<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20509
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
June 30, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ................ to ...................
Commission file number 0-26568
USA Detergents, Inc.
(Exact name of registrant as specified in its charter)
Delaware 11-2935430
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1735 Jersey Avenue, North Brunswick, New Jersey 08902
(Address of principal executive offices - Zip code)
(732) 828-1800
(Registrant's telephone number, including area code)
--------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the registrant was required to
file reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] (1) No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Stock No. of Shares Outstanding Date
-------------- ------------------------- ----
Common 13,825,602 August 14, 1998
(1) The Company was delinquent in the filing of its Form 10-Q for the quarter
ended June 30, 1997, which Form has since been filed.
<PAGE>
USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
December 31, June 30,
1997 1998
---- ----
<S> <C> <C>
Current assets:
Cash $ 1,848 $ 3,610
Accounts receivable, net of customer allowances and doubtful
accounts of $867 and $1,069 , respectively 24,349 20,703
Inventories 17,258 13,619
Refundable income taxes 7,120 7,057
Prepaid expenses and other current assets 3,249 2,892
------------- -------------
Total current assets 53,824 47,881
Property and equipment - net 45,672 45,795
Restricted funds 275 275
Deferred financing costs 491 1,476
Other non-current assets 2,546 2,140
------------- -------------
Total assets $ 102,808 $ 97,567
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,501 $ 36,321
Accounts payable 29,880 24,784
Accrued expenses 13,259 15,318
Other current liabilities 1,367 518
------------- -------------
Total current liabilities 47,007 76,941
Long-term debt - net of current portion 38,998 -
Long-term note payable - 4,000
Deferred rent payable 1,219 1,110
------------- -------------
Total liabilities 87,224 82,051
------------- -------------
Commitments and Contingencies
Stockholders' equity:
Preferred stock-no par value; authorized 1,000,000
shares, none issued - -
Common stock-$.01 par value; authorized 30,000,000 shares, issued
and outstanding 13,806,279 and 13,825,602 shares, respectively 138 138
Additional paid-in capital 28,336 29,200
Deficit (12,715) (13,647)
Note receivable - warrant (175) (175)
------------- -------------
Total stockholders' equity 15,584 15,516
------------- -------------
Total liabilities and stockholders' equity $ 102,808 $ 97,567
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except net loss per share information)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
--------------------- -----------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 54,970 $ 54,072 $ 115,640 $ 110,750
Cost of goods sold 46,767 36,826 96,112 76,803
---------- --------- ---------- ---------
Gross profit 8,203 17,246 19,528 33,947
Selling, general and administrative 20,948 14,648 40,093 29,082
Restructuring costs 2,379 400 2,379 400
Litigation settlement - 3,266 - 3,266
---------- --------- ---------- ---------
23,327 18,314 42,472 32,748
Income/(loss) from operations (15,124) (1,068) (22,944) 1,199
Interest and amortization of deferred financing costs - net 685 1,182 1,139 2,085
---------- --------- ---------- ---------
Loss before provision/(benefit) for income taxes (15,809) (2,250) (24,083) (886)
Provision/(benefit) for income taxes (1,092) 25 (3,909) 46
---------- ---------- ----------- ---------
Net loss $ (14,717) $ (2,275) $ (20,174) $ (932)
========== ========= ========== =========
Basic net loss per share $ (1.07) $ (.16) $ (1.46) $ (.07)
========== ========= ========== =========
Weighted average shares outstanding 13,794 13,825 13,779 13,820
========== ========= ========== =========
Diluted net loss per share $ (1.07) $ (.16) $ (1.46) $ (.07)
========== ========= ========== =========
Weighted average shares outstanding 13,794 13,825 13,779 13,820
========== ========= ========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997, AND 1998
(in thousands)
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(20,174) $ (932)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 2,298 2,895
Amortization of warrants - 328
Amortization of deferred financing costs - 179
Change in the provision for customer allowances and doubtful accounts 2,489 202
Decrease in deferred rent (32) (109)
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable (1,575) 3,444
Decrease in inventories 8,322 3,639
(Increase)/decrease in prepaid expenses and other current assets (112) 357
Decrease in other non-current assets 194 13
Increase/(decrease) in accounts payable and accrued expenses 19,248 (3,037)
(Increase)/decrease in refundable income taxes (3,740) 63
Decrease in deferred tax asset 534 -
Decrease in deferred tax liability (735) -
-------- --------
Net cash provided by operating activities 6,717 7,042
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (17,434) (2,705)
-------- --------
Net cash used in investing activities (17,434) (2,705)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (153) (178)
Net proceeds from/(repayments to) credit facility 5,618 (5,000)
Increase in non-current liabilities 602 -
Repayments of Oracle purchase obligation - (849)
Increase in deferred financing costs - (1,412)
Net proceeds from exercise of options 258 864
Increase in long-term note payable - 4,000
Decrease in note receivable 2,250 -
-------- --------
Net cash provided by/(used in) financing activities 8,575 (2,575)
--------- --------
Net (decrease)/increase in cash (2,142) 1,762
Cash at beginning of period 2,373 1,848
-------- --------
Cash at June 30, $ 231 $ 3,610
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 947 $ 1,471
======== ========
Income taxes $ 32 $ 64
======== ========
Income tax refunds received $ - $ 64
======== ========
Value of warrants issued in connection with bank &
related party financings $ - $750
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
USA DETERGENTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules of the Securities and Exchange
Commission ("SEC") and in the opinion of management, include all adjustments,
(consisting of normal recurring accruals) necessary for the fair presentation of
the Company's financial position, results of operations and cash flows. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules. The Company believes the
disclosures made are adequate to make such financial statements not misleading.
The results for the interim periods presented are not necessarily indicative of
the results to be expected for the full year. These financial statements should
be read in conjunction with the Company's December 31, 1997 Form 10-K, as
amended, which includes financial information for the year ended December 31,
1997.
Reclassification - Certain reclassifications have been made to prior
year amounts to conform with the presentation for the current year.
Note 2 - RESTRUCTURING COSTS
In June 1998, the Company recorded a $400,000 charge relating to its
future lease commitment, offset by sublease income, and associated lease
expenses for its Edison, New Jersey facility which was closed during the second
quarter of 1997.
Note 3 - LEGAL PROCEEDINGS
On May 5, 1997, a securities class action lawsuit entitled Feldbaum v.
USA Detergents, Inc. et al., No. 97-CV-3227, was filed in the U.S. District
Court for the Eastern District of Pennsylvania against the Company and certain
of its current and former officers and directors; the Feldbaum case subsequently
was transferred to the U.S. District Court for the District of New Jersey. On
May 15, 1997, a second securities class action lawsuit entitled Einhorn v. USA
Detergents, Inc. et al., No. 97-2459 was filed against the Company and certain
of its current and former officers and directors in the U.S. District Court for
the District of New Jersey. Since the Einhorn lawsuit was filed, twelve
additional securities class action lawsuits have been filed in the U.S. District
Court for the District of New Jersey against the Company and certain of its
current and former officers and directors. The class actions purport to be
brought on
5
<PAGE>
behalf of all persons who purchased the Company's common stock between June 5,
1996, at the earliest, and May 8, 1997, at the latest (the "putative class
period"). The class actions generally allege that, during the putative class
period, the defendants made false or misleading public statements and engaged in
improper accounting practices, which caused the price of the Company's common
stock to be artificially inflated. The class actions assert that the defendants'
conduct violated Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, and SEC Rule 10b-5 promulgated thereunder, as well as state common law.
The class actions do not specify an amount of damages. In June and July 1997,
the U.S. District Court for the District of New Jersey entered orders
consolidating all of the pending class actions with the Einhorn case. In August
1997, the court entered an order establishing a master docket for the
consolidated class actions, In re USA Detergents, Inc. Securities Litigation,
Master File No. 97-CV-2459 (MTB), and appointed lead plaintiffs and lead
plaintiffs' co-lead counsel.
The Company has reached an agreement in principle to settle for $10.0
million the consolidated stockholder class action. The Company's total cost
under the agreement, including legal fees, after insurance and other
participation, is anticipated to be approximately $3.3 million, and the Company
recorded a charge in that amount during the second quarter of 1998. The
proposed settlement is subject to several contingencies, including execution of
a formal stipulation of settlement, notice to the class, and judicial approval.
There can be no assurance that the settlement will finally be approved on these
terms, if at all.
In connection with certain events related to the foregoing litigation,
including the restatement of the Company's financial statements for the year
ended December 31, 1996, each of the quarters in 1996 and the quarter ended
March 31, 1997, the Company received a formal request from the Securities and
Exchange Commission ("SEC") for the production of various documents. The Company
fully intends to cooperate with the SEC in this matter.
Note 4 - NET LOSS PER SHARE
Net loss per share is based on the weighted average number of shares
outstanding during the periods presented. Common stock equivalents have not been
included in the computation of net loss per share since the impact is
antidilutive.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Net sales for the three months ended June 30, 1998 decreased 1.6% to
$54.1 million from $55.0 million for the three months ended June 30, 1997. The
decrease was primarily the result of a decrease in unit sales of household
cleaners and scented candles offset by an increase in unit sales of laundry
products.
Gross profit for the three months ended June 30, 1998 increased 109.8%
to $17.2 million from $8.2 million for the three months ended June 30, 1997.
Gross profit increased as a percentage of net sales to 31.9% for the three
months ended June 30, 1998 from 14.9% for the same period in 1997. The increase
in gross profit as a percentage of net sales was primarily attributable to a
decrease of 12.5% in material costs due to more favorable pricing and
manufacturing efficiencies and, to a lesser extent, by decreases as a percentage
of net sales of 2.2%, 1.4%, and 0.9% in distribution, manufacturing overhead and
facilities overhead costs, respectively, resulting from improved cost control
measures.
Selling, general and administrative expenses decreased 30.1% to $14.6
million in the three months ended June 30, 1998 from $20.9 million for the three
months ended June 30, 1997. As a percentage of net sales, these expenses
decreased to 27.1% for the three months ended June 30, 1998 from 38.1% for the
same period in 1997. The decrease as a percentage of net sales was primarily due
to decreases of 5.3% in marketing funds (co-op advertising, promotional
allowances and slotting amortization), 3.0% in freight to customers, 1.4% in
sales commissions, 0.8% in accounting fees and 0.5% in trade show expense.
Additionally, during the quarter ended June 30, 1998 the Company wrote-off
$155,000 of legal fees related to aborted financing transactions.
In June 1998, the Company recorded a $400,000 charge related to its
future lease commitment, offset by sublease income, and associated lease
expenses for its Edison, New Jersey facility which was closed during the second
quarter of 1997.
The Company has reached an agreement in principle to settle for $10.0
million the consolidated stockholder class action. The Company's total cost
under the agreement, including legal fees, after insurance and other
participation, is anticipated to be approximately $3.3 million, and the Company
recorded a charge in that amount during the second quarter of 1998. The proposed
settlement is subject to several contingencies, including execution of a formal
stipulation of settlement, notice to the class, and judicial approval. There can
be no assurance that the settlement will finally be approved on these terms, if
at all.
Interest and amortization of deferred financing costs-net increased to
$1.2 million for the three months ended June 30, 1998 from $0.7 million for the
three months ended June 30, 1997, primarily as a result of higher average
outstanding borrowings and the amortization of warrant and bank closing costs.
7
<PAGE>
Income tax provision for the three months ended June 30, 1998 of
$25,000 and the income tax benefit for the three months ended June 30, 1997 of
$1.1 million are based on actual tax computations for each of the periods. The
difference in the effective rates between the periods relates primarily to the
Company's net operating loss carry forward for which the Company has not
provided a tax benefit.
8
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net sales for the six months ended June 30, 1998 decreased 4.2% to
$110.8 million from $115.6 million for the six months ended June 30, 1997. The
decrease was primarily the result of a decrease in unit sales of household
cleaners and candles offset by an increase in unit sales of laundry products.
Gross profit for the six months ended June 30, 1998 increased 73.8% to
$33.9 million from $19.5 million for the six months ended June 30, 1997. Gross
profit increased as a percentage of net sales to 30.7% for the six months ended
June 30, 1998 from 16.9% for the same period in 1997. The increase in gross
profit as a percentage of net sales was primarily attributable to a decrease of
10.6% in material costs due to more favorable pricing and manufacturing
efficiencies, and to a lesser extent, by decreases as a percentage of net sales
of 1.7%, 0.5%, 0.2%, and 0.8% in distribution, manufacturing overhead, direct
labor and facilities overhead costs, respectively, resulting from improved cost
control measures.
Selling, general and administrative expenses decreased 27.4% to $29.1
million for the six months ended June 30, 1998 from $40.1 million for the six
months ended June 30, 1997. As a percentage of net sales, these expenses
decreased to 26.3% for the six months ended June 30, 1998 from 34.7% for the
same period in 1997. The decrease as a percentage of net sales was primarily due
to decreases of 4.2% in marketing funds (co-op advertising, promotional
allowances and slotting amortization), 2.1% in freight to customers, 1.1% in
sales commissions, 0.3% in trade show expense and 0.2% in consulting expenses.
In June 1998, the Company recorded a $400,000 charge related to its
future lease commitment, offset by sublease income, and associated lease
expenses from its Edison, New Jersey facility which was closed during the
second quarter of 1997.
The Company has reached an agreement in principle to settle for $10.0
million the consolidated stockholder class action. The Company's total cost
under the agreement, including legal fees, after insurance and other
participation, is anticipated to be approximately $3.3 million, and the Company
recorded a charge in that amount during the second quarter of 1998. The proposed
settlement is subject to several contingencies, including execution of a formal
stipulation of settlement, notice to the class, and judicial approval. There can
be no assurance that the settlement will finally be approved on these terms, if
at all.
Interest and amortization of deferred financing costs-net increased to
$2.1 million for the six months ended June 30, 1998 from $1.1 million for the
six months ended June 30, 1997, primarily as a result of higher average
outstanding borrowings and the amortization of warrant and bank closing costs.
Income tax provision for the six months ended June 30, 1998 of $46,000
and the income tax benefit for the six months ended June 30, 1997 of $3.9
million are based on actual tax computations for each of the periods. The
difference in the effective rates between the periods relates primarily to the
Company's net operating loss carry forward for which the Company has not
provided a tax benefit.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
PNC BANK DEBT
On February 25, 1998, the Company and PNC Bank, National Association
("PNC") entered into an amended and restated Loan and Security Agreement (the
"February 1998 PNC Facility"). Under the amended agreement, the Company made a
principal payment of $5 million and granted PNC a security interest in
substantially all of the assets of the Company. The balance of the principal
indebtedness, approximately $35 million, has been extended to January 4, 1999
and bears interest at rates which range from prime plus .25% to prime plus 2%.
The actual rate depends on the timing of the repayment of the indebtedness. The
February 1998 PNC Facility requires the Company to, among other things, maintain
a ratio of current assets to current liabilities (as defined) in excess of 1.1,
and prohibits the payment of dividends and the incurrence of new debt. Of the $5
million paid to PNC, $4 million was loaned to the Company, which is secured by a
second mortgage lien, by an entity owned by certain of the Company's principal
stockholders at a rate of 9.5% per annum, and is due in July 1999. These
stockholders also personally guaranteed the repayment of up to an additional $5
million of the indebtedness owed to PNC. At June 30, 1998, the total amount due
PNC of approximately $35 million is classified as current.
In connection with the transaction, PNC received a warrant to purchase
between approximately 138,000 and 690,000 shares of the Company's common stock,
depending on the repayment date of the remaining indebtedness (138,000 shares if
paid in full by September 30, 1998). In conjunction with the issuance of this
warrant, the Company recognized in the first quarter of 1998, a deferred charge
of $415,000. This charge is being deferred and amortized over the period ending
January 4, 1999. The Company engaged the services of an independent specialty
investment banking firm to establish the valuation of this warrant.
The stockholders who funded $4 million of the $5 million payment
described above and guaranteed the repayment of an additional $5 million have
been granted warrants to purchase between approximately 99,000 and 194,000
shares of the Company's common stock, depending on whether the $5 million which
is the subject of the guarantee is required to be paid. The warrants were
approved by the Board of Directors on April 30, 1998. In conjunction with the
issuance of these warrants, the Company recognized, in the first quarter of
1998, a deferred charge of $335,000 based on a warrant for approximately 99,000
shares. This charge is being deferred and amortized over an 18 month period. The
Company engaged the services of an independent specialty investment banking firm
to calculate and establish the valuation of these warrants.
10
<PAGE>
EDA LOAN
The Company also has a loan facility of $2.75 million from the New
Jersey Economic Development Authority (the "EDA Loan"). As of June 30, 1998, the
Company had used approximately $2.5 million of the EDA Loan for purchases of
machinery and equipment and improvements to the Company's North Brunswick
manufacturing facility. The remaining funds are restricted for the duration of
the EDA Loan. The EDA Loan, of which $1.1 million is outstanding at June 30,
1998, is payable in monthly installments of approximately $26,000 through
November 1, 2002. Interest on the EDA Loan is payable at a variable rate (3.45%
at June 30, 1998). As a result of several factors, including those relating to
the Company's historical financial performance, amounts owed under the EDA Loan,
at the option of the issuing lender thereunder, may be declared immediately due
and payable. There can be no assurance that all such amounts in the future will
not be declared immediately due and payable. The Company remains current with
respect to scheduled principal and interest payments. Consequently, the entire
obligation has been classified as current in the June 30, 1998 balance sheet.
ORACLE PURCHASE OBLIGATION
On April 16, 1998 the Company obtained a forbearance agreement from
Sanwa Business Credit Corporation, ("SBCC") which provided that SBCC would
forbear exercising its rights and remedies available to it under the Company's
May 29, 1997 agreement with Oracle Software, which was assigned to SBCC on
August 20, 1997. Under the terms of the forbearance agreement the Company has
agreed to pay SBCC the entire amount due in monthly installments by September
30, 1998. At June 30, 1998, the Company's obligation to SBCC was approximately
$518,000.
LIQUIDITY
At June 30, 1998, the Company's working capital deficiency was $29.1
million compared to working capital of $6.8 million at December 31, 1997. The
decrease in working capital is primarily attributable to the reclassification of
all amounts owed to PNC from long-term to current.
Net cash provided by operating activities for the six months ended June
30, 1998 was $7.0 million compared to $6.7 million for the six months ended June
30, 1997. The increase in cash provided by operating activities resulted
primarily from a decrease in inventories of $3.6 million and a decrease in
accounts receivable of $3.4 million, offset, in part by operating losses of $0.9
million and a decrease in accounts payable and accrued expenses of $3.0 million.
Net cash used in investing activities for the six months ended June 30,
1998 was $2.7 million relating primarily to the purchase of machinery and
equipment. This compares to net cash used in investing activities of $17.4
million for the six months ended June 30, 1997. The Company anticipates that
capital expenditures for the remainder of 1998 will be approximately $2 million,
which includes certain expenditures
11
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to upgrade the Company's manufacturing and distribution capabilities and enhance
the Company's information systems.
Net cash used in financing activities for the six months ended June 30,
1998 was $2.6 million compared to the net cash provided by financing activities
of $8.6 million for the six months ended June 30, 1997. Net cash used in
financing activities resulted primarily from a repayment to PNC of $5.0 million,
an increase in deferred financing costs of $1.4 million, and repayments to SBCC
of $0.8 million, offset in part by an increase in a long-term debt of $4.0
million and proceeds from the exercise of stock options of $0.9 million.
For the six months ended June 30, 1998, the Company has experienced
significant operating losses relating to, among other things, restructuring
costs associated with the close of its Edison facility and the shareholder
litigation settlement. The Company requires the availability of sufficient cash
flow and borrowing capacity to finance its operations, meet its debt service
obligations and fund future capital expenditure requirements. The Company's
operating plan for the remaining six months of 1998 includes continuing its cost
reduction programs and refinancing its debt to PNC. The cost reduction programs
include automation of manufacturing facilities related to spray products,
production rationalization, increased use of high speed fillers and cartoners
and improved production planning and control. There can be no assurance that the
Company will be successful in these efforts.
IMPACT OF INFLATION
General inflation in the economy has increased operating expenses of
most businesses. The Company has provided compensation increases generally in
line with the inflation rate and incurred higher prices for goods and services.
The Company continually seeks methods of reducing costs and streamlining
operations while maximizing efficiency through improved internal operating
procedures and controls. While the Company is subject to inflation as described
above, management believes that inflation currently does not have a material
effect on the Company's operating results, but there can be no assurance that
this will continue to be so in the future.
12
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NEW ACCOUNTING PRINCIPLE
During Fiscal 1997, the Financial Accounting Standards Board issued the
following account standards: Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS No. 130), Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS No. 131) and Statement of Financial Accounting
Standards No. 132 "Employers Disclosures about Pension and other Post retirement
Benefit Plans" (SFAS No. 132). The Company does not expect any material effect
from adoption of SFAS Nos. 131 and 132. The Company will report comprehensive
income as a component of equity. During the quarter ended June 30, 1998, the
Company does not have any items that would be reportable as a component of
comprehensive income other than its income from operations.
The Company's quarterly and annual operating results are
affected by a wide variety of factors that could materially and adversely affect
revenues and profitability, including competition from other suppliers of
laundry and household cleaning products; changes in consumer preferences and
spending habits; the inability to successfully manage growth; seasonality; the
ability to introduce and the timing of the introduction of new products; the
inability to obtain adequate supplies or materials at acceptable prices; the
inability to reduce expenses to a level commensurate with revenues; and the
inability to negotiate acceptable credit terms with the current or prospective
lenders. 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. Furthermore, this document and
other documents filed by the Company with the Securities and Exchange Commission
(the "SEC") contain certain forward looking statements with respect to the
business of the Company, including prospective financing arrangements. These
forward-looking statements are subject to certain risks and uncertainties,
including those mentioned above, which may cause actual results to differ
significantly from these forward-looking statements. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements which may be to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events. An
investment in the Company involves various risks, including those mentioned
above and those which are detailed from time to time in the Company's SEC
filings.
13
<PAGE>
Part II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
On May 5, 1997, a securities class action lawsuit entitled
Feldbaum v. USA Detergents, Inc. et al., No. 97-CV-3227, was filed in
the U.S. District Court for the Eastern District of Pennsylvania
against the Company and certain of its current and former officers and
directors; the Feldbaum case subsequently was transferred to the U.S.
District Court for the District of New Jersey. On May 15, 1997, a
second securities class action lawsuit entitled Einhorn v. USA
Detergents, Inc. et al., No. 97-2459, was filed against the Company and
certain of its current and former officers and directors in the U.S.
District Court for the District of New Jersey. Since the Einhorn
lawsuit was filed, twelve additional securities class action lawsuits
have been filed in the U.S. District Court for the District of New
Jersey against the Company and certain of its current and former
officers and directors. The class actions purport to be brought on
behalf of all persons who purchased the Company's common stock between
June 5, 1996, at the earliest, and May 8, 1997, at the latest (the
"putative class period"). The class actions generally allege that,
during the putative class period, the defendants made false or
misleading public statements and engaged in improper accounting
practices, which caused the price of the Company's common stock to be
artificially inflated. The class actions assert that the defendants'
conduct violated Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934, and SEC Rule 10b-5 promulgated thereunder, as well as
state common law. The class actions do not specify an amount of
damages. In June and July 1997, the U.S. District Court for the
District of New Jersey entered orders consolidating all of the pending
class actions with the Einhorn case. In August 1997, the court entered
an order establishing a master docket for the consolidated class
actions, In re USA Detergents, Inc. Securities Litigation, Master File
No. 97-CV-2459 (MTB), and appointed lead plaintiffs and lead
plaintiffs' co-lead counsel.
The Company reached an agreement in principle to settle for
$10.0 million the consolidated stockholder class action. The Company's
total cost under the agreement, including legal fees, after insurance
and other participation, is anticipated to be approximately $3.3
million, and the Company recorded a charge in that amount during the
second quarter of 1998. The proposed settlement is subject to several
contingencies, including execution of a formal stipulation of
settlement, notice to the class, and judicial approval. There can be no
assurance that the settlement will finally be approved on these terms,
if at all.
In connection with certain events related to the foregoing
litigation, including the restatement of the Company's financial
statements for the year ended December 31, 1996, each of the quarters
in 1996 and the quarter ended March 31, 1997, the Company received a
formal request from the Securities and Exchange Commission ("SEC") for
the production of various documents. The Company fully intends to
cooperate with the SEC in this matter.
14
<PAGE>
ITEM 2. CHANGES IN SECURITIES:
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company 's Annual Meeting of Stockholders was
held on May 27, 1998 (the "Annual Meeting").
(b) The following matters were voted upon and
approved by the Company's stockholders at the Annual Meeting:
(i) The election of five directors to serve
for the ensuing year. The following nominees were
elected as directors of the Company (with the
Company's stockholders having voted as set forth
below):
WITHHELD AUTHORITY
NOMINEE VOTES FOR TO VOTE
--------- --------- -------
Frederick R. Adler 8,164,762 16,765
Daniel Bergman 8,164,762 16,765
Uri Evan 8,164,762 16,765
Christopher Illick 8,164,762 16,765
Richard A. Mandell 8,164,762 16,765
(ii) Amendment of the Company's 1995 Stock
Option Plan to increase the number of shares
available for issuance thereunder. The Company's
stockholders voted as follows: For: 6,803,310
Against: 1,371,717 Abstentions: 6,500
(iii) The ratification of the appointment of
Deloitte & Touche LLP as the Company's independent
certified public accountants for the fiscal year
ending December 31, 1998. The Company's stockholders
voted as follows: For: 8,145,257 Against: 31,270
Abstentions: 5,000
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.28 Warrant dated April 30, 1998 issued by the Registrant to
101 Realty Associates, L.L.C.
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
USA DETERGENTS, INC.
August 14, 1998 By: /s/ Uri Evan
----------
Uri Evan
Chairman of the Board and
Chief Executive Officer
August 14, 1998 /s/ Richard D. Coslow
------------------
Richard D. Coslow
Senior Vice President
Chief Financial Officer
16
<PAGE>
USA DETERGENTS, INC.
Warrant for the Purchase of Shares of Common Stock
No. 2 98,524 Shares
USA Detergents, Inc., a Delaware corporation (the "COMPANY"), hereby
certifies that 101 Realty Associates, L.L.C. or its permitted assigns, are
entitled to purchase from the Company, at any time or from time to time
commencing on the date hereof and ending at 5:00 P.M., New York City time, on
April 14, 2003, ninety-eight thousand, five hundred twenty-four (98,524) fully
paid and non-assessable shares of Common Stock for an aggregate purchase price
of one million, thirty-four thousand, five hundred two dollars ($1,034,502)
(computed on the basis of $10.50 per share). The Company is issuing and the
Holder (as hereinafter defined) is purchasing this Warrant as a portion of the
consideration received by the Holder from the Company in connection with the
making of a $4 million loan by the Holder to the Company and the entry into of
a guarantee by certain of the members of the Holder guaranteeing $5 million of
the Company's indebtedness to PNC Bank, N.A. ("PNC Bank") on a joint and
several basis (the "Guarantee"). It is understood and agreed by the Company
that if the current members of the Holder are required to and actually do make
payment of the full $5 million amount of the Guarantee, the Company will issue
an additional warrant, upon the same terms and conditions (including Per Share
Warrant Price) as this Warrant, to purchase one hundred ninety-three thousand,
six hundred eighty-eight (193,688) fully paid and non-assessable shares of
Common Stock to the Holder (the "Additional Warrant"). Payment of less than the
full amount of the Guarantee shall result in the reduction of the number of
shares of Common Stock covered by the Additional Warrant on a proportional
basis. As used herein, (i) the common stock, $.01 par value per share, of the
Company, together with any other equity securities which may be issued by the
Company with respect thereto or in substitution therefor, is referred to as the
"COMMON STOCK," (ii) the shares of the Common Stock purchasable hereunder or
under any other Warrant (as hereinafter defined) are referred to individually
as a "WARRANT SHARE" and collectively as the "WARRANT SHARES," (iii) the
aggregate purchase price payable for the Warrant Shares hereunder is referred
to as the "AGGREGATE WARRANT PRICE," (iv) the price payable for each of the
Warrant Shares hereunder is referred to as the "PER SHARE WARRANT PRICE," (v)
this Warrant, all similar Warrants issued on the date hereof and all Warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "WARRANTS," (vi) the holder of this Warrant is
referred to as the "Holder" and the holder of this Warrant and all other
Warrants or Warrant Shares issued upon the exercise of any Warrant are referred
to as the "HOLDERS", and (vii) the period during which this Warrant is
exercisable is referred to as the "EXERCISE PERIOD". The Aggregate Warrant
Price is not subject to adjustment. The Per Share Warrant Price is subject to
adjustment as hereinafter provided; in the event of any such adjustment, the
number
<PAGE>
of Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by
the Per Share Warrant Price in effect immediately after such adjustment.
1. EXERCISE OF WARRANT. (a) At any time or times during the Exercise
Period, the Holder may exercise this Warrant, in whole or in part, as follows:
(i) By presentation and surrender of this Warrant to the Company at
the address set forth in Subsection 9(a) hereof, with the Subscription Form
annexed hereto (or a reasonable facsimile thereof) duly executed and
accompanied by payment of the Per Share Warrant Price for each Warrant
Share to be purchased. Payment for Warrant Shares shall be made by cash,
certified check payable to the order of the Company or by wire transfer to
an account designated by the Company for such purpose; or
(ii) By presentation and surrender of this Warrant to the Company at
the address set forth in Subsection 9(a) hereof, with a Cashless Exercise
Form annexed hereto (or a reasonable facsimile thereof) duly executed (a
"CASHLESS EXERCISE"). Such presentation and surrender shall be deemed a
waiver of the Holder's obligation to pay all or any portion of the
Aggregate Warrant Price. In the event of a Cashless Exercise, the Holder
shall exchange its Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares being exercised by a
fraction, the numerator of which shall be the difference between the then
current market price per share of the Common Stock and the Per Share
Warrant Price, and the denominator of which shall be the then current
market price per share of Common Stock. For purposes of any computation
under this Section 1(a)(ii), the then current market price per share of
Common Stock at any date shall be deemed to be the average for the five
consecutive business days immediately prior to the Cashless Exercise of the
daily closing prices of the Common Stock on the principal national
securities exchange on which the Common Stock is admitted to trading or
listed, or if not listed or admitted to trading on any such exchange, the
closing prices as reported by the Nasdaq National Market, or if not then
listed on the Nasdaq National Market, the average of the highest reported
bid and lowest reported asked prices as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or if not then publicly traded, the fair market price of the
Common Stock as determined by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock, and the Holder is
entitled to receive a new Warrant covering the Warrant Shares which have not
been exercised and setting forth the proportionate part of the Aggregate
Warrant Price applicable to such Warrant Shares. Upon such surrender of this
Warrant, the Company will (i) issue a certificate or certificates, in such
denominations as are requested for delivery by the Holder, in the name of the
Holder for the largest number of whole shares of the Common Stock to which the
Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of
any fractional share of the Common Stock to which the Holder shall
-2-
<PAGE>
be entitled, pay to the Holder cash in an amount equal to the fair value of
such fractional share (determined in such reasonable manner as the Board of
Directors of the Company shall determine), and (ii) deliver the other
securities and properties receivable upon the exercise of this Warrant, or the
proportionate part thereof if this Warrant is exercisable in part, pursuant to
the provisions of this Warrant. The Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder.
2. RESERVATION OF WARRANT SHARES; LISTING. The Company agrees that,
prior to the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer and free and clear of all preemptive rights and rights of first
refusal and (b) keep the shares of the Common Stock receivable upon the
exercise of this Warrant authorized for listing on such exchange upon notice of
issuance.
3. PROTECTION AGAINST DILUTION. (a) In case the Company shall
hereafter (i) pay a dividend or make a distribution on its capital stock in
shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares or (iv) issue by reclassification of its
Common Stock any shares of capital stock of the Company, the Per Share Warrant
Price shall be adjusted so that the Holder upon the exercise hereof shall be
entitled to receive the number of shares of Common Stock or other capital stock
of the Company which such Holder would have owned immediately following such
action had such Warrant been exercised immediately prior thereto. An adjustment
made pursuant to this Subsection 3(a) shall become effective immediately after
the record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(b) If, at any time or from time to time after the date of this
Warrant, the Company shall issue or distribute to the holders of shares of
Common Stock evidences of its indebtedness, any other securities of the Company
or any cash, property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common
Stock, referred to in Subsection 3(a), and also excluding cash dividends or
cash distributions paid out of net profits legally available therefor if the
full amount thereof, together with the value of other dividends and
distributions made substantially concurrently therewith or pursuant to a plan
which includes payment thereof, is equivalent to not more than 5% of the
Company's net worth) (any such non-excluded event being herein called a
"Special Dividend"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then
-3-
<PAGE>
current market price of the Common Stock (defined as the average for the five
consecutive business days immediately prior to the record date of the daily
closing price of the Common Stock as reported by the national securities
exchange upon which the Common Stock is then listed or if not listed on any
such exchange, the average of the closing prices as reported by the Nasdaq
National Market, or if not then listed on the Nasdaq National Market, the
average of the highest reported bid and lowest reported asked prices as
reported by NASDAQ, or if not then publicly traded, the fair market price as
determined by the Company's Board of Directors) less the fair market value (as
determined by the Company's Board of Directors) of the evidences of
indebtedness, cash, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be such then current market price per share
of Common Stock. An adjustment made pursuant to this Subsection 3(b) shall
become effective immediately after the record date of any such Special
Dividend.
(c) Except as provided in Subsection 3(e), in case the Company shall
hereafter issue or sell any shares of Common Stock for a consideration per
share less than the Per Share Warrant Price on the date of such issuance or
sale, the Per Share Warrant Price shall be adjusted as of the date of such
issuance or sale so that the same shall equal the price determined by dividing
(i) the sum of (A) the number of shares of Common Stock outstanding immediately
prior to such issuance or sale multiplied by the Per Share Warrant Price plus
(B) the consideration received by the Company upon such issuance or sale by
(ii) the total number of shares of Common Stock outstanding after such issuance
or sale.
(d) Except as provided in Subsections 3(b) and 3(e), in case the
Company shall hereafter issue or sell any rights, options, warrants or
securities convertible into Common Stock entitling the holders thereof to
purchase Common Stock or to convert such securities into Common Stock at a
price per share (determined by dividing (i) the total amount, if any, received
or receivable by the Company in consideration of the issuance or sale of such
rights, options, warrants or convertible securities plus the total
consideration, if any, payable to the Company upon exercise or conversion
thereof (the "TOTAL CONSIDERATION") by (ii) the number of additional shares of
Common Stock issuable upon exercise or conversion of such securities) less than
the then current Per Share Warrant Price in effect on the date of such issuance
or sale, the Per Share Warrant Price shall be adjusted as of the date of such
issuance or sale so that the same shall equal the price determined by dividing
(i) the sum of (A) the number of shares of Common Stock outstanding on the date
of such issuance or sale multiplied by the Per Share Warrant Price plus (B) the
Total Consideration by (ii) the number of shares of Common Stock outstanding on
the date of such issuance or sale plus the maximum number of additional shares
of Common Stock issuable upon exercise or conversion of such securities.
(e) No adjustment in the Per Share Warrant Price shall be required in
the case of (i) the issuance by the Company of options to purchase shares of
Common Stock pursuant to the Company's 1995 Stock Option Plan and the Company's
Non-
-4-
<PAGE>
Employee Directors Stock Option Plan, as each such plan may be amended from
time to time, and the issuance by the Company of shares of Common Stock upon
the exercise of such options and (ii) the issuance by the Company of Common
Stock pursuant to the exercise of (A) warrants granted in the ordinary course
of business or warrants granted, issued or sold to unaffiliated persons, joint
venturers, participating entities or other companies or institutions with which
the Company has a business relationship in order to obtain terms more favorable
to the Company in such relationship, (B) the Warrants, (C) a warrant issued to
Frederick R. Adler to purchase 350,000 shares of Common Stock, and (D) a
warrant issued to PNC Bank to purchase up to 689,401 shares of Common Stock.
(f) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange
effected in connection with a merger of a third corporation into the Company),
the Holder of this Warrant shall have the right thereafter to receive on the
exercise of this Warrant the kind and amount of securities, cash or other
property which the Holder would have owned or have been entitled to receive
immediately after such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had this Warrant been exercised
immediately prior to the effective date of such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Warrant to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Subsection 3(f) shall similarly
apply to successive reorganizations, reclassifications, consolidations,
mergers, statutory exchanges, sales or conveyances. The issuer of any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant shall be responsible for all of the agreements and obligations of
the Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than 20 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(g) In case any event shall occur as to which the other provisions of
this Section 3 are not strictly applicable but as to which the failure to make
any adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint
a firm of independent public
-5-
<PAGE>
accountants of recognized national standing reasonably acceptable to the
Company, which shall give their opinion as to the adjustment, if any, on a
basis consistent with the essential intent and principles established herein,
necessary to preserve the purchase rights represented by the Warrants. Upon
receipt of such opinion, the Company will promptly mail a copy thereof to the
Holder of this Warrant and shall make the adjustments described therein. The
fees and expenses of such independent public accountants shall be borne by the
Company.
(h) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.10
per share of Common Stock; provided, however, that any adjustments which by
reason of this Subsection 3(h) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Subsection 3(h)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/l00th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be
entitled to make such reductions in the Per Share Warrant Price, in addition to
those required by this Section 3, as it in its discretion shall deem to be
advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable.
(i) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of Warrants
in accordance with this Section 3, the Company shall promptly obtain, at its
expense, a certificate of a firm of independent public accountants of
recognized standing selected by the Board of Directors (who may be the regular
auditors of the Company) setting forth the Per Share Warrant Price and the
number of Warrant Shares after such adjustment or the effect of such
modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.
(j) If the Board of Directors of the Company shall (i) declare any
dividend or other distribution with respect to the Common Stock, other than a
cash dividend subject to the first parenthetical in Subsection 3(b), (ii) offer
to the holders of shares of Common Stock any additional shares of Common Stock,
any securities convertible into or exercisable for shares of Common Stock or
any rights to subscribe thereto, or (iii) propose a dissolution, liquidation or
winding up of the Company, the Company shall mail notice thereof to the Holders
of the Warrants not less than 15 days prior to the record date fixed for
determining stockholders entitled to participate in such dividend,
distribution, offer or subscription right or to vote on such dissolution,
liquidation or winding up.
-6-
<PAGE>
(k) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment) shall
determine the allocation of the adjusted Per Share Warrant Price between or
among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not
subject to preemptive rights or rights of first refusal, and the Company will
take all such actions as may be necessary to assure that the par value or
stated value, if any, per share of the Common Stock is at all times equal to or
less than the then Per Share Warrant Price. The Company further covenants and
agrees that it will pay, when due and payable, any and all Federal and state
stamp, original issue or similar taxes which may be payable in respect of the
issue of any Warrant Share or certificate therefor (other than those payable by
reason of the transfer of the Warrant or any Warrant Shares).
5. LIMITED TRANSFERABILITY. The Company may treat the registered
Holder of this Warrant as he or it appears on the Company's books at any time
as the Holder for all purposes. The Company shall permit any Holder of a
Warrant or his duly authorized attorney, upon written request during ordinary
business hours, to inspect and copy or make extracts from its books showing the
registered holders of Warrants. All Warrants issued upon the transfer or
assignment of this Warrant will be dated the same date as this Warrant, and all
rights of the Holder thereof shall be identical to those of the Holder. This
Warrant may be transferred, in all instances subject to compliance with the
Act, in whole or in part, to the members of the Holder who were members as of
the date hereof, or by operation of law, to and may be exercised by (i) the
successors, permitted assigns and/or legal representatives of the Holder and
(ii) the heirs, successors, assigns and/or legal representatives of the
Holder's permitted assigns upon the death or disability of such permitted
assign. Except as set forth above, this Warrant may not be sold, transferred,
assigned or hypothecated by the Holder.
6. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
7. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided
herein, this Warrant does not confer upon the Holder any right to vote or to
consent
-7-
<PAGE>
to or receive notice as a stockholder of the Company, as such, in respect of
any matters whatsoever, or any other rights or liabilities as a stockholder,
prior to the exercise hereof.
8. NOTICES. All notices and other communications required or permitted
to be given under this Warrant shall be in writing and shall be deemed to have
been duly given if delivered personally or by facsimile transmission, or sent
by recognized overnight courier or by certified mail, return receipt requested,
postage paid, to the parties hereto as follows:
(a) if to the Company, at 1735 Jersey Avenue, North Brunswick,
New Jersey 08902, Attn: President and Attn: Chief Financial Officer,
facsimile no. (732) 246-8833, or such other address as the Company has
designated in writing to the Holder,
(b) if to the Holder, at 101 Realty Associates, L.L.C., 333
Seventh Avenue, 11th Floor, New York, New York 10001, Attention:
Frederick J. Horowitz, or such other address or facsimile number as
the Holder has designated in writing to the Company.
9. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
10. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
IN WITNESS WHEREOF, USA Detergents, Inc. has caused this Warrant to be
signed by its Chief Executive Officer and its corporate seal to be hereunto
affixed and attested by its Secretary as of this ____ day of ___________, 1998.
USA DETERGENTS, INC.
By:
--------------------------------
Richard Coslow
Chief Financial Officer
ATTEST:
- -----------------------------
Secretary
[Corporate Seal]
-8-
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED ____________________________ hereby sells, assigns
and transfers unto __________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
_______________________, attorney, to transfer said Warrant on the books of
___________________________.
Dated:_______________________ Signature:___________________________
Address: ____________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED __________________________ hereby assigns and
transfers unto ____________________________ the right to purchase
______________ shares of the Common Stock of _________________________ covered
by the foregoing Warrant, and a proportionate part of said Warrant and the
rights evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer that part of said Warrant on the
books of ______________________________.
Dated:_______________________ Signature:___________________________
Address: ____________________________
-9-
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant pursuant to Section 1 (a)(i))
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
______________ shares of Common Stock, as provided for in Section 1(a)(i), and
tenders herewith payment of the purchase price in full in the form of cash,
check or wire transfer in the amount of $___________.
Please issue a certificate or certificates for such Common Stock in
the name of, and pay any cash for any fractional share to:
Name ___________________________________
(Please Print Name, Address and Social
Security No.)
Address ________________________________
________________________________
Social _________________________________
Security Number
Signature ______________________________
NOTE: The above signature should
correspond exactly with the
name on the first page of this
Warrant or with the name of
the assignee appearing in the
assignment form below.
Date ___________________________________
And if said number of shares shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder.
-10-
<PAGE>
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant
pursuant to Section 1(a)(ii))
The undersigned hereby irrevocably elects to surrender _________
shares purchasable under this Warrant for such shares of Common Stock issuable
in exchange therefor pursuant to the Cashless Exercise provisions of the within
Warrant, as provided for in Section 1(a)(ii) of such Warrant.
Please issue a certificate or certificates for such Common Stock in
the name of, and pay cash for fractional shares to:
Name ___________________________________
(Please Print Name, Address and Social
Security No.)
Address ________________________________
________________________________
Social _________________________________
Security Number
Signature ______________________________
NOTE: The above signature should
correspond exactly with the
name on the first page of this
Warrant or with the name of
the assignee appearing in the
assignment form below.
Date ___________________________________
And if said number of shares shall not be all the shares exchangeable
or purchasable under the within Warrant, a new Warrant is to be issued in the
name of the undersigned for the balance remaining of the shares purchasable
thereunder.
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-Q for the quarter ended June 30, 1998, and is qualified in
its entirety by reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,610
<SECURITIES> 0
<RECEIVABLES> 21,772
<ALLOWANCES> 1,069
<INVENTORY> 13,619
<CURRENT-ASSETS> 47,881
<PP&E> 57,229
<DEPRECIATION> 11,434
<TOTAL-ASSETS> 97,567
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0
0
<COMMON> 138
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<NET-INCOME> (2,275)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
