| ¨ | 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. | |||
Amount Previously Paid: | ||||
| (2) | Form, Schedule or Registration Statement No.: | |||
| (3) | Filing Party: | |||
| (4) | Date Filed: | |||
SCOTT’S LIQUID GOLD-INC.
4880 Havana Street
Denver, Colorado 80239
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To Be Held May 18, 201116, 2012
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Scott’s Liquid Gold-Inc., a Colorado corporation (the “Company”), will be held at 9:00 a.m., Mountain Time, on Wednesday, May 18, 201116, 2012 at the Company’s offices, 4880 Havana Street, Denver, Colorado 80239 for the purpose of considering and acting upon the following:
| (1) | The election of six directors; |
| (2) |
| (3) | Such other matters as may properly come before the meeting or any adjournment thereof. |
Only shareholders of record at the close of business on March 29, 201130, 2012 are entitled to notice of and to vote at the meeting.
Important notice regarding availability of proxy materials for the Annual Meeting of Shareholders to be held on May 18, 201116, 2012 or any adjournment thereof: The Proxy Statement for the Annual Meeting, the form of proxy and the Annual Report on Form 10-K for the year ended December 31, 20102011 are available at the Company’s website atwww.scottsliquidgold.com under the “Company & Investor Relations” tab.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jeffrey R. Hinkle
Jeffrey R. Hinkle
Corporate Secretary
Denver, Colorado
April 20, 20116, 2012
THE FORM OF PROXY IS ENCLOSED. TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE PREPAID, ADDRESSED ENVELOPE. NO ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
i
4880 Havana Street
Denver, Colorado 80239
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 18, 201116, 2012
The enclosed proxy is solicited by and on behalf of the Board of Directors (the “Board”) of Scott’s Liquid Gold-Inc., a Colorado corporation (the “Company”), for use at the Company’s Annual Meeting of Shareholders to be held at 9:00 a.m., Mountain Time, on Wednesday, May 18, 201116, 2012 at the Company’s offices, 4880 Havana Street, Denver, Colorado 80239, or any adjournment thereof. This Proxy Statement and the accompanying form of proxy and a copy of the Annual Report on Form 10-K for the year ended December 31, 2010 are first being mailed or given to the shareholders of the Company on or about April 22, 2011.12, 2012.
Any shareholder signing and mailing the enclosed proxy may revoke it at any time before it is voted by giving written notice of the revocation to the Company’s Corporate Secretary, by voting in person at the meeting or by filing at the meeting a later executed proxy.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
All voting rights are vested exclusively in the holders of the Company’s $0.10 par value common stock. Each share of the Company’s common stock is entitled to one vote. Cumulative voting in the election of directors is not permitted. Holders of a majority of shares entitled to vote at the meeting, when present in person or by proxy, constitute a quorum. On March 29, 2011,30, 2012, the record date for shareholders entitled to vote at the meeting, the Company had 10,898,50010,937,000 shares of its $0.10 par value common stock issued and outstanding.
When a quorum is present, in the election of directors, those six nominees having the highest number of votes cast in favor of their election will be elected to the Company’s Board. Consequently, any shares not voted (whether by abstention, broker non-vote or otherwise) have no impact in the election of directors except to the extent the failure to vote for an individual results in another individual receiving a larger number of votes. With respect to any other matter, unless a greater number of votes isare required by law, a matter is approved by the shareholders if the votes cast in favor of the matter exceed the votes cast in opposition. Any shares not voted (whether by abstention, broker non-vote or otherwise) have no impact on the vote for such other matters, if any, so long as a quorum is present.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following persons are the only persons known to the Company who on March 31, 2011,30, 2012, owned beneficially more than 5% of the Company’s common stock, its only class of outstanding voting securities:
Title of Class
| ||||||||||
| Ownership | Percent of Class | ||||||||
Mark E. Goldstein 4880 Havana Street Denver, Colorado 80239 | Common Stock | (1)(2) | % | |||||||
Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan 4880 Havana Street Denver, Colorado 80239 | Common Stock | (3) | % | |||||||
Yorktown Avenue Capital, LLC and Boston Avenue Capital, LLC 415 South Boston, 9th Floor Tulsa, Oklahoma 74103 | Common Stock | 1,461,530 | (4) | 13.4 | % | |||||
Timothy Stabosz 1307 Monroe Street Laporte, IN 46350 | Common Stock | (5) | % | |||||||
| (1) | Includes 2,126,473 shares held by the Goldstein Family Partnership, Ltd., a limited partnership of which the general partner is the Goldstein Family Corporation and whose limited partners include Mark E. Goldstein, his children, a sister, and certain other relatives. Mr. Goldstein is the sole director and sole executive officer of the Goldstein Family Corporation, and he owns 100% of the outstanding stock of the Goldstein Family Corporation. Mr. Goldstein has the sole voting and disposition powers with respect to these shares of the Company owned by the Goldstein Family Partnership, Ltd. Also includes 94,113 shares underlying stock options granted by the Company and exercisable within 60 days, and 86,670 shares held by Mr. Goldstein’s two adult and one minor |
| (2) | Does not include 140,808 shares held by the Company’s Employee Stock Ownership Plan attributable to Mr. Goldstein’s vested interest in the Plan as of December 31, |
| (3) | The |
| (4) | Yorktown Avenue Capital, LLC and Boston Avenue Capital, LLC are limited liability companies managed by Value Fund Advisors, LLC. This information is based upon filings by Yorktown Avenue Capital, LLC and Boston Avenue Capital, LLC with the Securities and Exchange Commission (the “SEC”). |
| (5) | This information is based upon a filing by Mr. Stabosz with the SEC. |
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows as of March 31, 2011,30, 2012, the shares of the Company’s common stock beneficially owned by each director and executive officer of the Company and the shares beneficially owned by all of the directors and executive officers as a group:
Title of Class | ||||||||
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percent of Class | ||||||
Mark E. Goldstein | (2)(3)(4) | % | ||||||
Barry J. Levine | 6,250 | (3) | 0.1 | % | ||||
Jeffrey R. Hinkle | (3)(4)(5) | % | ||||||
Dennis P. Passantino | (3)(4) | 1.4 | % | |||||
| ||||||||
| ||||||||
Dennis H. Field | (3) | % | ||||||
Jeffry B. Johnson | (3) | % | ||||||
Gerald J. Laber | (3) | 0.5 | % | |||||
Philip Neri | 6,250 | (3) | 0.1 | % | ||||
All Directors and executive officers as a Group (eight persons) | (3)(4) | % | ||||||
| (1) | Beneficial owners listed have sole voting and disposition power with respect to the shares shown unless otherwise indicated. |
| (2) | For information regarding Mr. Goldstein’s beneficial ownership of shares, see footnote 1 under the table in “Security Ownership of Certain Beneficial Owners.” |
| (3) | For each named person, includes the following number of shares underlying stock options granted by the Company and exercisable within 60 days: |
| (4) | Does not include shares owned by the Company’s Employee Stock Ownership Plan under which, at December 31, |
| (5) | Of Mr. Hinkle’s shares, 121,878 shares are held in a revocable trust of which Mr. Hinkle and his spouse are co-trustees. |
| (6) | Of Mr. Johnson’s shares, |
There has been no change in control of the Company since the beginning of the last fiscal year, and there are no arrangements known to the Company, including any pledge of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.
Because of his beneficial ownership of the Company’s stock and his positions as President, Chief Executive Officer and Chairman, Mark E. Goldstein may be considered a parent (i.e., a controlling person) of the Company.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company’s Board currently consists of six directors. On April 15, 2011, Mr. Passantino resigned from the Board and the Board reduced the number of seats from seven to six following such resignation. Mr. Passantino will continue to serve as the Company’s Vice President of Operations.
Unless authority to vote is withheld, the persons named in the enclosed form of proxy will vote the shares represented by such proxy for the election of the six nominees for director named below. If, at the time of the meeting, any of these nominees shall have become unavailable for any reason to serve as a
director, the persons entitled to vote the proxy will vote for such substitute nominee or nominees, if any, as they determine in their discretion. If elected, the nominees for director will hold office until the next annual meeting of shareholders or until their successors are elected and qualified. The nominees for director, each of whom has consented to serve if elected, are as follows:
Name of Nominee and Position | Age | Director | Principal Occupation for Last Five Years | Age | Director Since | Principal Occupation for Last Five Years | ||||||||
Mark E. Goldstein (Chairman of the Board, President and Chief Executive Officer) | 55 | 1983 | Chairman of the Board of the Company since February 2000, President and Chief Executive Officer of the Company since August, 1990, Vice President-Marketing of the Company from 1982 to 1990. Employed by the Company since 1978. Mr. Goldstein was selected as a director for his extensive experience in management, marketing, sales, consumer products and other aspects of the Company’s business. | 56 | 1983 | Chairman of the Board of the Company since February 2000, President and Chief Executive Officer of the Company since August, 1990, Vice President-Marketing of the Company from 1982 to 1990. Employed by the Company since 1978. Mr. Goldstein was selected as a director for his extensive experience in management, marketing, sales, consumer products and other aspects of the Company’s business. | ||||||||
Jeffrey R. Hinkle (Vice President – Marketing and Sales and Corporate Secretary) | 57 | 2000 | Vice President-Marketing and Sales of the Company since February 2000. Vice President of Marketing and Sales for the Company’s subsidiaries from November 1992 to 2000. Employed by the Company since 1981. Mr. Hinkle was selected as a director for his in-depth knowledge of consumer products, the marketplace for the Company’s products, the Company’s sales force, international suppliers of distributed products and customers. Mr. Hinkle was selected as a director for his extensive experience in marketing, sales and management. | |||||||||||
Carl A. Bellini | 77 | 2000 | Management Consultant since 1997. From 1987 to 1997, Executive Vice President and Chief Operating Officer of Revco D.S., Inc. (a large drug store chain). Mr. Bellini was selected as a director for his extensive experience in management, retail sales, marketing and strategic planning. | |||||||||||
Jeffrey R. Hinkle (Executive Vice President of Corporate Development and Corporate Secretary) | 58 | 2000 | Executive Vice President of Corporate Development since August 2011 previously serving as Vice President-Marketing and Sales of the Company since February 2000. Employed by the Company since 1981. Mr. Hinkle was selected as a director for his in-depth knowledge of consumer products, the marketplace for the Company’s products, the Company’s sales force, international suppliers of distributed products and customers. Mr. Hinkle brings to the Board extensive experience in marketing, sales and management. | |||||||||||
Dennis H. Field | 78 | 1991 | Management Consultant since 1990. From 1984 to 1990, Executive Vice President/General Manager, Faberge USA, Inc. (mass market health and beauty aids). Mr. Field was selected as a director for his extensive experience in marketing and sales of consumer products, including cosmetic and skin care products, and strategic planning. | 79 | 1991 | Management Consultant since 1990. From 1984 to 1990, Executive Vice President/General Manager, Faberge USA, Inc. (mass market health and beauty aids). Mr. Field was selected as a director for his extensive experience in marketing and sales of consumer products, including cosmetic and skin care products, and strategic planning. | ||||||||
Jeffry B. Johnson | 65 | 2000 | Retired. Formerly Treasurer and Chief Financial Officer of the Company from November 2000 to January 2009. From 1981 to 2000, Controller of the Company. Employed by the Company since 1976. Mr. Johnson was selected as a director for his extensive knowledge of the Company’s finances and experience in management and financial matters. | 66 | 2000 | Retired. Formerly Treasurer and Chief Financial Officer of the Company from November 2000 to January 2009. From 1981 to 2000, Controller of the Company. Employed by the Company since 1976. Mr. Johnson was selected as a director for his extensive knowledge of the Company’s finances. Mr. Johnson brings to the Board extensive experience in management and financial matters. | ||||||||
| Gerald J. Laber, CPA | 67 | 2004 | President, The Catholic Foundation for the Roman Catholic Church in Northern Colorado since January | |||||||||||
Name of Nominee and Position in the Company | Age | Director Since | Principal Occupation for Last Five Years | |||
| Gerald J. Laber, CPA | 68 | 2004 | President, The Catholic Foundation for the Roman Catholic Church in Northern Colorado since January 2008. Investor and community volunteer since 2000. From 1980 to 2000 partner with Arthur Andersen L.L.P. Currently a director, chair of the audit committee and member of the finance, compensation and nominating and governance committee of Smart Balance, Inc. (a manufacturer and distributor of heart-healthy food products); currently a director, member of the compensation committee and chair of the audit committee of Allied Motion Technologies; currently a director of three companies (Centennial Specialty Foods Corporation, HealtheTech, Inc. and Qualmark Corporation) which were public reporting companies while Mr. Laber served as a director and which ceased being public reporting companies during the past five years. Formerly, during the past five years, a director and chair of the audit committee of Spectralink Corporation until it was acquired in March 2007 and a director and member of audit committee of Applied Films Corporation until it was acquired in July 2007. Mr. Laber brings to the Board extensive experience in accounting, financial matters and strategic planning. He is also an audit committee financial expert. | |||
| Philip Neri | 55 | 2011 | Vice President of Sales and Marketing at Barrett-Jackson, where he manages the company’s sponsorship and business development programs, as well as its marketing and merchandising endeavors. Mr. Neri has been with Barrett-Jackson since 2006, serving as Director of Sponsorships and Business Development prior to his promotion to Vice President. Before joining Barrett-Jackson, Mr. Neri was Senior Vice President of Marketing and Sales at Home Fragrance Holdings, where his guidance and innovation led to the revitalization of the company’s sales and marketing program. Prior to Home Fragrance Holdings, Mr. Neri was Senior Vice President of Sales for The Dial Corporation with responsibility for all Dial Corp. products targeting grocery, drug, military and convenience store distribution channels throughout the U.S. Mr. Neri was with The Dial Corporation for 18 years and held numerous sales and management positions throughout the company prior to his promotion to Senior Vice President. Mr. Neri brings to the Board extensive sales and marketing, business development and strategic planning experience. | |||
All of the foregoing persons are currently directors of the Company. Their positions on standing committees of the Board are shown below under “Directors’ Meetings and Committees.”
There are no family relationships among the executive officers or directors of the Company. There are no arrangements or understandings pursuant to which any of these persons were elected as an executive officer or director.
Vote Required
The six nominees having the highest number of votes cast in favor of their election will be elected to the Company’s Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
EACH OF THE DIRECTOR NOMINEES.
BOARD LEADERSHIP STRUCTURE AND ROLE IN RISK OVERSIGHT
The Board is actively involved in assessing and managing risks that could affect the Company. Part of the Board'sBoard’s role is to periodically assess the processes utilized by management with respect to risk assessment and risk management, including identification by management of the primary risks of the Company’s business, and the implementation by management of appropriate systems to deal with such risks. The Board fulfills these responsibilities either directly, through delegation to committees of the Board, or, as appropriate, through delegation to individual directors. When the Board determines to delegate any risk management oversight responsibilities, typically such delegation is made to the standing committees of the Board.
Mr. Goldstein serves as both the Chairman of the Board and the Chief Executive Officer of the Company. The Company believes this is appropriate in light of Mr. Goldstein’s significant experience and leadership roles with the Company, and his in-depth knowledge of consumer products and the Company’s management, marketplace, customers, marketing, sales and strategic vision. The Company further believes Mr. Goldstein’s effectiveness in promoting the Company’s products and forming new business relationships is significantly enhanced by his role as both Chairman of the Board and Chief Executive Officer.
The Company has four executive officers. They are Mr. Goldstein, Mr. Levine, Mr. Hinkle, and Mr. Passantino and Brian L. Boberick.Passantino. Information regarding Mr. Goldstein and Mr. Hinkle is stated above under “Nominees.” Information concerning Mr. PassantinoLevine and Mr. BoberickPassantino is as follows:
Mr. Levine, 53, has been employed by the Company as Chief Operating Officer, Chief Financial Officer and Treasurer beginning in 2012. Prior to joining the Company, Mr. Levine was Director of Business Advisory Services at Hein & Associates, LLP, a leading accounting and consulting firm. Prior to that, he served as Chief Executive Officer of LGK Advisors, LLC, a national business advisory firm, from 2008 to 2011. From 2005 to 2008, he served as Senior Vice President, Business Affairs and General Counsel for Cohen Brothers Homes, LLC, a residential homebuilder and real estate developer.
Mr. Passantino, 55,56, has been employed by the Company since 1981. He has been Vice President – Operations of the Company since November 2002 and Corporate Secretary from 2002 until 2011. From 1991 to 2002, he served as Operations Manager of the Company.
Mr. Boberick, 55, He also served as a certified public accountant, has been the Chief Financial Officer and Treasurermember of the Company since his electionBoard of Directors from 2002 to these positions by the Board on February 24, 2009. Mr. Boberick was formerly Controller/Credit Manager of the Company since October 2000. While Controller/Credit Manager, he was involved in, among other things, the daily operations of the finance department, preparation of annual and quarterly reports to the SEC, and the Company’s relationships with lenders and others. Prior to joining the Company, Mr. Boberick was a controller at a sports marketing company, held finance positions at two other companies and was a senior auditor at an accounting firm.2011.
The officers of the Company are elected annually at the first meeting of the Company’s Board held after each annual meeting of shareholders and serve at the pleasure of the Board.
DIRECTORS’ MEETINGS AND COMMITTEES
During the year ended December 31, 2010,2011, the Company had four regular Board meetings, plusthree special meetings by conference call and two actions by unanimous written consent. The Company’s Board has both a Compensation Committee and an Audit Committee. The Company does not have a nominating committee. No member of the Board attended fewer than 75% of the meetings of the Board or of committees for which such member served during 2010.2011.
Compensation Committee
The primary responsibilities of the Compensation Committee include, without limitation, reviewing the development of a compensation philosophy for the Company, reviewing the compensation packages for executive officers and engaging and overseeing compensation consultants and advisers. The Compensation Committee may not delegate its authority. The Compensation Committee operates under resolutions adopted by the Board of Directors that may constitute a charter, a copy of which is attached hereto asAppendix BA. CurrentThe Compensation Committee currently consists of three independent directors. The current members of the Compensation Committee are Dennis H.Mr. Field (Chairperson), Carl A. Bellini,Mr. Laber and Gerald J. Laber,Mr. Neri, each of whom is an independent director as defined under the NASDAQ rules. The Compensation Committee had one meetingtwo meetings during 2010.2011.
In making decisions regarding executive compensation, the Compensation Committee requests the comments of the Chief Executive Officer and the other executive officers about their compensation and considers a number of factors. In determining the executive compensation in 20092010 and 2010,2011, the Committee considered, among other things, the following matters:
Overview
The objectives of the Company’s compensation program;
What the compensation program is designed to reward;
Each element of the compensation;
How the Company determines the amount (and, where applicable, the formula) for each element; and
How each compensation element and the Company’s decisions regarding that element fit into the Company’s overall compensation objectives and affect decisions regarding other elements.
Specific Factors
Services performed and time devoted to the Company by the executive;
Amounts paid to executives in comparable companies;
The size and complexities of the Company’s business;
Successes achieved by the executive;
The executive’s abilities;
The executive’s tenure;
The Company’s financial results;
Prevailing economic conditions;
Compensation paid to other employees of the Company; and
The amount previously paid to the executive.
The Compensation Committee had previously determined that an outside consultant on compensation matters should be used periodically to provide information about the compensation paid to the Company’s executive officers compared to compensation paid by other companies. Most recently,This is only one factor among many considered by the Compensation Committee. In 2011, the Compensation Committee engaged The Haythe Harlon Group in 2004 to provide this type of market analysis. The report from The Haythe Harlon Group compared each element of the Company’s base salary, total cash compensation and total direct compensation for the executive officers to The Hay Group’s all company executive compensation survey and to a peer group of 1410 companies indeveloped by the consumer products and specialty chemical industries.Harlon Group. This report showed among other things, that the aggregate actual total direct compensation levels for the Company’s executive officers fell betweenfor 2010 were below the 25th and 50th percentile levelsmedian of total direct compensation for executives of the peer group market, withcompanies.
Peer Group Companies determined by the Chief Executive Officer’s actual total direct compensation levels below the median of such market by approximately 20% to 25%. Harlon Group were:
United-Guardian, Inc.
Electromed, Inc.
Forward Industries, Inc.
The Compensation Committee has engaged an independent compensation expert to assist the Compensation Committee in evaluating the Company’sFemale Health Company
Universal Security Instruments, Inc.
Ocean Bio-Chem, Inc.
current compensation programs and policies. The Company anticipates having the results of this compensation analysis in the third quarter of the year. To the extent such evaluation leads to changes in compensation, the Company will make any required disclosures in current or periodic reports it files with the SEC.Heelys, Inc.
People’s Liberation, Inc.
Talon International, Inc.
MOD-PAC Corp.
The Compensation Committee also determines the fees paid to the non-employee directors. The fees for the non-employee directors result from discussions between the executive officers and each of the non-employee directors as to a reasonable amount.
Audit Committee
The Audit Committee’s primary responsibilities include appointing the independent auditor for the Company, pre-approving all audit and non-audit services, and assisting the Board in monitoring the integrity of the financial statements of the Company, the independent auditor’s qualifications, independence and performance and the Company’s compliance with legal requirements. The Audit Committee operates under a written charter adopted by the Board, a copy of which has been filed with the SEC and is available at the Company’s website at www.scottsliquidgold.com. The current members of the Audit Committee are Gerald J.Mr. Laber (Chairperson), Carl A. BelliniMr. Neri and Dennis H.Mr. Field. Each member of the Audit Committee is an independent director as defined in the NASDAQ rules. Mr. Laber has the professional experience deemed necessary to qualify as an audit committee financial expert under rules of the SEC. The Audit Committee had four meetings during 2010.2011.
The Board of the Company does not have a nominating committee. The full Board performs the functions of a nominating committee. The Board believes that it does not need a separate nominating committee because the full Board is relatively small, has the time to perform the functions of selecting Board nominees and in the past has acted unanimously in regard to nominees.
In considering an incumbent director whose term of office is to expire, the Board reviews the director’s overall service during the person’s term, the number of meetings attended, level of participation and quality of performance. In the case of new directors, the directors on the Board are asked for suggestions as to potential candidates, discuss any candidates suggested by a shareholder of the Company and apply the criteria stated below. The Company may engage a professional search firm to locate nominees for the position of director of the Company. However, to date the Board has not engaged professional search firms for this purpose. A selection of a nominee by the Board requires a majority vote of the Company’s directors. The Board consists of six members of which Carl A. Bellini, Dennis H.Mr. Field, Mr. Laber, Mr. Johnson and Gerald J. LaberMr. Neri are independent as defined under NASDAQ rules.
The Board seeks candidates for nomination to the position of director who have excellent decision-making ability, business experience, particularly those relevant to consumer products, personal integrity and a high reputation, diverse backgrounds and who meet such other criteria as may be set forth in a writing adopted by a majority vote of the Board.
During 2011, the Board is undertaking a search for a qualified, independent director. The Board’s preference is to nominate a candidate who has experience and expertise in consumer products marketing, advertising, branding and sales. While it is not a requirement for the Company, the goal of the Board is to have a majority of its members meet the independence requirements under the NASDAQ rules in the near term.
Pursuant to a policy adopted by the Board, the directors will take into consideration a director nominee submitted to the Company by a shareholder; provided that the shareholder submits the director nominee and reasonable supporting material concerning the nominee by the due date for a shareholder proposal to be included in the Company’s Proxy Statement for the applicable annual meeting as set forth in Section 2.14 of the Company’s Bylaws and the rules of the SEC then in effect. See “Shareholder Proposals”Proposals and Director Nominations” below.
DIRECTOR ATTENDANCE AT COMPANY ANNUAL MEETINGS
The Company does not have a policy regarding attendance by members of the Board at the Company’s annual meeting of shareholders. The Company has always encouraged its directors to attend its annual meeting. In 2009,2011, the year of our last annual meeting, all directors attended the Company’s annual meeting of shareholders.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
Historically, the Company has not had a formal process for shareholder communications with the Board. The Company does not believe a formal process for handling shareholder communications is necessary because the Board reviews and considers all material communications from shareholders.
CODE OF BUSINESS CONDUCT AND ETHICS
The Company has a Code of Business Conduct and Ethics that reflects long-standing positions of the Company and contains additional provisions that address the Company’s expectations relating to ethical business conduct. The Code applies to all employees, including executive officers, and to directors. The Code concerns, among other things, compliance with applicable law, the avoidance of conflicts of interest, trading restrictions imposed on persons who are aware of material non-public information, a prohibition on taking corporate opportunities, competing fairly and honestly, diversity as an asset, the Company’s efforts to provide a safe and healthful work environment, recordkeeping, confidentiality, proper use of Company assets and payments to government personnel. A copy of the Code of Business Conduct and Ethics may be obtained upon request to: Corporate Secretary, Scott’s Liquid Gold–Inc., 4880 Havana Street, Denver, Colorado 80239. The Code is also available at the Company’s website.website at www.scottsliquidgold.com.
The following Summary Compensation Table shows the annual and other compensation of the Chief Executive Officer and all other executive officers of the Company at December 31, 2010,2011, for services in all capacities provided to the Company and its subsidiaries for the past two years. The Company'sCompany’s compensation packages to the executive officers, as determined by the Compensation Committee, are designed to enable the Company to recruit, retain and motivate a talented and diverse group of people who contribute to the Company’s success. The packages are also intended to synchronize executive compensation with the Company'sCompany’s performance, motivate executive officers to achieve the Company’s business objectives, provide performance incentives and minimize undue risk to the Company. The Company'sCompany’s Chief Executive Officer provides input on determining and recommending compensation packages of the executive officers other than himself.
SUMMARY COMPENSATION TABLE
| ||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary $ | Bonus $(1) | Stock Awards $ | Option awards $ | Non-equity incentive plan compensation $ | Non-qualified deferred compensation earnings $ | All Other Compensation ($)(2) | Total $ | |||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||
Mark E. Goldstein | 2011 | 342,000 | 0 | 53,414 | 395,414 | |||||||||||||||||||||||
Chairman of the Board, President and Chief Executive Officer | 2010 | 342,000 | 23,914 | 56,614 | 422,528 | |||||||||||||||||||||||
Jeffrey R. Hinkle | 2011 | 192,375 | 0 | 25,742 | 218,117 | |||||||||||||||||||||||
Executive Vice President of Corporate Development and Corporate Secretary | 2010 | 192,375 | 24,448 | 14,129 | 230,952 | |||||||||||||||||||||||
Dennis P. Passantino | 2011 | 165,375 | 0 | 19,324 | 184,699 | |||||||||||||||||||||||
Vice President – Operations | 2010 | 165,375 | 17,563 | 25,029 | 207,967 | |||||||||||||||||||||||
Brian L. Boberick | 2011 | 135,000 | 0 | 25,537 | 160,537 | |||||||||||||||||||||||
Treasurer and Chief Financial Officer(3) | 2010 | 135,000 | 3,804 | 27,494 | 166,298 | |||||||||||||||||||||||
| (1) |
| (2) | Certain details for “All Other Compensation” for 2011 and 2010 |
| (3) |
| Mark E. Goldstein | Jeffrey R. Hinkle | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Automobile lease/allowance(a) | $ | 9,081 | $ | 12,961 | $ | — | $ | — | ||||||||
Income taxes on automobile lease/allowance(a) | 6,890 | 9,832 | — | — | ||||||||||||
Other automobile expenses | 953 | 1,810 | 1,012 | 668 | ||||||||||||
Memberships | 16,884 | 16,882 | — | — | ||||||||||||
Life insurance | 4,716 | 4,716 | 1,814 | 1,814 | ||||||||||||
Income taxes on life insurance | 3,578 | 3,578 | 1,280 | 1,280 | ||||||||||||
Medical plan(b) | 5,421 | 8,288 | 3,814 | 2,354 | ||||||||||||
Disability insurance | 4,672 | 4,672 | 4,987 | 4,987 | ||||||||||||
ESOP(c) | 1,545 | 1,094 | 1,222 | 866 | ||||||||||||
Other | 2,874 | 2,873 | — | — | ||||||||||||
Total other compensation | $ | 56,614 | $ | 66,706 | $ | 14,129 | $ | 11,969 | ||||||||
| Dennis P. Passantino | Brian L. Boberick | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Automobile lease/allowance(a) | $ | 6,066 | $ | 7,341 | $ | 6,000 | $ | 5,125 | ||||||||
Income taxes on automobile lease/allowance(a) | 4,274 | 5,165 | 4,225 | 3,608 | ||||||||||||
Other automobile expenses | 858 | 477 | 401 | 757 | ||||||||||||
Memberships | — | — | — | — | ||||||||||||
Life insurance | 1,245 | 1,245 | 2,719 | 4,065 | ||||||||||||
Income taxes on life insurance | 876 | 875 | 1,915 | 2,862 | ||||||||||||
Medical plan(b) | 8,269 | 6,644 | 8,991 | 5,305 | ||||||||||||
Disability insurance | 2,365 | 3,127 | 2,314 | 1,228 | ||||||||||||
ESOP(c) | 1,076 | 766 | 929 | 638 | ||||||||||||
Other | — | — | — | — | ||||||||||||
Total other compensation | $ | 25,029 | $ | 25,640 | $ | 27,494 | $ | 23,588 | ||||||||
| Mark E. Goldstein | Jeffrey R. Hinkle | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Automobile lease/allowance(a) | $ | 9,081 | $ | 9,081 | $ | 7,716 | $ | — | ||||||||
Income taxes on automobile lease/allowance(a) | 6,890 | 6,890 | 5,440 | — | ||||||||||||
Other automobile expenses | 1,190 | 953 | 925 | 1,012 | ||||||||||||
Memberships | 7,616 | 16,884 | — | — | ||||||||||||
Life insurance | 5,052 | 4,716 | 1,814 | 1,814 | ||||||||||||
Income taxes on life insurance | 3,833 | 3,578 | 1,280 | 1,280 | ||||||||||||
Medical plan(b) | 15,080 | 5,421 | 3,580 | 3,814 | ||||||||||||
Disability insurance | 4,672 | 4,672 | 4,987 | 4,987 | ||||||||||||
ESOP(c) | — | 1,545 | — | 1,222 | ||||||||||||
Other | — | 2,874 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other compensation | $ | 53,414 | $ | 56,614 | $ | 25,742 | $ | 14,129 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| Dennis P. Passantino | Brian L. Boberick | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Automobile lease/allowance(a) | $ | 5,951 | $ | 6,066 | $ | 6,000 | $ | 6,000 | ||||||||
Income taxes on automobile lease/allowance(a) | 4,195 | 4,274 | 4,225 | 4,225 | ||||||||||||
Other automobile expenses | 661 | 858 | 1,528 | 401 | ||||||||||||
Memberships | — | — | — | — | ||||||||||||
Life insurance | 1,245 | 1,245 | 4,495 | 2,719 | ||||||||||||
Income taxes on life insurance | 876 | 876 | 3,169 | 1,915 | ||||||||||||
Medical plan(b) | 3,056 | 8,269 | 3,367 | 8,991 | ||||||||||||
Disability insurance | 3,340 | 2,365 | 2,753 | 2,314 | ||||||||||||
ESOP(c) | — | 1,076 | — | 929 | ||||||||||||
Other | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other compensation | $ | 19,324 | $ | 25,029 | $ | 25,537 | $ | 27,494 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| (a) | The Company provides funds needed, plus an amount to pay resulting income taxes, to each executive |
| (b) | In addition to group life, health, hospitalization and medical reimbursement plans which are generally |
| (c) | ESOP compensation for each of the executive officers consists of Company contributions under an Employee Stock Ownership Plan and Trust Agreement |
Executive officers and non-employee directors of the Company are eligible to receive stock awards under the Company’s 2005 Stock Incentive Plan as amended, which expires on March 31, 2015. The number of shares availableauthorized under the 2005 Plan is 1,500,0003,000,000 shares of common stock; however, under Proposal 2 of this Proxy Statement, shareholders are being asked to approve of an increase in the number of available shares to a total of 3,000,000.stock. The 2005 Plan provides for the issuance of stock awards consisting of incentive and non-qualified stock options, stock appreciation rights, restrictedrestrictive stock or
restricted restrictive stock units. To date, the Company has only granted stock options under its plans. Eligible persons under the 2005 Plan are full-time and part-time employees, non-employee directors and consultants. Under the 2005 Plan, stock awards vest upon a change in control. All options granted in or prior to 2006 were 100% vested on the date of grant. Options granted after 2006 including those granted to date in 20112012 vest1/48 of the shares subject to the options each month after the date of grant and vest fully upon a change in control. The Company’s 1998 Stock Option Plan expired on November 8, 2008 and had covered 1,100,000 shares of common stock. Options under the 1998 Plan remain outstanding. The terms of the 1998 Plan are similar to those of the 2005 Plan.
Option Grants in 20092011
On February 24, 2009,August 9, 2011, the Company’s Board granted five-year options, effective February 26, 2009, for a total of 90,000 shares of common stock to an executive officer and certain non-employee directors at an exercise price of $0.17 per share (the closing market price on February 26, 2009). The number of shares subject to these options were 30,000 for Mr. Laber, 30,000 for Mr. Boberick and 30,000 for Mr. Bellini. On August 11, 2009, the Company’s Board granted a five-year option, effective on that date, for a total of 3,00030,000 shares of common stock to Mr. Boberickone non-employee director at an exercise price of $0.25$0.37 per share, (therepresenting 120% of the closing market price on August 11, 2009). These options vest at 1/48 per month from the date of grant or upon a change in control as indicated above.9, 2011.
Option Grants in 2010
On May 13, 2010, the Company’s Board granted five-year options, effective on that date, for a total of 357,000 shares of common stock to the four executive officers and two non-employee directors at an exercise price of $0.22 per share (the closing market price on May 13, 2010), except in the case of Mr. Goldstein whose options have an exercise price of $0.24, representing 110% of the closing market price. The number of shares subject to these options were 80,000 each for Mr. Goldstein, Mr. Hinkle, Mr. Passantino and Mr. Johnson, 30,000 for Mr. Bellini and 7,000 for Mr. Boberick.
On August 10, 2010, the Company’s Board granted five-year options, effective on that date, for a total of 265,000 shares of common stock to three executive officers and the four non-employee directors at an exercise price of $0.23 per share (the closing market price on August 10, 2010), except in the case of Mr. Goldstein whose options have an exercise price of $0.25, representing 110% of the closing market price. The number of shares subject to these options were 50,000 each for Mr. Goldstein, Mr. Hinkle and Mr. Johnson, 5,000 for Mr. Passantino, 55,000 for Mr. Belini, 25,000 for Mr. Field and 30,000 for Mr. Laber.
On November 10, 2010, the Company’s Board granted five-year options, effective December 14, 2010, for a total of 122,000 shares of common stock to the four executive officers and two non-employee directors at an exercise price of $0.20 per share (the closing market price on December 14, 2010), except in the case of Mr. Goldstein whose options have an exercise price of $0.22, representing 110% of the closing market price. The number of shares subject to these options were 18,400 each for Mr. Goldstein, Mr. Hinkle, Mr. Passantino, Mr. Boberick and Mr. Johnson, and 30,000 for Mr. Laber. These options vest at 1/48 per month from the date of grant or upon a change in control as indicated above.
The following table summarizes information with respect to each person’s outstanding stock options at December 31, 2010.2011.
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2010 Name (a) Mark E. Goldstein Jeffrey R. Hinkle Dennis P. Passantino Brian L. Boberick Option Awards Stock Awards Number
of
securities
underlying
unexercised
options
#
Exercisable
(b) Number
of securities
underlying
unexercised
options
#
Unexercisable
(c) Equity
incentive
plan
awards:
Number of
securities
underlying
unexercised
unearned
options
#
(d) Option
exercise
price
$
(e) Option
expiration
date
(f) Number
of
shares
or units
of stock
that
have
not
vested
#
(g) Market
value
of
shares
or
units of
stock
that
have
not
vested
$
(h) Equity
incentive
plan
awards:
Number
of
unearned
shares,
units or
other
rights
that have
not
vested
#
(i) Equity
incentive
plan
awards:
Market
or
payout
value of
unearned
shares,
units or
other
rights
that have
not
vested
$
(j) 15,525 (1) 675 — 0.90 Feb. 26, 2012 — — — — 36,719 (4) 33,781 — 0.19 Nov. 27, 2013 — — — — 12,500 (7) 67,500 — 0.24 May 12, 2015 — — — — 4,688 (8) 45,312 — 0.25 Aug. 9, 2015 — — — — 192 (9) 18,208 — 0.22 Dec. 13, 2015 — — — — 15,525 (1) 675 — 0.82 Feb. 26, 2012 — — — — 41,146 (4) 37,854 — 0.17 Nov. 27, 2013 — — — — 12,500 (7) 67,500 — 0.22 May 12, 2015 — — — — 4,688 (8) 45,312 — 0.23 Aug. 9, 2015 — — — — 192 (9) 18,208 — 0.20 Dec. 13, 2015 — — — — 25,108 (1) 1,092 — 0.82 Feb. 26, 2012 — — — — 40,375 (3) 16,625 — 0.55 Feb. 25, 2013 — — — — 4,167 (4) 3,833 — 0.17 Nov. 27, 2013 — — — — 12,500 (7) 67,500 — 0.22 May 12, 2015 — — — — 469 (8) 4,531 — 0.23 Aug. 9, 2015 — — — — 192 (9) 18,208 — 0.20 Dec. 13, 2015 — — — — 7,083 (1) 2,917 — 0.82 Feb 26, 2012 — — — — 1,750 (2) 1,250 — 0.82 Sep. 3, 2012 — — — — 2,292 (3) 2,708 — 0.55 Feb. 25, 2013 — — — — 6,250 (5) 23,750 — 0.17 Feb. 23, 2014 — — — — 250 (6) 2,750 — 0.25 Aug. 10, 2014 — — — — 1094 (7) 5,906 — 0.22 May 12, 2015 — — — — 192 (9) 18,208 — 0.20 Dec. 13, 2015 — — — —
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2011 | ||||||||||||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Name (a) | Number of securities underlying unexercised options # Exercisable (b) | Number of securities underlying unexercised options # Unexercisable (c) | Equity incentive plan awards: Number of securities underlying unexercised unearned options # (d) | Option exercise price $ (e) | Option | Number of shares or units of stock that have not vested # (g) | Market value of shares or units of stock that have not vested $ (h) | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested # (i) | Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested $ (j) | |||||||||||||||||||||||||
Mark E. Goldstein | 16,200 | (1) | — | 0.90 | Feb. 26, 2012 | — | — | — | — | |||||||||||||||||||||||||
| 54,344 | (4) | 16,156 | — | 0.19 | Nov. 27, 2013 | — | — | — | — | |||||||||||||||||||||||||
| 33,333 | (7) | 46,667 | — | 0.24 | May 12, 2015 | — | — | — | — | |||||||||||||||||||||||||
| 17,708 | (8) | 32,292 | — | 0.25 | Aug. 09, 2015 | — | — | — | — | |||||||||||||||||||||||||
| 4,983 | (9) | 13,417 | — | 0.22 | Dec. 13, 2015 | — | — | — | — | |||||||||||||||||||||||||
Jeffrey R. Hinkle | 16,200 | (1) | — | 0.82 | Feb. 26, 2012 | — | — | — | — | |||||||||||||||||||||||||
| 60,896 | (4) | 18,104 | — | 0.17 | Nov. 27, 2013 | — | — | — | — | |||||||||||||||||||||||||
| 33,333 | (7) | 46,667 | — | 0.22 | May 12, 2015 | — | — | — | — | |||||||||||||||||||||||||
| 17,708 | (8) | 32,292 | — | 0.23 | Aug. 9, 2015 | — | — | — | — | |||||||||||||||||||||||||
| 4,983 | (9) | 13,417 | — | 0.20 | Dec. 13, 2015 | — | — | — | — | |||||||||||||||||||||||||
Dennis P. Passantino | 26,200 | (1) | — | 0.82 | Feb. 26, 2012 | — | — | — | — | |||||||||||||||||||||||||
| 54,625 | (3) | 2,375 | — | 0.55 | Feb. 25, 2013 | — | — | — | — | |||||||||||||||||||||||||
| 6,167 | (4) | 1,833 | — | 0.17 | Nov. 27, 2013 | — | — | — | — | |||||||||||||||||||||||||
| 33,333 | (7) | 46,667 | — | 0.22 | May 12, 2015 | — | — | — | — | |||||||||||||||||||||||||
| 1,771 | (8) | 3,229 | — | 0.23 | Aug. 9, 2015 | — | — | — | — | |||||||||||||||||||||||||
| 4,983 | (9) | 13,417 | — | 0.20 | Dec. 13, 2015 | — | — | — | — | |||||||||||||||||||||||||
Brian L. Boberick | 10,000 | (1) | — | 0.82 | Feb 26, 2012 | — | — | — | — | |||||||||||||||||||||||||
| 3,000 | (2) | — | 0.82 | Sep. 3, 2012 | — | — | — | — | ||||||||||||||||||||||||||
| 4,792 | (3) | 208 | — | 0.55 | Feb. 25, 2013 | — | — | — | — | |||||||||||||||||||||||||
| 21,250 | (5) | 8,750 | — | 0.17 | Feb. 23, 2014 | — | — | — | — | |||||||||||||||||||||||||
| 1,813 | (6) | 1,188 | — | 0.25 | Aug. 10, 2014 | — | — | — | — | |||||||||||||||||||||||||
| 2,917 | (7) | 4,083 | — | 0.22 | May 12, 2015 | — | — | — | — | |||||||||||||||||||||||||
| 4,983 | (9) | 13,417 | — | 0.20 | Dec. 13, 2015 | — | — | — | — | |||||||||||||||||||||||||
| (1) | These options were granted on February 27, 2007 and vest1/48 per month from date of grant. |
| (2) | These options were granted on September 4, 2007 and vest1/48 per month from date of grant. |
| (3) | These options were granted on February 26, 2008 and vest1/48 per month from date of grant. |
| (4) | These options were granted on November 28, 2008 and vest1/48 per month from date of grant. |
| (5) | These options were granted on February 24, 2009 and vest1/48 per month from date of grant. |
| (6) | These options were granted on August 11, 2009 and vest1/48per month from date of grant. |
| (7) | These options were granted on May 13, 2010 and vest1/48 per month from date of grant. |
| (8) | These options were granted on August 10, 2010 and vest1/48 per month from date of grant. |
| (9) | These options were granted on December 14, 2010 and vest1/48 per month from date of grant. |
ThreeTwo directors, Mr. Goldstein and Mr. Hinkle, are full-time executive officers of the Company and receive no additional compensation for their service as a director. Carl A.Mr. Bellini, Dennis H.Mr. Field, Mr. Johnson, Mr. Neri and Gerald J.Mr. Laber were in 20092011 and, other than Mr. Bellini who has resigned, are currently non-employee directors. Mr. Johnson was an executive officer until January 29, 2009 and is currently a non-employee director. The Company paid $2,250 per month (through November 30, 2009) to each non-employee director for his services as director. Beginning December 2009, compensation paid per month tocompensates Messrs. Bellini, Field, Johnson and Johnson was reduced toNeri at a rate of $1,125 per month whilefor their service as directors, and compensates Mr. Laber’s compensation was reduced toLaber at a rate of $1,250 per month.month for his service as a director and Chair of the Audit Committee. In addition, directors are eligible for option award grants under the Company’s 2005 Stock Incentive Plan. The following table shows the annual and other compensation of the non-employee directors at December 31, 20102011 for services to the Company for 2010.2011.
DIRECTOR COMPENSATION FOR 2010 | ||||||||||||||||||||||||||||
Name (a) | Fees Earned or Paid in Cash ($) (b) | Stock Awards ($) (c) | Option Awards ($) (d)(1) | Non-Equity Incentive Plan Compensation ($) (e) | Non-Qualified Deferred Compensation Earnings ($) (f) | All Other Compensation ($) (g) | Total ($ ) (j) | |||||||||||||||||||||
Carl A. Bellini | 13,500 | — | 13,763 | — | — | — | 27,263 | |||||||||||||||||||||
Dennis H. Field | 13,500 | — | 3,824 | — | — | — | 17,324 | |||||||||||||||||||||
Gerald J. Laber | 15,000 | — | 8,753 | — | — | — | 23,753 | |||||||||||||||||||||
Jeffry B. Johnson | 13,500 | — | 24,469 | — | — | — | 37,969 | |||||||||||||||||||||
DIRECTOR COMPENSATION FOR 2011 | ||||||||||||||||||||||||||||
Name (a) | Fees Earned or Paid in Cash ($) (b) | Stock Awards ($) (c) | Option Awards ($) (d)(1) | Non-Equity Incentive Plan Compensation ($) (e) | Non-Qualified Deferred Compensation Earnings ($) (f) | All Other Compensation ($) (g) | Total ($) (j) | |||||||||||||||||||||
Carl A. Bellini | 13,500 | — | — | — | — | — | 13,500 | |||||||||||||||||||||
Dennis H. Field | 13,500 | — | — | — | — | — | 13,500 | |||||||||||||||||||||
Gerald J. Laber | 15,000 | — | — | — | — | — | 13,500 | |||||||||||||||||||||
Jeffry B. Johnson | 13,500 | — | — | — | — | — | 13,500 | |||||||||||||||||||||
Philip A. Neri | 5,625 | — | 11,100 | — | — | — | 16,725 | |||||||||||||||||||||
| (1) | Amounts shown in the column “Option Awards” are the aggregate grant date fair value of stock options granted in |
The following table summarizes information with respect to each non-employee director’s outstanding stock options at December 31, 2010:2011:
| Outstanding Options at December 31, 2010 | Outstanding Options at December 31, 2011 | |||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options # Exercisable | Number of Securities Underlying Unexercised Options # Unexercisable | Option Exercise Price $ | Option Expiration Date | Number of Securities Underlying Unexercised Options # Exercisable | Number of Securities Underlying Unexercised Options # Unexercisable | Option Exercise Price $ | Option Expiration Date | ||||||||||||||||||||||||
Carl A. Bellini | 47,917 | (1) | 2,083 | 0.82 | Feb. 26, 2012 | 50,000 | (1) | 0.82 | Feb. 26, 2012 | |||||||||||||||||||||||
| 13,750 | (4) | 16,250 | 0.17 | Feb. 23, 2014 | 21,250 | (4) | 8,750 | 0.17 | Feb. 23, 2014 | |||||||||||||||||||||||
| 4,688 | (5) | 25,312 | 0.22 | May 12, 2015 | 12,500 | (5) | 17,500 | 0.22 | May 12, 2015 | |||||||||||||||||||||||
| 5,156 | (6) | 49,844 | 0.23 | Aug. 9, 2015 | 19,479 | (6) | 35,521 | 0.23 | Aug. 09, 2015 | |||||||||||||||||||||||
Dennis H. Field | 95,833 | (1) | 4,167 | 0.82 | Feb. 26, 2012 | 100,000 | (1) | 0.82 | Feb. 26, 2012 | |||||||||||||||||||||||
| 23,438 | (2) | 21,562 | 0.17 | Nov. 27, 2013 | 34,688 | (3) | 10,313 | 0.17 | Nov. 27, 2013 | |||||||||||||||||||||||
| 2,344 | (6) | 22,656 | 0.23 | Aug. 9, 2015 | 8,854 | (6) | 16,146 | 0.23 | Aug. 09, 2015 | |||||||||||||||||||||||
Gerald J. Laber | 28,750 | (1) | 1,250 | 0.82 | Feb. 26, 2012 | 30,000 | (1) | 0.82 | Feb. 26, 2012 | |||||||||||||||||||||||
| 13,750 | (4) | 16,250 | 0.17 | Feb. 23, 2014 | 21,250 | (4) | 8,750 | 0.17 | Feb. 23, 2014 | |||||||||||||||||||||||
| 2,813 | (6) | 27,187 | 0.23 | Aug. 9, 2015 | 10,625 | (6) | 19,375 | 0.23 | Aug. 09, 2015 | |||||||||||||||||||||||
| 313 | (7) | 29,687 | 0.20 | Dec. 13, 2015 | 8,125 | (7) | 21,875 | 0.20 | Dec. 13, 2015 | |||||||||||||||||||||||
Jeffry B. Johnson | 15,525 | (1) | 675 | 0.82 | Feb. 26, 2011 | 16,200 | (1) | 0.82 | Feb. 26, 2012 | |||||||||||||||||||||||
| 29,750 | (3) | 12,250 | 0.55 | Feb. 25, 2013 | 40,250 | (2) | 1,750 | 0.55 | Feb. 25, 2013 | |||||||||||||||||||||||
| 4,167 | (4) | 3,833 | 0.17 | Nov. 27, 2013 | 6,167 | (3) | 1,833 | 0.17 | Nov. 27, 2013 | |||||||||||||||||||||||
| 12,500 | (5) | 67,500 | 0.22 | May 12, 2015 | 33,333 | (5) | 46,667 | 0.22 | May 12, 2015 | |||||||||||||||||||||||
| 4,688 | (6) | 45,312 | 0.23 | Aug. 9, 2015 | 17,708 | (6) | 32,292 | 0.23 | Aug. 09, 2015 | |||||||||||||||||||||||
| 192 | (7) | 18,208 | 0.20 | Dec. 31, 2015 | 4,983 | (7) | 13,417 | 0.20 | Dec. 13, 2015 | |||||||||||||||||||||||
Philip A. Neri | 3,125 | (8) | 26,875 | 0.37 | Aug. 18, 2016 | |||||||||||||||||||||||||||
| (1) | These options were granted on February 27, 2007 and vest1/48 per month from the date of grant. |
| (2) | These options were granted on February 26, 2008 and vest 1/48 per month from the date of grant. |
| (3) | These options were granted on November 28, 2008 and vest1/48 per month from the date of grant. |
|
| (4) | These options were granted on February 24, 2009 and vest1/48 per month from the date of grant. |
| (5) | These options were granted on May 13, 2010 and vest1/48 per month from the date of grant. |
| (6) | These options were granted on August 10, 2010 and vest1/48 per month from the date of grant. |
| (7) | These options were granted on December 14, 2010 and vest1/48 per month from the date of grant. |
| (8) | These options were granted on August 19, 2011 and vest 1/48 per month from the date of grant. |
PROPOSAL 2: AMENDMENT TO STOCK INCENTIVE PLANSHAREHOLDER PROPOSAL
Amendment
The Company’s Board amended on March 16, 2011, the Company’s 2005 Stock Incentive Plan (the “2005 Plan”) to increase the number of shares of common stock available under the 2005 Plan by 1,500,000 shares of common stock, for a total authorized number of 3,000,000 shares. The amendment increasing the number of shares under the 2005 Plan is subject to approval of the Company’s shareholders and is included asAppendix A hereto. The effective date of the amendment will be the date of shareholder approval.
Prior to the amendment, 1,500,000 shares have been available under the 2005 Plan. After the amendment, the total number of shares available under the 2005 Plan will be 3,000,000 shares. The reasons for the amendment to the 2005 Plan include:
The Company’s Board believes that the Company must have available and grant options to employees in order to retain employees in a competitive environment, particularly employees who are subject to the Company’s salary and wage freeze.
The 2005 PlanMr. Michael Deutsch, located at 7000 Boulevard East – 128C, Guttenberg, NJ 07093, is the only stock planbeneficial owner of the Company’s under which grants may be made.
The increase in options is intended in part to replace options which expire, without being exercised, under the Company’s 1997 Stock Option Plan and 1998 Stock Option Plan. See “Shares Under All Plans as of March 31, 2011” below. Stock options issued under the 1997 and 1998 Plans remain outstanding after the expiration of those Plans and continue for the term of the options, which has typically been five years from the date of grant. The amendment will subtract from the total number of shares available under the 2005 Plan the number of shares which are actually issued under the 1997 and 1998 Plans.
Options reward persons who have stayed with the Company.
Options provide an incentive on the part of officers and other employees, as well as directors, to improve the Company’s performance.
The grant of options aligns the goals of the optionees with those of the shareholders.
The options provide to directors and executive officers a meaningful stake in the Company.
Shares Under All Plans As of March 31, 2011
The Company currently has outstanding options under three stock option plans. They are the 1997 Stock Option Plan (for which the executive officers and directors are ineligible), the 1998 Stock Option Plan and the 2005 Plan. The number of shares available under the Plans are shown in the following table:
| 2005 Plan(3) | ||||||||||||||||
| 1997 Plan | 1998 Plan | With Amendment | Total | |||||||||||||
Shares authorized for future issuances | — | — | 3,000,000 | (1)(2) | 3,000,000 | (1)(2) | ||||||||||
Shares subject to outstanding options | 240,500 | 296,900 | 1,396,150 | 1,933,550 | ||||||||||||
Shares previously issued upon exercise of options | — | 22,000 | 3,500 | 25,500 | ||||||||||||
Shares available for option grants | 1,600,350 | 1,040,950 | (2) | |||||||||||||
Significant features of the 2005 Plan are summarized below, as currently in effect and as the 2005 Plan will be in effect after the amendment which solely increases the number of shares available for awards. This summary is qualified in its entirety by reference to the full text of the 2005 Plan which is available from the Company and is an exhibit to filings with the SEC.
General
In March, 2005, the Company’s Board adopted the 2005 Plan, subject to approval and ratification by shareholders. The shareholders approved the 2005 Plan in May 2005. The shareholders approved an amendment to increase the number of shares available under the 2005 Plan from 900,000 to 1,500,000 on May 6, 2008.
The 2005 Plan provides that the 2005 Plan administrator may issue stock awards consisting of incentive and non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units. The 2005 Plan administrator may grant one or more of these types of awards. The Board will administer the 2005 Plan unless the Board delegates the administration of the 2005 Plan to a committee, which will be appointed by and serve at the pleasure of the Board. The 2005 Plan administrator determines and designates from time to time (a) those eligible persons to whom awards are granted, (b) the size, form, terms (including vesting, if any) and conditions of awards under the 2005 Plan and (c) rules with respect to the administration of the 2005 Plan. The 2005 Plan administrator may at any time cancel an award, whether vested or unvested, if the participant engages in conduct that the 2005 Plan administrator determines to be detrimental to the best interest of the Company, including failure to comply with policies or procedures of the Company.
Shares Subject to 2005 Plan; Limitations
The aggregate number of shares of Common Stock that may be issued under awards granted pursuant to the 2005 Plan will be 3,000,000142,500 shares of the Company’s common stock lessand has submitted the numberfollowing precatory, non-binding shareholder proposal for consideration at the upcoming annual meeting. The proposal and supporting statement, for which the Board of shares issuedDirectors accepts no responsibility, is set forth below exactly as the Company received it. Following the proposal, we explain why our Board of Directors recommends a resultvote “against” the proposal.
Proponents Resolution
RESOLVED:
That the shareholders of Scott’s Liquid Gold Inc. urge its Board of Directors to promptly and clearly take action to amend Section 2.16 of the exerciseBylaws of options underScott’s Liquid Gold Inc. adopted by its Board of Directors on July 13, 2011 and other relevant corporate documents to mandate cumulative voting for Directors.
STATEMENT IN SUPPORT
Cumulative Voting is defined in the 1997website of the Securities and 1998 Plans, after May 6, 2008. If there isExchange Commission as “ …. a stock dividend, subdivision, reclassification, recapitalization, merger, consolidation, stock split, combination or exchangetype of voting process that helps strengthen the ability of minority shareholders to elect a director. This method allows shareholders to cast all of their votes for a single nominee for the board of directors when the company has multiple openings on its board.”
The financial performance of the company has been unsatisfactory for many years. The Scott’s Liquid Gold Annual Reports from 2000 and 2010 show that, in those 10 years:
Net Sales of all products were down approximately 50%
Number of Employees was down approximately 48%
Stockholders Equity was down approximately 48%
High Annual Stock Price was down approximately 69%
Cash and Equivalents was down approximately 91%
Advertising Expenditures were down approximately 95%
These results suggest that fresh voices are needed on the Board of Directors. The adoption of cumulative voting could increase the likelihood that badly needed viewpoints, possibly by investors who have acquired shares by significant open market purchases, rather than by grants of stock or other event described under the termsoptions, become members of the 2005 Plan,Board of Directors for the administrator will make appropriate adjustments to the total number of shares available under the 2005 Plan and to outstanding awards. If an outstanding award expires or ceases to be exercisable, the shares that were subject to the award will continue to be available under the 2005 Plan.
During any single calendar year, no participant will be eligible to be granted awards exceeding 10% of the limit on shares under the 2005 Plan. From March, 2005 to the date on which the 2005 Plan terminates, no participant will be eligible to be granted awards exceeding 20% of the limit on shares.
Term of 2005 Plan
The 2005 Plan was effective as of March 31, 2005. The 2005 Plan will terminate on March 31, 2015, unless terminated earlier by the Board. Termination of the 2005 Plan will not affect grants made prior to termination.
Eligibility
All full-time and part-time employees are eligible to receive any award under the 2005 Plan. Directors and consultants of the Company and its subsidiaries, who are not employees, are eligible to receive any award, other than incentive stock options, under the 2005 Plan.
Securities Issuable Under the 2005 Plan
Stock Options
The exercise price for an option granted under the 2005 Plan must not be less than 100% of the fair market value of the shares subject to the option at the date of grant. No option will be repriced. The term of each option may not be more than ten years from the date of grant. An option is fully vested unless otherwise provided by the 2005 Plan administrator in the option agreement. A participant may pay the exercise price and withholding taxes in cash or, upon approval of the 2005 Plan administrator, in common stock of the Company or another form of legal consideration. No incentive stock option may be granted to an employee who, at the time the incentive stock option is granted, owns stock (as determined in accordance with the Internal Revenue Code) representing more than 10% of the total combined voting powerbenefit of all classes of stock of the Company or of any parent or subsidiary, unless the option price of such incentive stock option is at least 110% of the fair market value of the stock subject to the incentive stock option and the incentive stock option by its terms is not exercisable more than five years from the date it is granted.
Stock Appreciation Rights
A stock appreciate right, or SAR, is exercisable for the receipt of a number of shares of common stock having a fair market value equal to (1) the fair market value on the date of exercise of the number of shares as to which the SAR has been exercised over (2) the aggregate exercise price of the SAR for such number of shares. The exercise price for each SAR will be no less than the fair market value of the common stock at the time the SAR is granted. No SAR will be repriced. The term of any SAR may not
exceed ten years from the date of grant. SARs will be fully vested unless otherwise determined by the 2005 Plan administrator and stated in a stock appreciation rights agreement.
Restricted Stock and Restricted Stock Units
Restricted stock may be granted to a participant without the payment of a purchase price. If a grant of restricted stock requires the payment of a purchase price, the purchase price of the restricted stock may not be repriced. If restricted stock has a purchase price, a participant must pay the purchase price in cash or, upon approval of the 2005 Plan administrator, in common stock or another form of legal consideration. If a participant fails to satisfy any applicable restriction (including vesting requirements) on the restricted stock, the restricted stock will be forfeited to the Company in return for no consideration or such consideration as specified in the applicable award agreement. Restricted stock constitutes issued and outstanding shares of common stock for all corporate purposes. The participant will have the right to vote the restricted stock, to receive and retain all regular cash dividends and such other distributions as the Board may, in its discretion, pay on the common stock, and to exercise all other rights, powers and privileges of a holder of common stock.
A restricted stock unit represents an obligation of the Company to deliver a specific number of shares of common stock to the participant on a specified date. Any award of restricted stock or an RSU will be fully vested or will vest in accordance with a vesting schedule provided in the agreement for that award as determined by the 2005 Plan administrator.
Valuation
For purposes of the 2005 Plan, the fair market value of common stock means the average of the closing sales prices for the common stock on its trading market for the five preceding trading days as reported in The Wall Street Journal or another publication or source for market prices selected by the Board. If there has not been trading of the common stock on a specific day, then a trading day is the next preceding day on which there was such trading. If closing sales prices are not available for the trading market, the average of the closing bid and asked prices are used. If none of these alternatives are available, the 2005 Plan administrator will determine the fair market value by applying any reasonable valuation method.
Change in Control
If a change in control event occurs, then the vesting of all awards held by participants in continuous service at the time will be accelerated in full. In anticipation of a change in control event, the 2005 Plan administrator may require that all unexercised awards be exercised upon the change in control event or within a specified number of days of the change in control. The 2005 Plan administrator may in its discretion also accelerate the vesting of any outstanding award in connection with any proposed or completed change in control event, and prior to a change in control event the 2005 Plan administrator may in its discretion terminate all unexercised awards (after acceleration of vesting) in exchange for consideration similar to that received by shareholders of common stock of the Company in the change of control event less the exercise price of the award. Alternatively, if a change in control event occurs, any surviving corporation or acquiring corporation may assume any outstanding award under the 2005 Plan or may substitute similar stock awards.
Termination of Continuous Service
Any vesting of an award ceases upon termination of a participant’s service with the Company. A stock option or SAR will terminate and may not be exercised after three months after a participant’s
service with the Company ceases for any reason other than cause, disability or death. If a participant ceases service with the Company for cause or if the participant breaches any covenant not to compete or non-disclosure agreement, an unexercised stock option or SAR shall terminate immediately. If a participant ceases their service with the Company due to death or disability, an outstanding stock option or SAR will be exercisable for one year after that time but not later than the expiration date of the award. The 2005 Plan administrator may in its discretion extend the dates for termination of awards as stated in this paragraph.
If a participant terminates service with the Company for any reason, any unvested restricted stock or unvested RSUs held by the participant as of the date of termination of service will be forfeited to the Company unless otherwise provided in an applicable award agreement.
Amendment of 2005 Plan
The Board may at any time and from time to time alter, amend, suspend or terminate the 2005 Plan or any part thereof as it may deem proper, except that no such action can diminish or impair the rights under an award previously granted. However, approval of the shareholders shall be required to increase the total number of shares issuable under the 2005 Plan, to reduce the exercise price for any option, SAR or RSU or the purchase price for any restricted stock below a level required by the 2005 Plan or to modify materially requirements for eligibility under the 2005 Plan. The 2005 Plan administrator may modify, extend or renew outstanding awards except that this action must not diminish or impair the rights of a previously granted award without the consent of the participant.
Federal Income Tax Consequences
The rules governing the tax treatment of stock awards granted under the 2005 Plan depend largely on the surrounding facts and circumstances. Generally, under current federal income tax laws, a participant will recognize income, and the Company will be entitled to a deduction as follows:
Stock Options
If an employee does not dispose of the shares acquired pursuant to the exercise of an incentive stock option within one year after the transfer of the shares to the participant and within two years from the grant of the option, the employee will not realize taxable income as a result of the grant or exercise of the option (except for purposes of the alternative minimum tax upon the exercise of the option), and any gain or loss that is subsequently realized may be treated as a long term capital gain or loss, depending on the circumstances. The Company will not be able to deduct any amount for the grant of the incentive stock option or the transfer of shares upon exercise. If the employee disposes of the stock prior to one year after the transfer of the shares (or two years prior to the option grant date), the participant will realize ordinary income in an amount equal to the lesser of (a) the excess of the fair market value of the common stock acquired on the date of exercise over the exercise price or (b) the gain recognized on such disposition. Upon the exercise of a nonqualified stock option, the participant will generally realize ordinary income equal to the excess of the fair market value of the shares on the date of exercise over the exercise price. The Company will be able to deduct an amount equal to the ordinary income realized by the participant.
Restricted Stock
A participant who receives an award of restricted stock will realize ordinary income (on a per share basis) at the time any restrictions lapse equal to the difference between the fair market value of the common stock at the time such restrictions lapse and the amount (if any) paid for the stock. Alternatively,
under Section 83 of the Internal Revenue Code, the participant may elect to accelerate the tax event and realize ordinary income (on a per share basis) equal to the difference between the purchase price (if any) of the common stock and the fair market value of the common stock on the date of grant upon the receipt of an award of restricted stock. When the participant recognizes ordinary income, the Company will be able to deduct an amount equal to the ordinary income recognized by the participant.
Restricted Stock Units
A participant who is granted an RSU will generally not recognize any income upon the grant of the award. The participant will generally recognize as ordinary income an amount equal to the fair market value of any shares transferred to the participant upon the vesting of such award. The Company will ordinarily be entitled to a deduction, in the amount of the ordinary income recognized by the participant, at the same time the participant recognizes such income, so long as the amount constitutes reasonable compensation.
Stock Appreciation Rights
Upon the exercise of any SAR, the value of any stock received will constitute ordinary income to the participant equal to the fair market value of the shares transferred to a participant upon the exercise. The Company will ordinarily be entitled to a deduction in the same amount and at the same time, so long as the amount constitutes reasonable compensation.
Section 409A
Section 409A, a section added to the Code in 2004, can affect the tax treatment of certain types of deferred compensation. Failure to comply with the requirements of Section 409A results in current income of amounts deferred, along with interest and a significant tax penalty. Certain types of equity-based compensation are exempt from Section 409A. The Company intends to operate the 2005 Plan so that all grants under the 2005 Plan are exempt from Section 409A.
Amendment Benefits
As of the date of this Proxy Statement, no executive officer, employee, director or consultant has been granted any award based upon the proposed amendment to the 2005 Plan. The benefits to be received by the eligible participants pursuant to the proposed amendment to the 2005 Plan are not determinable at this time.stockholders.
Other Equity Compensation Plan Information
The following table provides, asBoard of December 31, 2010, information regarding the Company’s equity compensation plans. The Company also has an Employee Stock Ownership Plan which invests only in common stock of the Company, but which is not included in the table below.
Plan Category
| Number of Securities to be issued upon exercise of outstanding options, warrants and rights (a)
| Weighted average exercise price of outstanding options, warrants and rights (b)
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
| |||
| Equity compensation plans approved by security holders | 1,933,550 | $0.39 | 100,350 | |||
| Equity compensation plans not approved by security holders | __ | __ | __ | |||
Total | 1,933,550 | $0.39 | 100,350 |
Vote required and RecommendationDirectors Response
The approval of the amendment to the 2005 Plan requires a majority of shares present and voting at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”“AGAINST” PROPOSAL 2 FOR THE AMENDMENT TO THE 2005 PLAN.FOLLOWING REASONS:
The Board of Directors does not believe that cumulative voting is in the best interests of the Company or its shareholders. The Company’s present voting system, which is like that of a majority of publicly traded companies, provides that each share of common stock is entitled to one vote for each nominee for director. This system allows all shareholders to vote on the basis of their share ownership. The Board of Directors believes this voting system is the fairest and the most likely to produce an effective board of directors that will represent the interests of all of the Company’s shareholders.
The Company and Board of Directors strongly believe that every director should represent the shareholders as a whole. In contrast, cumulative voting would permit shareholders representing a comparatively small number of shares to elect a director, possibly resulting in the election of directors who advocate for the positions of the small groups of shareholders responsible for their election rather than positions which are in the best interests of the Company as a whole and all its shareholders.
The presence on the Board of Directors of directors who were elected by, and are beholden to, small constituencies of shareholders and who advocate for the special interests of those constituencies could create partisanship and divisiveness among the members of the Board of Directors and impair the Board’s ability to operate effectively as a governing body, to the detriment of the Company and all its shareholders.
Under Colorado law, every member of the Board of Directors is obligated to represent all shareholders of a corporation fairly and equally. The Company’s current voting system encourages each director’s sense of responsibility towards all our shareholders without special commitments or loyalties and thereby promotes compliance with director fiduciary duty obligations. As discussed above, a cumulative voting standard would have the opposite effect.
The Company has an effective governance and nominating process in place to ensure that each year it nominates a Board of Directors which represents all shareholders. Pursuant to the Company’s Bylaws, a shareholder may recommend or nominate candidates for election to the Board of Directors. See “Shareholder Proposals” in this proxy statement and Section 2.14 in the Company’s Bylaws for additional information regarding how you may recommend or nominate a director.
The current Board of Directors is committed to continuing its strong oversight of management and progressive corporate governance practices, which include safeguards to shareholder representation and director independence such (i) as an annually elected Board (as opposed to a “classified” board in which directors hold office for terms of longer than one year), (ii) a majority of independent directors on the Board, (iii) key Board Committees composed exclusively of independent directors, and (iv) transparent corporate governance guidelines and committee charters.
The proponent of this proposal has offered no evidence that cumulative voting would produce more qualified or effective board of directors or that it would enhance the financial performance or competitive position of the Company. Accordingly, the Board of Directors believes the present method of voting best promotes the election of directors who will represent the interests of our shareholders as a whole.
Vote Required
The shareholder proposal is precatory and non-binding. The Company will not be required to take any action in response to the vote on the proposal. Because the implementation of cumulative voting would require an amendment to the Company’s Articles of Incorporation, if the Board determined to adopt a cumulative voting standard on a voluntary basis, the Company would first need to submit to shareholders a proposal to amend the Articles of Incorporation at a subsequent annual meeting of shareholders.
FOR THESE REASONS, OUR BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE “AGAINST” THIS PROPOSAL.
The Company has indemnification agreements with each of its directors and executive officers. These agreements provide for indemnification and advancement of expenses to the full extent permitted by law in connection with any proceeding in which the person is made a party because the person is a director or officer of the Company. They also state certain procedures, presumptions and terms relevant to indemnification and advancement of expenses.
Section 16(a) of the Securities Exchange Act of 1934 requires directors, executive officers and beneficial owners of more than 10% of the outstanding shares of the Company to file with the SEC reports regarding changes in their beneficial ownership of shares in the Company. To the Company’s knowledge, based solely upon review of Forms 3, 4 and 5, and amendments thereto furnished to the Company, there was full compliance with all Section 16(a) filing requirements applicable to those persons for reports filed in 2010.2011.
General
Ehrhardt, Keefe, Steiner & Hottman PC an independent registered public accounting firm, served as the Company’s independent auditors for the fiscal year ended December 31, 20102011 and has been selected by the Audit Committee of the Board as the Company’s independent auditors for the fiscal year ending December 31, 2011.2012. Ehrhardt, Keefe, Steiner &and Hottman PC has been the Company’s independent auditors since June 2003. A representative of Ehrhardt, Keefe, Steiner & Hottman PC is expected to be present at the Annual Meeting of Shareholders and to have the opportunity to make a statement if the representative so desires. Such representative also is expected to be available to respond to appropriate questions at that time.
REPORT OF AUDIT COMMITTEEReport of Audit Committee
March 16, 201123, 2012
To the Board of Scott’s Liquid Gold-Inc.:
We have reviewed and discussed with management the Company’s audited financial statements. We have discussed with Ehrhardt, Keefe, Steiner & Hottman PC, its independent auditors, the matters required to be discussed by Statement on Auditing Standards No. 114,61,The Auditors’ Communication with Those Charged with Governance.Audit Committees, as amended, as adopted in a rule of the Public Company Accounting Oversight Board (“PCAOB”). We have received and reviewed the written disclosures and the letter from the independent auditors required by applicable requirements of the PCAOB regarding the independent auditors’ communications with the Audit Committee concerning independence and have discussed with the auditors the auditors’ independence.
Based on the reviews and discussions referred to above, we recommended to the Board that the audited financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20102011 and filed with the SEC.
The Audit Committee is composed of the three directors named below, all of whom are independent directors as defined in Rule 4200(a)(15) of the NASDAQ Stock Market listing standards.
The Board has adopted a written charter for the Audit Committee.
Submitted by the members of the Audit Committee of the Board.
Gerald J. Laber, Chairman
Carl A. Bellini
Dennis H. Field
Philip A. Neri
The preceding information under the caption “Report of Audit Committee” shall be deemed to be “furnished” but not “filed” with the SEC.
Disclosure of Auditor Fees
The following is a description of the fees billed to the Company by its independent auditor (Ehrhardt, Keefe, Steiner & Hottman PC) for each of the years ended December 31, 20102011 and 2009.2010.
| Audit and Non-Audit Fees | 2010 | 2009 | 2011 | 2010 | ||||||||||||
Audit fees | $ | 60,693 | $ | 60,184 | $ | 75,500 | $ | 60,478 | ||||||||
Audit-related fees | 1,185 | 1,185 | 2,147 | 1,185 | ||||||||||||
Tax fees | 2,523 | 2,500 | 2,500 | 2,500 | ||||||||||||
All other fees | — | — | — | — | ||||||||||||
|
| |||||||||||||||
Total | $ | 64,401 | $ | 63,869 | $ | 80,147 | $ | 64,163 | ||||||||
|
| |||||||||||||||
Audit fees are for the audit of the Company’s annual financial statements and the review of the Company’s Annual Report on Form 10-K and the quarterly reviews of the financial statements included in the quarterly reports on form 10-Q.10-K. Audit-related fees include required review of certain filings with the SEC, issuance of consents, review of correspondence between the Company and the SEC and services concerning internal controls and transactions.controls. Tax fees primarily include tax compliance, tax advice, including the review of, and assistance in the preparation of, federal and state tax returns.
Policy on Pre-Approval of Audit and Non-Audit Services
The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by the independent public accountants. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services. The Audit Committee has delegated limited pre-approval authority to its chairperson. The chairperson is required to report any decisions to pre-approve such services to the full Audit Committee at its next meeting.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Shareholder proposals for inclusion in the Company’s proxy materials relating to the next annual meeting of shareholders must be received by the Company on or before December 24, 2011.14, 2012. Also, persons named in the proxy solicited by the Board of the Company for its year 20112012 annual meeting of shareholders may exercise discretionary authority on any proposal presented by a shareholder of the Company at that meeting if the Company has not received notice of the proposal by February 24, 2011.March 7, 2012.
Shareholder Proposals
A shareholder proposal will only be considered at an annual meeting of the shareholders if such proposal is properly brought before the meeting pursuant to Section 2.13 of the Company’s Bylaws or if such proposal is properly made in accordance with Rule 14-8 under the Securities Exchange Act of 1934 (the “Exchange Act”) and included in the notice of meeting given by the Board.
To bring a proposal before an annual meeting, a shareholder must (i) be a shareholder of record both at the time of giving notice and at the time of the meeting, (ii) be entitled to vote at the meeting, and (iii) comply with the requirements of Section 2.13 as to such business.
For a proposal to be properly brought by a shareholder, the shareholder must (i) provide Timely Notice (as defined below) thereof in writing and in proper form to the Secretary of the Company at the principal office of the Company and (ii) provide any updates or supplements to such notice as required by Section 2.13. To be timely, a shareholder’s notice must be delivered to, or mailed and received at, the principal office of the Company not less than 120 days nor more than 150 days prior to the one-year anniversary of the preceding year’s annual meeting; provided, however, that if the date of the annual meeting is more than 30 days before or after such anniversary date, notice by the shareholder to be timely must be so delivered, or mailed and received, not later than the later of (i) 90 days prior to such annual meeting, or (ii) the date that is 10 days after the day on which public disclosure of the date of such annual meeting was first made (such notice within such time periods, “Timely Notice”).
To be in proper form, a shareholder’s notice must set forth certain information as described in the Bylaws regarding (i) the proposing shareholder, beneficial owner of the shares, if different from the shareholder, the shareholder’s affiliates and any person acting in concert with the shareholder (collectively, a “Proposing Person”), and (ii) any proxy arrangements, “synthetic equity interests,” “stock borrowing arrangements,” performance fees related to any increase or decrease in the price or value of the Company’s shares, other persons responsible for formulating or involved in the decision to bring the proposal before the meeting, and any other information relating to the Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act.
Additionally, as to each item of business that the shareholder proposes to bring before the annual meeting, the shareholder’s notice must set forth: (i) a reasonably brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration), and (iii) a reasonably detailed description of all agreements, arrangements and understandings (a) between or among any of the Proposing Persons or (b) between or among any Proposing Person and any other person or entity (including their names) in connection with the proposal of such business.
The shareholder providing notice of a proposal to be brought before an annual meeting is responsible for further updating and supplementing the information previously provided to the Company in connection with the proposal so that the information provided or required to be provided is true and correct as of the record date of the annual meeting and through the date of the meeting or any adjournment or postponement thereof.
No business may be brought by a shareholder before an annual meeting other than in compliance with Section 2.13 of the Company’s bylaws.
Shareholder Director Nominations
To nominate a person for election to the Board at a meeting, a shareholder must (i) be a shareholder of record both at the time of giving the notice provided for in Section 2.14 of the Company’s Bylaws and at the time of the meeting, (ii) be entitled to vote at the meeting, and (iii) comply with the requirements of Section 2.14 as to such nomination.
For a shareholder to make any nomination of a person for election to the Board at an annual meeting, the shareholder must (i) provide Timely Notice (as defined above) thereof in writing and in proper form to the Secretary of the Company at the principal office of the Company and (ii) provide any updates or supplements to such notice as required by Section 2.14.
To be in proper form, a shareholder’s notice to the Secretary of the Company must set forth certain information as described in the Bylaws regarding (i) the nominating shareholder, beneficial owner of the shares, if different from the shareholder, the shareholder’s affiliates and any person acting in concert with the shareholder (collectively, a “Nominating Person”), and (ii) any proxy arrangements, “synthetic equity interests,” “stock borrowing arrangements,” performance fees related to any increase or decrease in the price or value of the Company’s shares, other persons responsible for formulating or involved in the decision to bring the proposal before the meeting, and any other information relating the Nominating Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Nominating Person in support of the election of directors in a contested election pursuant to Section 14(a) of the Exchange Act.
Additionally, as to each person whom a Nominating Person proposes to nominate for election as a director, (i) all information with respect to such proposed nominee that would be required to be set forth in a shareholder’s notice pursuant to Section 2.14 if such proposed nominee were a Nominating Person, (ii) all information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Exchange Act (including such proposed nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (iii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among any Nominating Person, on the one hand, and each proposed nominee, his or her respective affiliates and associates and any other persons with whom such proposed nominee (or any of his or her respective affiliates and associates) is acting in concert, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K (or any successor regulations) if such Nominating Person were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant, and (iv) a completed and signed questionnaire, representation and agreement as provided in Section 2.14.
The Company may also require any proposed nominee to furnish such other information (i) as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as an independent director of the Company in accordance with the Company’s corporate governance guidelines or (ii) that could be material to a reasonable shareholder’s understanding of the independence or lack of independence of such proposed nominee.
Any nominee for election to the Board must meet certain qualification criteria. A proposed nominee must (i) be capable of demonstrating to the reasonable satisfaction of Board or a committee thereof, in its sole discretion, an understanding of basic financial statements, (ii) be over 21 years of age, (iii) have relevant business experience (taking into account the business experience of the other directors) and high moral character, in each case as determined by the Board or a committee thereof, in its sole discretion, and (iv) satisfy such other criteria for service on the Board as may be set forth from time to time by the Company.
The shareholder providing notice of a nomination of a person for election to the Board is responsible for further updating and supplementing the information previously provided to the Company in connection with the proposal so that the information provided or required to be provided in such request or demand is true and correct as of the record date of the annual meeting and through the date of the meeting or any adjournment or postponement thereof.
No person may be nominated by a shareholder for election to the Board unless nominated in accordance with Section 2.14 of the Company’s Bylaws.
20102011 ANNUAL REPORT ON FORM 10-K
Shareholders who wish to obtain, without charge, a copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 20102011 in the form filed with the SEC should address a written request to Corporate Secretary, Scott’s Liquid Gold-Inc., 4880 Havana Street, Denver, Colorado 80239. The Company’s annual report to shareholders consists of such Form 10-K and accompanies this Proxy Statement.
The Company will pay the cost of soliciting proxies in the accompanying form. In addition to solicitation by mail, proxies may be solicited by officers and other regular employees of the Company by telephone, telegraph or by personal interview for which employees will not receive additional compensation. Arrangements also may be made with brokerage houses and other custodians, nominees and fiduciaries to forward solicitation materials to beneficial owners of the shares held of record by such
persons, and the Company may reimburse such persons for reasonable out-of pocket expenses incurred by them in so doing.
As of the date ofExcept as discussed in this Proxy Statement, management was not awarethere are no other matters that any business not described above would be presentedthe Board of Directors intends to present for considerationaction at the meeting.Annual Meeting. If any other businessmatters are properly comesbrought before the meeting,Annual Meeting, or if a person named as a Company nominee for election as a Director should decline or be unable to serve, the persons name as proxy holders are authorized to vote the shares according to their discretion. If the Chairman of the Annual Meeting determines that any matter is not properly brought before the Annual Meeting, the Chairman will announce this at the Annual Meeting and the matter will not be considered.
The Company has received notification that a shareholder of the Company, Mr. Michael Deutsch, intends to bring four proposals from the floor of the Annual Meeting (collectively, the “Deutsch Floor Proposals”). Such proposals may include:
A non-binding proposal to urge the Board of Directors to take action to revise the Company’s Bylaws to separate the positions and functions of Chairman of the Board of Directors and Chief Executive Officer.
A repeal of Section 2.13 of the Company’s Bylaws regarding advance notice of shareholder proposals.
A repeal of Section 2.14 of the Company’s Bylaws regarding shareholder nomination of candidates for election to the Board of Directors.
A non-binding proposal to urge the Board of Directors to not issue stock options at less than the most recent quarterly calculation of shareholders’ equity per share.
The Board of Directors has not endorsed any of the Deutsch Floor Proposals and does not believe they would be in the best interests of the Company or its shareholders. Therefore, the Board of Directors strongly urges any shareholders who attend the Annual Meeting to vote against the Deutsch Floor Proposals if they are
properly presented at the Annual Meeting by Mr. Deutsch. Additionally, it is intended that the shares represented byintention of the persons named as proxies in the accompanying form of proxy to exercise their discretionary authority to vote against each of the Deutsch Floor Proposals if they are properly presented at the Annual Meeting. If any other matter requiring a vote of the Shareholders should arise, the persons named in the accompany form of proxy will be voted in respect theretoexercise their discretionary authority to vote in accordance with their best judgment.
The Board of Directors does not support the judgmentDeutsch Floor Proposals for many reasons, including without limitation, the following:
Chair and CEO Role. Mr. Goldstein serves as both the Chairman of the persons voting them.Board and the Chief Executive Officer of the Company. The Company believes this is appropriate in light of Mr. Goldstein’s significant experience and leadership roles with the Company, and his in-depth knowledge of consumer products and the Company’s management, marketplace, customers, marketing, sales and strategic vision. The Company further believes Mr. Goldstein’s effectiveness in promoting the Company’s products and forming new business relationships is significantly enhanced by his role as both Chairman of the Board and Chief Executive Officer.
Advance Notice of Proposals. Section 2.13 is the Company’s advance notice requirement regarding shareholder proposals. Most public companies have an advance notice bylaw provision. Such provisions allow for the thoughtful consideration and evaluation of all proposals and for the orderly conduct of shareholder meetings. The 120 day advance notice requirement contained in Section 2.13 is consistent with both the SEC’s rules for shareholder proposals and other advance notice bylaw provisions adopted by the vast majority of public companies. This time frame allows for appropriate deliberation by the Board consistent with its fiduciary duties and gives the Company time to consider possible inclusion of the proposal in its proxy materials. Given that such proxy materials must be prepared and delivered to shareholders, brokers and other street name holders well in advance of the annual meeting, the 120 day time frame is both common and appropriate.
Shareholder Nominations. Section 2.14 sets forth requirements for shareholder submissions of director candidates. Absent this provision, there is no formal process by which shareholders may require the Board to consider shareholder proposed candidates to potentially include them in the Company’s proxy materials. Historically, the Board has voluntarily taken shareholder suggestions into consideration. Like the advance notice provision, this formal process allows for appropriate deliberation by the Board consistent with its fiduciary duties and gives the Company time to consider possible inclusion of the nominee in its proxy materials.
Option Pricing Limitation. In response to shareholder proposals at the 2011 annual shareholder meeting, the Company voluntarily amended its equity plan to set exercise prices 20% above market value and to limit the total number of awards that may be granted to directors and officers. The Company believes that the proposed further adjustment is out of market and, among other things, puts the Company at a disadvantage with respect to recruiting talented leadership at the executive and director levels. Further, the Company believes that the amendment of a specific provision of a Company’s equity plan is not a proper shareholder purpose.
The above Notice and Proxy Statement are sent by order of the Board.Board of Directors.
/s/ |
Jeffrey R. Hinkle Corporate Secretary |
Denver, Colorado
April 20, 20116, 2012
Form of Amendment to 2005 Stock Incentive Plan
1. Recitals. Pursuant to corporate resolution and subject to shareholder approval, Scott’s Liquid Gold-Inc. wishes to amend the Scott’s Liquid Gold-Inc. 2005 Stock Incentive Plan (the “Plan”) by increasing by 1,500,000 the number of shares available under the Plan from 1,500,000 shares to 3,000,000 shares.
2. Amendment of Plan. The following amendment to the Plan is adopted, effective as provided in Paragraph 3 below:
The Plan is hereby amended to revise the first sentence of Section 4.1 of the Plan to read in its entirety as follows:
3. Effective Date. The Effective Date of this Amendment shall be the date on which the shareholders approve this amendment.
4. Terms and Conditions of Plan. Except for the amendment in paragraph 2, all terms and conditions of the Plan are unamended and shall remain in full force and effect.
5. Execution. Scott’s Liquid Gold-Inc. has executed this Amendment as of the date set forth below.
| ||
| ||
COMPENSATION COMMITTEE CHARTER
SCOTT’S LIQUID GOLD-INC.
COMPENSATION COMMITTEE RESOLUTION
April 2011
RESOLVED, that the members of the Compensation Committee shall consist of at least two or more outside Directors of the Company as determined by the Board of Directors from time to time;
RESOLVED, that the Compensation Committee of the Board of Directors shall have the following authority and responsibilities:
1. To review the development of an executive compensation philosophy for the Company; and to obtain all relevant data and information to perform its functions, including the retention of outside consultants at the Company’s expense, if necessary;
2. To review all executive compensation proposals, including recommendations as to salaries, bonuses, determinations of stock grants under various stock plans and other executive benefits and perquisites;
3. To review the duties and responsibilities of the executive officers over time; and to recommend adjustments to compensation of executive officers up or down as appropriate;
4. To review the appropriate mix of variable versus fixed compensation for the Company’s executives and to make recommendations on this issue, as appropriate; and
5. To review the Company’s bonus and other long-term incentive plans and to determine if procedures followed historically are the most effective.effective; and
6. To consider, subject to approval by the whole Board of Directors and/or the shareholders where necessary and appropriate, any request or proposal for any loan by the Company to directors, officers or other insiders of the Company.
SCOTT’S LIQUID GOLD-INC. 4880 HAVANA ST.
DENVER, CO 8023
SCOTT’S LIQUID GOLD-INC. 4880 HAVANA ST. DENVER, CO 80239 ATTN: SHELLEY KENNISON | VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
| ||||||||
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
| M46162-P24322 | KEEP THIS PORTION FOR YOUR RECORDS | ||||||
| DETACH AND RETURN THIS PORTION ONLY | ||||||||
Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 1 1 OF Investor Address Line 4 Investor Address Line 5 John Sample 1234 ANYWHERE STREET 2 ANY CITY, ON A1A 1A1
NAME
THE COMPANY NAME INC.—COMMON THE COMPANY NAME INC.—CLASS A THE COMPANY NAME INC.—CLASS B THE COMPANY NAME INC.—CLASS C THE COMPANY NAME INC.—CLASS D THE COMPANY NAME INC.—CLASS E THE COMPANY NAME INC.—CLASS F THE COMPANY NAME INC.—401 K
x
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
VOTE BY INTERNET—www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE—1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
CONTROL # 000000000000
SHARES 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345
PAGE 1 OF 2
KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
SCOTT’S LIQUID GOLD-INC. | For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | ||||||||||||
The Board of Directors recommends you vote FOR the following nominees: | ||||||||||||||||
1. Election of Directors | ¨ | ¨ | ¨ | |||||||||||||
| Nominees: | ||||||||
01) Mark E. Goldstein | ||||||||
02) Jeffrey R. Hinkle | ||||||||
03) Dennis H. Field | ||||||||
04) Jeffry B. Johnson | ||||||||
05) Gerald J. Laber | ||||||||
06) Philip A. Neri | ||||||||
The Board of Directors recommends you vote AGAINST the following proposal: | For | Against | Abstain | |||||
2. A non-binding shareholder proposal to implement cumulative voting. | ¨ | ¨ | ¨ | |||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | ||||||||||||||
| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||||||
For Withhold For All
Important notice regarding availability of proxy materials for the Annual Meeting of Shareholders to be held on
To withhold authority to vote for any
All
All
Except
individual nominee(s), mark “For All
Except” and write the number(s) of the
The Board of Directors recommends you vote
nominee(s) on
the line below.
02
FOR the following:
0
0
0
1. Election of Directors
Nominees
01 Mark E. Goldstein 02 Jeffrey R. Hinkle 03 Carl A. Bellini 04 Dennis H. Field 05 Jeffry B. Johnson
06 Gerald J. Laber 0000000000
The Board of Directors recommends you vote FOR the following proposal:
For
Against
Abstain
2. To increase the number of shares of common stock available under the Company’s 2005 Stock Incentive Plan from 1,500,000 to
0
0
0 3,000,000 shares.
NOTE: Such other business as may properly come before the meetingMay 16, 2012 or any adjournment thereof.
Investor Address Line 1 Investor Address Line 2 R1.0.0.11699
Investor Address Line
3
Investor Address Line
4
Investor Address Line
5
1 Please sign exactly as your name(s) appear(s) hereon. When signing as
_
John Sample
attorney, executor, administrator, or other fiduciary, please give fulltitle as such. Joint owners should each sign personally. All holders must
1234 ANYWHERE
STREET
sign. If a corporation or partnership, please sign in full corporate or
ANY CITY, ON
A1A 1A1
partnership name, by authorized officer.
0000106163
SHARES
CUSIP #
JOB #
SEQUENCE #
Signature [PLEASE SIGN WITHIN BOX]
Date
Signature (Joint Owners)
Date
0000106163_2 R1.0.0.11699
Important Notice Regarding the Availability ofthereof: The Proxy MaterialsStatement for the Annual Meeting: The Notice & Proxy Statement,Meeting,
the form of proxy and the Annual Report is/on Form 10-K for the year ended December 31, 2011
are available at www.proxyvote.com .the Company’s website atwww.scottsliquidgold.com under the
SCOTT’S LIQUID GOLD-INC.“Company & Investor Relations” tab.
Annual Meeting of Shareholders
M46163-P24322
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 18, 2011 9:00 AM16, 2012
ThisThe enclosed proxy is solicited by the Boardand on behalf of Directors
This proxy is solicited by the Board of Directors of Scott’s Liquid Gold-Inc., a Colorado corporation (the “Company”), for use at the Company’s Annual Meeting on May 18, 2011,of Shareholders to be held at 9:00 A.M.a.m., Mountain Time, on Wednesday, May 16, 2012 at the Company’s offices, 4880 Havana Street, Denver, Colorado 80239, or any
adjournment thereof. This Proxy Statement and the accompanying form of proxy are first being mailed or given to the shareholders of the Company on or about April 12, 2012.
The sharesAny shareholder signing and mailing the enclosed proxy may revoke it at any time before it is voted by giving written notice of stock you holdthe revocation to the Company’s Corporate Secretary, by voting in your account will be voted as you specify onperson at the reverse side.
If no choice is specified,meeting or by filing at the proxy will be voted “FOR” Item 1 and Item 2.meeting a later executed proxy.
By signing the proxy, you revoke all prior proxies and appoint Mark E. Goldstein and Jeffrey R. Hinkle and each of them acting in the
absence of the others,other, with full power of substitution, as your proxies to vote all your shares on the matters shown on the reverse side and
any other matters which may come before the Annual Meeting and all adjournmentsany adjournment thereof.
If no choice is specified, the proxy will vote “FOR” Item 1 and “AGAINST” Item 2. For any other matters that may properly come before the meeting or any adjournment thereof, the proxy will vote as the Board of Directors recommends.
Continued and to be signed on reverse side