UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ¨☐ Filed by a Party other than the Registrant ¨☐
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| Preliminary Proxy Statement |
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| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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| Definitive Proxy Statement |
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| Definitive Additional Materials |
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| Soliciting Material Pursuant to §240.14a-12 |
Scott’s Liquid Gold–Inc.Gold-Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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SCOTT’S LIQUID GOLD-INC.
4880 Havana Street
Denver, Colorado 80239
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To Be Held June 4, 201514, 2017
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 Thursday,Wednesday, June 4, 201514, 2017 at the Doubletree by Hilton, 3203 Quebec Street, Denver, Colorado 80207, for the purpose of electing five directors and adopting the 2015 Equity and Incentive Plan.four directors.
Only shareholders of record at the close of business on April 16, 201524, 2017 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 June 4, 201514, 2017 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, 20142016 are available at the Company’s website at www.scottsliquidgold.comwww.slginc.com under the “Company & Investor“Investor Relations” tab.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Barry J. Levine
Corporate Secretary
Denver, Colorado
April 28, 20152017
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.
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APPENDIX A – |
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 4, 201514, 2017
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 Thursday,Wednesday, June 4, 201514, 2017 at the Doubletree by Hilton, 3203 Quebec Street, Denver, Colorado 80207, 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 28, 2015.2017.
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, delivering a later executed proxy before the meeting or voting in person at the meeting. If you would like to obtain directions to be able to attend the Company’s Annual Meeting of Shareholders and vote in person, you should contact the Company’s Corporate Secretary by telephone at (303) 373-4860.
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 April 16, 2015,24, 2017, the record date for shareholders entitled to vote at the meeting, the Company had 11,616,03911,857,026 shares of its $0.10 par value common stock issued and outstanding.
When a quorum is present, in the election of directors, those fivefour 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 are 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.
Neither Colorado law nor the Company’s Restated Articles of Incorporation or Amended and Restated Bylaws (“Bylaws”) entitle shareholders to any appraisal or similar rights of dissenters with respect to any of the proposals to be acted upon at the Annual Meeting.
CONSENT TO ELECTRONIC DELIVERY OF PROXY MATERIALS
If you are a shareholder of record or a member of the Company’s Employee Stock Ownership Plan, you may, if you wish, receive future proxy statements and annual reports online rather than receiving proxy materials in paper form. Electronic delivery of proxy materials reduces the costs and environmental impact incurred by the Company in printing and mailing proxy materials. If you elect this feature, you will receive an e-mail message notifying you when the materials are available, along with a web address for viewing the materials and instructions for voting by telephone or on the Internet. You may sign up for electronic delivery at any time by visiting www.proxyvote.com. If you received this proxy statement electronically, you do not need to do anything to continue receiving proxy materials electronically in the future. If you hold your shares in a brokerage account, you may also have the opportunity to receive proxy materials electronically. Please follow the instructions of your broker.
1
VOTING SECURITIESSECURITIES AND PRINCIPALPRINCIPAL SHAREHOLDERS
The following persons are the only persons known to the Company who on April 16, 2015,24, 2017, owned beneficially more than 5% of the Company’s common stock, its only class of outstanding voting securities:
Name and Address of Beneficial Owner | Name and Address of Beneficial Owner |
| Title of Class |
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| Amount |
| Percent |
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| Title of Class |
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| Amount |
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| Percent |
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Mark E. Goldstein 4880 Havana Street, Suite 400 Denver, Colorado 80239 | Mark E. Goldstein 4880 Havana Street, Suite 400 Denver, Colorado 80239 |
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| Common Stock |
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| 2,810,365 | (1)(2) |
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| 24.2 | % |
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| Common Stock |
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| 2,968,857 | (1)(2) |
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| 25.0 | % |
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IsZo Capital LP 415 Madison Avenue 15th Floor New York, New York 10017 |
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| Common Stock |
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| 665,069 | (3) |
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| 5.6 | % | |||||||||||||
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Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan 4880 Havana Street, Suite 400 Denver, Colorado 80239 | Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan 4880 Havana Street, Suite 400 Denver, Colorado 80239 |
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| Common Stock |
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| 811,652 | (3) |
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| 7.0 | % |
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| Common Stock |
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| 633,426 | (4) |
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| 5.3 | % |
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Tyler Rameson 300 Sheffield Drive Santa Barbara, California 93101 |
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| Common Stock |
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| 954,552 | (4) |
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| 8.2 | % | |||||||||||||
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William D. Summit 14839 Chancey Street Addison, Texas 75001 | William D. Summit 14839 Chancey Street Addison, Texas 75001 |
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| Common Stock |
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| 605,277 | (5) |
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| 5.2 | % |
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| Common Stock |
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| 605,277 | (5) |
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| 5.1 | % |
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(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 68,400 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 child. Includes 203,100 shares held jointly by Mr. Goldstein and his spouse, but does not include 26,390 shares of the Company’s common stock owned by Mr. Goldstein’s spouse, as to which Mr. Goldstein disclaims any beneficial ownership. |
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(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 43,746 shares underlying stock options granted by the Company and exercisable within 60 days, and 86,670 shares held by Mr. Goldstein’s three adult children. Also includes 342,500 shares held jointly by Mr. Goldstein and his spouse, but does not include 26,390 shares of the Company’s common stock owned by Mr. Goldstein’s spouse, as to which Mr. Goldstein disclaims any beneficial ownership. |
(2) | Does not include 140,960 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) | IsZo Capital GP LLC (“IsZo GP”) is the general partner of IsZo Capital LP (the “Fund’). IsZo Capital Management LP (“ICM”) is the investment manager of the Fund. Brian L. Sheehy is the managing member of IsZo GP and the President of the general partner of ICM. This information is based on a filing by the Fund with the Securities and Exchange Commission (the “SEC”). |
(4) | The Trustees administering the Employee Stock Ownership Plan will vote as directed by participants in the plan. Shares with respect to which the Trustees do not receive participant instructions will be voted by the Trustees in accordance with the terms of the plan. |
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(5) | William Summit is the sole portfolio manager of Golconda Capital Portfolio, LP and is the sole managing member of Golconda Capital Management, LLC. This information is based on filings by Mr. |
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SECURITY OWNERSHIPOWNERSHIP OF MANAGEMENT
The following table shows as of April 16, 2015,24, 2017, the shares of the Company’s common stock beneficially owned by each director, nominee and executive officer of the Company and the shares beneficially owned by all of the directors and executive officers as a group:
Name of Beneficial Owner | Name of Beneficial Owner |
| Amount |
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| Percent |
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| Amount |
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| Percent |
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Mark E. Goldstein | Mark E. Goldstein |
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| 2,810,365 | (2)(3)(4) |
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| 24.2 | % |
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| 2,968,857 | (2)(3) |
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| 25.0 | % |
Barry J. Levine | Barry J. Levine |
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| 131,259 | (3) |
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| 1.1 | % |
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| 402,291 | (3) |
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| 3.4 | % |
Michael B. Hyman | Michael B. Hyman |
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| 16,038 | (3) |
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| 0.1 | % |
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| 56,882 | (3) |
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| 0.5 | % |
Gerald J. Laber | Gerald J. Laber |
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| 125,000 | (3) |
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| 1.1 | % |
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| 178,338 | (3) |
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| 1.5 | % |
Philip A. Neri | Philip A. Neri |
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| 60,625 | (3) |
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| 0.5 | % |
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| 118,338 | (3) |
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| 1.0 | % |
Sharon D. Garrett |
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| 30,000 |
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| 0.3 | % | |||||||||
All Directors and executive officers as a group (six persons) |
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| 3,173,287 | (3) |
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| 27.3 | % | |||||||||
______________ | |||||||||||||||||
(1) | Beneficial owners listed have sole voting and disposition power with respect to the shares shown unless otherwise indicated. | ||||||||||||||||
All Directors and executive officers as a group (five persons) |
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| 3,724,706 | (3) |
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| 31.4 | % |
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(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 |
(3) | For each named person, includes the following number of shares underlying stock options granted by the Company and exercisable currently or within 60 |
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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 of the Board, Mark E. Goldstein may be considered a parent (i.e., a controlling person) of the Company.
PROPOSAL 1 - ELECTIONELECTION OF DIRECTORS
Shareholders are being asked to elect fivefour directors thatwho will comprise the Company’s entire Board. 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 fivefour 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 in the |
| Age |
| Director |
| Principal Occupation for Last Five Years |
Mark E. Goldstein (Chairman of the Board, President and Chief Executive Officer; Principal Executive Officer) |
| 61 |
| 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 brings to the Board extensive experience in management, marketing, sales, consumer products and other aspects of the Company’s business. |
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Barry J. Levine (Chief Operating Officer, Chief Financial Officer, Treasurer and Corporate Secretary; Principal Financial and Chief Accounting Officer) |
| 58 |
| 2013 |
| Chief Operating Officer, Chief Financial Officer and Treasurer since 2012 and Corporate Secretary since 2013. 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. Mr. Levine brings to the Board extensive management, operational, strategic planning, financial and legal experience. |
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Gerald J. Laber, CPA |
| 73 |
| 2004 |
| Mr. Laber has been a private investor since 2000, when he retired after 33 years of service with Arthur Andersen. Mr. Laber was an audit partner with Arthur Andersen from 1980 to 2000 and, with the exception of a leave for military service from 1966 through 1968, was employed by Arthur Andersen from 1965 until retiring in 2000. Mr. Laber is a Certified Public Accountant and is a member of the American Institute of Certified Public Accountants and the Colorado Society of Certified Public Accountants. Currently, Mr. Laber is on the board of directors, member of the audit committee and member of the compensation committee for Allied Motion Technologies, Inc. since November 2010. He served as President of The Catholic Foundation of Northern Colorado from January 2008 until November 2012. Formerly, Mr. Laber (i) served on the board of directors and as chair of the audit committee of Spectralink Corporation from April 2004 to March 2007, (ii) served on the board of directors and audit committee of Applied Films Corporation from July 2004 to July 2007 (audit chair from October 2005 to July 2007) and (iii) served on the board of directors, chair of the audit committee and member of the compensation and governance committee and nominating committee for Boulder Brands, Inc. from May 2005 through January 2016. Each of these companies is, or was, publicly traded. Mr. Laber’s services to each of these companies concluded upon their respective acquisitions by other companies. Mr. Laber brings to the Board extensive experience in accounting, financial matters and strategic planning. He is also an audit committee financial expert. |
Name of Nominee and Position in the |
| Age |
| Director |
| Principal Occupation for Last Five Years |
Mark E. Goldstein (Chairman of the Board, President and Chief Executive Officer; Principal Executive Officer) |
| 59 |
| 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. |
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Barry J. Levine (Chief Operating Officer, Chief Financial Officer, Treasurer and Corporate Secretary; Principal Financial and Chief Accounting Officer) |
| 56 |
| 2013 |
| Chief Operating Officer, Chief Financial Officer and Treasurer since 2012 and Corporate Secretary since 2013. 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. Mr. Levine was selected as a director for his extensive management, operational, strategic planning, financial and legal experience. |
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Gerald J. Laber, CPA |
| 71 |
| 2004 |
| Mr. Laber has been a private investor since 2000, when he retired after 33 years of service with Arthur Andersen. Mr. Laber was an audit partner with Arthur Andersen from 1980 to 2000 and, with the exception of a leave for military service from 1966 through 1968, was employed by Arthur Andersen from 1965 until retiring in 2000. Mr. Laber is a Certified Public Accountant and is a member of the American Institute of Certified Public Accountants and the Colorado Society of Certified Public Accountants. Currently, Mr. Laber is: (i) on the Board of Directors, Chair of the Audit Committee and a member of the Compensation Committee and Governance and Nominating Committee of Boulder Brands, Inc. since June 2005; (ii) on the Board of Directors, Chair of the Audit Committee and member of the Compensation Committee for Allied Motion Technologies, Inc. since November 2010; and (iii) on the Board of Directors and chair of the Audit Committee of two companies that are no longer public reporting companies. He served as President of The Catholic Foundation of Northern Colorado from January 2008 until November 2012. Formerly, Mr. Laber (i) served on the Board of Directors and as Chair of the Audit Committee of Spectralink Corporation from April 2004 to March 2007, and (ii) served on the Board of Directors and Audit Committee of Applied Films Corporation from July 2004 to July 2007 (Audit Chair from October 2005 to July 2007). Each of these companies is, or was, publicly traded. Mr. Laber brings to the Board extensive experience in accounting, financial matters and strategic planning. He is also an audit committee financial expert. |
4
Name of Nominee and Position in the |
| Age |
| Director |
| Principal Occupation for Last Five Years |
| Age |
| Director |
| Principal Occupation for Last Five Years |
Philip A. Neri |
| 58 |
| 2011 |
| Senior Vice President of the Bob Bondurant School of High Performance Driving since August 2014, where he manages sales and marketing operations. From 2006-2014 served as Vice President of Sales and Marketing at Barrett-Jackson, where he managed the company’s sponsorship and business development programs, as well as its marketing and merchandising endeavors. Before joining Barrett-Jackson, Mr. Neri was Senior Vice President of Marketing and Sales at Home Fragrance Holdings. Prior to Home Fragrance Holdings, Mr. Neri was Senior Vice President of Sales for The Dial Corporation with responsibility for all Dial Corporation 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. |
| 60 |
| 2011 |
| Phil Neri began his independent consulting business, P. Neri Advisory Group, LLC, in 2016 and has been Chief Automotive Officer for GO Automotive since 2015. Prior to joining GO, from 2014 to 2015, Mr. Neri was Senior Vice President for the Bob Bondurant School of High Performance Driving, where he managed the company's operations including the sales and marketing efforts. Before Bondurant, Mr. Neri was Vice President of Sales and Marketing at Barrett-Jackson, where he managed the company's sponsorship and business development programs, as well as its marketing, licensing and merchandising endeavors. Mr. Neri was with Barrett-Jackson from 2006 through 2014, serving as Director of Sponsorships and Business Development prior to his promotion to Vice President. Before joining Barrett-Jackson, Phil 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 joining Home Fragrance Holdings, Mr. Neri was Senior Vice President of Sales for the Dial Corporation with responsibility for all Dial Corporation products targeting grocery, drug, military and convenience store distribution channels throughout the United States. Phil 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. |
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Sharon D. Garrett |
| 66 |
| 2014 |
| Management consultant, providing advisory services, primarily to private equity companies, regarding acquisitions, divestitures, and operational process improvements. From 2007 to 2013, Ms. Garrett served as Executive Vice President for American Medical Response, the nation’s leading medical transportation company. Prior to that, Ms. Garrett served as Executive Vice President for Enterprise Services at PacifiCare Health Systems, a Fortune 200 managed care/health insurance company, from 2002 to 2006, and served as Chief Information Officer of The Walt Disney Company from 1989 to 2000. Ms. Garrett serves on the board of directors and audit committee of Ross Stores, Inc., a Fortune 500 company and the largest off-price apparel and home fashion chain in the United States. Ms. Garrett brings to the Board experience and expertise with respect to management matters, operational process improvement and technology innovation. |
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 fivefour 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
5
Proposal 2 - Approval of the 2015 Equity AND Incentive Plan
Reasons for the New Equity and Incentive Plan
The Board of Directors approved the 2015 Equity and Incentive Plan (the “2015 Plan”) on April 17, 2015, and established the number of shares of common stock to be reserved for issuance under this plan at 2,000,000. The existing 2005 Stock Incentive Plan expired on March 31, 2015. The number of shares authorized under the 2005 Stock Incentive Plan was 3,000,000 shares of common stock.
The 2015 Plan will enable the Company to attract and retain talented employees and directors, and align their interests with those of shareholders. The Board believes that the 2015 Plan is in our best interests and that of our shareholders, and is consistent with the compensation philosophy described in this Proxy Statement.
Approval of this proposal is intended to constitute approval of the material terms of the performance goals under the 2015 Plan for purposes of Internal Revenue Code (“Code”) Section 162(m).
In establishing the number of shares of common stock to be reserved for issuance under the 2015 Plan, the Board of Directors considered, among other factors, the following: (a) the ability to attract and retain talented employees and directors, especially given the Company’s strategy for future growth; (b) the potential dilution (as defined below) due to shares of common stock subject to equity awards; (c) the historical and anticipated burn rate (as defined below) of how quickly we use shares of common stock subject to equity awards; and (d) the total potential overhang (as defined below) due to shares of common stock subject to equity awards.
Dilution is the number of shares subject to equity awards outstanding but not exercised, divided by the total number of shares of common stock outstanding as of the end of the year.
The burn rate is calculated by dividing the number of common shares subject to equity awards granted during any particular period by the number of outstanding shares of common stock as of December 31 of the applicable year.
Overhang is the number of shares of common stock subject to equity awards outstanding but not exercised, plus the number of shares available to be granted, divided by the total number of shares outstanding as of the end of the year.
The following table sets for the dilution, burn rate and overhang for each of our last five fiscal years and the average for those years.
| 2014 | 2013 | 2012 | 2011 | 2010 | Average |
Dilution | 8.0% | 6.1% | 12.7% | 17.9% | 17.7% | 12.5% |
Burn Rate | 3.3% | 2.5% | 1.1% | 0.3% | 8.3% | 3.1% |
Overhang | 26.0% | 26.2% | 27.0% | 27.4% | 18.7% | 25.1% |
If the 2015 Plan is approved by shareholders, our total potential overhang would be 24.5%.
6
2015 Plan Summary
The following is a brief summary description of the 2015 Plan, which is qualified in its entirety by reference to the provisions of the 2015 Plan itself, which is attached as Appendix A to this Proxy Statement. Capitalized terms used and not otherwise defined in this summary description are used as defined in the 2015 Plan.
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The 2015 Plan provides for the grant of Incentive Stock Options, Non-qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Unit Awards, Performance Share Awards, and Performance Compensation Awards (collectively, “Awards”).
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Optionees receive the right to purchase a specified number of shares of common stock at a specified option price and subject to such other terms and conditions as are specified in connection with the option grant. Options may not be granted at an exercise price less than 100% of the fair market value of the common stock on the date of grant or for a term in excess of ten years. An incentive stock option may be granted with an option exercise price lower than that set forth in the preceding sentence if such option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Code Section 424(a).
The 2015 Plan permits the following forms of payment of the exercise price of options: (i) payment by cash, check or in connection with a “cashless exercise” through a broker, (ii) subject to certain conditions, surrender to the Company of shares of common stock, (iii) net exercise, (iv) by any other lawful means, or (v) any combination of these forms of payment.
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A stock appreciation right, or SAR, is an award entitling the holder, upon exercise, to receive an amount in common stock or cash or a combination thereof determined by reference to appreciation, from and after the date of grant, in the fair market value of a share of common stock or another specified price. SARs may be granted independently or in tandem with an option. SARs may not be granted at a base price less than 100% of the fair market value of the common stock on the date of grant.
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A restricted stock award is an award of actual stock that may be subject to conditions on transferability and subject to forfeiture for a period governed by the award agreement. The plan participant generally will have the rights of a shareholder including the right to vote such Restricted Stock, except that (unless otherwise provided in the award agreement) any dividends earned by such Restricted Stock will be withheld by the Company for the participant's account (with interest, if determined by the Committee). Any withheld dividends and interest will be distributed to the participant when the restrictions on the underlying stock lapse, in cash or at the discretion of the Committee in common stock having a Fair Market Value equivalent to the amount of such dividends. If the shares are forfeited, the participant will have no right to the dividends.
|
|
Restricted stock unit awards entitle the recipient to receive shares of common stock (or an equivalent amount of cash) to be delivered at the time the award vests. Participants are not required to pay any consideration to the Company at the time of grant of a restricted stock unit. The plan participant will have no voting rights with respect to the Restricted Stock Unit but may, at the discretion of the Committee, be credited with the cash equivalent of the stock dividends payable for one share of common stock per Restricted Stock Unit. Any such dividend equivalent amounts will be withheld by the Company for the participant's account (with interest, if determined by the Committee) and will be distributed to the participant upon settlement of the underlying restricted stock unit in cash or, at the discretion of the Committee, in common stock having a Fair Market Value equivalent to the amount
7
of such dividends. If the restricted stock unit award is forfeited, the participant will have no right to the dividend equivalents.
|
|
A performance share award is an award of actual stock that vests only to the extent to which performance goals established by the Committee are attained. The Committee has the discretion to determine: (i) the number of shares of common stock or stock-denominated units subject to a Performance Share Award granted to any Participant; (ii) the performance period applicable to any Award; (iii) the conditions that must be satisfied for a Participant to earn an Award; and (iv) the other terms, conditions and restrictions of the Award.
|
|
The Committee may determine at the time of grant that any award granted to an employee will be subject to performance conditions instead of or in addition to time-vesting conditions. Such performance conditions may be established and administered in accordance with the requirements of Code Section 162(m) for awards intended to qualify as “performance-based compensation.” Performance-based awards that are payable in cash may also be granted under the 2015 Plan.
Performance conditions under the 2015 Plan will utilize one or more objective measurable performance goals as determined by the Committee based upon one or more factors, including: (a) net earnings or net income (before or after taxes); (b) basic or diluted earnings per share (before or after taxes); (c) net revenue or net revenue growth; (d) gross revenue; (e) gross profit or gross profit growth; (f) net operating profit (before or after taxes); (g) return on assets, capital, invested capital, equity, or sales; (h) cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital); (i) earnings before or after taxes, interest, depreciation and/or amortization; (j) gross or operating margins; (k) improvements in capital structure; (l) budget and expense management; (m) productivity ratios; (n) economic value added or other value added measurements; (o) share price (including, but not limited to, growth measures and total shareholder return); (p) expense targets; (q) margins; (r) operating efficiency; (s) working capital targets; (t) enterprise value; (u) safety record; and (v) completion of acquisitions or business expansion.
The maximum performance compensation award payable to any one participant for any one performance period is 250,000 shares of common stock. If a performance compensation award is in the form of a cash bonus, the maximum amount that can be paid in any calendar year to any participant is $250,000.
Awards that are not intended to qualify as “performance-based compensation” under Code Section 162(m) may be granted under the 2015 Plan and determined without regard to performance goals and may involve the Committee’s discretion.
The Committee may award and administer options and stock appreciation rights in accordance with the requirements of Code Section 162(m), such that those awards will also qualify as “performance-based compensation.” These awards will be granted by the Committee, within the maximum number of shares that may be granted to an employee during a specified period and granted at no less than 100% of the fair market value of the common stock on the date of grant.
|
|
The 2015 Plan provides that no participant may be granted awards of any type with respect to more than 250,000 shares of common stock in the aggregate, during any one year period.
8
|
|
Except as the Board of Directors may otherwise determine or provide in an award, awards may not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law.
|
|
Employees (including executive officers) and directors of the Company and its subsidiaries and of other business ventures in which the Company has a controlling interest are eligible to be granted awards under the 2015 Plan. Under present law, however, incentive stock options may only be granted to employees of the Company and its subsidiaries.
|
|
The 2015 Plan provides that, unless otherwise provided in an award agreement, in the event of a participant’s termination of service for “Good Reason” or without “Cause” within 18 months after a change in control, all options and stock appreciation rights will become immediately exercisable. Under the same circumstances, any restricted stock awards or restricted stock units will fully vest. For performance compensation awards under the same circumstances, all performance goals or other vesting criteria will be deemed achieved at 100% of the target levels of performance at the date of the termination of service.
|
|
To the extent that shares are: (a) tendered in payment of an Option, (b) delivered or withheld by the Company to satisfy any tax withholding obligation, (c) covered by a stock-settled Stock Appreciation Right or other Awards that were not issued upon the settlement of the Award, or (d) canceled, forfeited or expires prior to exercise or realization, then such shares will not again be available for issuance under the Plan.
Key Corporate Governance Practices in the 2015 Plan
The 2015 Plan includes a number of provisions that we believe promote good corporate governance practices and reinforce the alignment between our equity compensation arrangements and the interests of our shareholders, including:
|
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|
|
|
|
|
|
|
9
Federal Income Tax Consequences
The following tax discussion is a general summary as of the date of this Proxy Statement of the U.S. federal income tax consequences to the Company and the participants in the 2015 Plan. The discussion is intended solely for general information of shareholders considering how to vote with respect to this proposal and not as tax guidance to participants in the 2015 Plan. The discussion does not address state, local or foreign income tax rules or other U.S. tax provisions, such as estate or gift taxes. Different tax rules may apply to specific participants and transactions under the2015 Plan, particularly in jurisdictions outside the United States. In addition, the federal income tax laws and regulations frequently have been revised and may be changed again at any time. Therefore, each recipient is urged to consult a tax advisor before exercising any award or before disposing of any shares acquired under the 2015 Plan both with respect to federal income tax consequences as well as any foreign, state or local tax consequences.
The grant of an option will create no tax consequences for the participant or the Company. A participant will have no taxable income upon exercise of an incentive stock option, except that the alternative minimum tax may apply. Upon exercise of an option other than an incentive stock option, a participant generally must recognize ordinary income equal to the fair market value of the shares acquired minus the exercise price. Upon a disposition of shares acquired by exercise of an incentive stock option before the end of the applicable incentive stock option holding periods, the participant generally must recognize ordinary income equal to the lesser of (1) the fair market value of the shares at the date of exercise minus the exercise price or (2) the amount realized upon the disposition of the incentive stock option shares minus the exercise price. Otherwise, a participant’s disposition of shares acquired upon the exercise of an option (including an incentive stock option for which the incentive stock option holding periods are met) generally will result in only capital gain or loss.
Other awards under the 2015 Plan (including restricted stock units, restricted stock awards, and performance based compensation) generally will result in ordinary income to the participant at the later of the time the award is paid (in cash or shares) or the time that either the risk of forfeiture or restriction on transferability lapses on previously delivered cash or shares.
Except as discussed below, the Company generally will be entitled to a tax deduction equal to the amount recognized as ordinary income by the participant in connection with an option, restricted stock unit award, or other awards, but will be entitled to no tax deduction relating to amounts that represent a capital gain to a participant. Thus, the Company will not be entitled to any tax deduction with respect to an incentive stock option if the participant holds the shares for the incentive stock option holding periods.
Code Section 162(m) generally allows the Company to obtain tax deductions without limit for performance-based compensation paid to the Chief Executive Officer and any of the Company’s other listed officers (other than the Chief Financial Officer or any officer not subject to U.S. income tax). The Company intends that options, stock appreciation rights and performance compensation awards granted under the 2015 Plan will qualify as performance-based compensation not subject to Section 162(m)’s $1 million deductibility cap. A number of requirements must be met in order for particular compensation to so qualify, however, so there can be no assurance that such compensation under the 2015 Plan will be fully deductible under all circumstances. In addition, other awards under the 2015 Plan may not qualify as performance-based compensation under Section 162(m), and therefore compensation paid to executive officers in connection with such awards may not be deductible.
The 2015 Plan will be adopted if the votes cast in favor of the 2015 Plan exceed the votes cast in opposition.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE 2015 PLAN
10
BOARD LEADERSHIP STRUCTURE ANDAND ROLE IN RISK OVERSIGHT
The Board is actively involved in assessing and managing risks that could affect the Company. Part of the Board’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 address 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 Board does not have a lead independent director.
The Company has three executive officers. They are Mr. Goldstein, Mr. Levine and Mr. Hyman. Information regarding Mr. Goldstein and Mr. Levine is stated above under “Election of Directors.” Information concerning Mr. Hyman is as follows:
Mr. Hyman, 59,61, has been employed by the Company as Senior Vice President of Sales beginning in 2013. Prior to joining the Company, Mr. Hyman served as an independent sales and marketing consultant from August 2012 through December 2012, Vice President of Sales OOK Division for the Hillman Group from December 2011 through July 2012, and Vice President of Sales for Impex Systems Group from August 2007 through December 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, 2014,2016, the CompanyBoard had four regular Boardsix meetings, four CompensationAudit Committee meetings, and four AuditCompensation Committee meetings. No member of the Board attended fewer than 75% of the meetings of the Board or of committees for which such member served during 2014.2016. Although the Company is not listed on NASDAQ, the Board has elected to apply NASDAQ’s independence standards to the Board. During 2014,2016, Mr. Laber, Mr. Neri and Ms. Sharon Garrett, until she resigned on December 2, 2016, satisfied the NASDAQ independence standards. The independent members of the Board meet without management present at least once each quarter and the chair of the Audit Committee serves as the chairperson for such meetings.
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.comwww.slginc.com.* During 20142016, the members of the Audit Committee were Mr. Laber (Chairperson), Mr. Neri and Ms. Garrett.Garrett, until she resigned on December 2, 2016. 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.
*Unless specified, we do not incorporate by reference herein information presented at our website.
11
The primary responsibilities of the Compensation Committee include, without limitation, overseeing 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 as Appendix BA. The Compensation Committee consists of three directors, each of whom is an independent director as defined under the NASDAQ rules. During 2014,2016, the members of the Compensation Committee were Mr. Neri (Chairperson), Mr. Laber and Ms. Garrett.Garrett, until she resigned on December 2, 2016.
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. The Compensation Committee also takes into account the results of the previous say-on-pay proposals and believes the recent favorable vote of 81% of the votes cast demonstrates shareholder support for its overall executive compensation structure. In determining the executive compensation in 20132015 and 2014,2016, 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 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 |
| • |
| 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 did not use an outside consultant for compensation matters during 20132015 and 2014.2016.
The Compensation Committee also determines the fees paid to the non-employee directors, with input from the Company’s executive officers.
12
DIRECTOR NOMINATIONNOMINATION PROCESS
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.
The Board seeks candidates for nomination to the position of director who have excellent decision-making ability, business experience, particularly experience relevant to consumer products, personal integrity, diverse backgrounds and who meet such other criteria as may be set forth in a writing adopted by a majority vote of the Board. While the Board values a diversity of viewpoints and backgrounds, it does not have a formal policy regarding the consideration of diversity in identifying director nominees.
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 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. All directors who were then serving attended the Company’s most recent 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 POLICY
The Company has a Code of Business Conduct and Ethics Policy (“Code of Conduct”) 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 of Conduct applies to all employees, including executive officers, and to directors. The Code of Conduct 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 Conduct may be obtained free of charge upon request to: Corporate Secretary, Scott’s Liquid Gold-Inc., 4880 Havana Street, Suite 400, Denver, Colorado 80239. The Code of Conduct is also available at the Company’s website at www.scottsliquidgold.comwww.slginc.com.
13
EXECUTIVE COMPENSATIONCOMPENSATION
The following Summary Compensation Table shows the annual and other compensation of the Chief Executive Officer and all other executive officers of the Company during the yearyears ended December 31, 2014,2016 and 2015, for services in all capacities provided to the Company and its subsidiaries for the past two years. The Company’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 group of people who contribute to the Company’s success. The packages are also intended to synchronize executive compensation with the Company’s performance, motivate executive officers to achieve the Company’s business objectives, provide performance incentives and minimize undue risk to the Company. The Company’s Chief Executive Officer provides input on determining and recommendingregarding compensation packages of the executive officers other than himself.
In 20142015 and 2013,2016, the Company had a performance-based bonus plan for the Chief Executive Officer, the Chief Financial Officer and the Senior Vice President of Sales. Under the bonus plan, Mr. Goldstein and Mr. Levine each had the potential to earn a bonus equal to up to a maximum of 30%35% of their respective salaries, if the Company achieved net income targets established by the Compensation Committee.and Mr. Hyman had the potential to earn a bonus equal to up to a maximum of 13% and 7%14.5% of his salary, in 2014 and 2013, respectively, if the Company achieved net income targets established by the Compensation Committee.Committee for each of 2015 and 2016. The Company exceeded the pre-established net income targets for both 20142015 and 2013.2016. The Compensation Committee can increase the foregoing bonus percentages if warranted by the circumstances.
The Company intends to continue the bonus plan in 2015,2017, with a target bonus for the Chief Executive Officer and the Chief Financial Officer of 35% of their respective salaries and 14.5% for the Senior Vice President of Sales if the Company achieves net income targets established by the Compensation Committee. The Compensation Committee can increase the foregoing bonus percentages if warranted by the circumstances.
SUMMARY COMPENSATION TABLE
Name and Principal Position | Name and Principal Position |
| Year |
|
| Salary |
|
| Bonus |
|
| Stock |
| Option |
|
| Non-equity |
|
| Non-qualified |
|
| All Other |
|
| Total |
|
| Year |
|
| Salary |
|
| Bonus |
|
| Stock |
| Option |
|
| Non-Equity |
|
| Non-Qualified |
|
| All Other |
|
| Total |
| ||||||||||||||||||||
(a) | (a) |
| (b) |
|
| (c) |
|
| (d) |
|
| (e) |
| (f) |
|
| (g) |
|
| (h) |
|
| (i) |
|
| (j) |
|
| (b) |
|
| (c) |
|
| (d) |
|
| (e) |
| (f) |
|
| (g) |
|
| (h) |
|
| (i) |
|
| (j) |
| ||||||||||||||||||||
Mark E. Goldstein | Mark E. Goldstein |
|
| 2014 |
|
|
| 351,727 |
|
|
| 109,605 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 30,203 |
|
|
| 491,535 |
|
|
| 2016 |
|
|
| 395,829 |
|
|
| 140,832 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 49,540 |
|
|
| 586,201 |
|
Chairman of the Board, President and Chief Executive Officer | Chairman of the Board, President and Chief Executive Officer |
|
| 2013 |
|
|
| 342,000 |
|
|
| 60,800 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 32,588 |
|
|
| 435,388 |
|
|
| 2015 |
|
|
| 369,314 |
|
|
| 128,029 |
|
|
| — |
|
|
| 83,168 |
|
|
| — |
|
|
| — |
|
|
| 35,328 |
|
|
| 615,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Barry J. Levine | Barry J. Levine |
|
| 2014 |
|
|
| 234,727 |
|
|
| 73,235 |
|
|
| — |
|
| 154,898 |
|
|
| — |
|
|
| — |
|
|
| 18,982 |
|
|
| 481,842 |
|
|
| 2016 |
|
|
| 301,980 |
|
|
| 165,902 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 27,568 |
|
|
| 495,450 |
| |
Chief Operating Officer, Chief Financial Officer, Treasurer, and Corporate Secretary | Chief Operating Officer, Chief Financial Officer, Treasurer, and Corporate Secretary |
|
| 2013 |
|
|
| 219,616 |
|
|
| 40,000 |
|
|
| — |
|
|
| 42,061 |
|
|
| — |
|
|
| — |
|
|
| 19,782 |
|
|
| 321,459 |
|
|
| 2015 |
|
|
| 257,368 |
|
|
| 105,365 |
|
|
| — |
|
|
| 234,490 |
|
|
| — |
|
|
| — |
|
|
| 25,596 |
|
|
| 622,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael B. Hyman | Michael B. Hyman |
|
| 2014 |
|
|
| 189,727 |
|
|
| 25,000 |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24,689 |
|
|
| 239,416 |
|
|
| 2016 |
|
|
| 199,925 |
|
|
| 30,250 |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24,548 |
|
|
| 254,723 |
| ||
Senior Vice President of Sales | Senior Vice President of Sales |
|
| 2013 |
|
|
| 180,000 |
|
|
| 12,500 |
|
|
| — |
|
| 10,223 |
|
|
| — |
|
|
| — |
|
|
| 15,477 |
|
|
| 218,200 |
|
|
| 2015 |
|
|
| 192,572 |
|
|
| 27,500 |
|
|
| — |
|
| 58,096 |
|
|
| — |
|
|
| — |
|
|
| 22,576 |
|
|
| 300,744 |
| ||
_______________ |
14_______________
(1) |
|
| Amounts shown in the column “Option Awards” are the aggregate grant date fair value of stock options computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC |
(3) | Certain details for “All Other Compensation” for 2014 and 2013 are summarized in the table below. | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Mark E. Goldstein |
|
| Barry J. Levine |
|
| Michael B. Hyman |
| ||||||||||||||||
|
| 2014 |
|
| 2013 |
|
| 2014 |
|
| 2013 |
|
| 2014 |
|
| 2013 |
| |||||||
Automobile lease/allowance (a) | $ | 10,200 |
|
| $ | 9,081 |
|
| $ | 7,800 |
|
| $ | 7,800 |
|
|
| $ | 6,000 |
|
| $ | 6,000 |
| |
Income taxes on automobile lease/allowance (a) |
| 6,390 |
|
|
| 6,390 |
|
|
| 5,280 |
|
|
| 5,280 |
|
|
|
| 4,060 |
|
|
| 4,060 |
| |
Medical plan (b) |
| 7,491 |
|
|
| 10,995 |
|
|
| 5,902 |
|
|
| 6,702 |
|
|
|
| 14,629 |
|
|
| 5,417 |
| |
Disability insurance |
| 4,672 |
|
|
| 4,672 |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
| |
Other |
| 1,450 |
|
|
| 1,450 |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
| |
Total other compensation | $ | 30,203 |
|
| $ | 32,588 |
|
| $ | 18,982 |
|
| $ | 19,782 |
|
|
| $ | 24,689 |
|
| $ | 15,477 |
| |
____________ | |||||||||||||||||||||||||
(a) | The Company provides funds needed, plus an amount to pay resulting income taxes, to each executive officer. In the case of Mr. Goldstein, the amount shown for 2014 represents a provision for his use of his personally-owned vehicle and for 2013 represents the lease value for his use of a vehicle leased by the Company. In the case of Mr. Hyman and Mr. Levine, the amount shown represents for both 2014 and 2013 a provision for their use of their personally-owned vehicles. |
(2) | Certain details for “All Other Compensation” for 2016 and 2015 are summarized in the table below. |
|
| Mark E. Goldstein |
| Barry J. Levine |
| Michael B. Hyman | |||||||||||||
|
| 2016 |
| 2015 |
| 2016 |
| 2015 |
| 2016 |
| 2015 | |||||||
Automobile allowance |
| $ | 10,200 |
| $ | 10,200 |
| $ | 7,800 |
| $ | 7,800 |
| $ | 6,000 |
| $ | 6,000 | |
Medical plan (a) |
|
| 14,488 |
|
| 12,516 |
|
| 14,488 |
|
| 12,516 |
|
| 14,488 |
|
| 12,516 | |
Disability and life insurance |
|
| 9,642 |
|
| 4,672 |
|
| — |
|
| — |
|
| — |
|
| — | |
Income tax reimbursement (b) |
|
| 13,510 |
|
| 6,390 |
|
| 5,280 |
|
| 5,280 |
|
| 4,060 |
|
| 4,060 | |
Other |
|
| 1,700 |
|
| 1,550 |
|
| — |
|
| — |
|
| — |
|
| — | |
Total other compensation |
| $ | 49,540 |
| $ | 35,328 |
| $ | 27,568 |
| $ | 25,596 |
| $ | 24,548 |
| $ | 22,576 |
_______________
| In addition to group life, health, hospitalization and medical reimbursement plans which are generally available to all employees, during reported periods the Company had a plan which provided for additional medical coverage of not more than $50,000 per year for each of the Company’s executive officers. |
(b) | The Company provides funds needed to pay resulting income taxes to each executive officer for the automobile allowance, disability and life insurance policies, and other compensation. |
ExecutivePrior to its expiration on March 31, 2015, executive officers and non-employee directors of the Company were eligible to receive stock awards under the Company’s 2005 Stock Incentive Plan as amended, which expired on March 31, 2015.(the “2005 Plan”) and awards under the 2005 Plan remain outstanding currently. Following the expiration of the 2005 Plan, the Company adopted the 2015 Equity and Incentive Plan (the “2015 Plan”). The number of common shares authorized under the 2005 Plan was 3,000,000 sharesand the number of common stock. shares authorized under the 2015 Plan is 2,000,000.
The 2005 Plan provided for the issuance of stock awards consisting of incentive and non-qualified stock options, stock appreciation rights, restrictive stock or restrictive stock units. Eligible persons under the 2005 Plan were full-time and part-time employees, non-employee directors and consultants. Under the 2005 Plan, stock awards vested 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 generally vested 1/48 of the shares subject to the options each month after the date of grant and vested fully upon a change in control, with the exception of option awards to our three non-employee directors which vested immediately, as described below.
For information regardingThe 2015 Plan provides for the issuance of stock awards consisting of incentive and non-qualified stock options, stock appreciation rights, restrictive stock or restrictive stock units, performance share awards and performance compensation awards. Eligible persons under the 2015 Plan please see Proposal 2 above.are full-time and part-time employees and non-employee directors. Under the 2015 Plan, stock awards vest upon a change in control in certain circumstances. With certain exceptions, options granted under the 2015 Plan generally vest1/48 of the shares subject to the options each month after the date of grant.
15
During 2014,2016, we granted options to acquire 250,000acquire: (1) 3,000 shares of our common stock to one of our production personnel at a price of $1.20 per share, which vest ratably over 48 months, or upon a change in control under certain circumstances, and which expire after 10 years; (2) 42,576 shares of our common stock to two of our management and administrative personnel at a price of $1.26 per share, which vest ratably over 48 months, or upon a change in control under certain circumstances, and which expire after 10 years; and (3) 90,072 shares of our common stock to our three non-employee board members at a price of $1.26 per share, which vest ratably over 36 months, or upon a change in control under certain circumstances, and which expire after five years. All of the foregoing options were granted at the market value as of the date of grant. The fair value of options is determined at the grant date and the related expense is recognized over the period in which the options vest in accordance with ASC 718. The Company recognizes the forfeitures of options as they occur.
Option Grants in 2015
During 2015, we granted options to acquire: (1) 326,500 shares of our common stock to 40 of our management and administrative personnel at a price of $1.25 per share, which vest ratably over 48 months, or upon a change in control under certain circumstances, and which expire after 10 years; (2) 200,000 shares of our common stock to one of our executive officers at a price of $0.86$1.25 per share, which vest ratably over 60 months, or upon a change in control under certain circumstances, and which expire after ten years. In addition, we granted options to acquire 35,00010 years; and (3) 90,000 shares of our common stock to our vice president of marketingthree non-employee board members at a price of $0.78$1.25 per share, options to acquire 2,500 shares of our common stock to an administrative employee at a price of $0.78 per share and options to acquire 60,000 shares of our common stock to two of our non-employee directors at a price of $0.79 per share, allhalf of which vested on the date of grant and the other half of which will vest ratably over 48 months,on the first anniversary of the date of grant, or upon a change in control under certain circumstances, and which expire after five years. SuchAll of the foregoing options were granted at 120% of the market value as of the date of grant. We also granted options to acquire 30,000100,000 shares of our common stock to one of our non-employee directors at a price of $0.79 per share, which vested upon the date of grant, and expire after five years. Such options were also granted at 120% of the market value as of the date of grant.
Option Grants in 2013
During 2013, we granted: (i) options to acquire 85,000 shares of our common stock to two of our executive officers at a price of $0.41$1.375 per share; (ii) an option to acquire 30,000 shares of our common stock to one of our board members at a price of $0.55 per share; (iii) an option to acquire 15,000 shares of our common stock to a regional sales manager at a price of $0.55 per share; (iv) an option to acquire 15,000 shares of our common stock to a regional sales manager at a price of $0.49 per share; and (v) an option to acquire 50,000 shares of our common stock to an executive officer at a price of $0.78 per share. These optionsshare, which vest ratably over 48 months, or upon a change in control under certain circumstances, and which expire after five years,years. Such options were granted at 120% of the market value as of the date of grant. In addition, during 2013, we granted options to acquire 90,000 shares of our common stock to three of our non-employee directors. These options which vested upon the date of grant, and which expire after five years, were granted at 120%110% of the market value as of the date of grant.
The following table summarizes information with respect to each person’sexecutive officer’s outstanding stock options at December 31, 2014.2016.
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2014 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2016 | OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2016 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Option Awards |
| Stock Awards |
|
| Option Awards |
| Stock Awards |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name (a) |
| Number |
|
| Number |
| Equity |
| Option |
| Option |
| Number |
| Market |
| Equity |
|
| Equity |
|
| Number |
|
| Number |
| Equity |
|
| Option |
| Option |
| Number |
|
| Market |
|
| Equity |
|
| Equity |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mark E. Goldstein |
| 29,500 | (1) |
| 0 |
|
|
| — |
|
| 0.24 |
|
| May 12, 2015 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 33,328(1) |
|
|
| 66,672 |
|
| — |
|
|
| 1.38 |
|
|
|
| Aug. 30, 2020 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||||||
|
| 50,000 | (1) |
| 0 |
|
|
| — |
|
| 0.25 |
|
| Aug. 09, 2015 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 18,400 | (1) |
| 0 |
|
|
| — |
|
| 0.22 |
|
| Dec. 13, 2015 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Barry J. Levine |
| 68,748 | (2) |
| 31,252 |
|
|
| — |
|
| 0.24 |
|
| Mar. 13, 2017 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 100,000(2) |
|
|
| — |
|
| — |
|
|
| 0.24 |
|
|
|
| Mar. 13, 2017 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||||||
|
| 21,880 | (2) |
| 28,120 |
|
|
| — |
|
| 0.41 |
|
| Mar. 18, 2018 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 46,876(2) |
|
|
| 3,124 |
|
| — |
|
|
| 0.41 |
|
|
|
| Mar. 18, 2018 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||||||
|
| 13,546 | (2) |
| 36,454 |
|
|
| — |
|
| 0.78 |
|
| Nov. 20, 2018 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 38,544(2) |
|
|
| 11,456 |
|
| — |
|
|
| 0.78 |
|
|
|
| Nov. 20, 2018 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||||||
|
| 12,501 | (3) |
| 237,499 |
|
|
| — |
|
| 0.86 |
|
| Sep. 01, 2024 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 112,505(3) |
|
|
| 137,495 |
|
| — |
|
|
| 0.86 |
|
|
|
| Sep. 01, 2024 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||||||
|
|
| 53,328(4) |
|
|
| 146,672 |
|
| — |
|
|
| 1.25 |
|
|
|
| Aug. 30, 2025 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael B. Hyman |
| 15,309 | (4) |
| 19,691 |
|
|
| — |
|
| 0.41 |
|
| Mar. 18, 2018 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 32,812(5) |
|
|
| 2,188 |
|
| — |
|
|
| 0.41 |
|
|
|
| Mar. 18, 2018 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||||||
_______________ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| 16,672(6) |
|
|
| 33,328 |
|
| — |
|
|
| 1.25 |
|
|
|
| Aug. 31, 2025 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
______________
(1) | These options were granted on |
16
(2) | These options were granted on March 14, 2012, March 19, 2013 and November 21, 2013, and vest 1/48 per month from the date of grant. |
(3) | These options were granted on September 2, 2014 and vest 1/60 per month from the date of grant. |
(4) | These options were granted on August 31, 2015 and vest 1/60 per month from the date of grant. |
(5) | |
| These options were granted on March 19, 2013 and vest 1/48 per month from the date of grant. |
(6) | These options were granted on August 31, 2015 and vest 1/48 per month from the date of grant. |
On March 26, 2014, the Company entered into employment agreements with Mr. Goldstein and Mr. Levine. Pursuant to the employment agreements, each executive is eligible to receive a base salary and an annual bonus of between 25-50% of the executive’s base salary during the applicable bonus period, provided the executive remains employed the entire calendar year, and the Board, in its sole discretion, determines that the executive and the Company, as applicable, met or exceeded all of the goals and objectives of the written annual bonus plan approved by the Board or Compensation Committee.
The agreements are automatically extended for a three-year term,one-year terms (unless terminated within 90 days before the end of the existing term), but may be terminated by either party before that time, with or without cause. The agreements also include terms and provisions to protect our business and confidential information, including standard non-compete, non-solicitation of clients and employees, and no-hire obligations during the term of employment. Upon either Mr. Goldstein’s or Mr. Levine’s termination of employment by the Company not for “cause,” or by Mr. Goldstein or Mr. Levine for “good reason” (as each term is defined in the employment agreement), in addition to already earned salary and any earned but unpaid bonus for the prior year, Mr. Goldstein and Mr. Levine are entitled to receive certain payments and benefits, including: (1) a severance payment equal to 18 months of their then current base salary in effect on the day of termination payable over a period of 18 month period;months; and (2) reimbursement for the costs of continuing health benefits for a period of 18 months following termination. All severance payments and benefits are subject to compliance with the restrictive covenants in the employment agreement (such as the nondisclosure,non-disclosure, non-solicitation, and non-competition provisions) for the 18 months after termination of employment, as well as the receipt of a release from the executive officer.
Each non-employee director must hold the number of shares of common stock equal in value to at least the annual cash compensation of such director, determined as of September 19, 2013. Directors have three years within which to acquire such number of shares (including such number of shares to reflect any increase in cash compensation that occurs during such three year period). In the event the cash compensation of directors is increased after such three year period, directors will have an additional year to raise their ownership to reflect the increased amount of compensation, using the closing price on the day of approval of such compensation increase. Future directors will have three years within which to satisfy initial stock ownership requirements and thereafter, one year to increase their ownership following any increase in cash compensation to directors. Mr. Laber exceedsand Mr. Neri are in compliance with the foregoing stock ownership requirements. Mr. Neri and Ms. Garrett each need to acquire an additional 21,431 and 3,333 shares, respectively, to meet the foregoing stock ownership requirements. They both currently plan to acquire these shares during 2015. For information regarding Ms. Garrett’s, Mr. Laber’s and Mr. Neri’s current beneficial ownership of shares, see the table “Security Ownership of Management.”
As of December 31, 2014,2016, two directors, Mr. Goldstein and Mr. Levine, were full-time executive officers of the Company and received no additional compensation for their service as a director, and Mr. Laber and Mr. Neri and Ms. Garrett were the Board’s non-employee directors. For the 20142016 fiscal year, the annual director fees were $22,500$33,750 for the Audit Chair and $21,000$32,250 for the other non-employee directors. In addition, directors were eligible for option award grants under the Company’s 2005 Stock Incentive Plan and will be eligible for Awards under the 2015 Plan. The following table shows the annual and other compensation of the non-employee directors at December 31, 2014 for services to the Company for 2014.2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
DIRECTOR COMPENSATION FOR 2014 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
DIRECTOR COMPENSATION FOR 2016 | DIRECTOR COMPENSATION FOR 2016 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name (a) |
| Fees Earned |
| Stock |
|
| Option |
| Non-Equity |
|
| Non-Qualified |
|
| All Other |
|
| Total |
|
| Fees Earned |
| Stock |
|
| Option |
| Non-Equity |
|
| Non-Qualified |
|
| All Other |
|
| Total |
| ||||||||||||||||||
Sharon Garrett |
| 17,500 |
| (1) |
| 0 |
|
| 5,492 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| 22,992 |
|
|
|
| 29,375 |
|
| — |
|
|
| 18,509 |
|
| — |
|
| — |
|
| — |
|
| 47,884 |
| |||||||
Gerald J. Laber |
| 22,500 |
|
|
| 0 |
|
| 15,544 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| 37,944 |
|
|
|
| 33,750 |
|
| — |
|
| 18,509 |
|
| — |
|
| — |
|
| — |
|
| 52,259 |
| ||||||||
Philip A. Neri |
| 21,000 |
|
|
| 0 |
|
| 15,544 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| 36,444 |
|
|
|
| 32,250 |
|
| — |
|
| 18,509 |
|
| — |
|
| — |
|
| — |
|
| 50,759 |
|
__________________________
(1)Ms. Garrett’s service as a director beganterminated on February 26, 2014.December 2, 2016.
The following table summarizes information with respect to each non-employee director’s outstanding stock options at December 31, 2014:2016:
Name | Name |
| Number of Securities |
|
| Number of Securities |
| Option |
| Option |
|
| Number of Securities |
|
| Number of Securities |
| Option |
| Option |
| ||||||||||||
Sharon Garrett |
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
| |||||||||||||||||||
(a) |
| (b) |
|
| (c) |
| (d) |
| (e) |
| |||||||||||||||||||||||
Sharon Garrett(1) |
| 19,467(2) |
|
|
| — |
| 1.25 |
|
|
|
| Aug. 30, 2020 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 834(3) |
|
|
| 29,190 |
| 1.26 |
|
|
|
| Nov. 17, 2021 |
| ||||
Gerald J. Laber | Gerald J. Laber |
| 3,125 | (1) |
|
| 0 |
| 0.23 |
|
|
|
| Aug. 09, 2015 |
|
| 30,000(4) |
|
|
| — |
| 0.47 |
|
|
|
| Jul. 23, 2018 |
| ||||
|
|
| 5,625 | (1) |
|
| 0 |
| 0.20 |
|
|
|
| Dec. 13, 2015 |
|
| 18,750(5) |
|
|
| 11,250 |
| 0.79 |
|
|
|
| Jun. 03, 2019 |
| ||||
|
|
| 30,000 | (2) |
|
| 0 |
| 0.47 |
|
|
|
| July 23, 2018 |
|
| 30,000(2) |
|
|
| — |
| 1.25 |
|
|
|
| Aug. 30, 2020 |
| ||||
|
|
| 3,750 | (1) |
|
| 26,250 |
| 0.79 |
|
|
|
| June 03,2019 |
|
| 834(3) |
|
|
| 29,190 |
| 1.26 |
|
|
|
| Nov. 17, 2021 |
| ||||
Philip A. Neri | Philip A. Neri |
| 2,500 | (3) |
|
| 5,000 |
| 0.37 |
|
|
|
| Aug. 18 2016 |
|
| 1,813(4) |
|
|
| — |
| 0.47 |
|
|
|
| Jul. 23, 2018 |
| ||||
|
|
| 22,944 | (2) |
|
| 0 |
| 0.47 |
|
|
|
| July 23, 2018 |
|
| 18,750(5) |
|
|
| 11,250 |
| 0.79 |
|
|
|
| Jun. 03, 2019 |
| ||||
|
|
| 3,750 | (3) |
|
| 26,250 |
| 0.79 |
|
|
|
| June 03,2019 |
|
| 30,000(2) |
|
|
| — |
| 1.25 |
|
|
|
| Aug. 30, 2020 |
| ||||
____________ | |||||||||||||||||||||||||||||||||
(1) | These options were granted on August 10, 2010, December 14, 2010 and June 4, 2014 and vest 1/48 per month from the date of grant. | ||||||||||||||||||||||||||||||||
|
| 834(3) |
|
|
| 29,190 |
| 1.26 |
|
|
|
| Nov. 17, 2021 |
|
____________
(1) | Ms. Garrett’s service as a director terminated on December 2, 2016. |
(2) | These options were granted on August 31, 2015 and vested ½ immediately and the other ½ vested one year from the date of grant. |
(3) | These options were granted on November 18, 2016 and vest 1/36 per month from the date of grant. |
(4) | These options were granted on July 24, 2013 and vested immediately. |
| These options were granted on |
The following table provides certain information with respect to all of the Company’s equity compensation plans in effect as of December 31, 2014.2016.
18
|
| Equity Compensation Plan Information |
|
| Equity Compensation Plan Information |
| ||||||||||||||||||
Plan Category |
| Number of securities |
|
| Weighted-average |
|
| Number of securities remaining |
|
| Number of securities |
|
| Weighted-average |
|
| Number of securities remaining |
| ||||||
Equity compensation plans approved by security holders |
|
| 918,969 |
|
| $ | 0.53 |
|
|
| 2,081,031 |
|
|
| 1,415,928 |
|
|
| 0.98 |
|
| 1,212,385 |
|
|
Equity compensation plans not approved by security holders |
|
| 0 |
|
|
| 0 |
|
| 0 |
|
|
| — |
|
|
| — |
|
| — |
|
| |
Total |
|
| 918,969 |
|
| $ | 0.53 |
|
|
| 2,081,031 |
|
|
| 1,415,928 |
|
|
| 0.98 |
|
| 1,212,385 |
|
|
19
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 2014.2016.
General
EKS&H LLLP served as the Company’s independent auditors for the fiscal year ended December 31, 20142016 and has been selected by the Audit Committee of the Board as the Company’s independent auditors for the fiscal year ending December 31, 2015.2017. EKS&H LLLP has been the Company’s independent auditors since June 2003. A representative of EKS&H LLLP 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 Committee
March 24, 201522, 2017
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 EKS&H LLLP, its independent auditors, the matters required to be discussed by Statement on Auditing Standards No. 16 as adopted by 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’their 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, 20142016 and filed with the SEC.
The Audit Committee is composed of the threetwo 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 for 2014.2016.
Gerald J. Laber, Chairman
Sharon D. Garrett
Philip A. Neri
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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 (EKS&H LLLP) for each of the years ended December 31, 20142016 and 2013.2015.
Audit and Non-Audit Fees |
| 2014 |
| 2013 |
| 2016 |
| 2015 | |||
Audit fees | $ | 86,185 |
| $ | 78,324 |
| $ | 111,140 |
| $ | 100,973 |
Audit-related fees |
| 0 |
|
| 0 |
|
| 113,006 |
| 2,125 | |
Tax fees |
| 26,600 |
|
| 16,850 |
|
| 28,000 |
| 19,410 | |
All other fees |
| 0 |
|
| 39,000 |
|
| — |
|
| 250 |
Total | $ | 112,785 |
| $ | 134,174 |
| $ | 252,146 |
| $ | 122,758 |
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 Quarterly Reports on Form 10-Q. 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.the audits performed for the Company’s acquisition in 2016 of the Prell®, Denorex®, and Zincon® brands of hair and scalp care products. Tax fees primarily include tax compliance, tax advice, including the review of, and assistance in the preparation of, federal and state tax returns. Other fees in 2013 primarily related to software advisory services.
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 theour 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. All of the audit and non-audit services disclosed in the table above were pre-approved by the Audit Committee.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Shareholder proposals for inclusion in the Company’sCompany's proxy materials relating to the next annual meeting of shareholders must be received by the Company on or before January 1, 2016.December 29, 2017. Shareholder director nominations and shareholder proposals to be presented at the annual meeting pursuant to our bylawsBylaws must be received no earlier than January 6, 201611, 2018 and no later than February 5, 2016.9, 2018.
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.
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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 Corporate Secretary of the Company at the principal office of the CompanyCompany; (ii) ensure the notice to the Corporate Secretary is in the proper form and (ii)contains the necessary information as required under Section 2.13 of the Bylaws; and (iii) provide any updates or supplements to such notice as required by Section 2.13.2.13 of the Bylaws. 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 Corporate Secretary of the Company at the principal office of the CompanyCompany; (ii) ensure the notice to the Corporate Secretary is in the proper form and (ii)contains the necessary information as required under Section 2.14 of the Bylaws; and (iii) 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 Corporate Secretary2.14 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 to the Nominating Person that would be required to be disclosed in a
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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.Bylaws.
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 the 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.
20142016 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, 20142016 in the form filed with the SEC should address a written request to Corporate Secretary, Scott’s Liquid Gold-Inc., 4880 Havana Street, Suite 400, Denver, Colorado 80239. The Company’s annual report to shareholders consists of such Form 10-K and accompanies this Proxy Statement.
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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, e-mail, 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 pocketout-of-pocket expenses incurred by them in so doing.
Except as discussed in this Proxy Statement, there are no other matters that the Board intends to present for action at the Annual Meeting. If any other matters are properly brought before the 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 named 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 above Notice and Proxy Statement are sent by order of the Board.
/s/ Barry J. Levine
Corporate Secretary
Denver, Colorado
April 28, 20152017
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Scott’s Liquid Gold-Inc.2015 Equity and Incentive Plan
Introduction
The name of this plan is the Scott’s Liquid Gold-Inc. 2015 Equity and Incentive Plan. The purposes of the Plan are to (a) enable Scott’s Liquid Gold-Inc. and any Affiliate to attract and retain the types of Employees, Consultants and Directors who will contribute to the Company’s long range success; (b) provide incentives that align the interests of Employees, Consultants and Directors with those of the shareholders of the Company; and (c) promote the success of the Company’s business.
The persons eligible to receive Awards are the Employees, Consultants and Directors of the Company and its Affiliates and such other individuals designated by the Committee who are reasonably expected to become Employees, Consultants and Directors after the receipt of Awards.
Awards that may be granted under the Plan include Incentive Stock Options, Non-qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Unit Awards, and Performance Compensation Awards.
Article 1DEFINITIONSAPPENDIX A
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In determining whether this paragraph (a) has been satisfied, the acquisition of ownership by any significant owner will be disregarded. For this purpose, “significant owner” means any person who, as of the Effective Date, is the beneficial owner of 20% or more of the total number of votes that may be cast for the election of Directors.
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A Performance Criteria may be expressed in any form that the Committee determines, including but not limited to: absolute value, ratio, average, percentage growth, absolute growth, cumulative growth, per share of common stock outstanding, or per full-time equivalent employee. In addition, a Performance Criteria may be used to measure the performance of the Company and/or an Affiliate as a whole or any division, business unit or operational unit of the Company and/or an Affiliate or any combination thereof, or as compared to the performance of a group of comparable companies, or published or special index, or the Committee may specify that a Performance Criterion will be measured as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph. To the extent required under Code Section 162(m), the Committee shall, within the first 90 days of a Performance Period (or, if longer or shorter, within the maximum period allowed under Code Section 162(m)), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period. In the event that applicable tax and/or securities laws change to permit the Committee discretion to alter the governing Performance Criteria without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval.
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Article 2ADMINISTRATION
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(provided, however, that the settlement has been approved by the Company, which approval shall not be unreasonably withheld) or paid by the Committee in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee did not act in good faith and in a manner which such person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful; provided, however, that within 60 days after institution of any such action, suit or proceeding, such Committee shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding.
Article 3SHARES SUBJECT TO THE PLAN
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Article 4ELIGIBILITY
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Article 6RESTRICTED STOCK AWARDS
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Article 7STOCK APPRECIATION RIGHTS
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Article 8RESTRICTED STOCK UNIT AWARDS
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Article 9PERFORMANCE COMPENSATION AWARDS
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Article 10SECURITIES LAW COMPLIANCE
Each Award Agreement may provide that no shares of Common Stock shall be purchased or sold thereunder unless and until (a) any then applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel and (b) if required to do so by the Company, the Participant has executed and delivered to the Company a letter of investment intent in such form and containing such provisions as the Committee may require. The Company will use reasonable efforts to seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise of the Awards; provided, however, that this undertaking does not require the Company to register under the Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Awards unless and until such authority is obtained.
Article 11USE OF PROCEEDS FROM STOCK
Proceeds from the sale of Common Stock pursuant to Awards, or upon exercise thereof, will constitute general funds of the Company.
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Article 12MISCELLANEOUS
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Article 13EFFECT OF CORPORATE TRANSACTION
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Article 14AMENDMENT OF THE PLAN AND AWARDS
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Article 15GENERAL PROVISIONS
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Article 16EFFECTIVE DATE OF PLAN
The Plan is effective as of the Effective Date, but no Award may be exercised (or, in the case of a stock Award, may be granted) unless and until the Plan has been approved by the shareholders of the Company within twelve months after the Effective Date.
Article 17TERMINATION OR SUSPENSION OF THE PLAN
The Plan will terminate automatically on April 17, 2025. No Award may be granted pursuant to the Plan after such date, but Awards granted before such date may extend beyond that date. The Board may suspend or terminate the Plan at any earlier date pursuant to Section 14.1 hereof. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated. Unless the Company determines to submit Article 9 of the Plan and the definition of “Performance Goal” and “Performance Criteria” to the Company’s shareholders at the first shareholder meeting that occurs in the fifth year following the year in which the Plan was last approved by shareholders (or any earlier meeting designated by the Board), in accordance with the requirements of Code Section 162(m), and such shareholder approval is obtained, then no further Performance Compensation Awards may be made to Covered Employees under Article 9 after the date of such annual meeting, but the Plan may continue in effect for Awards to Participants not in accordance with Code Section 162(m).
Article 18CHOICE OF LAW
The law of the State of Colorado will govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of law rules.
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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 consultantsconsultants 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;
5. To review the Company’s bonus and other long-term incentive plans and to determine if procedures followed historically are the most effective; and
6. To consider, subjectsubject 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.
VOTE BY INTERNET - www.proxyvote.comSCOTT'SSCOTT'S LIQUID GOLD-INC. C/O BROADRIDGEP.O.BROADRIDGE P.O. BOX 1342BRENTWOOD,1342 BRENTWOOD, NY 11717Use11717 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 meeting date. Have your proxy card in hand when you access the web sitewebsite 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 - 1-800-690-6903Use1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until11:until 11:59 p.m. Eastern Time the day before the 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,51Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: M92739-P66032-Z65441THISE28309-P92005 THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. To withhold authority to vote for any individual All All Except nominee(s), mark “For All Except” and write the The Board of Directors recommends you vote FOR the number(s) of the nominee(s) on the line below. following nominees: SCOTT'S LIQUID GOLD-INC. For Withhold For All 1.Election1. Election of Directors!Directors !! ! Nominees:01)Sharon D. Garrett04) Mark E. Goldstein 03) Barry J. Levine02)Mark E. Goldstein05)Philip A. Neri03)Levine 02) Gerald J. Laber, CPA The Board of Directors recommends you vote FOR the 2015 Equity and Incentive Plan.ForAgainst2.Adoption of 2015 Equity and Incentive Plan.!!04) Philip A. Neri 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 (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.M92740-P66032-Z65441www.proxyvote.com. E28310-P92005 PROXY STATEMENTANNUALSTATEMENT ANNUAL MEETING OF SHAREHOLDERS To Be Held June 4, 2015The14, 2017 The enclosed proxy is solicited by and on behalf of the Board of Directors 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 Thursday,Wednesday, June 4, 201514, 2017 at the DoubletreeDoubleTree by Hilton, 3203 Quebec Street, Denver, Colorado 80207, 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 28, 2015.Any2017. 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. By signing the proxy, you revoke all prior proxies and appoint Mark E. Goldstein and Barry J. Levine, and each of them acting in the absence of the other, with full power of substitution, as your proxies to vote all the shares on the matters shown on the reverse side and any other matters which may come before the Annual Meeting and any adjournment thereof. If no choice is specified, the proxy will vote "FOR" the election of directors and "FOR" adopting the 2015 Equity and Incentive Plan.directors. The proxy may vote in his discretion on such other business as may properly come before the meeting or any adjournment thereof. Continued and to be signed on reverse side