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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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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.:
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4) Date Filed:
SCOTT'S LIQUID GOLD-INC.
4880 Havana Street
Denver, Colorado 80239
___________________
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To Be Held May 6, 1998
____________________
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 6, 1998 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) Approval and ratification of the Scott's Liquid Gold-Inc. 1997 Stock
Option Plan for Company employees, OTHER THAN executive officers;
(3) Such other matters as may properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on March 11, 1998 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 27, 1998
________________________________________________________________
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 6, 1998
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 6, 1998 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 27, 1998.
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 11, 1998, the
record date for shareholders entitled to vote at the meeting, the Company had
10,092,358 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.
Approval and ratification of the 1997 Stock Option Plan requires that the votes
cast in favor of the Plan exceed the votes cast in opposition. 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 the Stock Option Plan or these other matters, if any, so
long as a quorum is present.
The following persons are the only persons known to the Company who on
March 11, 1998, owned beneficially more than 5% of the Company's common stock,
its only class of outstanding voting securities:
Name and Address of Amount and Nature Percent
Beneficial Owner of of Class
Beneficial
Ownership
Jerome J. and Goldie 2,447,024 (1)(3) 24.2%
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- 1,115,329 (4) 11.1%
Inc.
Employee Stock
Ownership Plan
4880 Havana Street
Denver, Colorado
80239
__________
(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, grandchildren, 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 123,156 shares held by the Company's Employee Stock
Ownership Plan attributable to Mr. Goldstein's vested interest in the Plan
as of December 31, 1997.
(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 11, 1998, 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:
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
(1)
Jerome J. Goldstein 2,517,524 (2)(6) 24.8%
Mark E. Goldstein 479,782 (3)(4)(6) 4.7%
Carolyn J. Anderson 288,460 (3)(6) 2.8%
Barry Shepard 264,500 (3)(6) 2.6%
Dennis H. Field 151,833 (5) 1.5%
James F. Keane 105,833 (5) 1.0%
Michael J. Sheets 128,333 (5) 1.3%
All Directors and 3,936,265 (6) 36.9%
executive officers as a
Group (7 persons)
__________
(1) Beneficial owners listed have sole voting and disposition power with
respect to the shares shown unless otherwise indicated.
(2) Of these shares, 2,447,024 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 "Voting 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) For each named executive, includes 70,500 shares underlying presently
exercisable stock options granted under the Company's 1986 Incentive Stock
Option Plan.
(4) Also includes 92,892 shares held by Mark Goldstein's wife and minor
children.
(5) 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.
(6) Does not include shares owned by the Company's Employee Stock Ownership
Plan under which, at December 31, 1997, Jerome J. Goldstein had a vested
interest in 123,156 shares, Mark E. Goldstein had a vested interest in
80,316 shares, Carolyn J. Anderson had a vested interest in 119,869 shares,
and Barry Shepard had a vested interest in 72,173 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 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 Director Principal Occupation for
in the Company Age Since Last Five Years
Jerome J. Goldstein 75 1954 Chairman of the Board of the
(Chairman of the Company since August, 1990.
Board) From 1954 to 1990, President
and Chairman of the Board of
the Company.
Mark E. Goldstein 41 1983 President of the Company since
(President and August, 1990. From 1982 to
Chief Executive 1990, Vice President-Marketing
Officer) of Company. Employed by the
Company since 1978.
Carolyn J. Anderson 59 1974 Executive Vice President since
(Executive Vice 1974, Chief Operating Officer
President, Chief of the Company since 1982 and
Operating Officer Corporate Secretary since 1973.
and Corporate Employed by the Company since
Secretary) 1970.
Barry Shepard 67 1982 Treasurer and Chief Financial
(Treasurer and Officer of the Company since
Chief 1981 when employed by the
Financial Officer) Company.
Dennis H. Field 65 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 64 1993 Independent businessman since
1987. Founder of and advisor to
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.).
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 67 1990 Principal, Gerald Schoenfeld,
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, 1997, 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), James F. Keane,
Michael J. Sheets, and Jerome J. Goldstein (with Mr. Goldstein having no vote).
Mr. Keane became a member of the Compensation Committee in February, 1998; the
other three persons were members of the Compensation Committee throughout 1997.
The Compensation Committee met two times during 1997.
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 1997.
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 a 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.
SUMMARY COMPENSATION TABLE
Annual Compensation
<TABLE>
Other All
Name and Annual Other
Principal Salary Bonus Compensation Compensation
Position Year $ $(1) $ ($)(2)
<C> <C> <C> <C> <C> <C>
Mark E. Goldstein 1997 $350,000 $140,373 $23,142 $2,289
President and Chief 1996 $350,000 $ 32,373 $65,053 $5,356
Executive Officer 1995 $350,000 $104,097 $23,054 $4,075
Jerome J. Goldstein 1997 $350,000 $140,373 $88,442 $2,289
Chairman of The Board 1996 $350,000 $ 32,373 $82,023 $5,356 7 373
1995 $350,000 $104,097 $93,044 $4,075
Carolyn J. Anderson 1997 $300,000 $140,373 $29,504 $2,289
Executive Vice 1996 $300,000 $ 32,373 $27,656 $5,356
President, Chief 1995 $300,000 $104,097 $72,867 $4,075
Operating Officer
Corporate Secretary
Barry Shepard 1997 $220,000 $140,373 $106,062 $2,289
Treasurer and 1996 $220,000 $ 32,373 $44,143 $5,356
Assistant Secretary 1995 $220,000 $104,097 $37,951 $4,075
</TABLE>
Note: There were no restricted stock awards, long term incentive payouts, or
long term compensation awards, such as an award of stock options, during the
last three fiscal years.
(1) The Company has adopted a bonus plan for its
executive officers for the 1998 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 1998 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 the above mentioned items. The Company had
substantially the same plan in 1997, 1996, and 1995.
(2) 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 1995 through 1997 is comprised of the
following:
<TABLE>
Mark E. Goldstein Jerome J. Goldstein
1995 1996 1997 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Automobile $ - $20,050 $ - $ - $ - $ -
purchase
(1)
Income taxes
Automobile - 19,302 - - - -
purchase
(1)
Other automobile
Expenses 2,364 2,426 919 1,463 989 364
Memberships 7,505 10,433 12,311 6,655 8,443 9,321
Life
insurance 2,345 2,446 2,446 35,150 35,150 34,835
Income taxes on
lifeIinsurance 2,022 1,888 2,273 34,017 28,298 32,797
Medical
plan(2) 6,382 6,072 2,831 12,417 5,801 8,759
Other 2,436 2,436 2,362 3,342 3,342 2,366
_________________________________________________________________________________
Total other
compensation $23,054 $65,053 $23,142 $93,044 $82,023 $88,442
Carolyn J. Anderson Barry Shepard
1995 1996 1997 1995 1996 1997
Automobile $25,000 $ - $ - $ - $ - $25,000
purchase
(1)
Income taxes
Automobile 22,384 - - - - 24,068
(1)
Other automobile
Expenses 3,355 1,409 2,706 2,512 1,557 1,929
Memberships 3,052 4,343 5,328 3,352 6,127 7,110
Life
insurance 8,220 8,220 8,220 12,956 14,822 15,733
Income taxes on
lifeIinsurance 7,089 6,617 7,648 11,174 10,431 13,812
Medical
plan(2) 1,870 5,170 3,239 5,521 8,770 16,045
Other 1,897 1,897 2,363 2,436 2,436 2,365
_________________________________________________________________________________
Total other
compensation $72,867 $27,656 $29,504 $37,951 $44,143 $106,062
</TABLE>
(1) Every three years, the Company provides $25,000, plus an amount to pay
resulting income taxes, to each executive officer for the purchase of an
automobile.
(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 plan further provides that, for a period of five years
following an executive officer's voluntary retirement, or involuntary
retirement in the event of a change in control of the Company, the Company
will, at no cost to the executive or his or her surviving dependents, cover
the executive and/or such dependents under the Company Health Plan and
shall also provide, at no cost to the executive, for the payment of this
additional medical coverage of up to $50,000.
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.
Option Exercises in 1997 and Year-End Option Values
No options were exercised by any of the Company's executive officers during
1997. The following table summarizes information with respect to the value of
each officer's unexercised stock options at December 31, 1997.
<TABLE>
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 Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Mark E, Goldstein 70,500 0 68,281 0
Jerome J. Goldstein 70,500 0 68,281 0
Carolyn J. Anderson 70,500 0 76,562 0
Barry Shepard 70,500 0 76,562 0
</TABLE>
(1) The in-the-money value of unexercised options is equal to the difference
between the per share market price of the Company's stock at December 31, 1997
and the per share exercise price multiplied by the number of unexercised
options.
The options shown in the table above were issued under the Company's 1986
Incentive Stock Option Plan. This Plan expired in 1996, and thus no additional
shares are available for options under this Plan. No option under this Plan may
be exercised more than ten years after it was 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 owned more than 10% of the Company's outstanding
stock, then these limitations were five years from the date of grant and 110% of
the fair market value. Options were not 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 was granted. Payment for shares purchased upon the exercise
of any option must be made in cash. The Company's executive officers and
outside directors are not eligible to participate in the Company's 1997 Stock
Option Plan being submitted for approval by the Company's shareholders at the
1998 Annual Meeting.
COMPENSATION COMMITTEE REPORT
Background
The Compensation Committee of the Board of Directors was created in March,
1992 and includes two outside directors. The responsibilities of the
Compensation Committee include the origination of all executive compensation
proposals.
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 has
continued to be the most important driving force behind Company policy.
Finally, the Company 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 in 1997 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-eight
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 Mrs. 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 of salary to 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 1997 as in
1996 and that the components of other compensation provided to the Company's
executive officers also remain the same in 1997 as in 1996. 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; the bonus plan has been in effect
for a number of years, with a result of decreasing compensation in 1996 because
of the Company's performance; the Company's emphasis is on the bonus plans and
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
1997; the anticipated amounts paid for the base salary and bonus in 1997 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 executive officers devote considerable time to the
Company, often more than full-time; and the Company's philosophy as to its
employees in general is that good employees, who are paid well and stay with the
Company, contribute significantly to the successes of the Company's businesses.
In terms of successes achieved by the executives in 1996, the Compensation
Committee noted, among others, the following: Alpha Hydrox sales rank number
one or very high for alpha hydroxy skin care products, according to national
data of an independent rating service; the Company has been able to maintain the
core sales of its household chemical products; for the 1996 year, the Company
had approximately $2.5 million in income from operations, before taxes and the
costs of settlement in an environmental lawsuit referred to as the Rocky
Mountain Arsenal case; settlement of the Rocky Mountain Arsenal matter in 1996
was in the Company's best interest; Elite Touch of Scent was test marketed and
represented an aggressive approach by the Company in an effort to increase sales
of Touch of Scent; there have been further line extensions of the Alpha Hydrox
products; the Company was and is in the process of considering new products; the
Company has maintained its businesses against severe competitive pressures, had
sales increases in the fourth quarter of 1996 and was endeavoring in 1997 to
reverse a sales downturn in 1996; international sales are being expanded, with
activity in Canada and preparations for the introduction of products in South
America; and, the Company's management had performed well in improving the
Company's financial condition, including continuing to satisfy covenants for the
Company's bonds, meeting bond sinking fund requirements, and repurchasing bonds
at favorable prices.
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 executive's 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. As a result of the Committee's decision to engage a
consultant on compensation matters every three years, the Hay Group was asked in
1997 to assess the competitiveness of the executive compensation levels of the
Company. Their report issued in July, 1997 concluded that overall the total
direct compensation practices of the Company fall within a peer group
competitive range, with competitiveness of the pay packages varying by
executive. Base salaries were viewed as in line with competitive practices;
annual incentive awards were below competition, with the size of the annual
incentive being a direct result of Company performance; and long-term incentive
awards, such as stock options, were below competitive practices.
The Company's 1997 executive bonus plan provides for a bonus pool based on
10% of pre-tax profits (excluding items that are infrequent, unusual or
extraordinary) for the year in excess of $1 million. The four key executive
officers are and were to share 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 a 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 1997, 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>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Scott's Liquid Gold 100 400 564.9 281.35 146.79 311.94
Peer Group 100 107.68 121.16 163.34 219.81 322.99
NYSE 100 113.54 111.33 144.36 173.9 228.78
</TABLE>
Fiscal year ended December 31
Assumes $100 invested on December 31, 1992 in
the Company, the Peer Group,
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: Avon Products, Inc., Clorox
Co. (includes Armor All Products, acquired by Clorox Co. in 1997), Zagarelli
Group International (formerly Cosmetic Group USA, Inc.), NCH Corp., Neutramax
Products, Inc., Ocean Bio-Chem, Inc. and 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. 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 on account 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 11, 1998, 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).
In November, 1997, the Board of Directors extended the expiration date of the
option held by Dennis H. Field for 100,000 shares from January 14, 1998 to
January 14, 2001. Except for the exercise of options for 100,000 shares by Mr.
Sheets, no options had been exercised at March 11, 1998.
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.
APPROVAL OF 1997 STOCK OPTION PLAN
(For Employees Other Than Executive Officers)
On November 10, 1997, the Company's Board of Directors adopted the Company's
1997 Stock Option Plan (the "Plan"), subject to approval and ratification by the
Company's shareholders. The Plan provides for the granting of options to
employees who are not executive officers of the Company. (The word "Company" as
used in the Plan refers to Scott's Liquid Gold-Inc. and its Subsidiaries.)
Under the Plan, the Board, in its sole discretion, may issue either
Nonqualified Stock Options (those which do not qualify as Incentive Stock
Options under Section 422 of the Internal Revenue Code of 1986 (the "Code") or
Incentive Stock Options (those which qualify for favorable federal income tax
treatment under the Code). The purpose of the Plan is to further the growth and
development of the Company through affording the opportunity for stock ownership
to selected employees. The effective date of the Plan is November 10, 1997.
A copy of the Plan appears as Exhibit A to this Proxy Statement. The major
features of the Plan are summarized below, but such summary is qualified in its
entirety by the full text of the Plan.
Shares Available for Issuance
A maximum of 300,000 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 on account of stock dividends, stock splits, mergers, consolidations,
recapitalizations, combinations or exchanges of stock, or other similar
occurrences effecting a change in the outstanding shares without the receipt of
additional consideration by the Company. 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.
Administration of the Plan
The Plan is administered by the Company's Board of Directors or a committee
appointed by and serving at the pleasure of the Board, consisting of no fewer
than two directors. The Plan is currently administered by the Board of
Directors. The Board or committee, whichever is appointed to administer the
Plan, is called the "committee". Subject to the terms of the Plan, after
considering the recommendation of any administering committee, the Board of
Directors determines which Company employees other than executive officers will
receive options, the type of options to be awarded (whether Incentive Stock
Options or Nonqualified Stock Options) , the exercise price of the options, the
number of shares to be subject to each option granted to an employee, and other
terms of the options. The Board has full authority to interpret the Plan and to
prescribe rules for its administration.
Eligibility
Under the Plan, all full-time salaried and hourly-rated employees of the
Company, excluding the Company's executive officers, who are responsible for the
performance of various duties for the Company and/or who are involved in
endeavors significant to the success of the Company are eligible to receive
options.
Option Exercise Price and Other Terms
Options may be granted under the Plan through November 9, 2007. The
option price per share for Incentive Stock Options granted under the Plan must
be not less than 100% of the fair market value (as of the date of grant) of the
shares subject to the option. The option price for Nonqualified Stock Options
granted under the Plan must not be less than 85% of the fair market value (as of
the date of grant) of the shares subject to the option. The fair market value is
determined by reference to closing prices on the public market. The full price
for shares must be paid in cash at the time the option is exercised. Each
option must expire no later than ten years after the date it is granted.
Upon termination of employment for reasons other than death, disability or
for cause, an optionee may at any time within three months after the date of
termination, and prior to any expiration of the option, exercise the option. A
period of one year is permitted for exercise by the optionee's heirs if the
optionee's employment is terminated due to death or disability. Options
terminate immediately upon termination of employment for cause.
Options may include vesting restrictions on the exercise based on the
passage of time, the achievement of goals or the occurrence of events. Options
granted under the Plan may be not be transferred other than by will or the laws
of descent and distribution.
Amendment and Termination
The Company's Board of Directors may at any time amend, suspend or
terminate the Plan except that no action by the Board may impair outstanding
options. No amendment to the Plan may be made without shareholder approval that
would increase the total number of shares under the Plan (except for any
adjustments as described above for stock dividends and other events), reduce the
exercise price of options or materially modify the eligibility requirements.
Subject to the terms of the Plan, the Board may modify, extend or renew any
outstanding option under the Plan, accept the surrender of outstanding options,
and authorize the grant of substitute options.
Federal Income Tax Consequences
The grant of an Incentive Stock Option under the Plan does not produce
taxable income to the optionee or a tax deduction to the Company. Upon exercise
of an Incentive Stock Option, the employee will not realize taxable income and
the Company will not be entitled to a compensation deduction; however, the
excess of the fair market value over the exercise price may be taxed to the
employee under the alternative minimum tax provisions of the Code. The Code
imposes a statutory holding period for Incentive Stock Options, which is the
later of (1) one year after the shares were transferred to an employee upon
exercise of an option or (2) two years after the date of grant. If an employee
sells or otherwise disposes of shares acquired upon the exercise of an Incentive
Stock Option prior to meeting the statutory holding period requirements, all or
a portion of any gain will be taxed as ordinary income to the employee; in that
case, the Company will be entitled to deduct an equal amount as a compensation
expense. The amount of ordinary income is the lesser of (1) the difference
between the fair market value at the date of exercise and the exercise price, or
(2) the gain on the sale (the amount realized less the exercise price).
Otherwise, an optionee's disposition of shares acquired upon the exercise of an
Incentive Stock Option (including a disposition after the expiration of the
statutory holding period) will result in short-term or long-term capital gain or
loss measured by the difference between the disposition price and the employee's
tax basis in the shares (the tax basis is generally the exercise price plus the
amount previously recognized as ordinary income).
The grant of a Nonqualified Stock Option under the Plan does not produce
taxable income to the optionee or a tax deduction to the Company. Upon exercise
of a Nonqualified Stock Option, the excess of the fair market value of the
shares acquired over the exercise price will be taxable to the optionee as
ordinary income and will be deductible by the Company as a compensation expense.
Existing Grant of Options
On February 25, 1998, the Board of Directors granted options for 232,000
shares under the Plan to 139 employees, subject to shareholder approval and
ratification of the Plan. The exercise price of their options is $3.875, which
was the closing price of the Company's common stock on February 24, 1998. These
options are not subject to any vesting requirements and expire on February 24,
2003. As of February 27, 1998, the closing price for the Company's common stock
on the New York Stock Exchange was $3.875.
The Board of Directors recommends a vote "FOR" approval and ratification of
the 1997 Plan. Proxies solicited by the Board of Directors will be voted "FOR"
approval and ratification of the Scott's Liquid Gold-Inc. 1997 Stock Option
Plan.
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, 1997, 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, 1998. 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 28, 1998.
1997 ANNUAL REPORT ON FORM 10-K
THE COMPANY'S FORM 10-K REPORT FOR 1997 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, 1997 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 27, 1998
EXHIBIT A
SCOTT'S LIQUID GOLD-INC.
1997 STOCK OPTION PLAN
SECTION 1: PURPOSE
The purpose of the Scott's Liquid Gold-Inc. 1997 Stock Option Plan (the
"Plan") is to further the growth and development of Scott's Liquid Gold-Inc.
(the "Company") by affording an opportunity for stock ownership to selected
employees of the Company and its Subsidiaries who are responsible for the
performance of various duties for the Company or its Subsidiaries and/or who are
involved in endeavors significant to the success of the Company or its
Subsidiaries.
SECTION 2: DEFINITIONS
Unless otherwise indicated, the following words when used herein shall have
the following meanings:
(a) "Board of Directors" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
(c) "Common Stock" shall mean the Company's common stock (par value $0.10 per
share) and any share or shares of the Company's capital stock hereafter
issued or issuable in substitution for such shares.
(d) "Director" shall mean a member of the Board of Directors.
(e) "Incentive Stock Option" shall mean any option granted to an eligible
employee under the Plan, which the Company intends at the time the option
is granted to be an Incentive Stock Option within the meaning of Section
422 of the Code.
(f) "Nonqualified Stock Option" shall mean any option granted to an eligible
employee under the Plan which is not an Incentive Stock Option.
(g) "Option" shall mean and refer collectively to Incentive Stock Options and
Nonqualified Stock Options.
(h) "Option Agreement" means the agreement specified in Section 7.2.
(i) "Optionee" shall mean any employee who is granted an Option under the Plan.
"Optionee" shall also mean the personal representative of an Optionee and
any other person who acquires the right to exercise an Option by bequest or
inheritance.
(j) "Parent" shall mean a parent corporation of the Company as defined in
Section 424(e) of the Code.
(k) "Subsidiary" shall mean a subsidiary corporation of the Company as defined
in Section 424(f) of the Code.
(l) "Termination for Cause" shall mean an involuntary severance of employment
on account of: (1) refusal to obey written or verbal directions of a lawful
and/or moral nature issued by a supervisor or corporate officer or by the
Board of Directors; (2) fraud or dishonesty directed against the Company
or any of its Subsidiaries; (3) breach of any material obligation of
nondisclosure or confidentiality owed to the Company or any of its
Subsidiaries, including any such breach pertaining to rules and regulations
of the Securities and Exchange Commission; (4) commission of any criminal
offense which constitutes a felony in the jurisdiction in which the offense
is committed; or (5) violation of any Company rules or regulations, such as
those pertaining to attendance, which constitutes grounds for dismissal.
SECTION 3: EFFECTIVE DATE
The effective date of the Plan is November 10, 1997; provided, however,
that the adoption of the Plan by the Board of Directors is subject to approval
and ratification by the shareholders of the Company within 12 months of the
effective date. Options granted under the Plan prior to approval of the Plan by
the shareholders of the Company shall be subject to approval of the Plan by the
shareholders of the Company.
SECTION 4: ADMINISTRATION
4.1 Administrative Committee. The Plan shall be administered by a Committee
appointed by and serving at the pleasure of the Board of Directors,
consisting of not fewer than two Directors (the "Committee"). The
Committee may, but need not, be the existing Compensation Committee of the
Board of Directors. The Board of Directors may from time to time remove
members from or add members to the Committee, and vacancies on the
Committee, howsoever caused, shall be filled by the Board of Directors.
4.2 Committee Meetings and Actions. The Committee shall hold meetings at such
times and places as it may determine. A majority of the members of the
Committee shall constitute a quorum, and the acts of the majority of the
members present at a meeting or a consent in writing signed by all members
of the Committee shall be the acts of the Committee and, subject to Board
of Directors' approval or ratification, shall be final, binding and
conclusive upon all persons, including the Company, its Subsidiaries, its
shareholders, and all persons having any interest in Options which may be
or have been granted pursuant to the Plan.
4.3 Powers of Committee. The Committee shall recommend to the Board specific
Option grants and determine terms and conditions of all Options granted
under the Plan and shall recommend amendments and/or deletions of rules and
regulations for administration of the Plan. In recommending Option grants,
the Committee shall take into consideration the contribution the Optionee
has made or may make to the success of the Company or its Subsidiaries and
such other factors as the Committee shall determine.
4.4 Interpretation of Plan. The determination of the Committee as to any
disputed question arising under the Plan, including questions of
construction and interpretation, shall be final, binding and conclusive
upon all persons, including the Company, its Subsidiaries, its
shareholders, and all persons having any interest in Options which may be
or have been granted pursuant to the Plan.
4.5 Indemnification. Each person who is or shall have been a member of the
Committee or of the Board of Directors shall be indemnified and held
harmless by the Company against and from any loss, cost, liability or
expense that may be imposed upon or reasonably incurred in connection with
or resulting from any claim, action, suit or proceeding to which such
person may be a party or in which such person may be involved by reason of
any action taken or failure to act under the Plan and against and from any
and all amounts paid in settlement thereof, with the Company's approval, or
paid in satisfaction of a judgment in any such action, suit or proceeding
against him, provided such person shall give the Company an opportunity, at
its own expense, to handle and defend the same before undertaking to
handle and defend it on such person's own behalf. The foregoing right of
indemnification shall not be exclusive of, and is in addition to, any other
rights of indemnification to which any person may be entitled
under the Company's Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify
them or hold them harmless.
SECTION 5: STOCK SUBJECT TO THE PLAN
5.1
Number. The aggregate number of shares of Common Stock which may be issued
under Options granted pursuant to the Plan shall not exceed 300,000 shares.
Shares which may be issued under Options may consist, in whole or in part, of
authorized but unissued stock or treasury stock of the Company not reserved for
any other purpose.
5.2
Unused Stock. If any outstanding Option under the Plan expires or for any
other reason ceases to be exercisable, in whole or in part, other than upon
exercise of the Option, the shares which were subject to such Option and as to
which the Option had not been exercised shall continue to be available under the
Plan.
5.3
Adjustment for Change in Outstanding Shares. If there is any change,
increase or decrease, in the outstanding shares of Common Stock which is
effected without receipt of additional consideration by the Company, by reason
of a stock dividend, recapitalization, merger, consolidation, stock split,
combination or exchange of stock, or other similar circumstances, then in each
such event, the Committee shall make an appropriate adjustment in the aggregate
number of shares of stock available under the Plan, the number of shares of
stock subject to each outstanding Option and the Option prices in order to
prevent the dilution or enlargement of any Optionee's rights. In making such
adjustments, fractional shares shall be rounded to the nearest whole share. The
Committee's determinations in making adjustments shall be final and conclusive.
5.4
Reorganization or Sale of Assets. If the Company is merged or consolidated
with another corporation and the Company is not the surviving corporation, or if
all or substantially all of the assets of the Company are acquired by another
entity, or if the Company is liquidated or reorganized (each of such events
being referred to hereinafter as a "Reorganization Event'), the Committee shall,
as to outstanding Options, either: (1) make appropriate provision for the
protection of any such outstanding Options by the substitution on an equitable
basis of appropriate stock of the Company, or of the merged, consolidated or
otherwise reorganized corporation, which will be issuable in respect of the
Common Stock, provided that no additional benefits shall be conferred upon
Optionees as a result of such substitution, and provided further that the excess
of the aggregate fair market value of the shares subject to the Options
immediately after such substitution over the purchase price thereof is not more
than the excess of the aggregate fair market value of the shares subject to such
Options immediately before such substitution over the purchase price thereof: or
(2) upon written notice to all Optionees, which notice shall be given not less
than twenty days prior to the effective date of the Reorganization Event,
provide that all unexercised Options must be exercised within a specified number
of days (which shall not be less than ten) of the date of such notice or such
Options will terminate. In response to a notice provided pursuant to clause (2)
of the preceding sentence, an Optionee may make an irrevocable election to
exercise the Optionee's Option contingent upon and effective as of the effective
date of the Reorganization Event. The Committee may, in its sole discretion,
accelerate the exercise dates of outstanding Options in connection with any
Reorganization Event.
SECTION 6: ELIGIBILITY
All full-time salaried and hourly-rated employees of the Company and its
Subsidiaries who are responsible for the performance of various duties for the
Company or its Subsidiaries and/or who are involved in endeavors significant to
the success of the Company or its Subsidiaries shall be eligible to receive both
Incentive Stock Options and Nonqualified Stock Options under the Plan; provided,
however, that the officers of the Company shall not be eligible to receive
Options under the Plan. For purposes of this Section 6, a full-time employee
shall be any employee of the Company or any of its Subsidiaries who is regularly
scheduled to work at least forty hours per week.
SECTION 7: GRANT OF OPTIONS
7.1 Grant of Options. The Committee may from time to time in its discretion
determine which of the eligible employees of the Company or its Subsidiaries
should receive Options, the type of Options to be granted (whether Incentive
Stock Options or Nonqualified Stock Options), the number of shares subject to
such Options, and the dates on which such Options are to be granted. No
employee may be granted Incentive Stock Options to the extent that the
aggregate fair market value (determined as of the time each Option is granted)
of the Common Stock with respect to which any such Incentive Stock Options are
exercisable for the first time during a calendar year (under all incentive
stock option plans of the Company and its Parent and Subsidiaries) would
exceed $100,000.
7.2 Option Agreement. Each Option granted under the Plan shall be evidenced by
a written Option Agreement setting forth the terms upon which the Option is
granted. Each Option Agreement shall designate the type of Options being
granted (whether Incentive Stock Options or Nonqualified Stock Options), and
shall state the number of shares of Common Stock, as designated by the
Committee, to which that Option pertains. More than one Option may be granted
to an eligible person.
7.3 Option Price. The option price per share of Common Stock under each Option
shall be determined by the Committee and stated in the Option Agreement. The
option price for Incentive Stock Options granted under the Plan shall not be
less than 100% of the fair market value (determined as of the day the Option
is granted) of the shares subject to the Option. The option price for
Nonqualified Stock Options granted under the Plan shall not be less than 85%
of the fair market value (determined as of the day the Option is granted) of
the shares subject to the Option. Notwithstanding the foregoing, in no event
shall the option price per share be less than the par value of the Common
Stock.
7.4 Determination of Fair Market Value. If the Common Stock (which is
currently listed on the New York Stock Exchange) is listed upon an established
stock exchange, then the fair market value per share shall be deemed to be the
quoted closing price of the Common Stock on such stock exchange on the day for
which the determination is made, or if no sales of the Common Stock shall have
been made on the stock exchange on that day, on the next preceding day on
which there was such a sale. If the Common Stock is listed upon more than one
established stock exchange, the fair market value per share shall be deemed to
be the average of the quoted closing prices of the Common Stock on all such
stock exchanges on the day for which the determination is made, determined for
each such stock exchange in accordance with the preceding sentence. If the
Common Stock is not listed upon any established stock exchange but is
traded in the NASDAQ National Market System, the fair market value per share
shall be deemed to be the closing price of the Common Stock in the National
Market System on the day for which the determination is made, or if there
shall have been no trading of the Common Stock on that day, on the next
preceding day on which there was such trading. If the Common Stock is not
listed upon any established stock exchange and is not traded in the National
Market System, the fair market value per share shall be deemed to be the mean
between the dealer "bid" and "ask" closing prices of the Common Stock on the
NASDAQ System on the day for which the determination is made, or if there
shall have been no trading of the Common Stock on that day, on the next
preceding day on which there was such trading. If none of these conditions
apply, the fair market value per share shall be deemed to be an amount as
determined in good faith by the Committee by applying any reasonable valuation
method.
7.5 Duration of Options. Each Option shall be of a duration as specified in
the Option Agreement; provided, however, that the term of each Option shall be
no more than ten years from the date on which the Option is granted and shall
be subject to early termination as provided herein.
7.6 Additional Limitations on Grant. No Incentive Stock Option shall be
granted to an employee who, at the time the Incentive Stock Option is granted,
owns stock (as determined in accordance with Section 424(d) of the Code)
representing more than 10% of the total combined voting power of all classes
of stock of the Company or of any Parent or Subsidiary, unless the option
price of such Incentive Stock Option is at least 110% of the fair market value
(determined as of the day the Incentive Stock Option is granted) of the stock
subject to the Incentive Stock Option and the Incentive Stock Option by its
terms is not exercisable more than five years from the date it is granted.
7.7 Other Terms and Conditions. The Option Agreement may contain such other
provisions, which shall not be inconsistent with the Plan, as the Committee
shall deem appropriate, including, without limitation, provisions that relate
the Optionee's ability to exercise an Option to the passage of time or the
achievement of specific goals established by the Committee or the occurrence
of certain events specified by the Committee.
SECTION 8: EXERCISE OF OPTIONS
8.1 Manner of Exercise. Subject to the limitations and conditions of the Plan
or the Option Agreement, an Option shall be exercisable, in whole or in
part, from time to time, by giving written notice of exercise to the
Secretary of the Company, which notice shall specify the number of shares
of Common Stock to be purchased and shall be accompanied by: (1) payment in
full to the Company of the purchase price of the shares to be purchased;
plus (2) payment in full of such amount as the Company shall determine to
be sufficient to satisfy any liability it may have for any withholding of
federal, state or local income or other taxes incurred by reason of the
exercise of the Option; and (3) a representation meeting the
requirements of Section 11.2 if requested by the Company.
8.2 Payment of Purchase Price. Payment for shares and withholding taxes shall
be in the form of either: (1) cash; or (2) a personal check to the order of
the Company; or (3) shares of the Common Stock, properly endorsed to the
Company, in an amount the fair market value of which on the date of receipt
by the Company (as determined in accordance with Section 7.4) equals or
exceeds the aggregate option price of the shares with respect to which the
Option is being exercised; or (4) in any combination thereof; provided,
however, that no payment may be made in shares of Common Stock unless
payment in such form and upon such exercise has been approved in advance by
the Committee and approved by the Board.
SECTION 9: EFFECT OF TERMINATION OF EMPLOYMENT
9.1 Termination of Employment Other Than Upon Death or Disability and Other
Than Termination for Cause. Upon termination of an Optionee's employment
with the Company or a Subsidiary other than upon death or disability
(within the meaning of Section 22(e)(3) of the Code) and other than a
Termination for Cause, an Optionee may, at any time within three months
after the date of termination but not later than the date of expiration of
the Option, exercise the Option to the extent the Optionee was entitled to
do so on the date of termination. Any Options not exercisable as of the
date of termination and any Options or portions of Options of terminated
Optionees not exercised within the period specified herein shall terminate.
9.2 Termination By Death of Optionee. If an Optionee shall die while in the
employ of the Company or a Subsidiary or within a period of three months
after the termination of employment with the Company or a Subsidiary under
circumstances to which Section 9.1 applies, the personal representatives of
the Optionee's estate or the person or persons who shall have acquired the
Option from the Optionee by bequest or inheritance may exercise the Option
at any time within the year after the date of death but not later than the
expiration date of the Option, to the extent the Optionee was entitled to
do so on the date of death. Any Options not exercisable as of the date of
death and any Options or portions of Options of deceased Optionees not
exercised within the period specified herein shall terminate.
9.3 Termination By Disability of Optionee. Upon termination of an Optionee's
employment with the Company or a Subsidiary by reason of the Optionee's
disability (within the meaning of Section 22(e)(3) of the Code), the
Optionee may exercise the Option at any time within one year after the date
of termination but not later than the expiration date of the Option, to the
extent the Optionee was entitled to do so on the date of termination. Any
Options not exercisable as of the date of termination and any Options or
portions of Options of disabled Optionees not exercised within the period
specified herein shall terminate.
9.4 Other Terminations. Upon termination of an Optionee's employment with the
Company or a Subsidiary under circumstances other than those set forth in
Sections 9.1, 9.2 or 9.3, including without limitation a Termination for
Cause, Options granted to the Optionee shall terminate immediately.
9.5 Extension of Option Termination Date. No option granted under this Plan
may be extended by either the Committee or the Board.
SECTION 10: NON-TRANSFERABILITY OF OPTION
Options granted pursuant to the Plan are not transferable by the Optionee
other than by Will or the laws of descent and distribution and shall be
exercisable during the Optionee's lifetime only by the Optionee. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the
Option contrary to the provisions hereof, or upon the levy of any attachment or
similar process upon the Option, the Option shall immediately become null and
void.
SECTION 11: ISSUANCE OF SHARES
11.1 Transfer of Shares to Optionee. As soon as practicable after the Optionee
has given the Company written notice of exercise of an Option and has
otherwise met the requirements of Section 8.1, the Company shall issue or
transfer to the Optionee the number of shares of Common Stock as to which the
Option has been exercised and shall deliver to the Optionee a certificate or
certificates therefor, registered in the Optionee's name. In no event shall
the Company be required to transfer fractional shares to the Optionee, and in
lieu thereof, the Company may pay an amount in cash equal to the fair market
value (as determined in accordance with Section 7.4) of such fractional shares
on the date of exercise. If the issuance or transfer of shares by the Company
would for any reason, in the opinion of counsel for the Company, violate any
applicable federal or state laws or regulations, the Company may delay
issuance or transfer of such shares to the Optionee until compliance with such
laws can reasonably be obtained. In no event shall the Company be obligated
to effect or obtain any listing, registration, qualification, consent or
approval under any applicable federal or state laws or regulations or any
contract or agreement to which the Company is a party with respect to the
issuance of any such shares.
11.2 Investment Representation. Upon demand by the Company, the Optionee shall
deliver to the Company a representation in writing that the purchase of all
shares with respect to which notice of exercise of the Option has been given
by the Optionee is being made for investment only and not for resale or with
a view to distribution, and containing such other representations and
provisions with respect thereto as the Company may require. Upon such demand,
delivery of such representation promptly and prior to the transfer or delivery
of any such shares and prior to the expiration of the option period shall be a
condition precedent to the right to purchase such shares.
SECTION 12: AMENDMENTS
The Board of Directors may at any time and from time to time alter, amend,
suspend or terminate the Plan or any part thereof as it may deem proper, except
that no such action shall diminish or impair the rights under an Option
previously granted. Unless the shareholders of the Company shall have given
their approval, the total number of shares for which Options may be issued under
the Plan shall not be increased, except as provided in Section 5.3, and no
amendment shall be made which reduces the price at which the Common Stock may be
offered under the Plan below the minimum required by Section 7.3, except as
provided in Section 5.3, or which materially modifies the requirements as to
eligibility for participation in the Plan. Subject to the terms and conditions
of the Plan, the Board of Directors may modify, extend or renew outstanding
Options granted under the Plan, or accept the surrender of outstanding Options
to the extent not theretofore exercised and authorize the granting of new
Options in substitution therefor, except that no such action shall diminish or
impair the rights under an Option previously granted without the consent of the
Optionee. )
SECTION 13: TERM OF PLAN
This Plan shall terminate on November 9, 2007; provided, however, that the
Board of Directors may at any time prior thereto suspend or terminate the Plan.
SECTION 14: RIGHTS AS STOCKHOLDER
An Optionee shall have no rights as a stockholder of the Company with
respect to any shares of Common Stock covered by an Option until the date of the
issuance of the stock certificate for such shares.
SECTION 15: NO EMPLOYMENT RIGHTS
Nothing contained in this Plan or in any Option granted under the Plan
shall confer upon any Optionee any right with respect to the continuation of
such Optionee's employment by the Company or any Subsidiary or interfere in any
way with the right of the Company or any Subsidiary, subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Optionee from the
rate in existence at the time of the grant of the Option.
SECTION 16: GOVERNING LAW
This Plan, and all Options granted under this Plan, shall be construed and
shall take effect in accordance with the laws of the State of Colorado, without
regard to the conflicts of laws rules of such State.
APPENDIX
PROXY CARD
SCOTT'S LIQUID GOLD-INC.
PROXY PROXY
Proxy Solicited by the Board of Directors for the Annual Meeting of Shareholders
To be held May 6, 1998
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 6, 1998, 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. nderson
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) Approval and ratification of the Scott's Liquid Gold-Inc. 1997 Stock Option
Plan for Company employees.
FOR AGAINST ABSTAIN
(3) In their discretion, the Proxies are authorized to vote upon such other
business as properly may come before the meeting.
(back of card)
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 AND "FOR" APPROVAL
AND RATIFICATION OF THE SCOTT'S LIQUID GOLD-INC. 1997 STOCK OPTION PLAN.
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 __________________________________, 1998
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.
