such notification shall be deemed
reasonable notice.

15.2 To Lender. Notices to Lender shall be directed to the following
address:

PNC Bank, N.A.
Two Tower Center Boulevard
East Brunswick, New Jersey 08816
Attention: Craig W. Heal, Vice President

15.3 To Borrower. Notice to Borrower shall be directed to the
following address:

USA Detergents, Inc.
1735 Jersey Avenue
North Brunswick, New Jersey 08902
Attention: Frederick Horowitz, CAO

<PAGE>

With a copy to:

Sheldon G. Nussbaum, Esq.
Fulbright & Jaworski, LLP
666 Fifth Avenue
New York, New York 10103

16. TERMINATION OF LOAN AGREEMENT:

16.1 Termination by Lender. Lender may terminate this Loan Agreement at
any time on or after the occurrence and during the continuance of an Event of
Default or on or after the Maturity Date, whereupon all of the Obligations
shall be due and payable immediately.

16.2 Termination by Borrower. Borrower may terminate this Agreement, as
to all Loans and only as to all Loans, by giving Lender not less than 30 days
written notice of the date upon which it will terminate the Agreement,
provided that on the Termination Date the Borrower shall pay to Lender:

(i) The principal and interest due on the Loans;

(ii) All other Obligations under this Agreement and the
Relevant Documents; and

(iii) in the event the Loans are repaid as a result of
Borrower's obtaining refinancing from another lender, Borrower shall also pay
a prepayment premium calculated as follows:

A. If the Termination Date is prior to the first
anniversary of the date stated at the beginning of this Loan Agreement, the
sum of Two Hundred Fifty Thousand Dollars ($250,000.00);

B. If the Termination Date is on or after such first
anniversary date but prior the second anniversary of the date stated at the
beginning of this Agreement, the sum of Two Hundred Thousand Dollars
($200,000.00);

C. If the Termination Date is on or after the second
anniversary date but prior to the third anniversary date of the date stated at
the beginning of this Agreement, the sum of One Hundred Fifty Thousand Dollars
($150,000.00);

D. If the Termination Date is on or after the third
anniversary date but prior to the fourth anniversary date of the date set
forth at the beginning of this Agreement, the sum of One Hundred Thousand
Dollars ($100,000.00); and

<PAGE>

E. If the Termination Date is on or after the fourth
anniversary date but prior to the fifth anniversary date set forth at the
beginning of this Agreement, the sum of Fifty Thousand Dollars ($50,000.00);
and

F. Thereafter, the Borrower may terminate this Loan
Agreement on the Termination Date without payment of any Termination Charge.

Anything herein to the contrary notwithstanding it is understood and agreed
that if, at any time after the second anniversary date of this Loan Agreement,
the Borrower obtains financing from another lender in an amount greater than
that which Lender is willing to provide, Borrower may prepay the Loans on its
closing of such new financing without paying Lender the prepayment premium.
However, the prepayment premium shall not be waived if Lender is willing to
provide financing in the same amount to be provided by such other lender.
Therefore, Lender shall have twenty (20) Banking Days, after its receipt of
notice from Borrower of its intent to terminate, to notify Borrower whether it
is willing to provide such financing.

16.3 Rights Upon Termination. Notwithstanding the termination of this
Loan Agreement as herein provided, Lender's security interest, rights and
remedies herein set forth shall remain in full force and effect until all
Borrower's Obligations are paid in full.

17. AMENDMENTS AND MISCELLANEOUS:

17.1 Amendments. The terms of this Loan Agreement shall not be waived,
altered, modified, amended, supplemented or terminated in any manner
whatsoever except by a written instrument signed by Lender and Borrower.

17.2 Binding on Successors. The provisions herein contained shall bind
and inure to the benefit of the Borrower and Lender and their respective legal
representatives, successors and assigns (provided, however, that the Borrower
shall not assign the Loan or the Relevant Documents without first obtaining
the written consent of Lender). Lender (or any subsequent assignee) may
transfer and assign the Loan or interests therein to such banks, lending
institutions or other Person as it may choose without the consent of Borrower
and deliver the Collateral to the assignee, who shall thereupon have all of
the rights of Lender; and Lender (or any such subsequent assignee that in turn
assigns as aforesaid) shall then be relieved and discharged of any
responsibility or liability with respect to future Advances and said
Collateral.

17.3 Invalidity. Any provision of this Loan Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.

<PAGE>

17.4 Gender. Throughout this Loan Agreement, the masculine shall include
the feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Loan Agreement indicates otherwise.

17.5 Cross Default. All other agreements between Borrower and Lender
and/or any of Lender's affiliates or subsidiaries whereby monies are loaned or
financial accommodations are made to Borrower are hereby amended so that a
default under this Loan Agreement is a default under all other agreements and
a default under any one of the other agreements is a default under this Loan
Agreement.

17.6 Expenses of Lender. Borrower agrees to pay all costs and expenses of
the Lender in connection with the preparation, execution, delivery and
administration of this Loan Agreement and other instruments and documents to
be executed contemporaneously herewith, including reasonable attorney's fees
and out of pocket expenses of counsel for Lender up to the sum of $50,000.00.

17.7 Section and Paragraph Headings. Section and paragraph headings are
for convenience only and shall not be construed as part of this Loan
Agreement.

17.8 Law/Jurisdiction. (a) This Loan Agreement shall be construed in
accordance with, and shall be governed by, the laws of the State of New
Jersey.

(b) The Borrower hereby consents to the in personam
jurisdiction of the federal and/or state courts located within the State of
New Jersey, over controversies arising from or relating to this Loan Agreement
or the Obligations.

17.9 Further Assurances. Borrower shall take such steps and execute and
deliver such financing statements and other documents all in form and
substance satisfactory to Lender relating to the creation, validity or
perfection of the security interests provided for herein, under the Uniform
Commercial Code or other laws of the State of New Jersey or of any other state
or states as Lender may from time to time request.

IN WITNESS WHEREOF, the undersigned have set their hands and seals or
caused these presents to be executed by their proper corporate officers and
sealed with their seals the day and year first above written.

ATTEST: USA DETERGENTS, INC.

By: /s/ Harold J. Macsata By: /s/ Frederick J. Horowitz
_____________________________ ________________________________
Harold J. Macsata, Vice President Frederick J. Horowitz, Vice President
and Chief Financial Officer and Chief Administrative Officer

<PAGE>

PNC BANK, N.A.

By: /s/ George L. Ziminski
_______________________________
George L. Ziminski,
Senior Vice President

<PAGE>

EXECUTION COPY

PURCHASE AND SALE AGREEMENT

FOR

1600 U.S. HIGHWAY ONE NORTH
NORTH BRUNSWICK, NEW JERSEY

MADE BY

THE OKONITE COMPANY, INC. AS SELLER

AND

USA DETERGENTS, INC., AS PURCHASER

DATED AS OF JANUARY 22, 1997

<PAGE>

PURCHASE AND SALE AGREEMENT

TABLE OF CONTENTS

Recitals................................................................... 1

Article 1
Fundamental Terms.......................................................... 2

Section 1.1. Fundamental Terms....................................... 2
Section 1.2. Other Definitions....................................... 2

Article 2
Purchase And Sale.......................................................... 7
Section 2.1. Purchase And Sale....................................... 7
Section 2.2. Payment Of The Purchase Price........................... 8

Article 3
Purchaser's Review......................................................... 9
Section 3.1. Property Documents...................................... 9
Section 3.2. Contingency Period...................................... 9
Section 3.3. Termination Of Agreement................................12
Section 3.4. Indemnity And Survival..................................12

Article 4
Title Documents............................................................13
Section 4.1. Survey..................................................13
Section 4.2. Title Commitment........................................13
Section 4.3. Title Defects...........................................14

Article 5
Representations, Warranties, And Covenants.................................17
Section 5.1. Seller's Representations And Warranties................17
Section 5.2. Survival Of Seller's Representations And Warranties.....28
Section 5.3. Purchaser's Representations And Warranties..............29
Section 5.4. Seller's Covenants......................................30
Section 5.5. Purchaser's Covenants...................................34

Article 6
Closing....................................................................35
Section 6.1. Conditions To Purchaser's Obligations To Close..........35
Section 6.2. Conditions To Seller's Obligations To Close.............37
Section 6.3. Closing.................................................38

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<PAGE>

Section 6.4. Prorations.............................................39
Section 6.5. Closing Costs..........................................46
Section 6.6. Closing Deliveries.....................................46
Section 6.7. Access to Records......................................51
Section 6.8. Survival...............................................51

Article 7
Brokerage..................................................................51

Article 8
Casualty and Condemnation..................................................52

Article 9
Defaults...................................................................55
Section 9.1. Purchaser's Default............................55
Section 9.2. Seller's Default...............................55
Section 9.3. Delivery of Earnest Money Deposit in the Event
of a Default.................................56

Article 10
Limitations of Liability...................................................56
Section 10.1. No Liability as to Representatives.............56
Section 10.2. Limitation of Liability of Purchaser...........57
Section 10.3. Limitation of Liability of Seller..............57
Section 10.4. Survival.......................................57

Article 11
Miscellaneous..............................................................57
Section 11.1. Assurances Of Cooperation......................57
Section 11.2. Successors And Assigns.........................58
Section 11.3. Interpretation.................................58
Section 11.4. Survival.......................................59
Section 11.5. Joint Cooperation..............................60
Section 11.6. Publicity......................................60
Section 11.7. Notices........................................61
Section 11.8. Certain Conditions.............................62
Section 11.9. Attorney's Fees................................62
Section 11.10. Counterparts...................................62

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<PAGE>

The Exhibits

Exhibit A..........The Real Property
Exhibit B..........The Permitted Title Exceptions
Exhibit C..........The Intangible Property And The Contracts
Exhibit D..........The Rent Roll
Exhibit E..........The Assignment of Contracts, and Intangible Property
Exhibit F..........The Assignment of Leases
Exhibit G..........The Claims
Exhibit H..........The Property Documents
Exhibit I..........Schedule of Insurance
Exhibit J..........Existing Mortgages and Encumbrances
Exhibit K..........Licenses
Exhibit L..........Environmental Reports
Exhibit M..........Escrow Agreement
Exhibit N..........Environmental Indemnity Agreement
Exhibit O..........Lease Agreement
Exhibit P..........Deed Covenant
Exhibit Q..........Pre-Closing Lease
Exhibit R..........Notice Dated July 26, 1996 from Okonite to NJDEP
Exhibit S..........CV Platforms to remain at Property

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<PAGE>

THIS PURCHASE AND SALE AGREEMENT ("AGREEMENT") is made as of January
22, 1997, by and between The Okonite Company, Inc., a New Jersey corporation
("SELLER") and USA Detergents, Inc., a Delaware corporation ("PURCHASER").

Recitals

A. Seller is the owner of the real property generally known as 1600
U.S. Highway One North, North Brunswick, New Jersey, more particularly
described on Exhibit A hereto (the "LAND").

B. A portion of the Land is improved with a building containing
approximately 650,000 square feet of warehouse and office space and other
improvements (collectively, the "IMPROVEMENTS"). The Land and the Improvements
are referred to herein as the "REAL PROPERTY." The Real Property, the Lease,
the Contracts, the Intangible Property and the Licenses (as those terms are
defined herein) are collectively referred to as the "PROPERTY."

C. Purchaser has agreed to purchase the Property from Seller, and
Seller has agreed to convey and transfer the Property to Purchaser, on the
terms and conditions contained in this Agreement.

In consideration of the respective agreements, covenants,
representations, warranties and conditions contained in this Agreement, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

<PAGE>

ARTICLE 1

FUNDAMENTAL TERMS
Section

1.1. Fundamental Terms. When used herein, the following terms
shall have the following meanings attributed to them:

Purchase Price: Seven Million Two Hundred Thousand Dollars
($7,200,000).

Earnest Money
Deposit: Purchaser, pursuant to an escrow agreement
dated December 31, 1996 (the "ESCROW AGREEMENT"), has
deposited the sum of One Million Four Hundred Forty
Thousand Dollars ($1,440,000.00) with Fulbright &
Jaworski L.L.P. as Escrow Agent under the Escrow
Agreement. Purchaser and Seller hereby direct such
Escrow Agent to promptly deliver all funds it is
holding in escrow pursuant to the Escrow Agreement to
Escrowee (as defined herein). The term "EARNEST MONEY
DEPOSIT" shall also include any interest earned on
the deposited monies, unless otherwise specifically
provided for in this Agreement.

Contingency Period
Expiration Date: 5:00 p.m. Eastern Time, March 15, 1997.

Closing Date: March 31, 1997, as such date may be extended pursuant
to the terms of this Agreement or by mutual consent of
the parties hereto.

Seller's Broker: None.

Purchaser's Broker: None.

Escrowee: Fulbright & Jaworski L.L.P.

Section 1.2. Other Definitions. As used herein, the following terms
shall have the following meanings:

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<PAGE>

ACO: As defined in Section 5.1.2.13. of this
Agreement.

Agreement: This Agreement, including all exhibits and schedules
hereto, all of which are incorporated into this
Agreement by this reference.

Change: As defined in Section 5.2.2. of this Agreement.

Cancellation
Notice: As defined in Section 3.3. of this Agreement.

Charges: As defined in Section 6.4.2.2. of this Agreement.

Claims: As defined in subsection 5.1.2.1. of this Agreement.

Closing: As defined in Section 6.3.1. of this Agreement.

Closing Date: As defined in Section 1.1. of this Agreement.

Closing
Statement: As defined in Section 6.4. of this Agreement.

Contingency
Period: As defined in Section 3.2.1. of this Agreement.

Contracts: All written or oral contracts, agreements and
understandings affecting all or any portion of the
Property to which Seller or its predecessor in
interest is a party (including without limitation all
guarantees and warranties pursuant to which goods or
services are furnished to or for the benefit of the
Property), which will survive the Closing Date. The
Contracts are identified on Exhibit C.

Cure Amount: As defined in Section 4.3.2.(a) of this Agreement.

Deed: As defined in Section 2.1. of this Agreement.

Delinquent Amounts: As defined in subsection 6.4.3.1. of this Agreement.

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<PAGE>

Environmental Laws: All Legal Requirements regulating,
relating to or imposing liability standards
concerning or in connection with Hazardous Materials.

Environment Reports: Those certain environmental reports listed on Exhibit
L.

Escrowee: As defined in Section 1.1. of this Agreement.

Escrow Agent: Fulbright & Jaworski L.L.P.

Escrow Agreement: That certain agreement dated as of
December 31, 1996 between Purchaser, Seller and
Escrow Agent.

Excess Uninsured Amount: As defined in Subsection (d) of Article 8 of this
Agreement.

Governmental Authority: The United States of America, or
any state, county, municipality, or other unit of
local Government, or any agency, board, or other
public entity empowered or constituted by any of
them, having jurisdiction over the Property or its
use or ownership.

Hazardous Material: Any substance, material, waste, gas,
or particulate matter which is: (i) defined as a
"hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," or
"restricted hazardous waste" under any provision of
the laws of the State of New Jersey or the laws of
the United States; (ii) petroleum; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive
material; (vi) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33
U.S.C. Sec. 1251 et seq.; (vii) defined as a
"hazardous waste" pursuant to Section 1004 of
the Resource Conservation and Recovery Act, 42 U.S.C.
Sec. 6901 et seq.; or (viii) defined as a "hazardous
substance" pursuant to Section (14) of the
Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. Sec. 9601 et seq.

Improvements: All buildings, structures, fixtures,
facilities, and other improvements of every kind
located on or under the Land, including any and all
plumbing, air conditioning, heating, ventilating,
mechanical, electrical and other utility systems,

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<PAGE>

landscaping, roadways, sidewalks, security devices,
signs and light fixtures, but not including publicly
owned or privately owned (unless owned by Seller)
utility lines.

Intangible Property: All intangible property, excluding Contracts and
Licenses owned by Seller, which pertains to the
Property, including all of Seller's rights (if any)
in and to the guarantees, warranties, plans and
specifications and reports pertaining to the Property
(or any portion thereof); certain items of Intangible
Property are identified on Exhibit C.

Involuntary Monetary
and Mechanics' Liens: As defined in Section 4.3.2.(a) of this Agreement.

Lease: That certain lease for the occupancy of a portion
of the Real Property, including any amendments and
modifications thereof, which is identified on Exhibit
D.

Legal Requirements: All laws, statutes, regulations, rules
and requirements of any Governmental Authority having
jurisdiction over the Property.

Licenses: All licenses, permits, certificates of
occupancy, and authorizations or other matters issued
by any Governmental Authority regarding operation of
the Real Property by Seller.

Material Part: As defined in Subsection (c) Article 8 of
this Agreement.

NJDEP: As defined in Section 5.4.6. of this Agreement.

New Lease: As defined in Section 5.4.2.4. of this Agreement.

Overage Rents: As defined in Section 6.4.2.2. of this Agreement.

Owner's Policy: As defined in Section 4.2. of this Agreement.

Permitted Assignee: A corporation, partnership or limited
liability company which is affiliated with Purchaser
or is an entity controlled by Purchaser, provided,
however, that Purchaser guarantees the performance of
such proposed assignee; or any entity with which
Purchaser is merged or consolidated

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<PAGE>

or to which all of Purchaser's assets have been
transferred, provided, however, that Seller is
furnished with sufficient documentation to enable
Seller to independently confirm that such merger,
consolidation or asset transfer has occurred.

Permitted Title
Exceptions: Those matters listed on Exhibit B to this Agreement.

Property: The Real Property, the Leases, the Licenses, the
Contracts and the Intangible Property.

Property Documents: As defined in Section 3.1. of this Agreement.

Prorations: As defined in Section 6.4. of this Agreement.

Purchaser: USA Detergents, Inc., a Delaware corporation.

Purchase Price: The consideration payable by Purchaser to
Seller for the Property and for all other benefits to
Purchaser provided for in this Agreement, as stated
in Section 1.1. of this Agreement.

Real Property: The real property described on Exhibit A to
this Agreement.

Rent Roll: As defined in Section 5.1.3.1. of this
Agreement; a copy of the Rent Roll is attached to
this Agreement as Exhibit D.

Representatives: As defined in Section 10.1. of this Agreement.

Seller: The Okonite Company, Inc., a New Jersey corporation.

Studies: As defined in Section 3.2.3. of this Agreement.

Survey: A current survey of the Real Property prepared by a
surveyor licensed by the State of New Jersey
and certified to the Purchaser, the Title Insurer,
the Seller and such other parties as Purchaser shall
designate, which survey shall be prepared in
accordance with the Minimum Detail Standards for Land
Title Surveys of 1992 of the American Title
Association and American Congress on Surveying and

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<PAGE>

Mapping for a Class A or Urban survey and shall be
dated no earlier than August 15, 1996 and shall also
include (i) the distances and bearings of all
boundaries of the Land and the location of all
changes in bearing, (ii) all abutting streets,
including an indication of the width of such streets
and the boundaries of the rights-of-way for such
streets, (iii) the number of stories of all of the
buildings and improvements located on the Land, (iv)
all recorded easements across the Land, identified by
book and page of recording, (v) all unrecorded
easements visible on the site or otherwise known to
the surveyor, and (vi) the total number of parking
spaces.

Tenant: A party in possession of a portion of the Property
pursuant to a Lease.

Title Commitment: A commitment for an ALTA Form 1970
Owner's Policy Form B of Title Insurance issued by
the Title Insurer in the amount of the Purchase Price
covering title to the Property on or after the date
of this Agreement, subject to the Permitted Title
Exceptions and containing the endorsements as set
forth in Section 4.2.

Title Defect: A lien, claim, charge, right, interest,
burden, encumbrance, defect, objection, exception or
security interest which is asserted against the
Property and which is not identified in this
Agreement as a Permitted Title Exception and as
defined in Section 4.1. of this Agreement.

Title Insurer: Chicago Title Insurance Company.

Violations: As defined in Section 5.4.4. of this Agreement.

Violations Cure Amount: As defined in Section 5.4.4. of this Agreement.

All Exhibits to this Agreement are by this reference
incorporated herein as if fully set forth herein at length.

ARTICLE 2

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<PAGE>

PURCHASE AND SALE
Section

2.1. Purchase And Sale. Subject to the terms and conditions contained in this
Agreement, Purchaser agrees to purchase the Property from Seller and Seller
agrees to sell the Property to Purchaser. Upon and subject to the terms and
conditions contained in this Agreement, Seller agrees to convey fee simple
title to the Real Property to Purchaser or its Permitted Assignee by a bargain
and sale deed with covenant against grantor's acts (the "DEED"), subject to
the Permitted Title Exceptions. Upon and subject to the terms and conditions
contained in this Agreement, Seller agrees to sell, assign and transfer to
Purchaser the Leases, the Contracts, and, to the extent assignable, the
Intangible Property and Licenses by the instruments attached hereto as
Exhibits E and F which instruments shall be executed by Seller for the benefit
of Purchaser or its Permitted Assignee.

Section 2.2. Payment Of The Purchase Price. Concurrently
with the execution and delivery of this Agreement or as soon thereafter as
reasonably practicable, the parties shall direct Escrow Agent to deliver the
Earnest Money Deposit to Escrowee. The Earnest Money Deposit shall be held by
the Escrowee pursuant to an escrow agreement as set forth on Exhibit M hereto
and as the same may be modified by agreement of the parties thereto and shall
be invested in an interest-bearing instrument by the Escrowee as directed by
Purchaser and Seller jointly. Purchaser

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<PAGE>

agrees to pay the Purchase Price to Seller, and Seller agrees to accept
payment of the Purchase Price on the Closing Date in the following manner:

2.2.1. The Earnest Money Deposit shall be delivered to Seller
in immediately available funds or by official bank check or by certified
check. The Earnest Money Deposit, but not the accumulated interest thereon,
will be credited against the Purchase Price at Closing.

2.2.2. To the extent Purchaser has paid any Base Rent to
Seller pursuant to the terms of the Lease attached hereto as Exhibit Q, the
total amount of such Base Rent paid by Purchaser shall be credited against the
Purchase Price.

2.2.3. On the Closing Date, Purchaser shall pay the balance of
the Purchase Price plus or minus net Prorations to Seller by wire transfer of
immediately available funds to a financial institution located in the
continental United States of America or by certified check or official bank
check. Seller's Wire transfer instructions are as follows:

Fleet Bank, N.A.
44 Wall Street
New York, New York 10005

Bank Routing No. 0212-00339

For credit of: The Okonite Company, Inc.
Ramsey, New Jersey 07446

Account No. 2170-00-0053

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<PAGE>

ARTICLE 3

PURCHASER'S REVIEW

Section

3.1. Property Documents. At any reasonable time and
from time to time following the execution and delivery of this Agreement, on
reasonable advance notice to Seller, Seller will permit Purchaser and its
authorized agents to examine and copy the instruments and documents listed on
Exhibit H and Exhibit L, together with such other instruments and documents
relating to the Property which are in the possession of Seller as Purchaser
may reasonably request (together with any documents copied pursuant to Section
3.2., the "PROPERTY DOCUMENTS"). Such inspection shall take place at the
offices of Seller, Seller's counsel, or at the Property.

If the transaction herein contemplated does not close, Purchaser
shall return to Seller all documents previously delivered to or copied by
Purchaser and its attorneys, accountants, consultants and other agents
regarding the Property.

Section 3.2. Contingency Period.

3.2.1. From the date of this Agreement to the Contingency
Period Expiration Date, Purchaser shall conduct its review of the Property and
of the Property's suitability for Purchaser's needs. The period from the date
of this Agreement to the Contingency Period Expiration Date is referred to
herein as the "CONTINGENCY PERIOD."

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3.2.2. During the Contingency Period and at all times prior to
the Closing, Seller shall make available to Purchaser and its representatives
for inspection and copying at Seller's offices or at the offices of Seller's
attorney, upon reasonable notice:

1. The original Property Documents and Environmental
Reports as set forth on Exhibit H and Exhibit L;

2. A schedule of all independent contractors currently
under contract, retained or employed by Seller or on behalf of its
managing agent in the operation or environmental remediation of the
Property or in connection with the plant clean-up or equipment
removal; and

3. All Contracts and Licenses.

3.2.3. During the Contingency Period, and at all times prior
to the Closing, Purchaser, its representatives or agents, shall have the right
to enter upon and inspect the Property. The Purchaser's right to inspect the
Property shall be subject to the following:

1. Purchaser may examine and test the Property, which
tests may include soil tests, environmental tests and engineering
tests which are noninvasive or invasive in a non-material manner.
Purchaser may conduct material invasive testing provided it obtains
prior written consent from Seller, which shall not be unreasonably
withheld or delayed. Notwithstanding the foregoing, however,
Purchaser's counsel may, subject to obtaining Seller's

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consent not to be unreasonably withheld or delayed, engage
an environmental consultant to conduct an examination of the
Property to obtain information about hazardous materials contained
thereon and to conduct any testing or examination required by a
customary and reasonable Phase I and II environmental review, taking
into account the nature, use and history of the Property; and

2. Purchaser may inspect the Improvements to evaluate
their suitability for Purchaser's needs.

3. Purchaser may initiate, and Seller shall assist and
cooperate with Purchaser, in preparing any necessary applications or
permits required by any Governmental Authority required in
connection with Purchaser's proposed use of the Property including
any proposed construction and/or demolition.

All of the examinations, inspections, studies, tests and
reports conducted or prepared pursuant to this Section 3.2.3. prior to Closing
are referred to in this Agreement as the "STUDIES."

3.2.4. Purchaser's right to enter onto the Property to conduct
these Studies is subject to the following conditions:

1. Purchaser shall provide Seller with reasonable prior
notice of any entry on the Property, and Seller may, at its
election, have a representative present during any such entry;

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2. All investigations and other activities conducted by
Purchaser with respect to the Property shall be at Purchaser's sole
cost and expense, and Purchaser shall keep the Property free of any
liens which may be asserted against Seller or the Property as a
result of these activities; and

3. Purchaser shall exercise due care with respect to the
Property in connection with its entry thereon so as to minimize any
damage caused to the Property and any interference with Seller's use
thereof. Promptly following any test or other examination which
results in any alteration of the Property, Purchaser will promptly
restore at its sole cost and expense the Property to the condition
which existed prior to such test or examination.

Section 3.3. Termination Of Agreement. Prior to the
Contingency Period Expiration Date, Purchaser shall have the right to elect to
terminate this Agreement for any reason in Purchaser's sole and absolute
discretion, and this Agreement shall be terminated if, on or before 5:00 p.m.
Eastern Time on the Contingency Period Expiration Date, Purchaser gives Seller
written notice of Purchaser's intention to terminate this Agreement (a
"CANCELLATION NOTICE"). If Purchaser gives the Cancellation Notice to Seller
in accordance with the terms of this Agreement, (a) Escrowee is hereby
instructed to return the Earnest Money Deposit to Purchaser and (b) this
Agreement shall be terminated, subject to the survival of the indemnity
obligations as provided in Section 3.4. and those provisions which
specifically survive the termination of this Agreement.

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Section 3.4. Indemnity And Survival. Purchaser hereby agrees
to indemnify, defend, protect and hold Seller harmless from any and all
claims, causes of action (including but not limited to any personal injury or
property damage liability claims or causes of action), costs, loss and
damages, including reasonable attorneys' fees and litigation expenses, which
may be brought against Seller or which Seller shall incur as a result of the
conduct or preparation of the Studies (but specifically not from the results
of the Studies). In the event this Agreement is terminated, this indemnity
shall survive the termination of this Agreement as to all claims which are
identified by Seller in writing to Purchaser within a period of six (6) months
from and after the date of termination of this Agreement, except that such
period shall be two (2) years in the case of personal injury or property
damage liability claims or causes of action. If this Agreement is not
terminated, this indemnification shall survive the Closing.

ARTICLE 4

TITLE DOCUMENTS

Section

4.1. Survey. Any encroachments onto the Real
Property from any adjacent property, encroachments by or from the Real
Property onto any adjacent property or violation of or encroachments upon any
building lines, restrictions or easements affecting the Real Property shown on
the Survey shall be considered "TITLE DEFECTS," unless otherwise included in
the Permitted Title Exceptions.

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Section 4.2. Title Commitment. Prior to or promptly after the date
of this Agreement, Purchaser shall cause the Title Insurer to deliver the
Title Commitment (and from time to time any update thereof) and copies of all
documents of record to Seller. Subject to the provisions of Section 4.3., on
the Closing Date, the Title Insurer shall issue an ALTA 1970 owner's title
insurance policy Form B (the "OWNER'S POLICY") or commitment therefor pursuant
to and in accordance with the Title Commitment insuring fee simple title to
the Real Property in the Purchaser as of the Closing Date in the amount of the
Purchase Price, subject to the Permitted Title Exceptions and such other
exceptions as Purchaser may approve pursuant to the provisions of this Article
4. Purchaser shall bear the cost of issuance of the Owner's Policy, the cost
of the lender's policy, and any endorsements required by Purchaser to be
issued in connection with the Owner's Policy or lender's policy.

Section 4.3. Title Defects.

4.3.1. If the Title Insurer is not prepared to issue the Owner's
Policy at Closing, consistent with the provisions of this Agreement, and if
Seller shall elect (or shall be required under Subsection 4.3.2 below) to
attempt to remove any defect in or objection to title or to fulfill any
condition, then Seller will be entitled, upon written notice delivered to
Purchaser at least two (2) business days prior to the Closing Date, to adjourn
the Closing Date one or more times, for a period not to exceed sixty (60) days
in the aggregate, to enable Seller to take such action as may be required to
cause the Title Insurer to issue the Owner's Policy in accordance with the
provisions

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of this Agreement. If Seller does not so elect to adjourn the Closing, or if
at the adjourned date(s) the Title Insurer is not prepared to issue the
Owner's Policy in accordance with the provisions of this Agreement, either
party may terminate this Agreement, by written notice to the other party
hereto, and the parties shall direct Escrowee to return the Earnest Money
Deposit to Purchaser and neither party will have any obligations under this
Agreement except for those provisions which specifically survive the
termination hereof.

4.3.2. (a) If Seller elects to adjourn the Closing as provided
above, this Agreement shall remain in effect for the period or periods of
adjournment in accordance with its terms. In no event, however, shall Seller
be required to take or bring any action or proceeding or any other steps to
remove any defect in or objection to title or to fulfill any condition or to
expend any moneys therefor, nor shall Purchaser have any right of action
against Seller therefor, at law or in equity, for damages or specific
performance; provided, however, that if an examination of title indicates the
existence of one or more (i) liens or encumbrances or (ii) mechanics' liens
created as a result of work performed at the Property on behalf of Tenant
prior to the Closing Date which as to (i) and (ii), are in liquidated amounts
and can be removed or discharged by payment of a sum of money ("INVOLUNTARY
MONETARY AND MECHANICS' LIENS") which is not in excess of Two Hundred Fifty
Thousand Dollars ($250,000.00) (the "CURE AMOUNT") in the aggregate, and if
such removal or discharge can reasonably be expected to be accomplished prior
to the Closing Date initially provided for in

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Section 1.1. hereof or within a period of sixty (60) days thereafter or such
longer period of time as Purchaser may approve, Seller agrees to take such
action as is reasonably required in order to remove or discharge such lien or
encumbrance and, if required, to adjourn the Closing Date for the period
required for such purpose. Seller will be deemed to have satisfied the
foregoing requirement with respect to any Involuntary Monetary and Mechanics'
Liens, provided that on the Closing Date the Title Insurer will issue or bind
itself to issue the Title Commitment without additional premium (unless Seller
shall pay such premium) which will (i) insure Purchaser against collection of
such Involuntary Monetary and Mechanics' Liens or enforcement thereof against
the Property and (ii) agree to issue a title commitment to any subsequent
mortgagee or purchaser of the Property from Purchaser, which commitment will
insure such mortgagee or purchaser against collection of such Involuntary
Monetary and Mechanics' Liens out of the Property or enforcement thereof
against the Property without any additional premium.

(b) In addition, Seller will, without limitation as to the
amount thereof and at its sole cost and expense, cause to be removed at or
prior to the Closing (i) all mortgages, assignments of leases and rents,
financing statements and deeds of trust whether created prior to or after the
date hereof, (ii) judgments or tax liens (other than real estate tax liens
which are addressed in Section 6.4.1.) against the Property resulting from
Seller's failure to pay any obligation of Seller or (iii) voluntary liens or
encumbrances (including mechanics' liens filed against landlord for work

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performed on Seller's behalf but excluding mechanics' liens filed in
connection with work performed on behalf of Tenant, except as provided for in
Section 4.3.2.(a)), affecting the Property, which liens or encumbrances result
from Seller's ownership or operation of the Property.

4.3.3. Notwithstanding the provisions of Section 4.3. hereof,
Purchaser may at any time accept the Owner's Policy in such form as the Title
Insurer is willing to issue, without reduction of the Purchase Price or any
credit or allowance on account thereof or any claims against Seller except
that if on the Closing Date there remain unremoved Involuntary Monetary and
Mechanics' Liens which have neither been removed by Seller nor insured over by
the Title Insurer as provided in Section 4.3.2., and Seller has not used the
entire Cure Amount in removing such liens, then Purchaser may elect to close
subject to such unremoved Involuntary Monetary and Mechanics' Liens and
receive the Cure Amount, less any amounts previously paid by Seller or
deposited with the Title Insurer to remove or obtain insurance over any
Involuntary Monetary and Mechanics' Liens, as a credit against the Purchase
Price. The acceptance of the Deed by Purchaser shall be deemed to be full
performance of, and discharge of, every agreement and obligation on Seller's
part to be performed under this Agreement, except for those which this
Agreement specifically provides shall survive the Closing.

ARTICLE 5

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REPRESENTATIONS, WARRANTIES, AND COVENANTS
Section

5.1. Seller's Representations And Warranties. In order to induce
Purchaser to enter into this Agreement, Seller represents and warrants to
Purchaser as follows:

5.1.1. As to Organization, Power and Authority.

5.1.1.1. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey.

5.1.1.2. Seller has full right, power and authority to
enter into and perform its obligations under this Agreement and the other
instruments and documents contemplated herein to be executed and performed by
it, including, without being limited to, those conveying the Property. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby (1) have been duly authorized by all
necessary action on the part of the Seller, (2) do not require any
governmental or other consent other than the consent of the NJDEP as set forth
in Section 5.4.5. hereof, and (3) will not result in the breach of any
agreement, indenture or other instrument to which Seller is a party or is
otherwise bound. This Agreement constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with the terms
hereof.

5.1.1.3. Neither Seller nor the Property is in the
hands of a receiver nor is an application for a receiver pending or
contemplated. Seller is neither insolvent nor has made an assignment for the
benefit of its creditors, nor has Seller

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filed, or had filed against it, any petition in bankruptcy, nor is any such
petition contemplated or threatened.

5.1.1.4. Seller is a "non-foreign person" within the
meaning of Section 1445 of the United States Internal Revenue Code of 1986, as
amended, and the regulations issued thereunder.

5.1.1.5. To the best of Seller's knowledge, Seller is
the sole owner of, and has good and marketable title to the Intangible Property
free and clear of all liens, encumbrances, claims, chattel mortgages,
conditional bills of sale, security interests and demands, other than the
Permitted Title Exceptions.

5.1.1.6. Seller has not entered into any agreement
currently in force to sell or mortgage or otherwise encumber or dispose of its
interest in the Property or any part thereof, except for this Agreement and
those relating to any existing mortgages and encumbrances as set forth on
Exhibit J which will be satisfied or discharged on or before the Closing Date.

5.1.2. As to the Property.

5.1.2.1. There is no litigation, action or proceeding
pending against the Property, Seller's interest in the Property, or any part
thereof, before any court or Governmental Authority, except as shown on
Exhibit G (the "CLAIMS"). Except as shown on Exhibit G, Seller has not
received notice of any citations, violations, suits, proceedings, orders,
decrees or judgments relating to zoning, building, use and occupancy, traffic,
storm water management, fire, health, sanitation,

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Environmental Laws or other laws or regulations, against, or with respect to,
the Property or any part thereof which remain uncured or remain of record.
Exhibit L sets forth a complete list of the agreements currently in effect
between Seller and the NJDEP or any other Governmental Authority relating to
the environmental remediation of the Property.

5.1.2.2. Seller will not modify or cancel any of the
covenants of record as of the date hereof or hereafter modify any building or
use related permit, approvals or consent currently in effect and relating to
the Property.

5.1.2.3. Seller has not received any notice from any
Governmental Authority that (i) the Property is not properly zoned for its
current use or (ii) the Property is being operated as a non-conforming use.
Various aspects of Seller's use may not comply with existing zoning rules and
regulations issued by the applicable Governmental Authority with respect to
the Property, such as outside storage.

5.1.2.4. Seller has not received any notice from any
Governmental Authority that the Property is violating any law governing the
number of parking spaces required for the Property.

5.1.2.5. There are no operating or other agreements
(written or oral) currently affecting the Property except as set forth on
Exhibit C.

5.1.2.6. To the best of Seller's knowledge the Property
has not suffered any material damage by fire or other casualty that has not
heretofore been

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repaired. Seller has not in the last twenty-four (24) months been rejected for
insurance coverage or received a denial from an insurance underwriter because
of structural deficiencies on the Property, and since the issuance of Seller's
most recent insurance policies, Seller has not received written notice of any
such deficiency from its insurer. Seller presently has and will continue in
effect until Closing liability and casualty (including fire) insurance
policies in the amounts and types set forth on Exhibit I with respect to the
Property.

5.1.2.7. Seller has not received any notice from any
Governmental Authority that there are tax abatements or exemptions affecting
the Property. Seller has instituted proceedings for calendar year 1996 to
cause a reduction in the Property's real estate tax assessment, and such
proceedings are presently pending. Between now and the Closing, Seller will
advise Purchaser of any proposed real estate tax assessments and the amounts
of such assessments, and Seller and Purchaser will cooperate jointly in
commencing and prosecuting such proceedings, if requested by Purchaser, on or
before Closing.

5.1.2.8. Seller has not received notice from any
Governmental Authority that (a) there are special or other assessments for
public improvements or otherwise now affecting the Property, or (b) that there
are any pending or threatened special assessments affecting the Property.

5.1.2.9. Seller has not received notice from any
Governmental Authority with respect to any actual or threatened taking (which
has

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not already been completed) of any portion of the Property for any purpose by
the exercise of the right of condemnation or eminent domain.

5.1.2.10. The Seller's employees at the Property were
unionized.

5.1.2.11. Except as set forth in Exhibit C and except
for the Lease, there are no contracts, including, without limitation, agreements
relating to the management, service, maintenance, purchase of materials,
supplies, equipment, machinery parts, products, employee benefits (including
collective bargaining, pensions, profit sharing or unions) relating to the
Property which would be binding on the Purchaser subsequent to the Closing.
Exhibit C is a complete list of all Contracts, each of which is, to the best
of Seller's knowledge, in full force and effect, and none of which has been
amended or modified except as disclosed in Exhibit C. To the best of Seller's
knowledge, no other party is in material default under any of the items set
forth on Exhibit C.

5.1.2.12. Seller has not received any notice of any
default or breach under any of the covenants, conditions, restrictions or
agreements affecting the Property.

5.1.2.13. The Property is the subject of an ongoing
environmental remediation pursuant to an Administrative Consent Order ("ACO")
between Seller and NJDEP, previously furnished to Purchaser, and included in
Exhibit C. Seller has disclosed and made available for inspection by Purchaser
and its

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consultants the Seller's and Seller's consultants' reports submitted to the
NJDEP, and all of Seller's files reflecting Seller's and Seller's consultants'
environmental assessments, evaluations, contamination delineation and
remediation efforts to date under and with respect to the ACO, including but
not limited to Seller's remedial investigations. Seller is presently
remediating certain, and already has remediated other, of the areas of concern
("AREAS OF CONCERN") identified in Seller's remedial action reports and work
plans, and in the map attached hereto as Exhibit L, and identified as follows:

1) Areas labeled "A" through "J";
2) the swale;
3) the unnamed tributary; and
4) the area of the removed underground tanks.

Except as provided in Section 5.5.2. of this Agreement, and as more
specifically set forth in the Environmental Indemnity Agreement attached
hereto as Exhibit N, Seller will retain exclusive responsibility for
completing the remediation of the foregoing Areas of Concern and any other
obligation Seller has or may have under the ACO, all of which shall be at
Seller's sole cost and expense. Seller's obligations as set forth in this
Section will survive Closing.

5.1.2.14. Seller's remediation of the Areas of Concern
will include use and deed restrictions. A copy of the text to be used as part
of the deed which will be executed and recorded in effecting such use or deed
restrictions is attached hereto as Exhibit L (the "Use Restriction Language").
The Use Restriction Language is the form of the use restriction language
presently mandated by the

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NJDEP for establishing use and deed restrictions. If at any time in the future
the NJDEP changes the substance or form of such use restriction langauge,
Seller will execute the revised deed with such revised language instead of the
deed which contains the Use Restriction Language as set forth in Exhibit L. As
set forth more particularly in Section 5.5.2. of this Agreement, Purchaser
acknowledges receipt of this advice and is willing to accept such use and deed
restrictions subject to the limitations set forth in Section 5.1.2.16. below.
Seller will keep Purchaser informed of all communications with NJDEP which
bear upon Seller's further environmental activities under the ACO and shall
provide Purchaser with copies of any proposed use a deed restrictions at least
30 days prior to the recordation of same. In addition to possible use and deed
restrictions, Purchaser consents to whatever further remediation may be
necessary to enable Seller to comply with and discharge Seller's obligations
under the ACO, subject to the limitations set forth in Section 5.1.2.16.
below.

5.1.2.15. Seller has furnished NJDEP with the notice
annexed to this Agreement as Exhibit R. Seller is continuing its efforts to
ascertain whether any potential condition referenced in the notice may in fact
exist and whether any such condition will require remediation or other
environmental activity. Any such condition which exists may be included as an
Area of Concern under the ACO and if so will become subject to remediation
thereunder, including but not limited to remediation by deed restriction in
whole or in part. Purchaser agrees that Seller, at its sole cost and expense,
after providing notice to Purchaser, may undertake such

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potential remediation or other environmental activity relating to subject
to the restrictions set forth in Section 5.1.2.16. below.

5.1.2.16. Notwithstanding anything to the contrary set
forth in Sections 5.1.2.13, 5.1.2.14 and 5.1.2.15 above, Seller shall not
undertake and Purchaser shall not be required to undertake or consent to any
remediation activity or grant any use or deed restriction ordered or otherwise
mandated by NJDEP ("NJDEP mandate") if Purchaser objects to and requests that
Seller contest any such mandate.

Upon receipt of such a request from Purchaser, Seller and
Purchaser will contest such NJDEP mandate by all legal means available,
including but not limited to administrative relief and subsequent judicial
review, through appeal. The filing and similar costs of any and all such
proceedings will be borne equally by Seller and Purchaser. All such
proceedings will be conducted by counsel mutually acceptable to Seller and
Purchaser, and Seller and Purchaser will each pay one-half of the legal fees
of such counsel. Upon the entry of a final, non-appealable order or judgment
terminating any such proceedings brought to contest an NJDEP mandate, Seller
will comply with each such NJDEP mandate. The Purchaser will cooperate with
Seller as provided in Sections 5.1.2.13, 5.1.2.14, 5.1.2.15 and 5.5.2 in
implementing each such NJDEP mandate, and Purchaser will do so without any
further qualification to Sections 5.1.2.13, 5.1.2.14, 5.1.2.15 and 5.5.2 by
this Section 5.1.2.16. For each contested mandate as to which proceedings have
been terminated by final, non-appealable order or judgment, this Section
5.1.2.16 will be deemed to be of no further

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force or effect whatsoever. The provisions of this Section 5.1.2.16 shall
survive the closing.

5.1.3. As to Leases, Contracts, Permits and Policies.

5.1.3.1. (1) There are no occupancy rights (written or
oral), leases or tenancies presently affecting the Property other than the
Lease; (2) Seller will allow Purchaser to examine during the Contingency
Period, and will deliver to Purchaser at Closing a true and complete copy of
the Lease, as amended; the Lease represents the complete agreement between
Seller and the Tenant as to all rights, liabilities and obligations of Seller
and the Tenant in and to the premises demised thereunder; (3) the Lease is in
full force and effect; (4) to the best of Seller's knowledge, the Tenant has
not assigned its rights under the Lease or sublet any portion of the leased
premises; (5) the Tenant has not been granted any renewal or extension options
except as disclosed in the Lease, nor does Tenant have an option to purchase
the Property or any part thereof; (6) Seller has performed its obligations
under the Lease in all material respects; Seller has not received from Tenant
any notice claiming any material default by Seller under the Lease which has
not been complied with, or any right of set-off or counterclaim against
Seller, and, to the best of Seller's knowledge, no condition has occurred
which with the lapse of time or giving of notice would constitute a material
default by Seller as landlord under the Lease; (7) Seller has not given Tenant
any written notice claiming any material defaults or nonpayment of rent by
Tenant under the Lease which has not been complied with, and to Seller's
knowledge,

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no event has occurred which with the lapse of time or giving of notice would
constitute a material default by the Tenant under its Lease; (8) all work
required to be performed by the landlord pursuant to the Lease has been
completed and fully paid for; (9) the information contained in the RENT ROLL
annexed hereto as Exhibit D is true and correct in all material respects and
contains a schedule of the Lease and each modification and amendment to the
Lease, if any; (10) Seller has not accepted any prepaid rent or prepayment of
any other sum due under the Lease more than thirty (30) days in advance; (11)
Exhibit D contains the security deposit paid by Tenant under the Lease; (12)
the Tenant has not contested any Charges (as defined in Section 6.4.2.2.), or
any other amounts payable under the Lease which have not been resolved, and
any such resolution will not adversely affect the Purchaser after the Closing
Date; and (13) (i) Seller has no obligations to perform any decorating,
repairs or alterations in or to the Tenant's space, and (ii) Seller as
landlord under the Lease has no obligation to reimburse Tenant under its Lease
for any such decorating, repairs or alterations, and (iii) no equipment other
than building service equipment is required to be furnished for Tenant.

5.1.3.2. Except for any brokerage commissions, fees or other
compensation due with respect to any extension of the term of the Lease or
expansion of space under the Lease which may be granted or agreed to, or which
may be specifically provided for under the Lease on or after the Closing Date
("EXTENSION COMMISSIONS"), no brokerage commission, fee or other compensation
is payable (or

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will, with the passage of time or occurrence of any event or
both, be payable), with respect to the Lease pursuant to any existing
agreement which would be binding on the landlord under such Lease after the
Closing Date. There will not remain in effect after the Closing any exclusive
or continuing brokerage agreements binding on Purchaser as to any of the space
covered by the Lease or as to any space in the Property or, except for the
Commission Agreement identified in Exhibit C, in connection with Extension
Commissions. As of the Closing Date, no actual or pending claims or rights
exist or may accrue against Seller which will be binding on Purchaser for any
brokerage commission, fee or other compensation in respect of all or any
portion of the Property that is subject to a Lease except in connection with
the Extension Commissions.

5.1.3.3. No management commission, fee or other
compensation will be payable by Purchaser from and after the Closing Date with
respect to the management of the Property prior to the Closing Date.

5.1.3.4. The documents listed on Exhibit K hereto are
all of the Licenses (including all amendments, modifications, supplements and
extensions thereof) and neither Seller nor its managing agent has received any
notice from any Governmental Authority that Seller is in default under or has
breached any of the Licenses.

5.1.3.5. Seller has no patents, registered trademarks
or registered trade names which are used by Seller with respect to the Property.

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5.1.3.6. The documents delivered to Purchaser pursuant
to this Agreement are true and correct copies or originals and, to the extent
the information contained in such documents contains factual information which
originated with Seller, such information is true and correct, and to the
extent the information contained in such documents contains factual
information which did not originate with Seller, to the best of Seller's
knowledge, such information is true and correct.

5.1.3.7. All statements made herein are true and
correct, and the information provided and to be provided by Seller to Purchaser
relating to this Agreement does not and will not contain any statement which
is false or misleading with respect to any material fact, or omits to state
any material fact necessary in order to make any statement contained therein
not false or misleading in any material respect.

Section 5.2. Survival Of Seller's Representations And Warranties.

5.2.1. At Closing, Seller shall deliver to Purchaser a
certificate of the Seller which will confirm that the warranties and
representations are in all material respects true and correct as of the date
of the Closing (to the best of Seller's knowledge, where so specified above),
subject to changes for matters beyond Seller's control and otherwise as
expressly permitted or contemplated by this Agreement. Seller's
representations and warranties shall survive the Closing Date for a period of
three (3) years.

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5.2.2. If, prior to the Closing Date, any event or
circumstance occurs or first becomes actually known (without imputation and
without duty of inquiry) to Purchaser, or written notice thereof is first
actually received by Purchaser, and if the same would make false in a material
manner any representation or warranty of Seller hereunder (a "CHANGE"), then,
notwithstanding anything to the contrary in this Agreement, but subject to
Seller's cure right provided for in the next sentence, Purchaser may elect to
terminate this Agreement after providing Seller ten (10) days' notice within
which to cure such Change. Seller shall notify Purchaser whether Seller will
undertake to cure the event or circumstance which gave rise to such Change.
Seller will have a reasonable period of time, consistent with what would
customarily need to be done to cure such event or circumstance, in order to
effect the cure, which will be at Seller's sole cost and expense. If Seller
notifies Purchaser that it will not undertake to cure such event or
circumstance, then Purchaser may terminate this Agreement as provided for
above in this Section 5.2.2., and upon such termination, Seller will instruct
the Escrow Agent to return the Earnest Money Deposit to Purchaser, and
thereupon neither Purchaser nor Seller shall have any further rights against
the other, except for such provisions of this Agreement specifically intended
to survive such termination.

5.2.3. If such Change is attributable to the intentional acts
or bad faith of Seller, Purchaser may elect to terminate this Agreement
without permitting Seller to cure as provided in Section 5.2.2. above, and in
the event of such termination

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Purchaser shall have such remedies with respect to such Change as provided for
in Section 9.2. hereof.

Section 5.3. Purchaser's Representations And Warranties. In order
to induce Seller to enter into this Agreement, Purchaser hereby represents and
warrants to Seller as follows:

5.3.1. Purchaser is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Purchaser has full right, power and authority to enter into and perform its
obligations under this Agreement and the other instruments and documents
contemplated herein to be executed and performed by it. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby (1) have been duly authorized by all necessary action on
the part of the Purchaser, (2) do not require any governmental or other
consent other than the consent of the NJDEP as set forth in Section 5.4.5.
hereof, (3) will not result in the breach of any agreement, indenture or other
instrument to which Purchaser is a party or is otherwise bound, and (4)
constitute the valid and binding obligation of Purchaser.

5.3.2. At Closing, Purchaser shall deliver to Seller a
certificate of the Purchaser which will confirm that the warranties and
representations set forth in Section 5.3.1 above are in all material respects
true and correct as of the date of the Closing subject to changes expressly
permitted or contemplated by this Agreement.

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Purchaser's representations and warranties contained in this Section 5.3.
shall survive the Closing for a period of three (3) years.

5.3.3. Purchaser acknowledges that it has received and/or has
inspected or been given access to all the information, documents and advice
contained or referred to in the Seller's representations and warranties.

Section 5.4. Seller's Covenants.

5.4.1. Except as set forth in Sections 5.4.6. and 5.4.7.
hereof, and except as set forth in the Lease annexed to this Agreement as
Exhibit Q, on the Closing Date, Seller shall tender possession of the Property
to Purchaser in the same condition the Property was in on the date of this
Agreement, subject to reasonable use, wear and tear and, subject to Article 8,
Seller shall make all needed repairs as and when required to keep the Property
in its present condition. Seller agrees that between the date hereof and the
Closing Date it shall continue to operate the Property in substantially the
same manner it has operated the Property prior to the date hereof and shall
not take any action to adversely affect the Property or to limit Purchaser's
proposed use of the Property.

5.4.2. Seller covenants and agrees that from and after the
date of this Agreement until the Closing Date or the earlier termination of
this Agreement by Purchaser, or as a result of a default by Purchaser
hereunder:

1. Seller will not, without the prior written
consent of Purchaser, enter into any new employment, management, service,
maintenance or

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union agreements relating to the Property or renew or extend any Contracts,
unless such new agreements and such Contracts, as renewed or extended, will be
cancelable by Purchaser on not more than thirty (30) days prior notice without
any costs for such cancellation.

2. The insurance policies described on Exhibit I (or
substantially similar substitute policies and with companies of similar or
better financial strength) shall be maintained in full force and effect.

3. Seller shall not sell, encumber or grant any
interest in the Property or any part thereof, except to effect the "deed
restrictions" referred to in Sections 5.1.2.13., 5.1.2.14., 5.1.2.15.
and 5.5.2.

4. Seller shall not, without the prior written
consent of Purchaser, enter into any new Lease, permit occupancy of space on
the Property which is presently vacant or which may hereafter become vacant
or extend the term of the Lease (collectively, a "NEW LEASE").

5. Seller shall not terminate or accept a surrender
of the Lease if Tenant is not in default or modify, cancel, or amend the Lease,
or release Tenant from liability under the Lease without the prior written
consent of Purchaser.

6. Seller shall not initiate any action to alter or
amend the zoning classification of the Property, or otherwise intentionally
perform any act or deed which shall diminish, encumber or affect Purchaser's
rights in and to the Property or prevent Seller from performing fully its
obligations hereunder.

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7. Seller shall not solicit or encourage directly or
indirectly (including solicitation or encouragement by any broker retained by
Seller), inquiries or proposals with respect to, furnish any information
relating to, or participate in any negotiation concerning any proposal for the
sale or lease of the Property.

8. Seller shall not fill the railroad siding located
on the Property with contaminated soil or any other type of fill.

5.4.3. From and after the date of this Agreement, Seller will
defend or will cause its insurance carrier to defend any claims that Seller
has breached any contractual obligation of Seller (including without
limitation the Lease) and any tort claims against Seller, which arose before
the Closing Date, with the result that Purchaser will not be liable with
respect to such claims for any actual loss, costs or damages in connection
therewith, including litigation costs and expenses and excluding any costs or
expenses for Purchaser's employees' time or overhead but including any
expenses paid by Purchaser to third parties in assisting or cooperating with
Seller in defending any such claims. Seller agrees to indemnify and hold
harmless Purchaser from and against, and to reimburse Purchaser with respect
to, any and all claims, demands, causes of action, loss, damage, liabilities,
costs, and expenses (including reasonable attorneys' fees and courts costs)
asserted against or incurred by Purchaser by reason of or arising out of any
such alleged breach of contract or tort claim.

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5.4.4. With respect to any written notices to Seller received
by Seller prior to Closing of violations of law or municipal ordinances,
orders or requirements issued by any Governmental Authority against or
affecting the Property (the "VIOLATIONS"), Seller shall have the option either
to (a) elect not to cure such Violation(s), or (b) to cure any such
Violation(s) prior to Closing, to the extent it is practicable to so effect
such a cure. If Seller elects to cure the Violation(s), then if any
Violation(s) remains uncured on the Closing Date, Seller shall be given a
reasonable time, consistent with the nature of the work to be done, the
availability of tradespeople to accomplish the work, and the weather and other
physical conditions required for the work to be accomplished efficaciously and
at minimal cost, to effect such cure, or, at Seller's election, Purchaser
shall receive a credit against the Purchase Price equal to the mutually agreed
upon estimated cost of curing the same. Notwithstanding the foregoing, in the
event, Seller elects not to cure any violations, then Purchaser, at its
election, may as its sole remedy in respect thereof either (A) terminate this
Agreement, in which event the parties shall direct the Escrowee to return the
Earnest Money Deposit to Purchaser and neither party hereto will have any
further obligations except for those which specifically survive the
termination hereof, or (B) accept the Property subject to the Violations
without reduction of the Purchase Price or any credit or allowance on account
thereof or any claims against Seller.

5.4.5. Seller shall, at its sole cost and expense, use its
best efforts to obtain from the New Jersey Department of Environmental
Protection ("NJDEP")

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the Transfer Authorization provided for in N.J.S.A. 13:1K-11.5(b) permitting
the transfer of the Property to Purchaser. If such Authorization has not been
issued by the NJDEP by April 15, 1997, for any reason, this Agreement may be
terminated by Purchaser. Upon Purchaser providing written notice of such
election to Seller and Escrowee, this Agreement shall terminate and Escrowee
shall return the Earnest Money Deposit to Purchaser, and neither party shall
have any further liability to the other hereunder.

5.4.6. Seller shall, at its sole cost and expense, on or
before the Closing Date, store any of its Personal Property then remaining on
the Property in the 30,000 square feet to be leased to Seller by Purchaser as
provided in Section 6.6.(B)(5) and Exhibit O of this Agreement.

5.4.7. Seller shall, at its sole cost and expense, on or
before the Closing Date: (i) except for the CV platforms presently existing at
the Property and located between columns 8 and 11 as shown on Exhibit S
annexed hereto, remove all foundations and platforms which supported machinery
and equipment previously located on the Property as well as remove any
associated electrical or mechanical equipment specifically associated with
that machinery or equipment, and restore the floor to level condition in the
area of all such foundations and platforms so removed; (ii) fill all elevator
"pits", and cover such pits with cement which will be level with the existing
floors and (iii) arrange for the breaking up of or scrubbing of all concrete
floors which are oil soaked.

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5.4.8. Seller shall promptly notify Purchaser of any Change,
as defined in Section 5.2.2.

5.4.9. The provisions of this Section 5.4. shall survive the
Closing Date.

Section 5.5. Purchaser's Covenants.

5.5.1. Except for the representations and warranties and
covenants expressly made in this Agreement, Seller has made no
representations, warranties or covenants with regard to the Property and
Purchaser is purchasing the Property in its "as is" and "where is" condition.

5.5.2. Purchaser grants to Seller, its consultants and
contractors and to NJDEP the right to enter upon the Property as required to
perform or monitor the work necessary under the ACO or as otherwise required
by NJDEP, including but not limited to all activities and acts referred to in
Sections 5.1.2.13., 5.1.2.14. and 5.1.2.15. Subject to the limitations set
forth in Sections 5.1.2.16, Purchaser shall cooperate with Seller to enable
Seller to complete and discharge Seller's obligations under the ACO to the
satisfaction of the NJDEP, including granting Purchaser's consent to, and
including Purchaser's entry into and/or recording of use or deed restrictions
with respect to the Property which are set forth in Exhibit P. Seller shall
provide Purchaser with reasonable advance notice of the exercise of the right
of access to the Property. At Closing Seller's deed shall include and reserve
to Seller the rights

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set forth in this Section 5.5.2., in substantially the form set forth in
Exhibit P annexed to this Agreement.

ARTICLE 6

CLOSING

Section

6.1. Conditions To Purchaser's Obligations To Close. The obligation of
Purchaser to close under this Agreement and to pay the Purchase Price therefor
shall be subject to the fulfillment on and as of the Closing Date of all of
the following conditions (in addition to any other conditions to Purchaser's
obligation under this Agreement which are set forth elsewhere herein):

6.1.1. Seller shall have delivered to Purchaser all of the
items required to be delivered to Purchaser pursuant to the terms of this
Agreement, including, without limitation, those provided for in Section 6.6.

6.1.2. Except as provided in Section 5.2., all of the
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date as if
the same were made on and effective as of such date.

6.1.3. Seller shall have performed and observed, in all
material respects, all covenants, agreements and conditions of this Agreement
to be performed and observed by Seller as of the Closing Date. Purchaser shall
have the right, at its

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election, at or prior to the Closing by notice to Seller, to waive any
condition set forth in this Agreement to its obligation hereunder and by
effecting the Closing, Purchaser shall be deemed to have waived any such
condition not then fulfilled. Nothing contained in the preceding sentence,
however, shall limit, constitute a waiver or otherwise affect the liability of
Seller with respect to any covenants, indemnities, warranties and
representations which survive the Closing pursuant to the terms hereof.

6.1.4. Purchaser shall have received on or before March 1,
1997 (the "COMMITMENT DATE"), a [written commitment] from the New Jersey
Economic Development Authority ("EDA") pursuant to which the EDA agrees to
make [a loan] to Purchaser, in an amount not less than $6,480,000, or such
lesser sum as Purchaser shall be willing to accept, at the prevailing fixed
rate of interest for a term of at least 30 years and on other customary
commitment terms, secured by a first mortgage on the Property. Purchaser shall
(a) make prompt application to the EDA for such mortgage loan, (b) furnish
accurate and complete information on Purchaser, as required, (c) pay all
charges required in connection with such application and loan, (d) pursue such
application with diligence, (e) cooperate in good faith with the EDA to the
end of securing such first mortgage loan, (f) furnish Seller with proof that
Purchaser has filed its application for the EDA [loan], substantially
contemporaneously with such filings, and (g) promptly give notice to Seller
when and if such commitment is issued by the EDA. Purchaser shall comply with
all requirements of such commitment and

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shall furnish Seller with a copy thereof promptly after receipt thereof. If
such commitment is not issued on or before the Commitment Date, then, unless
Purchaser has accepted a commitment that does not comply with the requirements
set forth above, Purchaser may cancel this Agreement by giving notice to
Seller within five (5) business days after the Commitment Date, in which case
this Agreement shall be deemed canceled and thereafter neither party shall
have any further rights against, or obligations or liabilities to, the other
by reason of this Agreement (except as specifically otherwise provided
herein), except that the Earnest Money Deposit shall be promptly refunded to
Purchaser.

Section 6.2. Conditions To Seller's Obligations To Close. The
obligation of Seller to close under this Agreement shall be subject to the
fulfillment on or before the Closing Date of all of the following conditions
(in addition to any other conditions to Seller's obligation under this
Agreement which are set forth in this Agreement):

6.2.1. Purchaser and/or Escrowee shall have delivered to
Seller all of the items required to be delivered to Seller pursuant to the
terms of this Agreement, including, without limitation, those provided for in
Section 6.6.

6.2.2. All of the representations and warranties of Purchaser
contained in this Agreement shall be true and correct in all material respects
on and as of the Closing Date as if the same were made on and effective as of
such date.

6.2.3. Purchaser shall have performed and observed, in all
material respects, all covenants, agreements and conditions of this Agreement
to be performed

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or observed by Purchaser as of the Closing Date. Seller shall have the right,
at its election at or prior to the Closing by notice to Purchaser, to waive
any condition set forth in this Agreement to its obligation hereunder and by
effecting the Closing, Seller shall be deemed to have waived any such
condition not then fulfilled. Nothing contained in the preceding sentence,
however, shall limit, constitute a waiver or otherwise affect the liability of
Purchaser with respect to any covenants, warranties, representations or
indemnities which survive the Closing pursuant to the terms hereof.

Section 6.3. Closing.

6.3.1. The closing of the transaction provided for in this
Agreement (the "CLOSING") will be held at 10:00 a.m. at the offices of Francis
T. Giuliano, Esq. in Ramsey, New Jersey, 07446 (or at such other place upon
which Seller and Purchaser shall agree) on the Closing Date, provided,
however, that Purchaser and Seller shall each be entitled to adjourn the
Closing upon notice to the other party hereto given as soon as reasonably
practical prior to or on the scheduled Closing Date (as the same may have been
adjourned pursuant to this sentence or as otherwise provided in this
Agreement) one or more times for reasonable periods not in excess of ten (10)
days of adjournment by either of the parties, if the party giving such notice
or its attorneys are unable to perform their obligations on the Closing Date
for reasons beyond their reasonable control in the nature of force majeure
which shall include, but shall not be limited to, events in the nature of
physical illness, death of a family member, disruption of the means of
transportation or the financial institutions relied upon by

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any such party or failure of reputable overnight delivery services to perform
within the normally anticipated periods of performance. Except as set forth in
Section 4.3.1., there shall be no right to adjournment of the Closing to any
date beyond April 20, 1997.

6.3.2. In the event this Agreement is validly terminated
pursuant to a specific provision of this Agreement providing therefor,
Escrowee shall be directed to return the Earnest Money Deposit as specifically
provided for herein.

Section 6.4. Prorations. The following items shall be apportioned
(the "PRORATIONS") between the parties as of 11:59 p.m. of the day immediately
preceding the Closing Date and shall be documented in a statement (the
"CLOSING STATEMENT") executed and delivered by Purchaser and Seller:

6.4.1. Taxes. General real estate taxes and special
assessments required to be paid in calendar year 1997 shall be prorated on a
calendar year basis as of the Closing Date on the basis of the actual amount
of the most recent tax bill. If any special assessment is payable in
installments, Purchaser and Seller will only adjust for such special
assessment on the basis of the minimum payment due on such special assessment
for the tax year in which the Closing occurs.

6.4.2. Rent. Rent shall be prorated for the month in which the
Closing Date occurs, with Seller entitled to receive rent for the period prior
to the Closing Date, and with Purchaser entitled to receive rent for the
period from and after the Closing Date. No rent proration shall be made for
rents other than rents which have been received by either Seller or Purchaser;
no credit proration shall be made at

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any time for rents which have accrued but which have not been paid in cash.
Seller's remedies for rent unpaid at the time of Closing are stated in Section
6.4.3. below. Rents which have been received by Seller for the month in which
the Closing occurs will be considered prepaid rent for the portion of that
month occurring from and after the Closing, and Purchaser shall receive credit
for prepaid rents hereunder.

6.4.2.1. Seller shall be entitled to fixed, minimum and
base rents for the period prior to the Closing Date. Seller shall be entitled
to retain payments it has received from Tenant, or for which it has billed
Tenant, for heat, electricity and real estate taxes, for the month in which
Closing occurs. Purchaser and Seller will prorate these items as provided in
Sections 6.4.1. and 6.4.6.

6.4.2.2. Overage rents ("OVERAGE RENTS") to be prorated
hereunder shall include consumer price index, escalation payments and other
similar rental payments in excess of fixed, minimum and base rents under the
Leases, whether finally determined before or after the expiration of the
fiscal years under the Leases. Charges ("CHARGES") to be prorated hereunder
shall include maintenance charges, taxes, operating expenses and similar
expenses to the extent Tenant under Lease pays monthly estimates with an
adjustment at the end of each fiscal year applicable to Charges. Overage Rents
and Charges shall be separately prorated under each Lease on the basis of the
fiscal year set forth in each Lease for the payment of Overage Rents and
Charges. All interim Overage Rent and Charges payments made before the Closing
Date shall be retained by Seller until year-end adjustment and determination

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of Seller's allocable share thereof. At the Closing, Seller shall provide a
schedule listing all Overage Rents and Charges it has collected for the
current fiscal year. All amounts received by Purchaser on or after the Closing
Date as interim payments of Overage Rents and Charges shall be retained by
Purchaser until year-end adjustment and determination of Seller's allocable
share thereof. Purchaser shall endeavor to complete the year-end adjustment
within one hundred-twenty (120) days of the end of the relevant fiscal year
after the Closing Date and will compute such adjustment in a reasonably
prudent manner provided that prior to forwarding the adjustment to Tenant,
Purchaser will forward a copy to Seller. Purchaser may not waive any
Delinquent Amounts nor modify the Lease so as to reduce amounts or charges
owed under the Lease for any period in which Seller is entitled to receive a
share of charges or amounts, without first obtaining Seller's written consent.
Upon final determination of Overage Rents and Charges owed by the Tenant under
the Lease for the fiscal year under that Lease in which the Closing Date
occurs, Seller and Purchaser shall adjust between themselves amounts owed for
such fiscal year (as applicable to the specific Overage Rent or Charge) on
account of Overage Rents and Charges, and Seller's allocable share of such
Overage Rents and Charges shall be equal to an amount determined by
multiplying separately each of the Overage Rents and Charges owed by the
fraction whose numerator is the number of days in such fiscal year before the
Closing Date, and whose denominator is the total number of days in such fiscal
year for the relevant Overage Rent or Charge. At the end of the fiscal year
for the Lease for

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which Overage Rents or Charges are due, Purchaser shall promptly bill the
amounts due, if necessary, and shall diligently pursue such payment. Within
fifteen (15) days after collection, Purchaser shall remit to Seller its
allocable share, less interim payments previously retained by Seller, if any,
less a pro rata share of costs of collection paid to third parties, if any. If
Seller has retained amounts in excess of its allocable share, Seller, within
fifteen (15) days after notice from Purchaser of the excess owed Purchaser,
shall remit such excess to Purchaser.

6.4.3. Collections and Applications of Payments after Closing.

6.4.3.1. After the Closing Date, Purchaser shall bill
Tenant for all amounts due under the Lease, including amounts accruing prior
to the Closing Date and at Seller's reasonable request, Purchaser shall
provide such information to Seller. Any amounts due and owing Seller before
the Closing Date by Tenant under the Lease which are unpaid on the Closing
Date are collectively called "DELINQUENT AMOUNTS." Rental and other payments
received by Purchaser or Seller from Tenant shall be applied first toward the
actual and reasonable out-of-pocket costs of collection paid to third parties;
then, if on the Closing Date Tenant is not in arrears in excess of one month's
rent, then any sums collected by Purchaser shall be applied against the
Delinquent Amount up to the amount in arrears on the Closing Date, but not to
exceed one month's rent and be promptly remitted to Seller; then toward the
payment of rent and other charges owed to Purchaser, and any excess monies
received shall be applied to the payment of the balance of the Delinquent
Amounts of the Tenant who on the

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Closing Date was in arrears in excess of one months rent. Purchaser may not
waive any Delinquent Amounts nor modify the Lease so as to reduce amounts or
charges owed for any period in which Seller is entitled to receive a share of
charges or amounts, without first obtaining Seller's written consent.

6.4.3.2. During the first year after the Closing Date,
Seller shall have and reserve the right to pursue any remedy against Tenant
for Delinquent Amounts provided that (i) Seller shall notify Purchaser of its
intent to institute any legal proceeding relating thereto not less than sixty
(60) days prior to the institution thereof, (ii) Seller shall not institute
any legal proceedings for collection of Delinquent Amounts prior to the
expiration of thirty (30) days following the Closing Date, (iii) Seller shall
in no event institute any proceeding to evict or dispossess Tenant from the
Real Property, and (iv) Seller shall not take any action which would limit
Purchaser's rights to pursue any remedy Purchaser may have for a default under
the Lease. Purchaser may, by written notice to Seller within twenty (20) days
of receipt of Seller's notice, restrict Seller from collecting such Delinquent
Amounts, but only if Purchaser first pays Seller such Delinquent Amounts in
exchange for Seller's assignment to Purchaser of all of Seller's rights and
causes of action with respect thereto. With respect to Delinquent Amounts owed
by tenants who are no longer tenants of the Property as of the Closing Date,
Seller shall retain all rights relating thereto. Seller shall indemnify and
hold harmless Purchaser from any action taken by

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Seller in violation of the provisions of this Section. The provisions of this
Section 6.4.3. shall survive the Closing.

6.4.4. Prepaid Rents and Security Deposit. All prepaid rents
and security and other deposits of the Tenant under the Lease not theretofore
applied to cure defaults by the Tenant, with accrued interest thereon, to the
extent any interest is required to be paid to the Tenant shall be delivered by
Seller to Purchaser on the Closing Date by unendorsed certified or official
bank check to Purchaser's order, or at Seller's election Seller may give
Purchaser a credit against the Purchase Price in the amount of such prepaid
rent, security deposits and accrued interest. The provisions of this Section
6.4.4. shall survive the Closing.

6.4.5. Contracts. Purchaser shall be entitled to a credit
against the Purchase Price for sums that are due (or accrued) and unpaid as of
the Closing Date under any Contracts which have been assigned to Purchaser,
and Seller shall be entitled to a credit to the extent that sums have been
paid under any Contracts which have been assigned to Purchaser for services to
be performed or goods to be delivered after the Closing Date.

6.4.6. Utility and Fuel Charges. Seller shall cause all water,
electricity, gas and other utility meters to be read on the day preceding the
Closing Date, or as close thereto as may be possible, and shall pay all bills
rendered as a result of such readings. The cost of such utilities for the
period, if any, between the date of the meter reading and the Closing Date
shall be adjusted on the basis of the most

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recently issued bill therefor. If Seller does not obtain such a meter reading
for any such utility, the adjustment therefore shall be on the basis of the
most recently issued bill therefor, subject to post-Closing adjustment in
accordance herewith. At the Closing, Purchaser shall reimburse Seller in an
amount equal to all deposits, if any, made by Seller with any utility which
the utility shall require remain on deposit for the benefit of Purchaser
subsequent to the Closing. In the event that there are any fuel oil supplies,
the fuel oil supplies will be prorated on the quantity on hand no earlier than
three (3) business days prior to the Closing Date based on Seller's cost
therefor (including sales tax, if any) based on measurements thereof by
Seller's regular suppliers.

6.4.7. Other Items of Expense or Receipt. All other
customarily prorated items of expense or receipt for properties similar to the
Property in North Brunswick, New Jersey, shall be prorated between the parties
hereto as of the Closing Date. Except with respect to items prorated at
Closing (a) Seller shall be responsible for payment of any and all bills or
charges incurred by Seller or its agent prior to the Closing Date for work,
services, supplies or materials in respect of the Property, and (b) Purchaser
shall be responsible for payment of any and all bills or charges incurred on
and after the Closing Date for work, services, supplies or materials in
respect of the Property. Unless otherwise provided for in this Agreement,
Purchaser shall not purchase, nor shall there be any proration credit given
for, any of Seller's receivables arising from the operation of the Property.

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6.4.8. Adjustments.

(a) Prorations shall be accomplished by a credit against
the Purchase Price due Seller or a credit in favor of Seller on the Closing
Date.

(b) Except for amounts due under Section 6.4.3., to the
extent that any of the prorations made upon the Closing Date pursuant to this
Article 6 are based upon estimates of payments to be made and/or expenses to
be incurred by Purchaser subsequent to the Closing Date or have been made
erroneously, Seller and Purchaser agree to adjust such prorations no later
than two hundred forty (240) days after the Closing Date upon receipt by
Seller or Purchaser, as the case may be, of bills or other documentation
setting forth the actual and/or correct amount of such expenses. The
provisions of this Section 6.4.8. shall survive the Closing.

Section 6.5. Closing Costs.

A. In connection with the Closing, Seller shall on the Closing Date pay:

1. The transfer taxes imposed by the State of New Jersey and any
local or county transfer taxes on the Deed and any other transfer or gains
taxes imposed on this transaction; and

2. Any other closing costs and expenses customarily paid by
sellers necessary to effectuate the transactions contemplated by this Agreement
(other than costs specifically allocated to Purchaser below).

B. In connection with the Closing, Purchaser shall pay:

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1. The title insurance premium for the costs of obtaining the
Owner's Policy and the lender's policy and any endorsements thereto;

2. The cost to record the Deed to Purchaser; and

3. Any other closing costs and expenses customarily paid by
purchasers necessary to effectuate the transactions contemplated by this
Agreement (other than costs specifically allocated to Seller above).

Section

6.6. Closing Deliveries.

A. Seller shall deliver at Closing the following documents ("SELLER'S CLOSING
DOCUMENTS"):

1. The Deed together with completed tax returns as required by
state, county or local law, if any;

2. An assignment of the Contracts which may be assigned and
Intangible Property from Seller in the form of Exhibit E;

3. A certificate confirming the continued accuracy of the
warranties and representations made by Seller in this Agreement as required by
Section 5.2.;

4. An estoppel letter addressed to Purchaser dated no earlier
than forty-five (45) days prior to the Closing Date from Tenant. The estoppel
letter will state, with respect to Tenant's Lease, (aa) that the Tenant has
accepted and is

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occupying the leased premises, (bb) the date of the Lease and that the Lease
has not been modified or amended (or, if modified or amended, stating the date
of each modification or amendment), (cc) that the Lease is in full force and
effect and Tenant has not received any written notices of default thereunder,
(dd) that there are no defaults of the landlord under the Lease known to the
Tenant, (ee) that any construction of tenant improvements required to be
completed by the landlord has been satisfactorily completed, (ff) the date to
which rent has been paid under the Lease (gg) the expiration date of the
Lease; and (hh) whether the Tenant has an option to extend the term of the
Lease;

5. A letter to Tenant advising it (i) of the change in
ownership of the Property, (ii) the amount of its security deposit and the
prepaid rent that has been delivered to Purchaser, (iii) directing it to pay
rent to Purchaser or as Purchaser may direct, and (iv) directing it to deliver
to Purchaser or as Purchaser may direct, an insurance certificate in the form
required under the Lease for the benefit of the landlord;

6. Appropriate evidence of Seller's right, power and authority
to sell the Property to Purchaser on the terms and conditions of this
Agreement as Purchaser may reasonably require;

7. An affidavit executed on behalf of Seller providing
Seller's taxpayer identification number and a statement that Seller is not a
foreign person within the meaning of Section 1445(f)(3) of the Internal
Revenue Code, as amended;

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<PAGE>

8. A complete set of all keys and magnetic pass cards to the
Improvements, appropriately tagged for identification to the extent in
Seller's possession or control;

9. To the extent in Seller's possession or control, and not
already delivered, all original licenses and permits, authorizations and
approvals which are currently in force pertaining to the Property and all
guarantees and warranties which are currently in force and which Seller has
received in connection with any work or services performed or equipment
installed in and to Improvements erected on the Property;

10. True and complete originals of the Lease and files with
respect to Overage Rents and Charges which will be deemed delivered if
delivered to Purchaser at the site of the Closing or at the Property;

11. An instrument duly executed and acknowledged by Seller, in
which Seller assigns to Purchaser all of Seller's right, title and interest as
landlord in, to and under the Lease as of the Closing Date in the form of
Exhibit F;

12. To the extent in Seller's possession or control, the
originals of the Property Documents and in all other instances copies thereof
which will be deemed delivered if delivered to Purchaser at the site of the
Closing or at the Property;

13. The current operating files for the Property except that
Seller shall not be required to deliver any original accounting documents, or
any canceled checks or bills which are not related to current amounts payable
or due under any of the Contracts which are being assigned pursuant to this
Agreement or are not required to compute Overage Rents and Charges, which will
be deemed delivered if delivered to Purchaser at the site of the Closing or at
the Property;

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<PAGE>

14. A duly executed Closing Statement;

15. An Environmental Indemnity Agreement substantially in the
form of Exhibit N;

16. A Transfer Authorization issued by the New Jersey
Department of Environmental Protection approving the transaction contemplated
by this Agreement pursuant to N.J.S.A. 13:1K-11.5(b);

17. An affidavit of title;

18. The corporate resolutions of Seller authorizing the
actions to be taken by Seller pursuant to this Agreement;

19. A certificate of incumbency for the officers of Seller;

20. The Lease Agreement in the form attached hereto as
Exhibit O;

21. A written designation by the appropriate Governmental
Authority that the Property is considered an "environmental opportunity zone"
pursuant to the New Jersey Environmental Opportunity Zone Act.

22. The written approval by the local Governmental Authority
of Purchaser's proposed use of the Property.

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23. Such other, and further customary instruments and
documents as Seller's counsel and Purchaser's counsel may reasonably require
to evidence and conclude the transaction contemplated by this Agreement.

B. Purchaser shall deliver at Closing the following items:

1. A duly executed Closing Statement;

2. Counterpart copies of any of Seller's Closing Documents
which require execution by Purchaser, including Exhibit F;

3. A certificate confirming the continued accuracy of the
warranties and representations made by Purchaser in this Agreement as required
by Section 5.3.2.;

4. The amounts required to be paid to Seller pursuant to the
Closing Statement; and

5. A Lease Agreement between Purchaser, as Landlord, and
Seller, as Tenant, providing for the lease to Seller of approximately 30,000
square feet of storage space, at a rental of $1.00 per year, for a term of two
(2) years, substantially in the form of Exhibit O.

6. Such other and further customary instruments and documents
as Seller's counsel and Purchaser's counsel may reasonably require to evidence
and conclude the transaction contemplated by this Agreement.

Section 6.7. Access to Records.

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6.7.1. Purchaser agrees that (i) all records and files
delivered to Purchaser by Seller pursuant to this Agreement will be preserved
by Purchaser, its successors and assigns, for a period of three (3) years
subsequent to the Closing at a location in North Brunswick, New Jersey, and
(ii) Seller may have access to such records and files, to the extent necessary
for the preparation of its tax returns or other good business reason, from
time to time after the Closing during normal business hours and upon
reasonable prior notice to Purchaser.

Section 6.8. Survival. The provisions of this Article 6 shall
survive the Closing.

ARTICLE 7

BROKERAGE

Each party represents and warrants to the other that it has dealt
with no broker or finder with respect to this Agreement. Each party hereby
indemnifies and agrees to save, defend and hold the other party harmless from
and against any loss, cost, damage, claim, liability or expense, including
reasonable attorneys' fees and litigation costs suffered or incurred as a
result of its breach of the foregoing representation and warranty. The
provisions of this Article 7 will survive the termination of this Agreement or
the Closing.

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ARTICLE 8

CASUALTY AND CONDEMNATION

(a) Seller and Purchaser waive the provisions of all
applicable laws relating to the occurrence of a casualty or condemnation
between the date hereof and the Closing, and Seller and Purchaser agree that
the provisions of this Article 8 shall govern in lieu thereof.

(b) If the Property shall hereafter be destroyed or
damaged in whole or in part by fire or other cause, or be taken in whole or in
part by right of eminent domain or by condemnation, the obligations of the
parties hereunder shall continue unaffected by reason of any such damage,
destruction or taking and the transaction contemplated by this Agreement shall
be fully consummated in accordance with the terms hereof without any reduction
or abatement in the Purchase Price or any credit or allowance against the
same, except as herein expressly provided for. Seller covenants and agrees
that it will give Purchaser prompt notice of any casualty, condemnation or
threatened condemnation.

(c) If prior to the Closing Date (i) a Material Part (as
defined below) of the Improvements is damaged or destroyed by fire or other
cause or a Material Part of the Property is taken by right of eminent domain
or condemnation or proceedings therefor or notice thereof shall have been
given or commenced, or (ii) Purchaser obtains knowledge of a taking (or the
contemplation of a taking) of a

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<PAGE>

Material Part of the Property by eminent domain or condemnation, Purchaser
may, by written notice given to Seller at or prior to the Closing (but not
more than thirty (30) days after notice of such damage or destruction, taking
or commencement of such a taking is received by Purchaser), cancel this
Agreement, whereupon this Agreement shall terminate, and neither party shall
have any rights or liabilities against or to the other except for those that
specifically survive the termination hereof and the parties shall direct the
Escrowee to return the Earnest Money Deposit to Purchaser. For the purposes of
this Article 8, a "MATERIAL PART" shall mean (i) damage or destruction the
cost of repair of which shall exceed One Million Dollars ($1,000,000.00), or
(ii) a taking or proposed taking of five percent (5%) or more of the square
footage of the building situated on the Land or a permanent taking or proposed
taking which would materially impede vehicular or pedestrian access to the
Property, or which would materially interfere with or impede the proposed use
of the Property by Purchaser.

(d) If prior to the Closing Date (i) an immaterial part of
the Improvements is damaged or destroyed in whole or in part by fire or other
cause, (ii) an immaterial part of the Property is taken by right of eminent
domain or by condemnation, or eminent domain or condemnation proceedings are
commenced with respect to an immaterial part of the Property, (iii) a Material
Part of the Improvements is damaged or destroyed in whole or in part by fire
or other cause and Purchaser has not canceled this Agreement in accordance
with the provisions of subsection (c) above or (iv) a Material Part of the
Property is taken by eminent domain or condemnation,

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<PAGE>

or eminent domain or condemnation proceedings are commenced with respect to a
Material Part of the Property and Purchaser has not canceled this Agreement in
accordance with subsection (c) above, then Seller as its sole obligation and
at its sole election shall either (i) credit on account of the Purchase Price
an amount equal to the net proceeds of any fire insurance and condemnation
award actually received by Seller (the term "NET PROCEEDS" as used in this
Section to mean such proceeds reduced by (aa) the reasonable cost of
collection and (bb) the cost of any repairs effected by or on behalf of Seller
with Purchaser's consent, which consent shall not be unreasonably withheld or
delayed, or without Purchaser's consent with respect to repairs of an
emergency nature) or (ii) if any such proceeds have not been received by
Seller, transfer and assign to Purchaser, without recourse, all of Seller's
right, title and interest in and to any insurance and condemnation proceeds
payable to Seller, and there shall be no abatement or credit on account of the
Purchase Price and no duty or obligation on Seller to repair or restore any
damage or to make any repairs to the Property by reason of such fire, casualty
or taking. Adjustment of any insurance or condemnation claim shall be
conducted jointly by Seller and Purchaser. In the event of an assignment of
all insurance claims as provided for above, Purchaser shall receive at
Closing, a credit against the Purchase Price in an amount equal to any
deductible(s) and uninsured amounts. Notwithstanding the foregoing, in the
event that the uninsured amount plus any sums expended by Seller pursuant to
clause (bb) above (which has not been reimbursed to Seller from the insurance
proceeds, if any) exceeds

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One Million Dollars ($1,000,000.) (an "EXCESS UNINSURED AMOUNT"), then Seller,
at its election, may terminate this Agreement and the parties shall direct the
Escrowee to return the Earnest Money Deposit to Purchaser, and neither party
will have any further obligation to the other except for those provisions
which specifically survive the termination hereof. Notwithstanding the
foregoing, Purchaser, at its election made within five (5) business days after
notice of Seller's election to terminate this Agreement due to an Excess
Uninsured Amount, may accept title to the Property, notwithstanding the
existence of an Excess Uninsured Amount, provided that on the Closing Date,
Seller credits the Purchase Price by an amount equal to One Million Dollars
($1,000,000.) less any sums expended by Seller pursuant to clause (bb) above
(which has not been reimbursed to Seller from the insurance proceeds, if any).

ARTICLE 9

DEFAULTS

Section 9.1. Purchaser's Default. In the event that Purchaser
wilfully defaults under this Agreement and the Closing does not occur as the
result thereof, Seller shall, as its sole and exclusive remedy, retain the
Earnest Money Deposit as liquidated and agreed damages for such default by
Purchaser, whereupon neither party hereto shall have any further obligations
to the other under this Agreement; provided, however,

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<PAGE>

that neither party shall be released from its obligations which specifically
survive the termination of this Agreement.

Section 9.2. Seller's Default. If Seller defaults in its
obligations under this Agreement, and the Closing does not occur as a result
thereof, then except as set forth below, the sole obligation of Seller shall
be to cause the refund of the Earnest Money Deposit to Purchaser and upon the
making of such refund and reimbursement this Agreement shall be null and void
and of no further force or effect, no party hereto shall have any further
claim against the other by reason of this Agreement provided, however, that
neither party shall be released from its obligations which specifically
survive the termination of this Agreement. Notwithstanding the foregoing, if
Seller's inability to close shall result from Seller's willful default or
willful material misrepresentation or willful and material breach of warranty
or a covenant, then and in any such event Purchaser may, at its election,
pursue any remedy allowed by law, including, without limitation, specific
performance, or Purchaser may elect to cancel this Agreement and receive the
return of the Earnest Money Deposit. If Purchaser elects to cancel this
Agreement, then upon receipt by Purchaser of the Earnest Money Deposit, no
party hereto shall have any further claim against the other by reason of this
Agreement except in connection with those provisions which expressly survive
the termination hereof.

Section 9.3. Delivery of Earnest Money Deposit in the Event of a
Default. In any case where either party is entitled to receive the Earnest
Money Deposit

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hereunder due to a default by the other party to this Agreement (or as
otherwise provided in this Agreement), the parties agree to give the Escrowee
prompt written instructions to deliver the Earnest Money Deposit to the party
entitled thereto.

ARTICLE 10

LIMITATIONS OF LIABILITY

Section

10.1. No Liability as to Representatives. The parties agree that
all obligations of a party under or with respect to this Agreement do not
constitute personal obligations of the partners, members, officers, directors,
employees, shareholders, advisors or agents of such party (collectively
"REPRESENTATIVES") and shall not involve or create any claim against or any
personal liability of any of the Representatives and that each party or any
person claiming by or under such party will look solely to the assets of the
other party for satisfaction of such party's liabilities under this Agreement
and will not seek recourse against any of the Representatives for any such
satisfaction.

Section 10.2. Limitation of Liability of Purchaser. Anything herein
to the contrary notwithstanding, the liability of Purchaser for failure to
perform its obligations or otherwise under or in connection with this
Agreement shall prior to the Closing or after the termination of this
Agreement be limited to the Earnest Money Deposit.

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Section 10.3. Limitation of Liability of Seller. Anything herein to
the contrary notwithstanding, the liability of Seller for failure to perform
its obligations under or in connection with this Agreement prior to the
Closing or after the termination of this Agreement shall be limited to its
interest in the Property, the proceeds of sale or other transfer thereof and
the net proceeds of any refinancing thereof.

Section 10.4. Survival. The provisions of this Article 10 shall
survive the Closing or termination of this Agreement.

ARTICLE 11

MISCELLANEOUS

Section

11.1. Assurances Of Cooperation. The parties hereby
covenant and agree that they will at any time prior to or after the Closing
and from time to time, execute, acknowledge and deliver, or will cause to be
done, executed, acknowledged and delivered all such further acts, documents
and instruments as may reasonably berequired by the other party in order to
carry out fully and effectuate the transaction herein contemplated in
accordance with the provisions of this Agreement.

Section 11.2. Successors And Assigns. This Agreement shall be
binding in all respects on and shall inure to the benefit of the Seller and
Purchaser and their respective successors and assigns. Purchaser may assign
its interests under this

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Agreement to (i) a Permitted Assignee; or (ii) to any other entity upon the
prior written consent of Seller, which consent shall not be unreasonably
withheld. Upon such assignment, Purchaser named herein shall be released of
liability hereunder provided, however, that upon Purchaser's assignment the
assignee assumes in writing, for Seller's benefit, all liabilities of
Purchaser under this Agreement and reaffirms all of the representations and
warranties contained in Section 5.3. hereof with respect to the assignee, and
a counterpart of such assignment and assumption is delivered to Seller. This
Agreement is made for the sole and exclusive benefit of the parties hereto and
their respective successors and assigns; no third party is intended to have or
shall have any rights under this Agreement.

Section 11.3. Interpretation.

11.3.1. This Agreement represents the entire agreement between
the parties hereto and shall not be modified or affected by any offer,
proposal, statement or representation, oral or written, made by or for either
party in connection with the negotiation of the terms hereof. No future
modification or Amendment of this Agreement may be made, except by written
agreement executed by the parties hereto.

11.3.2. No failure by the parties hereto to insist upon the
strict performance of any covenant, duty, agreement or condition of this
Agreement or to exercise any right or remedy upon a breach thereof shall
constitute a waiver of any such right or remedy or any other covenant,
agreement, term or condition. Any party

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to this Agreement may by written notice waive any of its rights or any
conditions to its obligations hereunder, or any duty, obligation or covenant
of any other party hereto.

11.3.3. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provision
to other persons or circumstances shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.

11.3.4. Use of the terms "include," "including," or
"includes," followed by specific examples shall not be deemed to limit the
object of the reference to the specific examples.

11.3.5. The masculine, feminine or neuter pronouns used herein
shall be interpreted without regard to gender, and the use of the singular or
plural shall be deemed to include the other whenever the context so requires.
The headings in this Agreement are inserted for convenience of reference only
and shall not be a part of or control or affect the meaning of this Agreement.

11.3.6. The validity, construction and enforceability of this
Agreement shall be governed in all respects by the laws of the State of New
Jersey, without regard to its conflict of laws rules.

Section

11.4. Survival. All provisions of this Agreement which are
expressly stated to survive the Closing, shall not merge with, be extinguished
or otherwise affected by the Deed

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or any of the Closing Documents. The provisions of this Article 11 shall
survive the Closing or termination of this Agreement.

Section 11.5. Joint Cooperation. Upon obtaining knowledge of any
event which could give rise to a claim of indemnity under this Agreement, the
party seeking indemnification shall promptly notify the other party of that
event but the failure of the indemnified party to timely give written notice
as provided herein shall not relieve the indemnifying party of its obligations
under this Agreement unless such failure to give notice materially adversely
affects the ability of the indemnifying party to defend such claim. If such
claim or demand relates to a claim or demand asserted by a third party, the
indemnifying party shall have the right, at its expense, to employ counsel
reasonably acceptable to the indemnified party, except that counsel designated
by the insurance company of the indemnifying party shall be deemed acceptable,
to defend such claim or demand and the indemnified party shall have the right,
but not the obligation, to participate in the defense of any such claim or
demand. So long as the indemnifying party is defending such claim or demand in
good faith, the indemnified party will pay its own attorney fees for
participating in such defense and will not settle such claim or demand without
the indemnifying party's consent. The indemnified party shall make available
to the indemnifying party all records and other materials reasonably required
by it in contesting a claim or demand asserted by a third party against the
indemnified party and shall cooperate in the defense thereof. The parties
shall make their records available to each other to the extent required to
comply with

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any audit or other review of a party's records or tax returns by a
governmental agency.

Section 11.6. Publicity. Neither Purchaser nor Seller shall
announce or disclose publicly the terms or provisions hereof without the prior
written approval of the other party, except as such disclosure may be required
by law and except that this provision shall not prohibit either party from
disclosing such terms or provisions to its attorneys, accountants, lenders,
bankers, financial advisors, investors or any other advisor or consultant.
Neither Seller nor Purchaser shall record this Agreement or any evidence
thereof in the public records of the county in which the Real Property is
located.

Section 11.7. Notices. All elections, notices and other
communications to be given hereunder by either party to the other shall be in
writing and sent by personal delivery, reliable overnight courier with
evidence of receipt or by facsimile (with confirmation by one of the other
methods of notice), addressed:

If to Seller: Mr. David J. Sokira
The Okonite Company
102 Hilltop Road
Ramsey, New Jersey 07446
Facsimile No. (201) 825-2672

with a copy to Francis T. Giuliano, Esq.
Seller's Counsel: 102 Hilltop Road
Post Office Box 340
Ramsey, New Jersey 07446
Facsimile No. (201) 825-2672

If to Purchaser: Mr. Frederick J. Horowitz
USA Detergents, Inc.
1735 Jersey Avenue

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<PAGE>

North Brunswick, New Jersey 08902
Facsimile No. (908) 246-8833

with a copy to Sheldon Nussbaum, Esq.
Purchaser's Fulbright & Jaworski L.L.P.
Counsel: 666 Fifth Avenue
New York, New York 10103
Facsimile No. (212) 752-5958

or at such other addresses as the parties may designate to the other by
written notice in the manner herein provided. Any such notices or election
shall be effective at the following times: (i) upon delivery, if personally
delivered; (ii) one (1) day after delivery to the overnight courier; or (iii)
the date of transmission if by facsimile with confirmed electronic receipt.

Section 11.8. Certain Conditions. Notwithstanding anything to the
contrary set forth in Sections 6.6.A.21 and 6.6.A.22, Seller shall not be
required to deliver the documents set forth in said sections as a condition to
the Closing; and if such documents are not delivered by Seller at or prior to
the Closing, Purchaser shall nonetheless be required to Close this transaction
if all other conditions to the Closing have been satisfied.

Section 11.9. Attorney's Fees. In the event of any litigation
between the parties hereto with respect to their rights and obligations
hereunder, the reasonable attorneys' fees and costs of the party successful in
such action, but only with respect to the first $500,000 of such fees and
costs, will be borne by the party which is the losing party in such
litigation.

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<PAGE>

Section 11.10. Counterparts. This Agreement may be executed and
delivered in counterpart copies, all of which together will constitute one
executed original agreement.

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IN WITNESS WHEREOF, Seller and Purchaser have executed this
Agreement the day and year first above written.

SELLER:

THE OKONITE COMPANY, INC.

By: /s/ David J. Sokika
-------------------------
David J. Sokika
Its: Vice President Finance &
Treasurer

PURCHASER:

USA DETERGENTS, INC.

By: /s/ Frederick J. Horowitz
--------------------------
Frederick J. Horowitz
Its: Executive Vice President

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INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement
Nos. 33-98988 and 33-98986 of USA Detergents Inc. on Form S-8 of our report
dated February 17, 1997 (March 3, 1997 and March 24, 1997 as to note 4),
appearing in this Annual Report on Form 10-K of USA Detergents Inc. for the
year ended December 31, 1996.

/s/ Deloitte & Touche LLP
New York, New York
March 27, 1997

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1996
CONSOLIDATED FINANCIAL STATEMENTS OF USA DETERGENTS, INC. AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,373
<SECURITIES> 0
<RECEIVABLES> 29,545
<ALLOWANCES> (1,349)
<INVENTORY> 32,657
<CURRENT-ASSETS> 64,976
<PP&E> 33,473
<DEPRECIATION> (4,870)
<TOTAL-ASSETS> 98,904
<CURRENT-LIABILITIES> 24,414
<BONDS> 0
0
0
<COMMON> 138
<OTHER-SE> 41,121
<TOTAL-LIABILITY-AND-EQUITY> 98,904
<SALES> 0
<TOTAL-REVENUES> 174,031
<CGS> 115,338
<TOTAL-COSTS> 35,634
<OTHER-EXPENSES> 7,412
<LOSS-PROVISION> 1,421
<INTEREST-EXPENSE> 868
<INCOME-PRETAX> 14,779
<INCOME-TAX> 5,912
<INCOME-CONTINUING> 15,647
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,867
<EPS-PRIMARY> .65
<EPS-DILUTED> .65

</TABLE>