March 21, 1997
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: SCOTT'S LIQUID GOLD-INC.
DEFINITIVE SOLICITING MATERIAL FOR 1997 ANNUAL MEETING
Ladies and Gentlemen:
On behalf of Scott's Liquid Gold-Inc. (the "Company"), and pursuant to
Rule 14a-6, there are transmitted with this letter the following documents:
1. The definitive Notice and Proxy Statement for the annual meeting of
shareholders of the Company to be held on May 7, 1997;
2. As an appendix, the form of proxy card for such meeting; and
3. A cover sheet for such proxy materials.
In addition, we are sending separately to you a paper copy of the
performance graph, in definitive form, as required by Regulation S-K, Item
402(1).
The proxy materials are being mailed to the Company's shareholders on
March 21, 1997.
Please contact Mark R. Levy of Holland & Hart LLP, Suite 3200,
555 Seventeenth Street, Denver, Colorado 80202, (303/295-8073), our corporate
counsel, or the undersigned if you have any questions. Thank you.
Very truly yours,
SCOTT'S LIQUID GOLD-INC.
By: /s/ Barry Shepard
Barry Shepard, Treasurer
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant : X
Filed by a Party other than the Registrant
Check the Appropriate box:
Preliminary Proxy Statement 9 Confidential for Use of the
Commission Only (as permitted
X Definitive Proxy Statement by Rule 14a-6(e)(2))
Definitive Additional Materials
Soliciting Material Pursuant to ' 240.14a-11(c) or ' 240.14a-12
Scott's Liquid Gold-Inc.
(Name of Registrant as Specified in its Charter)
- ---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-------
2) Aggregate number of securities to which transaction applies:
-------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------
4) Proposed maximum aggregate value of transaction:
-------
5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
SCOTT'S LIQUID GOLD-INC.
4880 HAVANA STREET
DENVER, COLORADO 80239
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD MAY 7, 1997
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Scott's Liquid Gold-Inc., a Colorado
corporation (the "Company"), will be held at 10:00 a.m., Mountain Time, on
Wednesday, May 7, 1997 at the Company's offices, 4880 Havana Street, Denver,
Colorado for the purpose of considering and acting upon the following:
(1) The election of seven directors;
(2) Such other matters as may properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on March 5, 1997 are
entitled to notice of and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
CAROLYN J. ANDERSON
Corporate Secretary
Denver, Colorado
March 21, 1997
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.
SCOTT'S LIQUID GOLD-INC.
4880 HAVANA STREET
DENVER, COLORADO 80239
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 7, 1997
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 10:00 a.m., Mountain
Time, on Wednesday, May 7, 1997 at the Company's offices, 4880 Havana Street,
Denver, Colorado, 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 March 21, 1997.
Any shareholder signing and mailing the enclosed Proxy may revoke it at any
time before it is voted by giving written notice of the revocation to the
Company's Corporate Secretary, by voting in person at the meeting or by filing
at the meeting a later executed proxy.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
All voting rights are vested exclusively in the holders of the Company's
$0.10 par value common stock. Each share of the Company's common stock is
entitled to one vote. Cumulative voting in the election of directors is not
permitted. Holders of a majority of shares entitled to vote at the meeting,
when present in person or by proxy, constitute a quorum. On March 5, 1997, the
record date for shareholders entitled to vote at the meeting, the Company had
10,030,900 shares of its $0.10 par value common stock issued and outstanding.
When a quorum is present, in the election of directors, those seven
nominees having the highest number of votes cast in favor of their election will
be elected to the Company's Board of Directors. 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 which may properly come before the Meeting,
unless a greater number of votes is 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 these other matters so long as a
quorum is present.
The following persons are the only persons known to the Company who on
March 5, 1997, owned beneficially more than 5% of the Company's common stock,
its only class of outstanding voting securities:
<TABLE>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
---------------- -------------------- --------
<S> <C> <C>
Jerome J. and Goldie 2,439,367 (1)(3) 24.3%
S. Goldstein
4880 Havana Street
Denver, Colorado
80239
Jerome J. Goldstein 70,500 (2)(3) 0.7%
4880 Havana Street
Denver, Colorado
80239
Scott's Liquid Gold- 1,194,284 (4) 11.9%
Inc.
Employee Stock
Ownership Plan
4880 Havana Street
Denver, Colorado
80239
</TABLE>
(1) These shares are 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 Mr. and Mrs. Goldstein, two
of their children, and certain of their relatives. Mr. and Mrs. Goldstein
are the sole stockholders and directors of the Goldstein Family
Corporation. Mr. and Mrs. Goldstein share the voting and disposition
powers with respect to these shares.
(2) These shares underlie presently exercisable incentive stock options granted
under the Company's 1986 Incentive Stock Option Plan.
(3) Does not include 129,402 shares held by the Company's Employee Stock
Ownership Plan attributable to Mr. Goldstein's vested interest in the Plan.
(4) The six person committee administering the Employee Stock Ownership Plan
directs the voting of shares held under such Plan. Three of the Company's
four executive officers are members of this six-person committee.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows as of March 5, 1997, the shares of the Company's
common stock beneficially owned by each director and executive officer of the
Company and the shares beneficially owned by all of the directors and executive
officers as a group:
<TABLE>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OF CLASS
---------------- -------------------- --------
<S> <C> <C> <C>
Jerome J. Goldstein 2,509,867 (2)(7) 24.9%
Mark E. Goldstein 479,782 (3)(7) 4.7%
Carolyn J. Anderson 288,460 (4)(7) 2.9%
Barry Shepard 274,500 (5)(7) 2.7%
Dennis H. Field 151,833 (6) 1.5%
James F. Keane 105,833 (6) 1.0%
Michael J. Sheets 128,333 (6) 1.3%
All Directors and 3,902,609 (7) 37.1%
executive officers
as a Group (7
persons)
</TABLE>
<TABLE>
(1) Beneficial owners listed have sole voting and disposition power with
respect to the shares shown unless otherwise indicated.
(2) Of these shares, 2,439,367 are held by the Goldstein Family Partnership,
Ltd., as to which Mr. and Mrs. Jerome J. Goldstein share voting and
disposition powers. See footnote 1 under the table in ``oting Securities
and Principal Shareholders.'' Also includes 70,500 shares underlying
presently exercisable stock options granted to Jerome J. Goldstein under
the Company's 1986 Incentive Stock Option Plan.
(3) Includes 70,500 shares underlying presently exercisable stock options
granted to Mark E. Goldstein under the Company's 1986 Incentive Stock
Option Plan. Also includes 92,892 shares held by Mr. Goldstein's wife and
minor children.
(4) Includes 70,500 shares underlying presently exercisable stock options
granted to Mrs. Anderson under the Company's 1986 Incentive Stock Option
Plan.
(5) Includes 70,500 shares underlying presently exercisable stock options
granted to Mr. Shepard under the Company's 1986 Incentive Stock Option
Plan.
(6) Includes for Mr. Sheets, 48,333 shares, for Mr. Field 148,333 shares and
for Mr. Keane 103,333 shares underlying presently exercisable stock options
granted by the Company's Board of Directors under the Company's 1993 Stock
Option Plan for Outside Directors.
(7) Does not include shares owned by the Company's Employee Stock Ownership
Plan under which, at December 31, 1996, Jerome J. Goldstein has a vested
interest in 129,402 shares, Mark E. Goldstein has a vested interest in
78,905 shares, Carolyn J. Anderson has a vested interest in 118,458 shares,
and Barry Shepard has a vested interest in 70,763 shares.
There has been no change in control of the Company since the beginning of
the last fiscal year, and there are no arrangements known to the Company,
including any pledge of securities of the Company, the operation of which may at
a subsequent date result in a change in control of the Company.
ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
NOMINEES
- --------
The Company's Board of Directors consists currently of seven directors.
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
seven nominees for director named below. If, at the time of the Meeting, any of
these nominees shall have become unavailable for any reason for election 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:
<CAPTION>
NAME OF NOMINEE AND
POSITION,IF ANY,
IN THE DIRECTOR PRINCIPAL OCCUPATION FOR
COMPANY AGE SINCE LAST FIVE YEARS
<S> <C> <C> <C>
Jerome J. Goldstein 74 1954 Chairman of the Board of
(Chairman of the the Company since August,
Board) 1990. From 1954 to 1990,
President and Chairman of
the Board of the Company.
Mark E. Goldstein 40 1983 President of the Company
(President and since August, 1990. From
Chief Executive 1982 to 1990, Vice
Officer) President-Marketing of
Company. Employed by the
Company since 1978.
Carolyn J. Anderson 58 1974 Executive Vice President
(Executive Vice since 1974, Chief Operating
President, Chief Officer of the Company
Operating Officer since 1982 and Corporate
and Corporate Secretary since 1973.
Secretary) Employed by the Company
since 1970.
Barry Shepard 66 1982 Treasurer and Chief
(Treasurer and Financial Officer of the
Chief Company since 1981 when
Financial Officer) employed by the Company.
Dennis H. Field 64 1991 Management Consultant since
1990. From 1984 to 1990,
Executive Vice
President/General Manager,
Faberge USA, Inc. (mass
market health and beauty
aids).
James F. Keane 63 1993 Independent businessman
since 1987 and Founder and
advisor of Repower
Industries, Inc.
(distributor of auto and
marine engines and parts)
since January, 1997. From
1991 to 1997, President of
Engine World Inc. (a
predecessor of Repower
Industries, Inc. and
distributor of auto and
marine engines). From 1990
to 1992, Marketing
Professor at Bentley
College. From 1974 to
1987, Vice President, S.C.
Johnson & Son, Inc.
(household and personal
care products).
Michael J. Sheets 66 1990 Principal, Gerald
Schonfeld, Inc. (new
product concepts) since
August 1994. President,
The French Culinary
Institute, from February
1994 to August 1994.
Consultant, October, 1990
to present. From 1975 to
1990, President of Airwick
Industries, Inc. (household
products).
All of the foregoing persons are currently directors of the Company. Their
positions on standing committees of the Board of Directors are shown below under
"Directors' Meetings and Committees".
The Company's only executive officers are those who are described in the
foregoing table. The officers of the Company are elected annually at the first
meeting of the Company's Board of Directors held after each annual meeting of
shareholders and serve at the pleasure of the Board of Directors.
Mark E. Goldstein is the son of Jerome J. Goldstein. With this exception,
there are no family relationships among the executive officers or directors, and
there are no arrangements or understandings pursuant to which any of them was
elected as an executive officer or director.
DIRECTORS' MEETINGS AND COMMITTEES
- -----------------------------------
During the year ended December 31, 1996, the Company had four directors
meetings, plus seven actions by unanimous written consent. The Company's Board
of Directors has both a Compensation Committee and an Audit Committee.
The primary responsibilities of the Compensation Committee include development
of an executive compensation philosophy for the Company; origination of all
executive compensation proposals; review of the appropriate mix of variable
versus fixed compensation; and review of all transactions between the Company
and any executive officer or director, whether or not involving compensation.
The Committee consists of at least two or more outside directors of the Company
and, in addition, the Chairman of the Board of the Company. Current members of
the Compensation Committee are Dennis H. Field (Chairperson), Michael J. Sheets,
and Jerome J. Goldstein (with Mr. Goldstein having no vote). The Compensation
Committee met two times during 1996.
The Audit Committee has as its primary responsibilities the recommendation of
an independent public accountant to audit the annual financial statements of the
Company, the review of internal and external audit functions, the review of
internal accounting controls, the review of annual financial statements, and a
review at its discretion of compliance with corporate policies and codes of
conduct. The Audit Committee is comprised of outside directors. The current
members of the Audit Committee are Michael J. Sheets (Chairperson), James F.
Keane, and Dennis H. Field. The Audit Committee met two times during 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
- ---------------------------------------------------------------
The Compensation Committee includes two persons who are or have
previously been employed by the Company or its subsidiaries. Jerome J.
Goldstein is Chairman of the Board of the Company and, prior to August 1990, was
also the President and Chief Executive Officer of the Company. Mr. Goldstein is
a non-voting member of the Committee. From 1978 to 1982, Dennis H. Field was
President and Chief Operating Officer of Aquafilter Corporation, a wholly-owned
subsidiary of the Company which manufactured cigarette filters. After leaving
Aquafilter Corporation, Mr. Field had virtually no contact with the Company from
the date of his resignation to 1991 when he was asked to join the Company's
Board. Prior to 1991, he was Executive Vice President/General Manager, U.S.
Division, of Faberge. Mr. Field has a distinguished career with significant
consumer product companies.
Michael J. Sheets, a director and member of the Compensation Committee,
is a consultant to the Company, providing advice primarily in the areas of
marketing and advertising. Mr. Sheets became a consultant at the time of
joining the Company's Board of Directors in 1990. He is paid $1,667 per month
for his services as a consultant. Mr. Sheets was, prior to October, 1990,
President and Chief Executive Officer of Airwick Industries (Reckitt and Colman
Household Products), a large competitor of the Company, and has a distinguished
career in consumer products manufacturing, advertising and sales.
EXECUTIVE COMPENSATION
- -----------------------
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table shows the annual and other
compensation of the chief executive officer and all other executive officers of
the Company for services in all capacities provided to the Company and its
subsidiaries for the past three years.
</TABLE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
SECURITIES
OTHER UNDERLYING ALL OTHER
NAME AND ANNUAL (NO. OF COMPENSATION
PRINCIPAL SALARY BONUS COMPENSATION SHARES)
POSITION YEAR $ $(1) $ (2) ($)(3)
<S> <C> <C> <C> <C> <C> <C>
Mark E. 1996 $350,000 $ 32,373 $65,053 - $5,356
Goldstein
President and 1995 $350,000 $104,097 $23,054 - $4,075
Chief
Executive 1994 $250,000 $256,148 $16,228 20,500 $3,237
Officer
Jerome J. 1996 $350,000 $32,373 $82,023 - $5.356
Goldstein 1995 $350,000 $104,000 $93,044 - $4,075
Chairman of 1994 $350,000 $256,148 $95,882 20,500 $3,237
the Board
Carolyn J. 1996 $300,000 $ 32,373 $27,656 - $5.356
Anderson 1995 $300,000 $104,097 $72,867 - $4,075
Executive 1994 $275,000 $256,148 $23,912 20,500 $3,237
Vice
President,
Chief Operating
Officer,Corporate
Secretary
Barry 1996 $220,000 $ 32,373 $44,143 - $5.356
Shepard 1995 $220,000 $104,097 $37,951 - $4,075
Treasurer and 1994 $200,000 $256,148 $75,714 20,500 $3,237
Assistant
Secretary
</TABLE>
Note: There were no restricted stock awards or long term incentive payouts
during the last three fiscal years.
(1) The Company has adopted a bonus plan for its
executive officers for the 1997 year. The Plan provides that an amount will be
distributed to the Company's executive officers equal to 10% of the annual
before tax profit exceeding $1 million, excluding items that are infrequent,
unusual, or extraordinary. Such amount, if any, for 1997 will be divided
equally among the Company's four executive officers. In no event is a bonus
paid unless pre-tax profits, excluding the above-mentioned items, exceed
$1,000,000 for the fiscal year, nor is any bonus paid on the first $1,000,000 of
pre-tax earnings, excluding above-mentioned items. The Company had substantially
the same plan in 1996, 1995 and 1994.
(2) Key employees, including executive officers (but
excluding any person who serves only as a director), who from time to time are
responsible for the management, growth and protection of the business of the
Company, are eligible to be granted options under the Company's 1986 Incentive
Stock Option Plan. No option under the 1986 Plan may be exercised more than ten
years after it is granted, and the exercise price must be at least 100% of the
fair market value of the Company's stock on the date of grant. If an employee
owns more than 10% of the Company's outstanding stock, then these limitations
are five years from the date of grant and 110% of the fair market value.
Options may not be granted to any person in any year to purchase shares having
an aggregate fair market value greater than $100,000 at the date the option is
granted. Payment for shares purchased upon the exercise of any option must be
made in cash.
(3) All Other Compensation for each of the executive
officers consists of Company contributions under an Employee Stock Ownership
Plan and Trust Agreement ("ESOP") which provides that the Company may contribute
annually to the ESOP cash or common stock in an amount not to exceed 15% of all
participants' total compensation. The Board of Directors determines whether any
contributions will be made for the year. Benefits are allocated to all eligible
employees according to a formula based on compensation, except that any income
earned on assets of the Trust is allocated to ESOP participants based upon the
value that each participant's account bears to the total value of Trust assets.
There were no changes in the base salaries of the Company's four officers
from October 30, 1988 through December 31, 1994. In the aggregate, executive
officers' base salaries were increased by 13.5% for 1995, and there have been no
changes since that year.
The dollar amount of Other Annual Compensation changes from year to year
because of fluctuations in the costs of benefits and their timing. Other Annual
Compensation in the table above for 1994 through 1996 is comprised of the
following:
<TABLE>
<CAPTION>
Mark E. Goldstein Jerome J. Goldstein Carolyn J. Anderson Barry Shepard
1994 1995 1996 1994 1995 1996 1994 1995 1996 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Automobile $ - $ - $20,050 $ - $ - $ - $ - $25,000 $ $24,000 $ - $ -
purchase (1)
Income taxes
on
automobile - - 19,302 - - - - 22,384 - 21,489 - -
purchase (1)
Other
automobile
expenses 3,512 2,364 2,426 2,972 1,463 989 2,656 3,355 1,409 3,460 2,512 1,557
Memberships 2,472 7,505 10,433 2,885 6,655 8,443 824 3,052 4,343 912 3,352 6,127
Life
insurance 2,345 2,345 2,446 39,437 35,150 35,150 8,220 8,220 8,220 12,956 12,956 14,822
Income taxes on
life
insurance 1,911 2,022 1,888 28,644 34,017 28,298 6,680 7,089 6,617 7,907 11,174 10,431
Medical
plan(2) 3,391 6,382 6,072 16,512 12,417 5,801 4,154 1,870 5,170 2,391 5,521 8,770
Other 2,597 2,436 2,436 5,432 3,342 3,342 1,378 1,897 1,897 2,599 2,436 2,436
Total
other $16,228 $23,054 $65,053 $95,882 $93,044 $82,023 $23,912 $72,867 $27,656 $75,714 $37,951 $44,143
compensation
</TABLE>
(1)Commencing in 1990, the Company adopted a policy of providing $25,000 every
three years to each executive officer for the purchase of an automobile and
paying the executive officer an amount to compensate the executive for the
additional tax obligations resulting from that purchase.
(2)In addition to group life, health, hospitalization and medical reimbursement
plans which generally are available to all employees, the Company has adopted a
plan which provides for additional medical coverage of not more than $50,000 per
year to each of the Company's executive officers.
The Company maintains a Key Executive Disability Plan, which is not reflected
in the table above. The purpose of this Plan is to provide the executive with
his or her regular salary during periods of long-term disability in excess of 90
days to age 70, or to date of death, whichever first occurs; and to provide the
Chairman of the Board with the same benefit for life. The benefits available
under this Plan will cease upon termination of employment as an executive
officer of the Company other than during a period of disability. The Plan is
partially funded by disability insurance maintained by the Company under which
the Company is the beneficiary.
OPTIONS GRANTED
No options were granted to the Company's executive officers during the last
fiscal year.
OPTIONS EXERCISES IN 1996 AND YEAR-END OPTION VALUES
No options were exercised by any of the Company's executive officers during
1996. The following table summarizes information with respect to the value of
each officer's unexercised stock options at December 31, 1996.
<TABLE>
<CAPTION>
FISCAL YEAR END OPTION VALUES
Number of Securities In-the-Money
Underlying Unexercised Value of Unexercised
Options at Year End Options at Year End(1)
Name Exercisable Unexerciable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Mark E. Goldstein 70,500 0 0 0
Jerome J. Goldstein 70,500 0 0 0
Carolyn J. Anderson 70,500 0 0 0
Barry Shepard 70,500 0 0 0
</TABLE>
(1) The exercise price of unexercised options exceeded the market price of the
Company's stock at December 31, 1996.
COMPENSATION COMMITTEE REPORT
Introduction and Background
The Compensation Committee of the Board of Directors was created in March,
1992 and includes two outside directors. The responsibilities of Compensation
Committee include the origination of all executive compensation proposals.
The two outside directors on the Committee were also members of a special
litigation committee which in 1991 and 1992 considered compensation issues.
With the assistance of its counsel and the Hay Group, which is a well known,
respected compensation and management consulting firm, the special litigation
committee conducted an intensive investigation and analysis of the Company's
executive compensation and concluded that compensation paid to the executive
officers from 1985 to 1991 was fair. A report issued by that committee served
as the basis for the 1992, 1993 and 1994 compensation of the executive officers,
which continued an existing base salary, a bonus plan and other benefits.
In making decisions regarding executive compensation, the Compensation
Committee considers a number of factors. The Compensation Committee has also
determined that an outside consultant on compensation matters should be used
once every three years.
Organization Philosophy
The Committee believes that the Company's organization and the specific
responsibilities of the four executive officers are an essential part of
analyzing compensation levels. The first important point concerning the
management of the Company is that the four executives subscribe to a team
concept of executive management, and operate in accordance with this concept.
Although each of the executive officers has his or her specific areas of
responsibility and each is able to and often does make independent decisions,
the executive officers operate as a collaborative team, and very few significant
decisions are made without input from the group as a whole.
Second, each executive officer is responsible for a number of distinct
areas and tasks. Each performs many tasks traditionally associated with "middle
management" in other companies in addition to their respective duties of top
level or executive management. As a result, the Company has very little "middle
management" and operates as a fairly lean organization compared to many of its
competitors. In a real sense, this management organization has saved the
Company substantial amounts of money over the years. Also the few middle
managers in the Company have virtually no role in setting Company policy or in
making significant management decisions, all of which are handled by one or more
of the four executive officers.
Jerome J. Goldstein is the founder of the Company and served as its
President, Chief Executive Officer and Chairman of the Board until August 1990.
In August 1990 he relinquished the titles of President and Chief Executive
Officer to Mark E. Goldstein, his son. Mr. Goldstein's relinquishment of the
positions of President and CEO was in no sense a retirement, nor a reduction in
his contribution to the Company and its performance. Jerome Goldstein remains
today the most important driving force behind Company policy. Finally, the
Company still relies greatly on Mr. Goldstein's entrepreneurial skills and his
talent with respect to product development and design. Since the Company's
success is driven by the quality and marketability of its current products and
the development of new products, these skills cannot be minimized when assessing
Jerome Goldstein's contributions to the Company, both presently and over time.
Mark E. Goldstein has the basic responsibilities associated with being a
CEO of a public company. He is also actively involved in the sales and
marketing efforts of the Company. For example Mark Goldstein is the primary
contact with the Company's largest account, Wal-Mart Stores, Inc., and he
directs the Company's advertising and promotional efforts. He ultimately is
responsible for the day-to-day operations of the Company, although he relies on
the other three executive officers for their advice and counsel.
Carolyn J. Anderson has been employed by the Company for twenty-seven
years, longer than anyone on the executive team other than Jerome Goldstein.
She became Corporate Secretary in 1973; she was promoted to Executive Vice
President in 1974; and Ms. Anderson was given the additional title and
responsibilities of Chief Operating Officer in 1982. As Chief Operating
Officer, Ms. Anderson has the most direct responsibility and decision-making
authority with respect to the day-to-day operations of the Company's plant and
facilities. Additionally, Ms. Anderson directs the Company's research and
development activities. Ms. Anderson also plays a major role, in cooperation
with Barry Shepard, with respect to the Company's "human resources" decisions.
It should be noted that the Company does not have a director of human resources.
Further, Ms. Anderson is, together with Mr. Shepard, the primary contact for
the Company's legal matters.
Barry Shepard performs all of the traditional functions of Treasurer and
Chief Financial Officer, including negotiations and maintenance of relationships
with creditors and the trustee for the Company's bonds. He has been with the
Company since 1981, and his role on the executive team has increased during his
tenure with the Company. Mr. Shepard supervises all of the back office
functions of the Company, including accounting, data processing, computer
operations and personnel. In addition, he is an active participant in the
Company's extensive market research program.
Factors
In determining its recommendations on executive compensation, the Committee
considered the management organization as described above and the following
factors, among others:
(a) Services performed and time devoted to the Company by the executive;
(b) Amounts paid to executives in comparable companies;
(c) The size and complexities of the business;
(d) Successes achieved by the executive;
(e) The executive's abilities;
(f) Increase in volume of business during the executive's tenure;
(g) Corporate earnings and profits;
(h) Comparison on salary with distributions to stockholders;
(i) Prevailing economic conditions;
(j) Compensation paid to other employees of the corporation; and
(k) The amount previously paid to the executive.
Utilizing these factors, the Compensation Committee recommended that the
base salaries of the Company's executive officers remain the same in 1996 as in
1995 and that the components of other compensation provided to the Company's
executive officers also remain the same in 1996 as in 1995. These recom-
mendations were adopted by the Company's Board of Directors.
In making the recommendations, the Compensation Committee noted, among
other things, that: With respect to base salaries, the base salaries of the
Company's four executive officers prior to 1995 had not changed since October
30, 1988; the Chairman of the Board requested no increase in his base salary in
1995 and did not receive an increase; the executive officers' base salaries were
increased in the aggregate by 13.5% for 1995; this modest increase continues to
take into account the performance of each executive as well as the
responsibilities of Mark E. Goldstein as President and Chief Executive Officer;
the bonus plan has been in effect for a number of years, with a result of
decreasing compensation in 1995 because of the Company's performance; the levels
of the bonus plan and other components of compensation have been in effect for a
number of years; the Company's officers have not received stock options since
1994 and no stock options were recommended for 1996; the anticipated amounts
paid for the base salary and bonus in 1996 were and are expected to be tax
deductible, without being subject to a limitation on the deductibility of
certain compensation in excess of $1 million under the Internal Revenue Code;
the Company has continued to be successful with its cosmetic products, which
have been expanded; the Company has continued to have a strong core of business
consisting of its household chemical products; the Company has reformulated
Touch of Scent so that it is an improved product which meets new environmental
standards; the Company's officers completed the Company's physical plant
expansion at the end of 1995 and early 1996, which expansion was financed as a
result of the efforts of the officers through the issuance of bonds in 1994; and
the Company's stock was listed on the New York Stock Exchange in 1994 and
continues to be so listed.
In connection with recommending the compensation of executive officers for
1995, the Compensation Committee did engage the Hay Group for a review of
competitiveness of the Company's executive compensation levels. In summary, the
Hay Group found that, while some executives' total direct compensation levels
are relatively high and others relatively low compared to competition, in total
the compensation levels of the Company's executive officers are within
competitive ranges.
The Company's 1996 executive bonus plan provided for a bonus pool based on
100% of pre-tax profits (excluding items that are infrequent, unusual, or
extraordinary) for a year in excess of $1 million. The four key executive
officers shared equally the bonus awarded under the plan. The Company had
substantially the same plan in prior years. The Compensation Committee believes
that this bonus plan is an important part of the incentives for the Company's
executive officers and recognizes directly many of the factors considered
important by the Compensation Committee as are stated above.
The Company provides certain other benefits and perquisites to the
executive officers. The Committee believes that the types of benefits offered to
Company executives and the value of these benefits are similar to benefit
packages provided by competitors. While the Hay Group report in 1992 found that
the Company had a comprehensive executive benefits package, there are several
other common benefit programs that the Company does not provide to its
executives. A number of the benefits are provided by the Company not only to
the executive officers but also to other Company employees. These benefits are
appropriate for their positions, to compensate them consistent with market
levels and to facilitate performance of their jobs in a more efficient and
effective manner.
In conclusion, the factors described above remain applicable for 1996, and
the Compensation Committee believes that the levels of compensation for the
Company's four executive officers have been fair and appropriate.
COMPENSATION COMMITTEE
Dennis H. Field
Michael J. Sheets
Jerome J. Goldstein
STOCK PERFORMANCE GRAPH
There follows a graph, constructed for the Company, comparing the cumulative
total shareholder return of Scott's Liquid Gold-Inc. common stock to the NYSE
Composite Index and to a selected peer group.
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Scott's Liquid Gold 100 154.55 618.18 873.02 434.82 226.86
Peer Group 100 117.48 126.56 142.4 191.42 257.36
NYSE 100 104.7 118.88 116.57 151.15 182.08
</TABLE>
Fiscal year ended December 31
Assumes $100 invested on December 31, 1991 in
the Company, the Peer Group, and
The NYSE Composite Index
and assumes the reinvestment of any dividends
Note: The foregoing graph was prepared for the Company by Media General
Financial Services of Richmond, Virginia. The peer group selected by the
Company consists of companies which use the standard industrial classification
of specialty cleaning and sanitation and which are publicly held, and other
publicly held companies which are partially or entirely engaged in the cosmetics
business. The Company believes that, within its industry classes, the assembly
of a peer group is difficult because the Company competes with other companies
which are significantly larger than Scott's Liquid Gold-Inc., including two
major companies which are not publicly traded.
The following companies comprise the peer group: Armor All Products Corp., Avon
Products, Inc., Clorox Co., Cosmetic Group USA, Inc., NCH Corp., Nutramax
Products, Inc., Ocean Bio-Chem, Inc., Procter & Gamble, and Stephan Co.
COMPENSATION OF DIRECTORS
Four directors are full-time executive officers of the Company and receive no
additional compensation for service as a director. Michael J. Sheets, Dennis H.
Field, and James F. Keane are non-employee directors. The Company pays $2,500
per month to each non-employee director for his services as director. Mr.
Michael J. Sheets is also paid $1,667 per month as a consultant to the Company,
primarily in the area of marketing and advertising.
On January 15, 1993, the Company's Board of Directors adopted the Company's
1993 Stock Option Plan for Outside Directors (the "Plan"), which was approved by
the Company's shareholders on May 5, 1993. The Plan provides for the granting
of options to directors who are not employees of the Company. (There are
currently three outside directors, but the number of outside directors may
change in the future.) The purpose of the Plan is to further the growth and
development of the Company by providing an incentive to outside directors of the
Company, by increasing their involvement in the business and affairs of the
Company, by helping the Company to attract and retain well qualified directors
and/or by rewarding directors for their past dedication to the Company. The
Plan became effective on January 15, 1993.
A maximum of 400,000 shares of the Company's common stock are available for
issuance upon the exercise of options granted under the Plan. The number of
shares available under the Plan, the number of shares subject to outstanding
options, and the exercise price per share of such options are subject to
adjustment upon the occurrence of stock dividends, stock splits, mergers,
consolidations, recapitalizations, combinations or exchanges of stock, or other
similar circumstances. If any option under the Plan terminates or expires, the
shares allocable to the unexercised portion of the option will again be
available for purposes of the Plan.
The Plan is administered by the Board of Directors or a committee appointed
by and serving at the pleasure of the Board of Directors, consisting of no fewer
than two directors. The Plan is currently administered by the Board of
Directors. At March 5, 1997, options to purchase 399,999 shares of the
Company's common stock had been granted under the Plan, 148,333 each to Michael
J. Sheets and Dennis H. Field (with an exercise price of $1.09 for 100,000
shares, $4.87 for 45,000 shares and $2.00 for 3,333 shares), and 103,333 to
James F. Keane (with an exercise price per share of $1.66 for 5,000 shares,
$3.00 for 50,000 shares, $4.87 for 45,000 shares and $2.00 for 3,333 shares).
Except for the exercise of options for 100,000 shares by Mr. Sheets, no options
had been exercised at March 5, 1997.
TRANSACTIONS WITH MANAGEMENT
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 REPORTS
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 Securities and Exchange Commission
reports regarding changes in their beneficial ownership of shares in the
Company. To the Company's knowledge, there was full compliance with all Section
16(a) filing requirements applicable to those persons.
COMPANY ACCOUNTANTS
Arthur Andersen LLC were selected by the Board of Directors as the Company's
independent auditors for the fiscal year ended December 31, 1996, and it is
anticipated that the Company may select the same firm as the Company's
independent auditors for the fiscal year ending December 31, 1997. A
representative of Arthur Andersen LLC is expected to be present at the Annual
Meeting of Shareholders and to have the opportunity to make a statement if he so
desires. Such representative also is expected to be available to respond to
appropriate questions at that time.
SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the Company's proxy materials relating
to the next annual meeting of shareholders must be received by the Company on or
before November 6, 1997.
1996 ANNUAL REPORT ON FORM 10-K
THE COMPANY'S FORM 10-K REPORT FOR 1996 CONSISTS PRIMARILY OF CROSS
REFERENCES TO INFORMATION IN THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS AND
THIS PROXY STATEMENT AND IS FILED ELECTRONICALLY WITH THE SECURITIES AND
EXCHANGE COMMISSION. SHAREHOLDERS WHO WISH TO OBTAIN, WITHOUT CHARGE, A COPY OF
THE COMPANY'S FORM 10-K REPORT FOR THE YEAR ENDED DECEMBER 31, 1996 IN THE FORM
FILED WITH THE SEC SHOULD ADDRESS A WRITTEN REQUEST TO CAROLYN J. ANDERSON,
CORPORATE SECRETARY, SCOTT'S LIQUID GOLD-INC., 4880 HAVANA STREET, DENVER,
COLORADO 80239.
SOLICITATION OF PROXIES
The Company will pay the cost of soliciting proxies in the accompanying form.
In addition to solicitation by mail, proxies may be solicited by officers and
other regular employees of the Company by telephone, telegraph or by personal
interview for which employees will not receive additional compensation.
Arrangements also may be made with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation materials to beneficial owners
of the shares held of record by such persons, and the Company may reimburse such
persons for reasonable out-of pocket expenses incurred by them in so doing.
OTHER BUSINESS
As of the date of this Proxy Statement, Management was not aware that any
business not described above would be presented for consideration at the
meeting. If any other business properly comes before the meeting, it is
intended that the shares represented by proxies will be voted in respect thereto
in accordance with the judgment of the persons voting them.
The above Notice and Proxy Statement are sent by order of the Board of
Directors.
CAROLYN J. ANDERSON
Corporate Secretary
Denver, Colorado
March 21, 1997
APPENDIX
PROXY SCOTT'S LIQUID GOLD-INC. PROXY
Proxy Solicited by the Board of Directors for the Annual Meeting of Shareholders
To be held May 7, 1997
The undersigned hereby appoints Jerome J. Goldstein, Mark E. Goldstein,
Carolyn J. Anderson, or Barry Shepard, and each of them, proxies of the
undersigned, with full power of substitution, to vote all shares of common stock
of Scott's Liquid Gold-Inc., which the undersigned is entitled to vote, at the
Annual Meeting of Shareholders to be held on May 7, 1997, at 10:00 a.m. and at
any and all adjournments thereof for the following purposes:
(1) Election of Directors:
__ FOR all nominees listed below (except as marked to the contrary
below)
__ WITHHOLD AUTHORITY to vote for all nominees listed below
Jerome J. Goldstein
Mark E. Goldstein
Carolyn J. Anderson
Barry Shepard
Dennis H. Field
James F. Keane
Michael J. Sheets
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THE NOMINEE'S NAME ON THE LINE IMMEDIATELY BELOW.)
(2) In their discretion, the Proxies are authorized to vote upon such other
business as properly may come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS INDICATED, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING "FOR" ELECTION OF THE
NOMINEES FOR DIRECTOR AS SELECTED BY THE BOARD OF DIRECTORS.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement furnished therewith. The undersigned
hereby revokes any proxies given prior to the date reflected below.
Dated
__________________________________ ,1997
__________________________________
SIGNATURE(S) OF SHAREHOLDER(S)
Please complete, date and sign
exactly as your name appears
hereon. If shares are held
jointly, each holder should sign.
When signing as attorney,
executor, administrator, trustee,
guardian or corporate official,
please add your title.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. PLEASE SIGN AND
RETURN THIS PROXY IN THE ENCLOSED ENVELOPE. THE GIVING OF A PROXY WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
