<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
USA DETERGENTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement no.:
-----------------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
USA DETERGENTS, INC.
Dear Stockholder:
You are cordially invited to attend the Company's Annual Meeting of
Stockholders to be held on Wednesday, May 12, 1999 at 2:00 P.M., New York time,
at The University Club, 1 West 54th Street, New York, New York.
The formal Notice of Meeting and the accompanying Proxy Statement set
forth proposals for your consideration this year. You are being asked to elect
directors, to vote upon a proposal to amend the Company's 1995 Stock Option
Plan to increase the number of shares available for issuance thereunder, and to
ratify the appointment of Deloitte & Touche LLP as the independent certified
public accountants of the Company.
At the meeting, the Board of Directors will also report on the affairs of
the Company, and a discussion period will be provided for questions and
comments of general interest to stockholders.
We look forward to greeting personally those of you who are able to be
present at the meeting. However, whether or not you are able to be with us at
the meeting, it is important that your shares be represented. Accordingly, you
are requested to sign, date and mail, at your earliest convenience, the
enclosed proxy in the envelope provided for your use.
Thank you for your cooperation.
Very truly yours,
/s/ Uri Evan
------------------------------
Uri Evan,
Chief Executive Officer
April 8, 1999
<PAGE>
USA DETERGENTS, INC.
1735 JERSEY AVENUE
NORTH BRUNSWICK, NEW JERSEY 08902
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of USA
Detergents, Inc. (the "Company") will be held on Wednesday, May 12, 1999 at
2:00 P.M., New York time, at The University Club, 1 West 54th Street, New York,
New York, for the following purposes:
(1) To elect five directors to serve for the ensuing year.
(2) To consider and vote upon a proposal to amend the Company's 1995
Stock Option Plan to increase the number of shares available for
issuance thereunder.
(3) To consider and act upon a proposal to ratify the appointment of
Deloitte & Touche LLP as the Company's independent certified public
accountants for the fiscal year ending December 31, 1999.
(4) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only stockholders of record at the close of business on April 1, 1999 will
be entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN
PERSON, EACH STOCKHOLDER IS URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM
OF PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. No postage is
required if the proxy is mailed in the United States. Stockholders who attend
the Annual Meeting may revoke their proxy and vote their shares in person.
By Order of the Board of Directors
Daniel Bergman,
Secretary
April 8, 1999
<PAGE>
USA DETERGENTS, INC.
1735 JERSEY AVENUE
NORTH BRUNSWICK, NEW JERSEY 08902
PROXY STATEMENT
GENERAL INFORMATION
GENERAL
This Proxy Statement (first mailed to stockholders on or about April 8,
1999) is furnished to the holders of Common Stock, par value $.01 per share
(the "Common Stock"), of USA Detergents, Inc. (the "Company") in connection
with the solicitation by the Board of Directors of the Company of proxies for
use at the Annual Meeting of Stockholders (the "Annual Meeting"), or at any
adjournment thereof, pursuant to the accompanying Notice of Annual Meeting of
Stockholders. The Annual Meeting will be held on Wednesday, May 12, 1999, at
2:00 P.M., New York time, at The University Club, 1 West 54th Street, New York,
New York.
It is proposed that at the Annual Meeting: (i) five directors will be
elected, (ii) the Company's 1995 Stock Option Plan (the "Plan") will be amended
to increase the number of shares available for issuance thereunder and (iii)
the appointment of Deloitte & Touche LLP as the independent certified public
accountants of the Company for the fiscal year ending December 31, 1999 will be
ratified.
Management currently is not aware of any other matters which will come
before the Annual Meeting. If any other matters properly come before the Annual
Meeting, the persons designated as proxies intend to vote in accordance with
their best judgment on such matters.
Proxies for use at the Annual Meeting are being solicited by the Board of
Directors of the Company. Proxies will be solicited chiefly by mail; however,
certain officers, directors, employees and agents of the Company, none of whom
will receive additional compensation therefor, may solicit proxies by
telephone, telegram or other personal contact. The Company will bear the cost
of the solicitation of the proxies, including postage, printing and handling,
and will reimburse the reasonable expenses of brokerage firms and others for
forwarding material to beneficial owners of shares of Common Stock.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the Annual Meeting and a return envelope for
the proxy are enclosed. Unless otherwise indicated on the form of proxy, shares
of Common Stock represented by any proxy in the enclosed form, assuming the
proxy is properly executed and received by the Company prior to the Annual
Meeting, will be voted with respect to the
1
<PAGE>
following items on the agenda: (i) the election of each of the nominees for
director as shown on the form of proxy, (ii) the amendment of the Plan to
increase the number of shares available for issuance thereunder and (iii) the
appointment of Deloitte & Touche LLP as the independent certified public
accountants of the Company.
Stockholders may revoke the authority granted by their execution of a
proxy at any time prior to the effective exercise of the powers conferred by
that proxy, by filing with the Secretary of the Company a written notice of
revocation or a duly executed proxy bearing a later date, or by voting in
person at the meeting. Shares of Common Stock represented by executed and
unrevoked proxies will be voted in accordance with the instructions specified
in such proxies. If no specifications are given, the proxies intend to vote the
shares represented thereby "for" the election of each of the nominees for
director as shown on the form of proxy, "for" approval of the proposed
amendment to the Plan to increase the number of shares available for issuance
under the Plan, "for" the ratification of the appointment of Deloitte & Touche
LLP as the independent certified public accountants of the Company, and in
accordance with their best judgment on any other matters which may properly
come before the meeting.
RECORD DATE AND VOTING RIGHTS
On April 1, 1999, there were 13,825,602 shares of Common Stock
outstanding, each of which is entitled to one vote upon each of the matters to
be presented at the Annual Meeting. Only stockholders of record at the close of
business on April 1, 1999 are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof. The holders of a majority of the
outstanding shares of Common Stock, present in person or by proxy and entitled
to vote, will constitute a quorum at the Annual Meeting. Abstentions and broker
non-votes will be counted for purposes of determining the presence or absence
of a quorum, but will not be counted with respect to the specific matter being
voted upon. "Broker non-votes" are shares held by brokers or nominees which are
present in person or represented by proxy, but which are not voted on a
particular matter because instructions have not been received from the
beneficial owner.
The affirmative vote of the holders of a plurality of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the
Annual Meeting is required for the election of directors. The affirmative vote
of the holders of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote at the Annual Meeting is required
both for the approval of the proposed amendment to the Plan and for the
ratification of the appointment of Deloitte & Touche LLP.
The following table sets forth information as of April 1, 1999 regarding
the beneficial ownership of the Company's Common Stock of: (i) each person
known by the Company to own beneficially more than five percent of the
outstanding Common Stock; (ii) each director and nominee for director of the
Company; (iii) each executive officer named in the Summary Compensation Table
(see "Executive Compensation" below); and (iv) all directors and executive
officers of the Company as a group. Except as otherwise specified, the named
beneficial owner has the sole voting and investment power over the shares
listed.
2
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) COMMON STOCK (2) COMMON STOCK
- ----------------------------------------- ------------------------- -------------
<S> <C> <C>
Uri Evan (3) ........................... 698,560 5.05%
Dinah Evan (3) ......................... 698,560 5.05
Daniel Bergman (4) ..................... 811,716 5.87
Bergman Family Limited Partnership (4)
1961 East 1st Street
Brooklyn, New York 11223 .............. 811,716 5.87
Frederick R. Adler (5)
1520 South Ocean Boulevard
Palm Beach, Florida 33480 ............. 2,114,183 14.90
Christopher D. Illick (6)
c/o Brean Murray & Co., Inc.
570 Lexington Avenue
New York, New York 10022 .............. 4,500 *
Richard A. Mandell (7)
245 East 19th Street
New York, New York 10003 .............. 21,375 *
Frederick J. Horowitz
c/o American Value Brands Inc.
333 Seventh Avenue
New York, New York 10001 .............. 791,746 5.73
Joseph S. Cohen (8)
1585 East 10th Street
Brooklyn, New York 11230 .............. 840,001 6.08
Mark Antebi (9)
1435 East 9th Street
Brooklyn, New York 11230 .............. 813,521 5.88
Capital Guardian Trust Company (10)
11100 Santa Monica Boulevard
Los Angeles, California 90025 ......... 1,231,150 8.90
National Westminster Bank, PLC and
Coutts Bank (Switzerland) Ltd. (11)
41 Lothbury
London EC2P 2BP
England ............................... 1,326,556 9.59
Frank Corella (12) ..................... 67,920 *
Richard D. Coslow (13) ................. 15,250 *
Keith Spero (6) ........................ 6,000 *
All directors and executive officers
as a group (8 persons) (14) ........... 3,739,504 26.18%
</TABLE>
- ------------------
* Indicates less than one percent.
(1) Except as otherwise noted, the address of the named stockholder is c/o USA
Detergents, Inc., 1735 Jersey Avenue, North Brunswick, New Jersey 08902.
3
<PAGE>
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") which generally
attribute beneficial ownership of securities to persons who possess sole
or shared voting power and/or investment power with respect to those
securities.
(3) Amounts reflected for Uri Evan and Dinah Evan, who are married to one
another, consist of (i) an aggregate of 386,430 shares held by Dinah Evan
and (ii) 312,130 shares indirectly held by Uri Evan. Mr. and Mrs. Evan may
each be deemed to beneficially own the shares of Common Stock held by the
other. Each of Mr. and Mrs. Evan disclaims beneficial ownership of all
shares other than those held in his or her name.
(4) Shares held by the Bergman Family Limited Partnership, a Nevada
partnership of which Mr. Bergman is the general partner. Mr. Bergman
disclaims beneficial ownership of all shares other than those held in his
name.
(5) Includes options to purchase 13,500 shares of Common Stock, exercisable
within 60 days, and a warrant to purchase 350,000 shares of Common Stock.
(6) Reflects options to purchase shares of Common Stock, exercisable within 60
days.
(7) Includes options to purchase 16,875 shares of Common Stock, exercisable
within 60 days.
(8) Includes 238,288 shares of Common Stock held by the children of Mr. Cohen.
Mr. Cohen disclaims beneficial ownership of all shares other than those
held in his name.
(9) Includes 185,332 shares of Common Stock held by the children of Mr.
Antebi. Mr. Antebi disclaims beneficial ownership of all shares other than
those held in his name.
(10) Information is as of February 10, 1999 and is derived solely from the
Schedule 13G, dated February 8, 1999, filed with the Commission. Capital
Guardian Trust Company, a "bank" as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, is reported to be the beneficial owner
of such shares as a result of its serving as the investment manager of
various institutional accounts.
(11) Information is as of February 9, 1999 and is derived from the Schedule
13G, dated the same date, filed with the Commission. According to such
filing, National Westminster Bank, PLC is a parent holding company of
Coutts Bank (Switzerland) Ltd. within the meaning of Rule 13d-1(b)(1)
(ii)(G).
(12) Includes options to purchase 55,000 shares of Common
Stock, exercisable within 60 days.
(13) Includes options to purchase 13,750 shares of Common Stock, exercisable
within 60 days.
(14) Includes options to purchase 109,625 shares of Common Stock, exercisable
within 60 days, and a warrant to purchase 350,000 shares of Common Stock.
4
<PAGE>
PROPOSAL NO. 1--ELECTION OF DIRECTORS
Five directors (constituting the entire Board) are to be elected at the
Annual Meeting. Unless otherwise specified, the enclosed proxy will be voted in
favor of the persons named below (all of whom are currently directors of the
Company) to serve until the next annual meeting of stockholders and until their
respective successors shall have been duly elected and qualified. If any of
these nominees becomes unavailable for any reason, or if a vacancy should occur
before the election, the shares represented by the proxy will be voted for the
person, if any, who is designated by the Board of Directors to replace the
nominee or to fill the vacancy on the Board. All nominees have consented to be
named and have indicated their intent to serve if elected. The Board of
Directors has no reason to believe that any of the nominees will be unable to
serve or that any vacancy on the Board of Directors will occur.
The nominees, their respective ages, the year in which each first became a
director of the Company and their principal occupations or employment during
the past five years are as follows:
<TABLE>
<CAPTION>
YEAR
FIRST
BECAME
NOMINEE AGE DIRECTOR PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- -------------------- ----- ---------- --------------------------------------------------------------
<S> <C> <C> <C>
Uri Evan 63 1989 Chairman of the Board of the Company since 1989, Chief
Executive Officer since 1993. Mr. Evan is a co-founder and
served as Chairman from 1995 to 1998 of Net Grocer Inc.,
a nationwide, low-cost interactive grocery shopping
service on the Internet. 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.
Daniel Bergman 41 1988 Co-founder of the Company and a Vice President of the
Company since June 1995. Mr. Bergman also 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.
Frederick R. Adler 73 1993 Director of the Company since 1993. Mr. Adler is
Managing Director of Adler & Company, a venture capital
management firm he organized in 1968, and a general
partner of its related investment funds. Since January 1,
1996, Mr. Adler has been of counsel to the law firm of
Fulbright & Jaworski L.L.P. and, for more than five years
prior thereto, was a senior partner in the firm. Mr. Adler is
also Chairman of the Executive Committee and a director
of Data General Corporation, Chairman and a director of
Shells Seafood Restaurants, Inc., and a director of Prime
Cellular, Inc. and of various private companies.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
YEAR
FIRST
BECAME
NOMINEE AGE DIRECTOR PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- ----------------------- ----- ---------- --------------------------------------------------------------
<S> <C> <C> <C>
Christopher D. Illick 60 1998 Director of the Company since April 1998. Mr. Illick has
served as a senior officer of Brean Murray & Co., Inc., an
investment bank, since 1997 and a general partner of Illick
Brothers, a real estate and management concern, since
1965. From 1995 to 1997, Mr. Illick was a limited partner
in the investment banking firm of Oakes, Fitzwilliams &
Co. From 1992 to 1995, Mr. Illick served as Chairman and
Chief Executive Officer of National Transaction Network,
an electronic payment systems integrator. Mr. Illick
presently serves as a director of Biomune Systems Inc.
Richard A. Mandell 56 1995 Director of the Company since August 1995. From
January 1996 to February 1998, he was a Vice
President--Private Investments at Clariden Asset
Management (New York) Inc., a subsidiary of Clariden
Bank, a private Swiss bank. From 1982 to June 1995, he
was a Managing Director of Investment Banking for
Prudential Securities Incorporated. Mr. Mandell is also a
director of Shells Seafood Restaurants, Inc., Sbarro, Inc., a
food service company, and Trend-Lines, Inc., a specialty
retailer of woodworking tools and accessories and golf
equipment and supplies.
</TABLE>
The Board of Directors met eight times and acted by written consent four
times in 1998 with each incumbent director attending at least 75% of the total
number of meetings.
The Board of Directors has an Audit Committee, Compensation Committee,
Stock Option Committee and Nominating Committee. The Audit Committee is
currently composed of Messrs. Mandell and Illick. The functions performed by
this Committee include recommending to the Board of Directors the engagement of
independent auditors, reviewing the scope of internal controls and reviewing
the implementation by management of recommendations made by the independent
auditors. The Audit Committee met twice during 1998.
The Compensation Committee is currently composed of Messrs. Adler and
Mandell. The functions of this Committee include the review of existing and
proposed employment arrangements and making recommendations to the Board of
Directors with respect to all forms of remuneration to any officer or director
of the Company. The Compensation Committee met once during 1998.
The Stock Option Committee is currently composed of Messrs. Adler, Illick
and Mandell. The Stock Option Committee is responsible for making grants of
stock options under the Company's 1995 Stock Option Plan. The Stock Option
Committee met eight times during 1998.
The Executive Committee, formed in May 1997, is currently composed of
Messrs. Evan, Adler, Illick and Mandell. The Executive Committee is empowered
to act on behalf of the full Board of Directors to the maximum extent permitted
by Delaware law. The Executive Committee did not meet during 1998.
6
<PAGE>
The Nominating Committee is currently composed of Messrs. Evan and Adler.
The Nominating Committee is responsible for recommending director nominees and
Board of Director committee members. The Nominating Committee did not meet
during 1998. Stockholders who wish to propose director candidates for
consideration by the Nominating Committee may do so by writing to the Company's
Secretary and supplying the candidate's name, biographical data and
qualifications.
VOTE REQUIRED
The five nominees receiving the highest number of affirmative votes of the
shares present in person or represented by proxy and entitled to vote for them
shall be elected as directors. Only votes cast for a nominee will be counted,
except that the accompanying proxy will be voted for all nominees in the
absence of instructions to the contrary. Abstentions, broker non-votes and
instructions on the accompanying proxy card to withhold authority to vote for
one or more nominees will not be counted as a vote for any such nominee.
THE BOARD OF DIRECTORS DEEMS THE ELECTION AS DIRECTORS OF THE FIVE
NOMINEES LISTED ABOVE TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THESE
NOMINEES.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and
non-cash compensation awarded to, earned by or paid to the Company's chief
executive officer and each of the Company's executive officers whose total
annual compensation during the fiscal year ended December 31, 1997 for services
in all capacities to the Company and its subsidiaries was $100,000 or greater.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------- -------------
SECURITIES
UNDERLYING
OTHER ANNUAL STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(1)
- ------------------------------ ------ ----------- ---------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Uri Evan(2) 1998 $247,730 $ -- $ 6,188 --
Chairman of the Board and 1997 200,000 -- 22,605 --
Chief Executive Officer 1996 200,000 -- 22,020 --
Daniel Bergman 1998 147,596 28,500 -- --
Vice President 1997 125,000 -- 2,800 --
1996 125,000 42,367 5,600 --
Frank Corella 1998 294,231 45,000 14,372 25,000
Vice President of Sales and 1997 175,000 125,000(3) 20,000 5,000
Marketing 1996 175,000 150,000(3) 12,933 15,000
Richard D. Coslow(2) 1998 196,154 30,000 11,037 25,000
Chief Financial Officer and 1997 111,000 25,000 -- 30,000
Executive Vice President 1996 -- -- -- --
Keith Spero(4) 1998 138,811 26,250 -- 20,000
Executive Vice President 1997 -- -- -- --
and General Manager 1996 -- -- -- --
</TABLE>
- ------------------
(1) Amounts reflected have been adjusted for the three-for-two stock split of
the Company's Common Stock in the form of a stock dividend paid on
February 9, 1996 (the "Stock Split").
(2) Mr. Coslow commenced employment with the Company in April 1997.
(3) Represents sales commissions and bonuses. See "--Employment Agreements."
(4) Mr. Spero was appointed an executive officer in August 1998.
8
<PAGE>
The following table sets forth information on option grants in the fiscal
year ended December 31, 1998 to the persons named in the Summary Compensation
Table. All amounts have been adjusted to reflect the Stock Split.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
NUMBER OF % OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR(1) PER SHARE DATE 5% 10%
- ------------------- ------------ ---------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Uri Evan -- -- -- -- -- --
Daniel Bergman -- -- -- -- -- --
Frank Corella 25,000 9.0% $ 9.50 1/23/08 $149,362 $378,514
Richard D. Coslow 25,000 9.0% $ 9.50 1/23/08 $149,362 $378,514
Keith Spero 20,000 7.2% $ 9.50 1/23/08 $119,450 $302,811
</TABLE>
- ------------------
(1) Options vest over three years in installments of 25%, 25% and 50%.
(2) Amounts reflected in these columns represent hypothetical values that may
be realized upon exercise of the options immediately prior to the
expiration of their term, assuming the specified annually compounded
rates of appreciation of the Company's Common Stock over the term of the
options. These numbers are calculated based on rules promulgated by the
Securities and Exchange Commission. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the timing of such
exercise and the future performance of the Company's Common Stock.
The following table sets forth information with respect to (i) exercises
of stock options during fiscal 1998 and (ii) unexercised stock options held at
December 31, 1998 by the persons named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
OPTION EXERCISES HELD AT FISCAL YEAR END AT FISCAL YEAR END($)(2)
--------------------------- ----------------------------- ----------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ------------- ------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Uri Evan -- -- -- -- -- --
Daniel Bergman -- -- -- -- -- --
Frank Corella 9,573 $96,926 61,250 33,750 $262,500 $ 0
Richard D. Coslow -- -- 7,500 47,500 $ 0 $ 0
Keith Spero -- -- 2,000 26,000 $ 0 $ 0
</TABLE>
- ------------------
(1) The "value realized" represents the difference between the exercise price
of the option and the closing price of the Common Stock on The Nasdaq
National Market on the date of exercise.
(2) The value for an "in-the-money" option represents the difference between
the exercise price of the option and the closing price of the Common
Stock on The Nasdaq National Market on December 31, 1998 of $7.25.
9
<PAGE>
EMPLOYMENT AGREEMENTS
In January 1996, the Company entered into an amended employment agreement
with Mr. Evan which provides for an annual base salary of $200,000, as well as
such bonuses as may be authorized from time to time by the Board of Directors.
The agreement expires in June 1999, with automatic extensions of one year
unless terminated, and a covenant not to compete for a period of up to
twenty-four months following the termination of employment. Mr. Evan has agreed
to devote approximately 80% of his working time to the business and affairs of
the Company. If the Company terminates the agreement other than for cause, Mr.
Evan will be entitled to continue to receive his base salary through the end of
the term. The agreement also provides that in the event of a Change of Control
(as defined in the agreement) during the term of the agreement or during the
twenty-four months thereafter, Mr. Evan shall receive a payment equal to 2.5%
of the increase in the Market Capitalization of the Company (as defined in the
agreement) between the Company's 1995 IPO and such Change of Control.
Mr. Bergman has entered into an employment agreement with the Company that
provides for an annual base salary of $125,000, the right to receive a bonus
based on a percentage of operating gross margin, if such a bonus program is
still in effect, and such other bonuses as may be authorized from time to time
by the Board of Directors. See "--Profit Sharing Plan." The agreement has a
term of three years expiring in 1998, with automatic extensions of one year
unless terminated, and a covenant not to compete for a period of up to
twenty-four months following the termination of employment. The agreement
requires the executive to devote his full time, attention and efforts to the
business and affairs of the Company. If the Company terminates the agreement
other than for cause, Mr. Bergman will be entitled to continue to receive his
base salary through the end of the term.
Mr. Corella has entered into an employment agreement with the Company that
provides for an annual base salary of $175,000. The agreement has a term of
five years expiring in 2000, with automatic extensions of one year unless
terminated, and a covenant not to compete for a period of up to twenty-four
months following the termination of employment. Mr. Corella is also expected to
be able to earn sales commissions and, pursuant to the terms of his employment
agreement, is entitled to receive an additional $125,000 in bonuses in the
event the Company's net sales exceed $100,000,000 for the year. During 1998,
the Company and Mr. Corella agreed to move his $125,000 bonus amount into his
base salary for 1998 and all subsequent years. If the Company terminates the
agreement other than for cause, Mr. Corella will be entitled to receive his
base salary through the end of the term.
In March 1997, the Company entered into an employment agreement with
Richard D. Coslow to serve as the Company's Chief Financial Officer beginning
April 14, 1997. The agreement provides for an annual base salary of $156,000
plus such bonuses as may be authorized from time to time by the Board of
Directors, and the right to a bonus based on a percentage of operating gross
margin, if such a bonus program is still in effect. The agreement has an
initial three year term, with automatic extensions of one year unless
terminated. If the Company terminates the agreement other than for cause or the
permanent disability or death of Mr. Coslow, he will be entitled to continue to
receive his base salary for a period of six months from the date of such
termination.
10
<PAGE>
In July 1997, the Company entered into an employment agreement with Giulio
Perillo to serve as the Company's President and Chief Operating Officer
beginning August 4, 1997. Mr. Perillo resigned from his position as President
and Chief Operating Office effective February 25, 1998. The agreement provided
for an annual base salary of $190,000 plus such bonuses as authorized from time
to time by the Board of Directors.
PROFIT SHARING PLAN
Prior to 1998, the Company had a profit sharing plan which was based on
the amount by which the Company's operating gross margin, as defined, exceeded
ten percent (the "OGM Plan"). In 1998, the Company replaced the OGM Plan with a
bonus plan (the "Bonus Plan") for certain employees based on the level of
operating income achieved, excluding restructuring and litigation settlement
charges. If the Company's 1998 operating income, as defined, achieved 85% or
greater of a predetermined amount, a bonus would be distributed based upon a
predetermined formula. For the year ended December 31, 1998, approximately
$472,000 was distributed under the Bonus Plan. Messrs. Bergman, Corella, Coslow
and Spero received bonuses of $28,500, $45,000, $30,000 and $26,250,
respectively, under the Bonus Plan. The structure of the Company's bonus plan
for 1999 has not yet been approved by the Company's Board of Directors.
COMPENSATION OF DIRECTORS
During 1998, each non-employee director of the Company received an annual
fee of $30,000. Mr. Adler waived payment of his annual fee commencing in
February 1998. In addition, directors who are not employees or consultants of
the Company are compensated through stock options. See "--Non-Employee
Directors' Plan."
1995 STOCK OPTION PLAN
See "Proposal No. 2" for a description of the terms of the Plan.
NON-EMPLOYEE DIRECTORS' PLAN
Effective 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 (i.e. directors who are not employees or consultants to
the Company). 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, 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.
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
General. The Compensation Committee, presently consisting of Messrs. Adler
and Mandell, was established in August 1995 and is responsible for the
planning, review and administration of the Company's executive compensation
program. Prior to the establishment of the Compensation Committee, the Board of
Directors administered the Company's executive compensation programs, monitored
corporate performance and its relationship to compensation of executive
officers, and made appropriate decisions concerning matters of executive
compensation.
The Company's objective is to provide a superior return to its
stockholders. To support this objective, the Company believes it must attract,
retain and motivate top quality executive talent. The Company's executive
compensation program is a critical tool in this process. The Company's
executive compensation program has been designed to link executive compensation
to the Company's performance through at-risk compensation opportunities,
providing significant reward to executives based on the Company's success. The
Company's executive compensation program consists of base salary, annual cash
incentive opportunities and long-term incentives represented by stock options.
Base Salary. The Committee recognizes the importance of a competitive
compensation structure in retaining and attracting senior executives. Executive
salary levels are reviewed and established annually. The salaries received by
the Company's executives generally reflect their levels of responsibility and
other factors, such as assessments of individual performance.
As described above, the compensation of Mr. Evan, the Company's Chief
Executive Officer, was $253,918 during 1998. This, along with the other
compensation provided for in Mr. Evan's employment agreement, reflected the
Board of Directors' agreement on Mr. Evan's contributions to the Company during
the last year, including Mr. Evan's performance in strategically positioning
the Company for future growth.
Profit Sharing Plan. The Company's executive officers are eligible for
annual cash performance bonuses under the Bonus Plan, as described above. The
Bonus Plan is designed to create an additional incentive for certain executive
officers and employees of the Company to grow the Company's business while
continuing to focus on operating income. The Committee believes that this form
of compensation helps to more closely align the interests of the employees with
those of the Company and its stockholders. For 1998, the Company made payments
under the Bonus Plan in the aggregate amount of $472,000. See "--Profit Sharing
Plan."
Stock Options. Stock option grants have historically been used by the
Company as part of its compensation program for team members, including the
Company's executives and management team members. The Company's stock option
program permits team members to buy a specific number of shares of Common
Stock, in the future, at the fair market value of such shares on the date the
option is granted. Since stock options gain value only if the price of the
Common Stock increases above the option exercise price, the use of stock option
grants reflects the Company's philosophy of linking compensation to
performance. In addition, the Committee believes that stock option grants to
team members help to provide an incentive for their
12
<PAGE>
continued employment and otherwise more closely align their interests with
those of the Company and its stockholders. The Company also has used stock
options as part of its standard compensation package developed to attract
highly qualified employment candidates to the Company.
Option grants made by the Committee during 1998 to the Company's executive
officers included the grant of performance options for the purchase of 70,000
shares of the Common Stock. These option grants were part of the Committee's
program to provide the Company's executives with added long-term incentive
through stock-based compensation. The options vest over the next three years,
at 25% for each of the first and second years, and 50% for the third year. As
stated above, it is part of the Company's compensation philosophy to link
compensation with performance.
The Compensation Committee believes that linking executive compensation to
individual accomplishments as well as corporate performance results in a better
alignment of compensation with corporate business goals and stockholder value.
As strategic and performance goals are met or exceeded, resulting in increased
value to stockholders, executives are rewarded commensurately. The Compensation
Committee believes that compensation levels during 1998 adequately reflect the
Company's compensation goals and policies.
Compensation Committee,
Frederick R. Adler
Richard A. Mandell
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Frederick R. Adler, a director and principal stockholder of the Company,
is a member of the Company's Compensation Committee. See "Certain Relationships
and Related Transactions."
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
To the Company's knowledge, the Company's directors, executive officers
and beneficial owners of more than ten percent of the Company's Common Stock
are in compliance with the reporting requirements of Section 16(a) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
is aware that during 1998, each of Messrs. Corella and Illick failed to timely
file one report under Section 16(a), which filings were subsequently made.
13
<PAGE>
COMPARATIVE PERFORMANCE BY THE COMPANY
The Securities and Exchange Commission requires the Company to present a
chart comparing the cumulative total stockholder return on its Common Stock
with the cumulative total stockholder return of (i) a broad equity market index
and (ii) an index based on returns from a peer group of companies. The peer
group of companies compared in the chart below consists of Church & Dwight Co.,
Inc., The Clorox Company, Colgate-Palmolive Company, The Dial Corp., Paragon
Trade Brands, Inc., Perrigo Company, The Procter & Gamble Company and Unilever
N.V. (the "Peer Group Index"). This peer group was selected based on the
Company's good faith determination that these companies fairly represent the
companies which compete in the same industry or line-of-business as the
Company. This chart compares the Common Stock with (i) the Nasdaq Composite
Index and (ii) the Peer Group Index, and assumes an investment of $100 on
August 7, 1995 (the date the Company's shares began trading on the Nasdaq
National Market) in each of the Common Stock, the stocks comprising the Nasdaq
Composite Index and the stocks comprising the Peer Group Index.
USA DETERGENTS, INC.
COMPARISON OF CUMULATIVE TOTAL RETURN
(AUGUST 7, 1995-DECEMBER 31, 1998)(1)
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
<TABLE>
<CAPTION>
Sep Dec Mar
COMPANY SYMBOL EXCHANGE 7-Aug-95 Sep-95 Dec-95 Mar-96
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CHURCH & DWIGHT CHD NYSE 100.0000 95.0800 80.8750 91.2594
CLOROX CLX NYSE 100.0000 107.9400 108.3178 130.2413
COLGATE PALMOLIVE CL NYSE 100.0000 95.3500 100.5370 111.4453
DIAL/VIAD DL/VVI NYSE 100.0000 101.5400 121.5434 114.8707
NCH CORP. NCH NYSE 100.0000 95.2200 96.0484 94.1755
PARAGON PTB NYSE 100.0000 105.9800 159.8284 141.8797
PERRIGO PRGO NASDAQ 100.0000 101.0300 97.9385 111.3365
PROCTOR & GAMBLE PG NYSE 100.0000 110.9900 119.6361 122.1604
UNI-LEVER UN NYSE 100.0000 98.5800 106.7326 102.9436
USA DETERGENTS' PEER GROUP $ 100 $ 101 $ 107 $ 110
NASDAQ COMPOSITE INDEX $ 100 $ 105 $ 106 $ 111
USA DETERGENTS USAD NASDAQ $ 100 $ 143 $ 162 $ 336
DESOTO, INC. DSO 100.0000 94.7400 110.5332 97.3797
<CAPTION>
Jun Sep Dec Mar Jun
COMPANY Jun-96 Sep-96 Dec-96 Mar-97 Jun-97
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CHURCH & DWIGHT 91.2594 89.0692 99.9980 125.6775 116.9303
CLOROX 134.0183 144.9810 151.7806 169.9336 199.8929
COLGATE PALMOLIVE 121.2859 124.3302 132.0262 142.5751 186.7591
DIAL/VIAD 117.4323 113.8389 127.1694 131.7856 143.0664
NCH CORP. 106.8609 92.1034 100.2085 98.3346 103.9495
PARAGON 147.0016 159.8201 205.1131 114.5146 116.6560
PERRIGO 92.7767 81.4394 75.2581 89.6926 103.0927
PROCTOR & GAMBLE 130.6261 140.5406 155.1287 165.3982 203.5886
UNI-LEVER 110.0570 119.5329 132.8967 141.2426 165.3245
$ 116 $ 117 $ 128 $ 132 $ 151
$ 119 $ 123 $ 130 $ 123 $ 145
USA DETERGENTS $ 412 $ 411 $ 430 $ 238 $ 106
DESOTO, INC. 84.2237 73.6957 84.2268
<CAPTION>
Sep Dec Mar Jun Sep Dec
COMPANY Sep-97 Dec-97 Mar-98 Jun-98 Sep-98 Dec-98
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CHURCH & DWIGHT 126.7641 122.6696 132.2378 141.5209 128.4019 157.0869
CLOROX 224.5597 240.0543 259.9068 289.1983 249.4914 353.2549
COLGATE PALMOLIVE 199.4587 210.3691 248.2986 251.8741 196.7640 265.8085
DIAL/VIAD 149.7333 164.6018 197.6703 220.2245 194.5904 243.0434
NCH CORP. 118.0866 108.9349 117.5625 106.5469 102.0719 98.9587
PARAGON 126.9101 88.0248 36.7504 20.9404 22.2220 14.5287
PERRIGO 129.8968 110.3084 101.0315 82.9873 75.2529 72.6793
PROCTOR & GAMBLE 199.0893 230.0875 243.2485 262.5381 205.0685 263.2669
UNI-LEVER 161.2410 189.3937 208.1626 239.4494 185.7888 251.5766
$ 161 $ 168 $ 182 $ 191 $ 160 $ 203
$ 169 $ 158 $ 184 $ 190 $ 170 $ 220
USA DETERGENTS $ 133 $ 84 $ 142 $ 171 $ 83 $ 75
DESOTO, INC.
</TABLE>
- ------------------
(1) Comparison has been restated from comparison included in the Company's
Proxy Statement, dated April 12, 1996, to reflect the removal of Armor
All Products Corp., De Soto Inc., Paragon Group, Inc. and INBRAND Corp.
from the Peer Group Index due the cessation of public trading in their
common stocks.
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995, Mr. Adler was granted rights to "piggyback" on any registration
statement filed by the Company, subject to certain restrictions. The
registration rights agreement relating to such "piggyback" rights covers all
Common Stock held by Mr. Adler. Mr. Adler has been of counsel to the law firm
of Fulbright & Jaworski L.L.P. since January 1, 1996, which firm was retained
to provide legal services to the Company during 1997.
On December 26, 1997, the Company granted a warrant to purchase 350,000
shares of Common Stock to Mr. Adler, in consideration of the sum of $175,000
and investment banking services to be rendered by Mr. Adler during the three
year period commencing January 1, 1998. The warrant is exercisable beginning
December 2000 or, if earlier, upon the occurrence of an "Accelerating Event" as
defined in the warrant, at an exercise price of $7.875 per share of Common
Stock (the market price of the Common Stock on the grant date). The Company
valued the warrant at approximately $375,000, the amount specified by an
independent banking and valuation firm engaged by the Company. The value of the
warrant, net of consideration to be received, will be deferred and amortized
over the three year consulting period.
As part of the refinancing of the Company's then-existing indebtedness to
PNC Bank, N. A. ("PNC") in February 1998, $4 million was loaned to the Company
by 101 Realty Associates L.L.C. ("101 Realty") at a rate of 9.5% per annum. 101
Realty is a New Jersey limited liability company owned by Uri Evan, the
Company's Chairman and Chief Executive Officer, Dinah Evan, Mr. Evan's wife,
Daniel Bergman, a Director and beneficial owner of more than 5% of the
outstanding Common Stock, and Frederick J. Horowitz, Mark Antebi and Joseph
Cohen, each of whom is the beneficial owner of more than 5% of the Company's
outstanding Common Stock. The loan from 101 Realty was secured by a second
mortgage on one of the Company's properties, subject to a first mortgage held
by PNC in the amount of $5 million. Additionally, each of Messrs. Evan,
Horowitz, Bergman, Cohen and Antebi jointly and severally guaranteed repayment
of an additional $5 million of the Company's indebtedness to PNC. As part of
the transaction, 101 Realty was issued a warrant to purchase 98,524 shares of
Common Stock, exercisable until April 2003, at an exercise price of $10.50 per
share (subject to certain anti-dilution provisions).
In August 1998, the Company entered into a credit facility with a
syndicate of lenders, including FINOVA Capital Corporation ("FINOVA"), in
connection with which, all but $10 million of the Company's indebtedness to PNC
was paid down and the personal guarantees described above were released. In
February 1999, the Company refinanced its credit facility with the syndicate of
lenders led by FINOVA. As part of the refinancing, $4.0 million of proceeds
were set aside for the repayment of the Company's indebtedness to 101 Realty,
provided the Company meets certain working capital availability criteria and
achieves specified profitability levels for fiscal 1998 and 1999. The agreement
with FINOVA provides for the reserved funds to be used to pay down certain
indebtedness to FINOVA to the extent these conditions are not met for the
repayment of the 101 Realty indebtedness. The Company satisfied these tests for
fiscal 1998.
15
<PAGE>
PROPOSAL NO. 2--APPROVAL OF AN AMENDMENT TO THE
COMPANY'S 1995 STOCK OPTION PLAN TO INCREASE
THE NUMBER OF SHARES WHICH MAY BE ISSUED THEREUNDER
The Board of Directors has unanimously adopted, subject to stockholder
approval, an amendment to the Company's 1995 Stock Option Plan which would
increase the aggregate number of shares of Common Stock that may be issued
under the Plan from 1,000,000 shares to 1,250,000 shares. The Board of
Directors believes that approval of this amendment will serve the best
interests of the Company and its stockholders.
The Plan was adopted for the purpose of securing for the Company and its
stockholders the benefits of common stock ownership of the Company by key
personnel of the Company and its subsidiaries. The Board of Directors believes
that the granting of options under the Plan will foster the Company's ability
to attract, retain and motivate those individuals who will be largely
responsible for the profitability and long-term future growth of the Company.
The proposed amendment to the Plan will provide the Company with the
flexibility to continue to grant stock options to these persons. As of April 1,
1999, the Company had approximately 332,818 shares available for future grants
under the Plan. As of April 1, 1999, approximately 615 persons were eligible to
participate in the Plan.
The Plan authorizes the Board to issue incentive stock options ("ISO's"),
as defined in Section 422(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 (within the meaning of Code Section
422(b)(6)) 10% or more of the outstanding stock of the Company or any
subsidiary (a "10% Stockholder"), the exercise price may 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, subject to acceleration in the event of a Change in
Control (as hereinafter defined), and may not be exercised after the tenth
anniversary (fifth anniversary in the case of an ISO granted to a 10%
Stockholder) of their grant. Options may not be transferred during the lifetime
of an optionholder. No stock options may be granted under the Plan after August
2005.
The Plan is administered by the Stock Option Committee (the "Committee")
of the Board of Directors. Subject to the provisions of the Plan, the Committee
has the authority to, among other things, determine the individuals to whom the
stock options are to be granted, the number of shares to be covered by each
option, the option price, the type of option, the option period, the
restrictions, if any, on the exercise of the option and the terms for the
payment of the option price, to interpret the provisions of the Plan, to fix
and interpret the provisions of option agreements made under the Plan, to
supervise the administration of the Plan, and to take such other action as may
be necessary or desirable in order to carry out the provisions of the Plan.
Each grant of options is to be evidenced by a stock option agreement executed
by the Company and the optionee at the time of grant in accordance with the
terms and conditions of the Plan.
16
<PAGE>
No option will become exercisable unless the person to whom the option is
granted remains in the continuous employ or service of the Company or one of
its subsidiaries for at least six months (or for such longer period as the
Committee may designate) from the date the option is granted. Unless extended
by the Committee, if an optionee ceases to be employed by or to perform
services for the Company or one of its subsidiaries for any reason other than
death or disability, then each outstanding option granted to him or her under
the Plan will terminate on the date three months after the date of such
termination of employment or service, of, if earlier, the date specified in the
option agreement. If an optionee's employment or service is terminated by
reason of the optionee's death or disability (or if the optionee's employment
or service is terminated by reason of his or her disability and the optionee
dies within one year after such termination of employment or service), then,
unless extended by the Committee, each outstanding option granted to the
optionee under the Plan will terminate on the date one year after the date of
such termination of employment or service (or one year after the later death of
a disabled optionee) or, if earlier, the date specified in the option
agreement.
If any event constituting a "Change in Control of the Company" shall
occur, all options granted under the Plan which are outstanding at the time a
Change in Control of the Company occurs will immediately become exercisable. A
"Change in Control of the Company" will be deemed to occur if (i) there is
consummated (x) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
Common Stock would be converted into cash, securities or other property, other
than a merger of the Company in which the holders of the Common Stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or (y) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company, or (ii) the stockholders of the Company approve any plan or proposal
for liquidation or dissolution of the Company, or (iii) any person (as such
term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), becomes the beneficial owner (within
the meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the
Company's outstanding Common Stock other than pursuant to a plan or arrangement
entered into by such person and the Company, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period.
The Board of Directors may amend or terminate the Plan. Except as
otherwise provided in the Plan with respect to equity changes, any amendment
which would increase the aggregate number of shares of Common Stock as to which
options may be granted under the Plan, materially increase the benefits under
the Plan, or modify the class of persons eligible to receive options under the
Plan is subject to the approval of the Company's stockholders. No amendment or
termination may affect adversely any outstanding option without the written
consent of the optionee.
FEDERAL INCOME TAX CONSEQUENCES
An optionee will not realize taxable income upon the grant of an option.
In general, the holder of a Non-ISO will realize ordinary income when the
option is exercised equal to the
17
<PAGE>
excess of the value of the stock over the exercise price (i.e., the option
spread), and the Company receives a corresponding deduction in the same amount,
subject to the deduction limits of Section 162(m) of the Code. (If an optionee
is subject to the six month restrictions on sale of Common Stock under Section
16(b) of the Exchange Act, ordinary income recognition generally will be
postponed until the date the restrictions lapse, unless an early income
recognition election is made.) Upon a later sale of the stock, an optionee will
realize capital gain or loss equal to the difference between the selling price
and the value of the stock at the time the option was exercised (or, if later,
the time the ordinary income is recognized with respect to the shares received
upon exercise).
The holder of an ISO will not realize taxable income upon the exercise of
the option (although the option spread is an adjustment to taxable income that
may result in alternative minimum tax (the adjustment, if any, is also added to
the basis of the shares for purposes of determining adjusted gain or loss under
the alternative minimum tax when the shares are sold)). If the stock acquired
upon exercise of the Incentive Stock Option is sold or otherwise disposed of
within two years from the option grant date or within one year from the
exercise date, then, in general, gain realized on the sale is treated as
ordinary income to the extent of the option spread at the exercise date, and
the Company receives a corresponding deduction in the same amount, subject to
the limitations of Section 162(m) of the Code. Any remaining gain is treated as
short-term or long-term capital gain depending on the holding period. If the
stock is held for at least two years from the grant date and one year from the
exercise date, then gain or loss realized upon the sale will be capital gain or
loss and the Company will not be entitled to a deduction.
THE AMENDMENT TO THE PLAN
The Board of Directors believes that approval of the amendment to increase
the aggregate number of shares which may be issued under the Plan will serve
the best interests of the Company and its stockholders by permitting the
Committee to exercise needed flexibility in the administration of the Plan and
the granting of options thereunder. In addition, the Board of Directors
believes that the ability to grant additional options will help attract,
motivate and retain key employees and directors who are in a position to
contribute to the successful conduct of the business and affairs of the Company
as well as stimulate in such individuals an increased desire to render greater
service to the Company.
Accordingly, the Board of Directors recommends that the stockholders
approve the following resolution:
RESOLVED, that the aggregate number of shares of the Company's Common Stock
which may be issued under the Company's 1995 Stock Option Plan (the "Plan")
shall be increased to 1,250,000 shares, and that the first sentence of
Section 2 of the Plan be amended to read in its entirety as follows:
"The Company may issue and sell a total of 1,250,000 shares of its common
stock, $.01 par value (the "Common Stock"), pursuant to the Plan."
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
18
<PAGE>
PROPOSAL NO. 3--RATIFICATION OF APPOINTMENT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The stockholders will be asked to ratify the appointment of Deloitte &
Touche LLP as the independent certified public accountants of the Company for
the fiscal year ending December 31, 1999. Deloitte & Touche LLP audited the
financial statements of the Company for the fiscal years ended December 31,
1996, 1997 and 1998. A representative of Deloitte & Touche LLP is expected to
be present at the Annual Meeting, will have an opportunity to make a statement
if he or she desires to do so and is expected to be available to respond to
appropriate questions from stockholders.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 3 TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
19
<PAGE>
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at the Annual
Meeting of Stockholders of the Company to be held in 1999 must be received by
the Company no later than December 10, 1999 for inclusion in the Board of
Directors' proxy statement and form of proxy relating to that meeting.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
Annual Meeting. However, if any other business properly comes before the Annual
Meeting, it is the intention of the persons named in the enclosed proxy to vote
on such matters in accordance with their best judgment.
The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend
the Annual Meeting, please sign the proxy and return it in the enclosed
envelope.
By Order of the Board of Directors
Daniel Bergman,
Secretary
Dated: April 8, 1999
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE SENT WITHOUT
CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM: USA DETERGENTS, INC.,
ATTENTION: CHIEF FINANCIAL OFFICER, 1735 JERSEY AVENUE, NORTH BRUNSWICK, NEW
JERSEY 08902.
20
<PAGE>
USA DETERGENTS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 12, 1999
The undersigned, a stockholder of USA Detergents, Inc. (the
"Corporation"), hereby constitutes and appoints Uri Evan and Daniel Bergman and
each of them, the true and lawful proxies and attorneys-in-fact of the
undersigned, with full power of substitution in each of them, to vote all
shares of Common Stock of the Corporation which the undersigned is entitled to
vote at the Annual Meeting of Stockholders of the Corporation to be held on
Wednesday, May 12, 1999, and at any and all adjournments or postponements
thereof, as follows:
(1) ELECTION OF DIRECTORS
[ ] FOR the nominees listed below [ ] WITHHOLDING AUTHORITY
(except as marked to the to vote for all the nominees
contrary below) listed below
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name in the list below.)
Nominees: Frederick R. Adler, Daniel Bergman, Uri Evan, Christopher D. Illick
and Richard A. Mandell.
(2) PROPOSAL TO AMEND THE CORPORATION'S 1995 STOCK OPTION PLAN TO INCREASE
THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE THEREUNDER
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion, upon such other business as may properly come
before the meeting and any and all adjournments or postponements thereof.
(CONTINUED ON REVERSE SIDE.)
<PAGE>
(CONTINUED)
Shares represented by this Proxy will be voted in accordance with the
instructions indicated in items 1, 2 and 3 above. IF NO INSTRUCTION IS
INDICATED, THIS PROXY WILL BE VOTED FOR ALL LISTED NOMINEES FOR DIRECTORS, FOR
PROPOSAL 2 AND FOR PROPOSAL 3.
Any and all proxies heretofore given by the undersigned are hereby
revoked.
Dated:--------------------------------------
--------------------------------------------
--------------------------------------------
Please sign exactly as your name(s) appear
hereon. If shares are held by two or more
persons each should sign. Trustees, executors
and other fiduciaries should indicate their
capacity. Shares held by corporations,
partnerships, associations, etc. should be
signed by an authorized person, giving full
title or authority.
PLEASE DATE, SIGN AND MAIL IN THE ENCLOSED REPLY ENVELOPE
