UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
March 31, 2007
Commission File No. 001-13458
SCOTT'S LIQUID GOLD-INC.
4880 Havana Street
Denver, CO 80239
Phone: 303-373-4860
Colorado 84-0920811
State of Incorporation I.R.S. Employer
Identification No.
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Check whether the issuer: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-B-2 of the Exchange Act). Yes [ ] No [X]
As of March 31, 2007, the Registrant had 10,533,000 of its $0.10 par value common stock outstanding.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended
March 31,
2007 2006
----------- -----------
Net sales $ 4,175,800 $ 4,155,800
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Operating costs and expenses:
Cost of Sales 2,346,500 2,243,500
Advertising 112,300 593,700
Selling 1,255,400 1,425,500
General and administrative 814,100 912,100
----------- -----------
4,528,300 5,174,800
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Loss from operations (352,500) (1,019,000)
Interest income 24,200 12,600
Interest expense (103,900) (41,300)
----------- -----------
(432,200) (1,047,700)
Income tax expense (benefit) - -
----------- -----------
Net loss $ (432,200) $(1,047,700)
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Net loss per common share (Note 2):
Basic and Diluted $ (0.04) $ (0.10)
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Weighted average shares outstanding:
Basic and Diluted 10,533,000 10,503,000
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SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Balance Sheets
March 31, December 31,
2007 2006
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,028,200 $ 2,804,100
Investment securities 50,900 51,100
Trade receivables, net of allowance
for doubtful accounts of $61,700 and
$62,000, respectively 1,407,300 743,700
Other receivables 42,000 55,500
Inventories, net 3,459,800 3,291,400
Prepaid expenses 129,800 161,600
----------- -----------
Total current assets 7,118,000 7,107,400
Property, plant and equipment, net 13,000,700 13,159,700
Other assets 58,600 59,700
----------- -----------
TOTAL ASSETS $20,177,300 $20,326,800
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,267,800 $ 1,893,600
Accrued payroll and benefits 863,400 866,400
Other accrued expenses 372,700 417,100
Current maturities of long-term debt 194,400 191,600
----------- -----------
Total current liabilities 3,698,300 3,368,700
Long-term debt, net of current maturities 4,824,800 4,875,500
----------- -----------
8,523,100 8,244,200
Commitments and contingencies
Shareholders' equity:
Common stock; $.10 par value, authorized
50,000,000 shares; issued and
outstanding 10,533,000 shares 1,053,300 1,053,300
Capital in excess of par 5,019,800 5,015,800
Accumulated comprehensive income 900 1,100
Retained earnings 5,580,200 6,012,400
----------- -----------
Shareholders' equity 11,654,200 12,082,600
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $20,177,300 $20,326,800
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SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
---------------------------
2007 2006
----------- -----------
Cash flows from operating activities:
Net loss $ (432,200) $(1,047,700)
----------- -----------
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 161,600 175,800
Stock issued to ESOP - 48,700
Stock options granted 4,000 -
Changes in assets and liabilities:
Trade and other receivables, net (650,100) 633,300
Inventories (168,400) (628,200)
Prepaid expenses and
other assets 31,800 (144,400)
Accounts payable and
accrued expenses 326,800 645,400
----------- -----------
Total adjustments to net loss (294,300) 730,600
----------- -----------
Net Cash Used by
Operating Activities (726,500) (317,100)
----------- -----------
Cash flows from investing activities:
Purchase of property, plant & equipment (1,500) (28,700)
----------- -----------
Net Cash Used by
Investing Activities (1,500) (28,700)
----------- -----------
Cash flows from financing activities:
Short-term borrowings (payments), net - 300,000
Purchase of stock for contribution
to ESOP - (48,700)
Principal payments on
long-term borrowings (47,900) (233,200)
----------- -----------
Net Cash Provided (Used)
by Financing Activities (47,900) 18,100
---------- -----------
Net Decrease in Cash and Cash Equivalents (775,900) (327,700)
Cash and Cash Equivalents, beginning of period 2,804,100 2,260,700
----------- -----------
Cash and Cash Equivalents, end of period $ 2,028,200 $ 1,933,000
=========== ===========
Supplemental disclosures:
Cash Paid during period for:
Interest $ 104,000 $ 41,300
=========== ===========
Income taxes $ 900 $ 1,100
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SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Summary of Significant Accounting Policies
(a) Company Background Scott's Liquid Gold-Inc. (a Colorado corporation) was incorporated on February 15, 1954. Scott's Liquid Gold-Inc. and its wholly owned subsidiaries (collectively, "we" or "our") manufacture and market quality household and skin care products, and we fill, package and market our Mold Control 500 product. Since the first quarter of 2001, we have acted as a distributor in the United States of beauty care products contained in individual sachets and manufactured by Montagne Jeunesse. Our business is comprised of two segments, household products and skin care products.
(b) Principles of Consolidation Our consolidated financial statements include our accounts and those of our subsidiaries. All intercompany accounts and transactions have been eliminated.
(c) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include, but are not limited to, realizability of deferred tax assets, reserves for slow moving and obsolete inventory, customer returns, coupon redemptions and allowances, and bad debts.
(d) Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents.
(e) Investments in Marketable Securities We account for investments in marketable securities in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115 "Accounting for Certain Investments in Debt and Equity Securities", which requires that we classify investments in marketable securities according to management's intended use of such investments. We invest our excess cash and have established guidelines relative to diversification and maturities in an effort to maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates. We consider all investments as available for use in our current operations and, therefore, classify them as short-term, available-for-sale investments. Available-for-sale investments are stated at fair value, with unrealized gains and losses, if any, reported net of tax, as a separate component of shareholders' equity and comprehensive income (loss). The cost of the securities sold is based on the specific identification method. Investments in corporate and government securities as of December 31, 2006, are scheduled to mature within one year.
(f) Inventories Inventories consist of raw materials and finished goods and are stated at the lower of cost (first-in, first-out method) or market. We record a reserve for slow moving and obsolete products and raw materials. We estimate reserves for slow moving and obsolete products and raw materials based upon historical and anticipated sales.
Inventories were comprised of the following at:
March 31, 2007 December 31, 2006
-------------- -----------------
Finished goods $ 2,546,100 $ 2,435,400
Raw materials 1,360,900 1,337,200
Inventory reserve
for obsolescence (447,200) (481,200)
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$ 3,459,800 $ 3,291,400
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(g) Property, Plant and Equipment Property, plant and equipment are recorded at historical cost. Depreciation is provided using the straight-line method over estimated useful lives of the assets ranging from three to forty-five years. Building structures and building improvements are estimated to have useful lives of 35 to 45 years and 3 to 20 years, respectively. Production equipment and production support equipment are estimated to have useful lives of 15 to 20 years and 3 to 10 years, respectively. Office furniture and office machines are estimated to have useful lives 10 to 20 and 3 to 5 years, respectively. Carpeting, drapes and company vehicles are estimated to have useful lives of 5 to 10 years. Maintenance and repairs are expensed as incurred. Improvements that extend the useful lives of the assets or provide improved efficiency are capitalized.
(h) Financial Instruments Financial instruments which potentially subject us to concentrations of credit risk include cash and cash equivalents, investments in marketable securities, and trade receivables. We maintain our cash balances in the form of bank demand deposits with financial institutions that management believes are creditworthy. As of the balance sheet date and periodically throughout the year, the Company has maintained balances in various operating accounts in excess of federally insured limits. We establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. We have no significant financial instruments with off-balance sheet risk of accounting loss, such as foreign exchange contracts, option contracts or other foreign currency hedging arrangements.
The recorded amounts for cash and cash equivalents, receivables, other current assets, and accounts payable and accrued expenses approximate fair value due to the short-term nature of these financial instruments. The fair value of investments in marketable securities is based upon quoted market value. Our long-term debt bears interest at a fixed rate that adjusts annually on the anniversary date to a then prime rate. The carrying value of long-term debt approximates fair value as of March 31, 2007 and December 31, 2006.
(i) Long-Lived Assets We account for long-lived assets in accordance with the provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
(j) Income Taxes We account for income taxes in accordance with the provisions of SFAS No. 109, "Accounting for Income Taxes", which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective income tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which related temporary differences become deductible. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
(k) Revenue Recognition Revenue is generally recognized upon delivery of products to customers, which is when title passes. Reserves for estimated market development support, pricing allowances and returns are provided in the period of sale as a reduction of revenue. Reserves for returns and allowances are recorded as a reduction of revenue, and are maintained at a level that management believes is appropriate to account for amounts applicable to existing sales. Reserves for coupons and certain other promotional activities are recorded as a reduction of revenue at the later of the date at which the related revenue is recognized or the date at which the sales incentive is offered. At March 31, 2007 and December 31, 2006 approximately $705,000 and $649,000, respectively, had been reserved as a reduction of accounts receivable, and approximately $55,000 and $50,000, respectively, had been reserved as current liabilities. Co-op advertising, marketing funds, slotting fees and coupons are deducted from gross sales and totaled $659,100, and $630,100 at March 31, 2007 and 2006, respectively.
(l) Advertising Costs We expense advertising costs as incurred.
(m) Stock-based Compensation At March 31, 2007, we had four stock-based employee compensation plans. During the first quarter of fiscal 2007, we adopted the provisions of, and account for stock-based compensation in accordance with, the Financial Accounting Standards Board's ("FASB") Statement of Financial Accounting Standards No. 123-revised 2004 ("SFAS 123R"), "Share-Based Payment" which replaced Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees." Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. We elected the modified-prospective method, under which prior periods are not revised for comparative purposes. The valuation provisions of SFAS 123R apply to new grants and to grants that were outstanding as of the effective date and are subsequently modified. No grants occurred in 2006 subsequent to the adoption of SFAS 123R and all outstanding options granted prior to December 31, 2006 were fully vested as of December 31, 2006.
Prior to January 1, 2006, we accounted for the plans described above under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income prior to January 1, 2006, as all options granted under those plans had an exercise price not less than the market value of the underlying common stock on the date of grant.
We granted 448,550 options for shares of our common stock (268,550 to employees and 180,000 to non-employee directors) during the first quarter of 2007. The options which vest ratably over forty-eight months, or upon a change in control, and which expire after five years, were granted at or above the market value of $0.82 as of the date of grant.
The weighted average fair market value of the options granted of $0.42 was estimated on the date of grant using a Black-Scholes option pricing model with the following assumptions.
Three Months Ended
March 31, 2007
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Expected life of options 4.5 years
Risk-free interest rate 4.46%
Expected volatility of stock 58%
Expected dividend rate None
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Compensation cost related to stock options recognized in operating results (included in general and administrative expenses) under SFAS 123R was $3,900 in the three months ended March 31, 2007. Approximately $186,200 of total unrecognized compensation costs related to non-vested stock options is expected to be recognized over the next forty-seven months. In accordance with SFAS 123R, there was no tax benefit from recording the non-cash expense as relates to the options granted to employees as these were qualified stock options which are not normally tax deductible. With respect to the non-cash expense associated with the options granted to the non-employee directors, no tax benefit was recognized due to the existence of as yet unutilized net operating losses. At such time as these operating losses have been utilized and a tax benefit is realized from the issuance of non-qualified stock options, a corresponding tax benefit may be recognized.
(n) Comprehensive Income We follow SFAS No. 130, "Reporting Comprehensive Income" which establishes standards for reporting and displaying comprehensive income and its components. Comprehensive income includes all changes in equity during a period from non-owner sources.
The following table is a reconciliation of our net loss to our total comprehensive loss for the quarters ended March 31, 2007 and 2006:
2007 2006
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Net loss $ (432,200) $(1,047,700)
Unrealized gain (loss) on
investment securities (200) (500)
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Comprehensive loss $ (432,400) $(1,048,200)
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(o) Operating Costs and Expenses Classification Cost of sales includes costs associated with manufacturing and distribution including labor, materials, freight-in, purchasing and receiving, quality control, internal transfer costs, repairs, maintenance and other indirect costs, as well as warehousing and distribution costs. We classify shipping and handling costs comprised primarily of freight-out and nominal outside warehousing costs as a component of selling expense on the accompanying Consolidated Statement of Operations. Shipping and handling costs totaled $345,000 and $387,700 for the quarters ended March 31, 2007 and 2006, respectively.
Selling expenses consist primarily of shipping and handling costs, wages and benefits for sales and sales support personnel, travel brokerage commissions, promotional costs, as well as other indirect costs.
General and administrative expenses consist primarily of wages and benefits associated with management and administrative support departments, business insurance costs, professional fees, office facility related expenses and other general support costs.
(p) Recently Issued Accounting Pronouncements In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS No. 157"). This Statement defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value in generally accepted accounting principles ("GAAP") and expands disclosure related to the use of fair value measures in financial statements. SFAS No. 157 does not expand the use of fair value measures in financial statements, but standardizes its definition and guidance in GAAP. The Standard emphasizes that fair value is a market-based measurement and not an entity-specific measurement based on an exchange transaction in which the entity sells an asset or transfers a liability (exit price). SFAS No. 157 establishes a fair value hierarchy from observable market data as the highest level to fair value based on an entity's own fair value assumptions as the lowest level. SFAS No. 157 is effective in fiscal years beginning after November 15, 2007. Adoption of this statement is not expected to materially impact our results of operations or financial position.
In July 2006, the FASB issued FASB Interpretation No. 48 (FIN 48,) "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, Accounting for Income Taxes". FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The interpretation applies to all tax positions related to income taxes subject to FASB Statement No. 109.
FIN 48 is effective for fiscal years beginning after December 15, 2006. Differences between amounts recognized in the statements of financial position prior to the adoption of FIN 48 and the amounts reported after adoption should be accounted for as cumulative-effect adjustment recorded to the beginning balance of retained earnings. The adoption of FIN 48 did not have a material impact on our financial position.
Note 2. Basis of Preparation of Financial Statements
We have prepared these unaudited interim consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission. Such rules and regulations allow the omission of certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles as long as the statements are not misleading. In the opinion of management, all adjustments necessary for a fair presentation of these interim statements have been included and are of a normal recurring nature. These interim financial statements should be read in conjunction with our financial statements included in our 2006 Annual Report on Form 10-KSB.
Note 3. Earnings per Share
Per share data was determined by using the weighted average number of common shares outstanding. Potentially dilutive securities, including stock options, are considered only for diluted earnings per share, unless considered anti-dilutive. The potentially dilutive securities, which are comprised of outstanding stock options of 1,944,650 and 1,680,600 at March 31, 2007 and 2006, were excluded from the computation of weighted average shares outstanding due to their anti-dilutive effect.
A reconciliation of the weighted average number of common shares outstanding for the three months ended March 31 follows:
2007 2006
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Common shares outstanding,
beginning of the year 10,533,000 10,503,000
Stock options exercised - -
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Weighted average number of
common shares outstanding 10,533,000 10,503,000
Dilutive effect of common share
equivalents - -
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Diluted weighted average number
of common shares outstanding 10,533,000 10,503,000
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At March 31, 2007, there were authorized 50,000,000 shares of our $.10 par value common stock and 20,000,000 shares of preferred stock issuable in one or more series. None of the preferred stock was issued or outstanding at March 31, 2007.
Note 4. Segment Information
We operate in two different segments: household products and skin care products. Our products are sold nationally and internationally (primarily Canada), directly and through independent brokers, to mass merchandisers, drug stores, supermarkets, wholesale distributors and other retail outlets. Management has chosen to organize our business around these segments based on differences in the products sold. The household products segment includes "Scott's Liquid Gold" for wood, a wood cleaner which preserves as it cleans, Mold Control 500, a mold remediation product, and "Touch of Scent," a room air freshener. The skin care segment includes "Alpha Hydrox," alpha hydroxy acid cleansers and lotions; a retinol product; "Diabetic Skin Care", a healing cream and moisturizer developed to address skin conditions of diabetics; and beauty care sachets of Montagne Jeunesse distributed by us.
The following provides information on our segments for the three months ended March 31:
2007 2006
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Household Skin Care Household Skin Care
Products Products Products Products
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Net sales to
external customers $ 2,305,500 $ 1,870,300 $ 2,065,000 $ 2,090,800
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Income (loss) before
profit sharing,
bonuses and
income taxes $ 60,300 $ (492,500) $ (327,100) $ (720,600)
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Identifiable assets $ 3,599,000 $ 5,978,600 $ 3,660,700 $ 6,401,800
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The following is a reconciliation of segment information to consolidated information for the three months ended March 31:
2007 2006
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Net sales to external customers $ 4,175,800 $ 4,155,800
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Loss before profit sharing,
bonuses and income taxes $ (432,200) $(1,047,700)
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Identifiable assets $ 9,577,600 $10,062,500
Corporate assets 10,599,700 10,851,000
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Consolidated total assets $20,177,300 $20,913,500
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Corporate assets noted above are comprised primarily of our cash and investments, and property and equipment not directly associated with the manufacturing, warehousing, shipping and receiving activities.
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
During the first quarter of 2007, we experienced an increase in sales of our Scott's Liquid Gold household products and our Neoteric line of skin care products, while experiencing a decrease in sales of our Montagne Jeunesse line of skin care products and a decrease in sales of our Touch of Scent air freshener line of products. Our net loss for the first quarter of 2007 was $432,200 versus a loss of $1,047,700 in the first quarter of 2006. The loss for 2007 was primarily due to lower sales of the Montagne Jeunesse product line and our Alpha Hydrox skin care line. The decrease in our loss for the first quarter of 2007 compared to the first quarter of 2006 results from a reduction in our operating costs and expenses, including the reduction of advertising.
Summary of Results as a Percentage of Net Sales
Year Ended Three Months Ended
December 31, March 31,
2006 2007 2006
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Net sales
Scott's Liquid Gold
household products 53.1% 55.2% 49.7%
Neoteric Cosmetics 46.9% 44.8% 50.3%
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Total Net Sales 100.0% 100.0% 100.0%
Cost of Sales 57.4% 56.2% 54.0%
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Gross profit 42.6% 43.8% 46.0%
Other revenue 1.0% 0.6% 0.3%
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43.6% 44.4% 46.3%
------ ------ ------
Operating expenses 63.8% 52.2% 70.5%
Interest expense 2.0% 2.5 1.0%
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65.8% 54.7% 71.5%
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Loss before income taxes (22.2%) (10.3%) (25.2%)
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Our gross margins may not be comparable to those of other entities, because some entities include all of the costs related to their distribution network in cost of sales and others, like us, exclude a portion of them (freight out to customers and nominal outside warehouse costs) from gross margin, including them instead in the selling expense line item. See Note 1(o), Operating Costs and Expenses Classification, to the unaudited Consolidated Financial Statements in this Report.
Comparative Net Sales
Percentage
Increase
2007 2006 (Decrease)
----------- ----------- ----------
Scott's Liquid Gold and other
household products $ 1,960,100 $ 1,681,200 16.6%
Touch of Scent 345,400 383,800 (10.0%)
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Total household
chemical products 2,305,500 2,065,000 11.6%
----------- ----------- ----------
Alpha Hydrox and other skin care 1,174,400 1,028,700 14.2%
Montagne Jeunesse skin care 695,900 1,062,100 (34.5%)
----------- ----------- ----------
Total skin care products 1,870,300 2,090,800 (10.5%)
----------- ----------- ----------
Total Net Sales $ 4,175,800 $ 4,155,800 0.5%
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Three Months Ended March 31, 2006
Compared to Three Months Ended March 31, 2005
Consolidated net sales for the first quarter of the current year were $4,175,800 versus $4,155,800 for the first three months of 2006, an increase of $20,000. Average selling prices were up by $41,300. Co-op advertising, marketing funds, slotting fees, and coupons paid to retailers are deducted from gross sales, and totaled $659,100 in the first quarter of 2007 versus $630,100 in the same quarter in 2006, an increase of $29,000 or 4.6%. This increase consisted of a decrease in coupon expense of $49,700, an increase in co-op marketing funds of $159,000, and a decrease in slotting fee expenses of $80,300.
During the first quarter of 2007, net sales of skin care products accounted for 44.8% of consolidated net sales compared to 50.3% for the same quarter of 2006. Net sales of these products for that period were $1,870,300 in 2007 compared to $2,090,800 in 2006, a decrease of $220,500 or 10.5%. Our increase in sales of Alpha Hydrox and other skin care was due to the first quarter 2007 introduction of a line of Neoteric Massage Oils, including the initial "pipeline" orders so that the massage oils are on the shelves of retailers. With only the introduction underway, it is too early to tell about consumer acceptance of the Neoteric Massage Oils. This increase was somewhat offset by a decrease in sales of our Alpha Hydrox products introduced in 2005. We have continued to experience a drop in unit sales of our more recently introduced 2005 Alpha Hydrox products and our earlier-established alpha hydroxy acid-based products due primarily to maturing in the market for alpha hydroxy acid-based skin care products, intense competition from producers of similar or alternative products, many of which are considerably larger than Neoteric Cosmetics, Inc. and reduced distribution of these products at retail stores in current and prior periods. For the first quarter of 2007, the sales of our Alpha Hydrox products accounted for 33.0% of net sales of skin care products and 14.8% of total net sales, compared to 32.9% of net sales of skin care products and 16.6% of total net sales in 2006.
For 2007, net sales of Montagne Jeunesse products were $695,900 in the first quarter versus $1,062,100 for the comparable quarter of 2006, a decrease of $366,200 or 34.5%. The decrease reflects changes in product positioning at several key retailers in 2006 as they had revised the amount of shelf and floor space allocated to these types of products, including the elimination in the first quarter of 2006 at approximately 1,500 Wal-Mart Stores of the department where Montagne Jeunesse products were previously displayed. However, late in the first quarter of 2007 Wal-Mart began the ordering Montagne Jeunesse sachets for placement in significantly more stores including the stores we lost in 2006.
Sales of household products for the first quarter of this year accounted for 55.2% of consolidated net sales compared to 49.7% for the same period in 2006. These products are comprised primarily of Scott's Liquid Gold wood care products (Scott's Liquid Gold for wood, a wood wash and wood wipes), mold remediation products and Touch of Scent. During the quarter ended March 31, 2007 sales of household products were $2,305,500 as compared to $2,065,000 for the same quarter in 2006, an increase of $240,500, or 11.6%. Sales of Scott's Liquid Gold wood care and other household products increased from $1,681,200 in 2006 to $1,960,100 in 2007 an increase of $278,900, or 16.6%. This increase is primarily due to sales of our mold remediation product Mold Control 500 in 2007 which are included in the sales shown for Scott's Liquid Gold and other household products. Mold Control 500 sales were $213,100 for the first quarter of 2007, with Mold Control 500 continuing to be carried in some stores of national retail chains. In the second quarter of 2006 we began introducing Mold Control 500 under the Scott's Liquid Gold product line. It is too early to determine if this introduction will be successful. Sales of "Touch of Scent" were down by $38,400, or 10.0%, primarily due to a decrease in distribution in past quarters.
As sales of a consumer product decline, there is the risk that retailers will stop carrying the product. The loss of any significant customer for any skin care products, "Scott's Liquid Gold" wood care or mold remediation products or "Touch of Scent", could have a significant adverse impact on our revenues and operating results. We believe that our future success is highly dependent on favorable acceptance in the marketplace of Montagne Jeunesse products, of our new Alpha Hydrox products and of our "Scott's Liquid Gold" wood care and mold remediation products.
We also believe that the introduction of successful new products, including line extensions of existing products, such as the wood wash and our new mold remediation product, using the name "Scott's Liquid Gold", are important in our efforts to maintain or grow our revenue. Late in the fourth quarter of 2006, we introduced two new items within our Alpha Hydrox cosmetic line of products. We currently plan to introduce four new items to the Alpha Hydrox cosmetic line plus a line of health and beauty care products under the Neoteric cosmetic label. Within the household product line we plan to introduce three to four new products or items including some additions to our Touch of Scent air fragrance product line. To the extent that we manufacture a new product rather than purchase it from external parties, we are also benefited by the use of existing capacity in our facilities. We are using our facilities to fill and package the mold control products. The actual introduction of additional products, the timing of any additional introductions and any revenues realized from new products is uncertain.
On a consolidated basis, cost of goods sold was $2,346,500 during the first three months of 2007 compared to $2,243,500 for the same period of 2006, an increase of $103,000 or 4.6%, on a sales increase of 0.5%. As a percentage of consolidated net sales, cost of goods sold was 56.2% in 2007 versus 54.0% in 2006, an increase of about 4.1%. This was essentially due to our decrease in plant utilization, and the increase in sales promotion expenses which lowered our revenues and thus affected our margins particularly in the skin care line of products.
Operating Expenses, Interest Expense and Other Income
Percentage
Increase
2007 2006 (Decrease)
----------- ----------- ----------
Operating Expenses
Advertising $ 112,300 $ 593,700 (81.8%)
Selling 1,255,400 1,425,500 (11.9%)
General & Administrative 814,100 912,100 (10.7%)
----------- ----------- ---------
Total operating
expenses $ 2,181,800 $ 2,931,300 (25.6%)
=========== =========== =========
Interest Income $ 24,200 $ 12,600 92.1%
Interest Expense $ 103,900 $ 41,300 151.6%
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Operating expenses, comprised of advertising, selling and general and administrative expenses, decreased by $749,500 in the first quarter of 2007 when compared to first quarter of 2006. The various components of operating expenses are discussed below.
Advertising expenses for the first three months of 2007 were $112,300 compared to $593,700 for the comparable quarter of 2006, a decrease of $481,400 or 81.8%. A majority of that decrease was due to a decrease in advertising expenses applicable to our Alpha Hydrox skin care products.
Selling expenses for the first quarter of 2007 were $1,255,400 compared to $1,425,500 for the comparable three months of 2006, a decrease of $170,100 or 11.9%. That decrease was comprised of a decrease in salaries and fringe benefits and related travel expense of $76,300 primarily because of a decrease in personnel in 2007 versus 2006, a decrease in freight and brokerage expenses of $69,400, a decrease in promotional selling expenses of $23,300 and a net decrease in other selling expenses of $1,100.
General and administrative expenses for the first three months of 2007 were $814,100 compared to $912,100 for the same period of 2006, a decrease of $98,000 or 10.7%. That decrease was primarily attributable to a decrease in salaries and fringe benefits of $91,300 resulting from a reduction in salaries and personnel, and a net decrease in other general and administrative expenses of $6,700.
Interest expense for the first quarter of 2007 was $103,900 versus $41,300 for the comparable quarter of 2006. Interest expense increased because of higher interest rates and increased borrowing levels. Interest income for the three months ended March 31, 2007 was $24,200 compared to $12,600 for the same period of 2006, which consists of interest earned on our cash reserves in 2007 and 2006.
During the first quarter of 2007 and of 2006, expenditures for research and development were not material (under 2% of revenues).
Liquidity and Capital Resources
On June 28, 2006, we entered into a new loan with a fifteen year amortization with Citywide Banks for $5,156,600 secured by the land, building and fixtures at our Denver, Colorado facilities. This loan replaces the bank loan with Citywide Banks, secured by the facilities, in the principal amount of approximately $1,582,900. Interest on the bank loan (8.0% at December 31, 2006) is at the prime rate as published in The Wall Street Journal, adjusted annually each June. Part of the proceeds of the new loan was used to pay off the prior loan, and the remaining proceeds have been or will be used in business operations, including the development and introduction of new products. This loan requires 180 monthly payments of approximately $49,500, which commenced on July 28, 2006. As did the prior bank loan, the loan agreement contains a number of covenants, including the requirement for maintaining a current ratio of at least 1:1 and a ratio of consolidated long-term debt to consolidated net worth of not more than 1:1. We may not declare any dividends that would result in a violation of either of these covenants. The foregoing requirements were met at the end of the first three months of 2007.
During the first quarter of 2007 our working capital decreased by $319,000, and concomitantly, our current ratio (current assets divided by current liabilities) decreased from 2.1:1 at December 31, 2006 to 1.9:1 at March 31, 2007. This decrease in working capital is attributable to a net loss in the first three months of 2007 of $432,200, and a reduction in long-term debt of $47,900, offset by depreciation in excess of capital additions of $159,000.
At March 31, 2007, trade accounts receivable were $1,407,300 versus $743,700 at the end of 2006, largely because sales in the last two months of the quarter ended March 31, 2007 were more than those of the last two months of the quarter ended December 31, 2006. Accounts payable increased from the end of 2006 through March of 2007 by $374,200 corresponding primarily with the increase and timing of purchases of inventory over that period. At March 31, 2007 inventories were $168,400 more than at December 31, 2006, due to the increase in cosmetic product inventory, resulting partially from lower than anticipated sales in the first quarter, anticipated increases in sales of the Montagne Jeunesse sachets and our proposed new product introductions in the upcoming months. Prepaid expenses decreased from the end of 2006 by $31,800 primarily due to a decrease in prepaid insurance expenses.
We have no significant capital expenditures planned for 2007 and have no current plans for any external financing, other than our existing bank loan. We expect that our available cash and cash flows from operating activities will fund the next twelve months' cash requirements.
Our dependence on operating cash flow means that risks involved in our business can significantly affect our liquidity. Any loss of a significant customer, any further decreases in distribution of our skin care or household products, any new competitive products affecting sales levels of our products, or any significant expense not included in our internal budget could result in the need to raise cash, such as through a bank financing. We have no arrangements for any additional external financing of debt or equity, and we are not certain whether any such financing would be available on acceptable terms. In order to improve our operating cash flow, we need to achieve profitability.
Forward-Looking Statements
This report may contain "forward-looking statements" within the meaning of U.S. federal securities laws. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements and our performance inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of each of our significant products in the marketplace; the degree of success of any new product or product line introduction by us; the uncertainty of consumer acceptance of the new Alpha Hydrox introduced in 2005, mold control and wood wash products; competitive factors; any decrease in distribution of (i.e., retail stores carrying) our significant products; continuation of our distributorship agreement with Montagne Jeunesse; the need for effective advertising of our products; limited resources available for such advertising; new competitive products and/or technological changes; dependence upon third party vendors and upon sales to major customers; changes in the regulation of our products, including applicable environmental regulations; continuing losses which could affect our liquidity; the loss of any executive officer; and other matters discussed in our 2006 Annual Report on Form 10-KSB. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this report.
Item 3A(T). Controls and Procedures
As of March 31, 2007, we conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms as of March 31, 2007. There was no change in our internal control over financial reporting during the quarter ended March 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Not Applicable
Item 2. Not Applicable.
Item 3. Not Applicable
Item 4. Not Applicable
Item 5. Other Information
As reported in our proxy statement for the 2007 Annual Meeting of Shareholders, on February 27, 2007, we granted stock options to executive officers, employees and non-employee directors for a total of 448,550 shares of common stock at an exercise price of $0.82 per share (the closing price on February 27, 2007) except that the exercise price was $0.902 for Mark E. Goldstein. These options were issued under revised option agreements which provide for vesting at 1/48th per month from the date of grant or upon a change of control. Previously, options were 100% vested at the date of grant. Concurrently, we refined one provision of our 2005 Stock Incentive Plan regarding acceleration of vesting. Attached as exhibits to this Form 10-QSB Report are the forms of stock option agreements and the revised 2005 Plan.
The number of shares subject to the options granted on February 27, 2007 were: 16,200 for each of Mark E. Goldstein, Jeffrey R. Hinkle and Jeffry B. Johnson; 25,200 shares for Dennis P. Passantino; 50,000 for Carl A. Bellini (replacing an expired option); 100,000 shares for Dennis H. Field (replacing an expired option); and 30,000 for Gerald J. Laber.
Item 6. Exhibits
10.1 2005 Stock Incentive Plan, as amended.
10.2 Form of 1997 Stock Option Plan Incentive Stock Option
Agreement
10.3 Form of 1998 Stock Option Plan Incentive Stock Option
Agreement
10.4 Form of 2005 Stock Option Plan Incentive Stock Option
Agreement
10.5 Form of 1998 Stock Option Plan Nonqualified Stock
Option Agreement
10.6 Form of 2005 Stock Incentive Plan Nonqualified Stock
Option Agreement
31.1 Rule 13a-14(a) Certification of the Chief Executive Officer
31.2 Rule 13a-14(a) Certification of the Chief Financial Officer
32.1 Section 1350 Certification
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
SCOTT'S LIQUID GOLD-INC.
May 4, 2007 BY: /s/ Mark E. Goldstein
Date --------------------------------------
Mark E. Goldstein
President and Chief Executive Officer
May 4, 2007 BY: /s/ Jeffry B. Johnson
Date --------------------------------------
Jeffry B. Johnson
Treasurer and Chief Financial Officer
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EXHIBIT INDEX
Exhibit
No. Document
10.1 2005 Stock Incentive Plan, as amended.
10.2 Form of 1997 Stock Option Plan Incentive Stock Option Agreement
10.3 Form of 1998 Stock Option Plan Incentive Stock Option Agreement
10.4 Form of 2005 Stock Option Plan Incentive Stock Option Agreement
10.5 Form of 1998 Stock Option Plan Nonqualified Stock Option Agreement
10.6 Form of 2005 Stock Incentive Plan Nonqualified Stock Option
Agreement
31.1 Rule 13a-14(a) Certification of the Chief Executive Officer
31.2 Rule 13a-14(a) Certification of the Chief Financial Officer
32.1 Section 1350 Certification
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EXHIBIT 10.1
SCOTT'S LIQUID GOLD-INC.
2005 STOCK INCENTIVE PLAN
Effective Date: March 31, 2005
Approved by Stockholders: May 4, 2005
Termination Date: March 31, 2015
As Amended On February 27, 2007
SCOTT'S LIQUID GOLD-INC.
2005 STOCK INCENTIVE PLAN
INTRODUCTION
The purpose of the Scott's Liquid Gold-Inc. 2005 Stock Incentive Plan (the "Plan") is to further the growth and development of Scott's Liquid Gold-Inc., a Colorado corporation (the "Company"), by affording an opportunity for stock ownership to selected Employees, Directors and Consultants of the Company and its Subsidiaries who are responsible for the conduct and management of its business or who are involved in endeavors significant to its success. The Plan is also intended to assist the Company in attracting new Employees and Consultants and retaining existing Employees and Consultants; to encourage growth of the Company through incentives that are consistent with the Company's goals; to provide incentives for individual performance; and to promote teamwork.
ARTICLE 1.
DEFINITIONS
When used in this Plan, the following capitalized terms shall have the meanings set forth below unless a different meaning is plainly required by the context:
1.1 Award. means the grant of Options, Restricted Stock or other stock-based grant under the Plan.
1.2 Board of Directors. means the Board of Directors of the Company.
1.3 Cause. means "Cause," as defined in the Participant's employment agreement, if applicable, or if the Participant has not entered into an employment agreement with the Company, as determined in the sole and absolute discretion of the Company, a termination on account of dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential information or trade secrets or conviction or confession of a crime punishable by law (except minor violations), in each such case as determined by the Plan Administrator, and its determination shall be conclusive and binding. Such actions constituting "Cause" shall include, without limitation, a violation of the Company's Code of Business Conduct and Ethics. A Participant who agrees to resign from his or her affiliation with the Company in lieu of being terminated for Cause shall be deemed to have been terminated for Cause for purposes of the Plan.
1.4 Change in Control. means, as may be further limited by Code
Section 409A, the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following:
(a) Any third person, including a "group" as defined in
Section 13(d) or 14(d) of the Exchange Act, becomes the beneficial owner
of shares of the Company having 50% or more of the total number of votes
that may be cast for the election of Directors of the Company.
(b) The stockholder(s) of the Company approve: (i) any
agreement for a merger or consolidation of the Company with another
entity, provided that there shall be no change of control if the persons
and entities who were the stockholders of the Company immediately before
such merger or consolidation continue to own, directly or indirectly,
more than two-thirds of the outstanding voting securities of the
corporation resulting from such merger or consolidation in substantially
the same proportion as their ownership of the voting securities of the
Company outstanding immediately before such merger or consolidation;
(ii) any sale, exchange or other disposition of all or substantially all
of the Company's assets; or (iii) a plan of complete dissolution or
liquidation of the Company (or a complete dissolution or liquidation of
the Company shall otherwise occur).
(c) There is a consummated sale, exchange or other disposition of greater than 50% in fair market value of the Company's assets, other than in the ordinary course of business, whether in a single transaction or a series of related transactions.
In determining whether subsection (a) has been satisfied, the third person owning shares must be someone other than a person or an Affiliate of a person that, as of the Effective Date, was the beneficial
owner of shares of the Company having 20% or more of the total number of votes that may be cast for the election of Directors of the Company.
The Plan Administrator's reasonable determination as to whether such an event has occurred shall be final and conclusive.
1.5 Code. means the Internal Revenue Code of 1986, as amended from time to time.
1.6 Common Stock or Stock. means the Company's Common Stock and any share or shares of the Company's capital stock hereafter issued or issuable in substitution for such shares.
1.7 Consultant. means a consultant, agent, advisor or independent contractor who provides service to the Company and who does not receive wages subject to income tax federal withholding under Code Section 3401; provided, however, that such person is a natural person, renders bona fide services that are not in connection with the offer and sale of the Company's securities in a capital raising transaction and does not directly or indirectly promote or maintain a market for the Company's securities. Consultant does not include Directors who are not compensated by the Company for services as Directors, and the payment of a Director's fee by the Company for services as a Director shall not cause a Director to be considered a Consultant for purposes of the Plan.
1.8 Continuous Service. means that the Participant's service with the Company, its Parent or Subsidiary, whether as an Employee, Consultant or Director, is not interrupted or terminated. The Participant's Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company, its Parent or Subsidiary as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant's Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of a Subsidiary or a Director will not constitute an interruption of Continuous Service. The Plan Administrator, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence, including sick leave, military leave or any other personal leave.
1.9 Director. means a member of the board of directors of the Company, its Parent or Subsidiary.
1.10 Disability. means disability within the meaning of the long-term disability policy maintained by the Company, or if none, within the meaning of Code Section 22(e)(3).
1.11 Effective Date. means the effective date of the Plan, as first set forth above.
1.12 Employee. means a common law employee of the Company or its Subsidiary and any person who has accepted a binding offer of employment from the Company or its Subsidiary, but excludes any individual classified by the Company or its Subsidiary as an independent contractor or leased employee.
1.13 Exchange Act. means the Securities Exchange Act of 1934, as amended from time to time.
1.14 Fair Market Value. means the value of the Common Stock, determined in accordance with the following: If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market, the Nasdaq SmallCap Market, the OTC Bulletin Board or otherwise over the counter, then the Fair Market Value per share shall be deemed to be the average of the closing sales prices (or, if closing sales prices are not available for the trading market, the average of closing bid and asked prices) for the Common Stock or security for the five preceding trading days as reported in the Wall Street Journal or another publication or source for market prices selected by the Board of Directors. If there has not been trading of the Common Stock on a specific date, then a trading day is 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 Plan Administrator by applying any reasonable valuation method.
1.15 Incentive Stock Option. means 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 Code Section 422.
1.16 Nonqualified Stock Option. means any option granted to an eligible Employee, Director or Consultant under the Plan that is not an Incentive Stock Option.
1.17 Option. means and refers collectively to Incentive Stock Options and Nonqualified Stock Options.
1.18 Option Agreement. means the agreement specified in
Section 6.2.
1.19 Parent. means a parent corporation of the Company as defined in Code Section 424(e).
1.20 Participant. means any Employee, Director or Consultant who is granted an Award under the Plan. Participant also means the personal representative of a Participant and any other person who acquires the right to exercise or receive payment pursuant to an Award by bequest or inheritance.
1.21 Plan Administrator. means the body that is responsible for the administration of the Plan, as determined pursuant to Section 3.1.
1.22 Repriced . means any amendment or adjustment of the exercise price or the purchase price of an Award through amendment, cancellation, replacement grants or any other means.
1.23 Restricted Stock. means shares of Common Stock granted to a Participant that are subject to the restrictions set forth in Article 8 of the Plan and the Restricted Stock Award Agreement. Restricted Stock also means any shares of the Company's capital stock issued as the result of a dividend on or split of Restricted Stock. Upon termination of the restrictions, such Common Stock or other capital stock shall no longer be Restricted Stock.
1.24 Restricted Stock Award Agreement. means the agreement specified in Section 8.2 between the Company and a Participant pursuant to which Restricted Stock is granted to the Participant.
1.25 Restricted Stock Unit or RSU. means a contingent obligation of the Company to deliver shares of Common Stock to the Participant who is a party to a Restricted Stock Unit Award Agreement pursuant to Article 8 of the Plan. Each RSU represents the unfunded, unsecured right of the Participant to receive a share of Common Stock on the date(s) specified herein. RSUs do not constitute issued and outstanding shares of Common Stock for any corporate purposes and do not confer on the Participant any right to vote on matters that are submitted to a vote of shareholders.
1.26 Restricted Stock Unit Award Agreement. means the agreement specified in Section 8.2 between the Company and a Participant pursuant to which a contingent right to shares of Common Stock is granted to the Participant.
1.27 Restriction Period. means the period set forth in the Restricted Stock Award Agreement that is the period beginning on the date of grant of the Award and ending on the final vesting date of the Restricted Stock.
1.28 Rule 16b-3. means Rule 16b-3 promulgated by the Securities Exchange Commission under the Exchange Act, together with any successor rule, as in effect from time to time.
1.29 Stock Appreciation Right or SAR. means a standalone stock appreciation right that has been granted pursuant to Article 7 of the Plan.
1.30 Stock Appreciation Right Award Agreement. means the agreement specified in Section 7.2 between the Company and a Participant pursuant to which a contingent right to shares of Common Stock is granted to the Participant.
1.31 Subsidiary. means a subsidiary corporation of the Company as defined in Code Section 424(f).
1.32 Termination Date. means the termination date of the Plan, as first set forth above.
ARTICLE 2.
EFFECTIVE DATE
The Effective Date of the Plan shall be the date on which the Plan is approved by the stockholders of the Company.
ARTICLE 3.
ADMINISTRATION
3.1 PLAN ADMINISTRATOR. The Plan shall be administered by the Board of Directors, unless and until such time as the Board of Directors delegates the administration of the Plan to a committee, which shall be appointed by and shall serve at the pleasure of the Board of Directors. Any committee member shall be deemed to have resigned automatically from the committee upon his or her termination of service with the Company. To the extent the Board considers it desirable for transactions relating to an Award to be eligible to qualify for an exemption under Rule 16b-3, the Plan Administrator shall consist of a committee of two or more Directors of the Company, all of whom qualify as "non-employee directors" within the meaning of Rule 16b-3. To the extent the Board considers it desirable for compensation delivered pursuant to an Award to be eligible to qualify for an exemption under Code Section 162(m), the Plan Administrator shall consist of a committee of two or more Directors of the Company, all of whom qualify as "outside directors" within the meaning of Code Section 162(m). The Board may from time to time remove members from or add members to any such committee; fill vacancies on the committee, howsoever caused; and otherwise increase or decrease the number of members of such committee, in each case as the Board deems appropriate to permit transactions in Common Stock pursuant to the Plan and to satisfy such conditions of Rule 16b-3 or Code Section 162(m) as then in effect.
3.2 MEETINGS AND ACTIONS. The Plan Administrator shall hold meetings at such times and places as it may determine. A majority of the members of the Plan Administrator 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 Plan Administrator shall be the acts of the Plan Administrator and shall be final, binding and conclusive upon all persons, including the Company, its Subsidiaries, its stockholders, and all persons having any interest in Awards that may be or have been granted pursuant to the Plan.
3.3 POWERS OF PLAN ADMINISTRATOR. The Plan Administrator shall have the full and exclusive right to grant and determine terms and conditions of all Awards granted under the Plan and to prescribe, amend and rescind rules and regulations for administration of the Plan. In selecting Participants and granting Awards, the Plan Administrator shall take into consideration the contribution the Participant has made or may make to the success of the Company or its Subsidiaries and such other factors as the Plan Administrator shall determine.
3.4 INTERPRETATION OF PLAN. The Plan Administrator may correct any defect, supply any omission, or reconcile any inconsistency in the Plan or in any agreement entered into hereunder. The determination of the Plan Administrator 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 stockholders, and all persons having any interest in Awards that may be or have been granted pursuant to the Plan.
ARTICLE 4.
STOCK SUBJECT TO THE PLAN
4.1 PLAN LIMIT. Subject to the provisions of Section 4.4, the aggregate number of shares of Common Stock that may be issued under Awards granted pursuant to the Plan shall not exceed [ ] shares. Shares that may be issued under Awards may consist, in whole or in part, of authorized but unissued stock or treasury stock of the Company not reserved for any other purpose.
4.2 INDIVIDUAL LIMIT. During any single calendar year, no Participant shall be eligible to be granted Awards exceeding 10% of the limits set forth in Section 4.1. From the Effective Date to the date on which the Plan terminates, no Participant shall be eligible to be granted Awards exceeding 20% of the limits set forth in Section 4.1.
4.3 UNUSED STOCK. If any outstanding Award under the Plan expires or for any other reason ceases to be exercisable, is forfeited or repurchased by the Company, in whole or in part (other than upon exercise of an Award), the shares that were subject to such Award (and as to which the Award had not been exercised) shall continue to be available under the Plan or revert to the Plan to again be available for issuance under the Plan; provided, however, that subject to the provisions of Section 4.4 relating to adjustments, the aggregate maximum number of shares of Common Stock that may be issued as Incentive Stock Options shall be the number of shares of Common Stock as may be approved by the stockholders of the Company from time to time for issuance as Incentive Stock Options under Section 4.1.
4.4 ADJUSTMENT FOR CHANGE IN OUTSTANDING SHARES.
(a) In General. If there is any change, increase or decrease, in the outstanding shares of Common Stock that is effected without receipt of additional consideration by the Company, by reason of a stock dividend, subdivision, reclassification, recapitalization, merger, consolidation, stock split, combination or exchange of stock, or other similar circumstances not involving the receipt of consideration by the Company (each a Capitalization Event), then in each such event, the Plan Administrator shall make an appropriate adjustment in the aggregate number of shares of Common Stock available under the Plan, the number of shares of Common Stock subject to each outstanding Award and the exercise prices in order to prevent the dilution or enlargement of any Participant's rights. In the event of any adjustment in the number of shares of Common Stock covered by any Award, including those provided in subsection (b) below, each such Award shall cover only the number of full shares resulting from such adjustment. The Plan Administrator's determinations in making any adjustment shall be final and conclusive.
(b) Adjustments for Certain Distributions of Property. If the Company at any time distributes with respect to its Common Stock securities or other property (except cash or Common Stock), a proportionate part of those securities or other property shall be set aside and delivered to the Participant when he exercises an Option or the restrictions on Restricted Stock lapse. The securities or other property shall be in the same ratio to the total securities and property set aside for the Participant as the number of shares of Common Stock with respect to which the Option is then exercised or the Restricted Stock then vests is to the total shares of Common Stock subject to the Award.
(c) Exceptions to Adjustment. Except as expressly provided herein, the issue by the Company of shares of Common Stock of any class, or securities convertible into or exchangeable for shares of Common Stock of any class, for cash or property or for labor or services, or upon sale or upon exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into or exchangeable for shares of Common Stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to any Award granted under the Plan.
4.5 RETENTION OF RIGHTS. The existence of this Plan and any Award granted pursuant to the Plan shall not affect the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other change in the Company's capital structure or its business, or a merger or consolidation of the Company, or any issue of bonds, debentures, or preferred or preference stock ranking before or affecting the Common Stock, or the dissolution of the Company or any sale or transfer of all or any part of the Company's assets or business, or any other corporate act or proceeding, whether similar or not.
4.6 CANCELLATION OF AWARD. The Plan Administrator may at any time cancel an Award, whether vested or unvested, if the Participant engages in conduct that the Plan Administrator in its sole discretion determines to be detrimental to the best interest of the Company. Without limiting the foregoing, the Plan Administrator may cancel all or any portion of an Award, whether vested or unvested, if the Plan Administrator determines that the Participant has failed at an time during the Participant's employment or other affiliation with the Company to comply with any policies or procedures of the Company, including the Company's Code of Business Conduct and Ethics.
ARTICLE 5.
ELIGIBILITY
All full-time and part-time Employees shall be eligible to receive any Award under the Plan. Directors and Consultants who are not Employees shall be eligible to receive any Award, other than Incentive Stock Options, under the Plan. Any Director who is otherwise eligible to participate, who makes an election in writing not to receive any grants under the Plan, shall not be eligible to receive any such grants during the period set forth in such election.
ARTICLE 6.
STOCK OPTIONS
6.1 GRANT OF OPTIONS. The Plan Administrator may from time to time in its discretion determine which of the eligible Employees, Directors and Consultants 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 of the Employee's 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. To the extent that the limitation set forth in the preceding sentence has been exceeded, the Options that exceed the annual limitation shall be deemed to be Nonqualified Stock Options rather than Incentive Stock Options.
6.2 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 Plan Administrator, to which that Option pertains. More than one Option, and any combination of Options, SARs and Restricted Stock Awards, may be granted to an eligible person.
(a) Option Price. The Option price (i.e., exercise price) per share of Common Stock under each Option shall be determined by the Plan Administrator and stated in the Option Agreement. The Option price for any 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 exercise price of the Common Stock under each Option may not be Repriced.
(b) Duration of Options. Each Option shall be of a duration as specified in the Option Agreement; provided, however, that the term of any 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.
(c) Vesting. Unless otherwise stated in the Option Agreement, Options shall be fully vested. Any vesting schedule may be waived or accelerated by the Plan Administrator at any time.
(d) Additional Limitations on Grant for 10% Stockholders. 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 Code Section 424(d)) 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.
(e) Rights as Stockholder. A Participant 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.
(f) Other Terms and Conditions. The Option Agreement may contain such other provisions, which shall not be inconsistent with the Plan, as the Plan Administrator shall deem appropriate, including, without limitation, provisions that relate to the Participant's ability to exercise an Option in whole or in part to the passage of time or the achievement of specific goals or the occurrence of certain events, as specified by the Plan Administrator.
6.3 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 Chief Financial Officer of the Company, which notice shall specify the number of whole shares of Common Stock to be purchased and shall be accompanied by (a) payment in full to the Company of the exercise price of the whole number of shares to be purchased; plus (b) 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 (c) representations meeting the requirements of Section 11.4 if requested by the Company. The conditions of this section shall be satisfied at the time that the Option or any part thereof is exercised, and no shares of Common Stock shall be issued or delivered until such conditions have been satisfied by the Participant.
6.4 PAYMENT OF OPTION PRICE. Payment for shares and withholding taxes shall be in the form of either (a) cash, (b) a certified or bank cashier's check to the order of the Company, or (c) 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 equals or exceeds the aggregate option price of the shares with respect to which the Option is being exercised, provided that such shares have been held outright by the Participant for at least six months, (d) any other form of legal consideration that may be acceptable to the Plan Administrator, or (e) in any combination thereof; provided, however, that no payment may be made in shares of Common Stock unless the Plan Administrator has approved of payment in such form by such Participant with respect to the Option exercise in question. If the Common Stock is registered under Section 12 of the Exchange Act at the time an Option is exercised and if the procedure stated in this sentence is expressly permitted by the Plan Administrator, and to the extent the option is exercised for vested shares, then payment may also be made through a special sale and remittance procedure pursuant to which the Participant shall concurrently provide irrevocable written instructions (1) to a brokerage firm designated by the Company to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable withholding taxes, and (2) to the Company to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale.
ARTICLE 7.
STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARS. The Plan Administrator may from time to time in its discretion determine which of the eligible Employees, Directors and Consultants should receive SARs, the number of shares subject to such SARs, and the dates on which such SARs are to be granted. The grant of the SAR shall be evidenced in a written Stock Appreciation Rights Award Agreement. The Stock Appreciation Rights Award Agreement shall state the number of shares of SARs being granted, as designated by the Plan Administrator, the exercise price per share of each SAR, and the duration of the SAR.
7.2 AWARD AGREEMENT. Each SAR granted under the Plan shall be evidenced by a written Stock Appreciation Right Award Agreement setting forth the terms upon which the SAR is granted. Each Stock Appreciation Right Award Agreement shall state the number of shares of Common Stock, as designated by the Plan Administrator, to which that SAR pertains. More than one SAR, and any combination of Options, SARs and Restricted Stock Awards, may be granted to an eligible person.
(a) SAR Exercise Price. The exercise price per share of Common Stock under each SAR shall be determined by the Plan Administrator shall not be less than 100% of the Fair Market Value (determined as the day the SAR is granted ) of the Common Stock subject to the SAR, and shall be stated in the Stock Appreciation Right Award Agreement. The exercise price of the Common Stock under each SAR may not be Repriced.
(b) Duration of SARs. Each SAR shall be of a duration as specified in the Stock Appreciation Right Award Agreement; provided, however, that the term of any SAR shall be no more than ten years from the date on which the SAR is granted and shall be subject to early termination as provided herein.
(c) Vesting. Unless otherwise stated in the Stock Appreciation Right Award Agreement, SARs shall be fully vested. Any vesting schedule may be waived or accelerated by the Plan Administrator at any time.
(d) Rights as Stockholder. A Participant shall have no rights as a stockholder of the Company with respect to any shares of Common Stock covered by a SAR until the date of the issuance of the stock certificate for such shares.
(e) Other Terms and Conditions. The Stock Appreciation Right Award Agreement may contain such other provisions, which shall not be inconsistent with the Plan, as the Plan Administrator shall deem appropriate, including, without limitation, provisions that relate to the Participant's ability to exercise an SAR in whole or in part to the passage of time or the achievement of specific goals or the occurrence of certain events, as specified by the Plan Administrator.
7.3 MANNER OF EXERCISE. Subject to the limitations and
conditions of the Plan or the Stock Appreciation Right Award Agreement,
a SAR shall be exercisable, in whole or in part, from time to time, by
giving written notice of exercise to the Chief Financial Officer of the
Company, which notice shall specify the number of whole shares of Common
Stock to be purchased and shall be accompanied by (a) 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 SAR; and
(b) representations meeting the requirements of Section 11.4 if
requested by the Company. The conditions of this section shall be
satisfied at the time that the SAR or any part thereof is exercised, and
no shares of Common Stock shall be issued or delivered until such
conditions have been satisfied by the Participant. The effective date of
exercise of a SAR shall be the date on which the Company shall have
received notice from the Participant of the exercise thereof. Upon the
exercise of SARs, the Participant shall receive a number of shares of
Common Stock having a Fair Market Value equal to the Fair Market Value
on the date of exercise of such SAR of the number of shares of Common
Stock with respect to which such SAR shall have been exercised over the
aggregate exercise price of the SAR or portion thereof exercised.
ARTICLE 8.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
8.1 GRANT OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS. The Plan Administrator may from time to time in its sole discretion determine which of the eligible Employees, Directors, or Consultants should receive grants of Restricted Stock and/or Restricted Stock Units, the number of shares with respect to which Restricted Stock or RSUs are to be granted to each such eligible Employee, Director, and Consultant, the dates on which such Awards are to be granted, and the restrictions applicable to each Award grant.
8.2 AWARD AGREEMENT. Each Restricted Stock Award or RSU granted under the Plan shall be evidenced by a written Award Agreement setting forth the terms upon which the Award is granted. Each Award Agreement shall state the number of shares of Common Stock, as designated by the Plan Administrator, to which that Award pertains; the price, if any, to be paid by the Participant for the shares; and the restrictions applicable to each grant. More than one Award may be granted to an eligible person. The terms of any Award Agreement need not be identical to the terms of any other Award Agreement applicable to other grants under the Plan to the same or other Participants. No Restricted Stock or RSU shall be issued under the Plan until the Participant provides the Company with a signed Restricted Stock or RSU Award Agreement in the form specified by the Plan Administrator with respect to the grant of such Restricted Stock or RSU to that Participant. No shares of Common Stock shall be issued under the Plan with respect to a Restricted Stock Unit Award until the Participant provides the Company with a signed Award Agreement and satisfies the conditions described in that Award Agreement.
(a) Issuance of Restricted Stock. The right to receive
Restricted Stock shall be conditioned upon the delivery of the purchase
price, if any, by the Participant by (i) payment in full, in cash, check,
or by certified or bank cashier's check to the Company (or payment by
such other consideration as shall be permitted by the Plan Administrator)
or, upon approval of the Plan Administrator, 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 equals or exceeds the
aggregate purchase price of the shares; (ii) payment in similar form
equal to 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 vesting of the
Restricted Stock or the Participant's election under Code Section 83(b);
(iii) a representation meeting the requirements of Section 11.4 if
requested by the Plan Administrator; and (iv) a copy of the executed
Restricted Stock Award Agreement in the form specified by the Plan
Administrator with respect to the grant of Restricted Stock to that
Participant.
(b) Purchase Price. Restricted Stock may be granted under the Plan without the payment of a purchase price. If a grant is made with a purchase price, the purchase price of the Restricted Stock may not be Repriced.
(c) Vesting. Unless otherwise stated in the Restricted Stock Award Agreement or Restricted Stock Unit Award Agreement, as applicable, the Award shall be fully vested. Any vesting schedule may be waived or accelerated by the Plan Administrator at any time.
(d) Redemption of RSUs. Subject to the limitations and
conditions of the Plan or the Restricted Stock Unit Award Agreement,
RSUs shall be redeemed, in whole or in part, from time to time, according
to the terms of the applicable Restricted Stock Unit Award Agreement,
which notice shall specify the number of whole shares of Common Stock
to be issued; provided that the Participant provides the Company
(a) 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
redemption of the RSU; and (b) representations meeting the requirements
of Section 11.4 if requested by the Company. The conditions of this
section shall be satisfied at the time that the RSU or any part thereof is
redeemed, and no shares of Common Stock shall be issued or delivered
until such conditions have been satisfied by the Participant.
(e) Stock Certificates. The stock certificate or certificates representing the Restricted Stock shall be registered in the name of the Participant to whom such Restricted Stock shall have been granted. Such certificates shall remain in the custody of the Company and the Participant shall deposit with the Company stock powers or other instruments of assignment, each endorsed in blank, so as to permit retransfer to the Company of all or a portion of the Restricted Stock that shall be forfeited or otherwise not become vested in accordance with the Plan and the applicable Restricted Stock Award Agreement.
(f) Restrictions and Rights. Restricted Stock shall constitute issued and outstanding shares of Common Stock for all corporate purposes. The Participant shall have the right to vote such Restricted Stock, to receive and retain all regular cash dividends and such other distributions, as the Board of Directors may, in its discretion, designate, pay or distribute on such Restricted Stock, and to exercise all other rights, powers and privileges of a holder of Common Stock with respect to such Restricted Stock, except as set forth in this Article 8. The Restricted Stock Award Agreement or Restricted Stock Unit Award Agreement, as applicable, may contain such other provisions, which shall not be inconsistent with the Plan, as the Plan Administrator shall deem appropriate.
(g) Forfeiture. If the Participant fails to satisfy any applicable restrictions (including without limitation any vesting requirements), terms and conditions set forth in this Plan or in the Restricted Stock Award Agreement or Restricted Stock Unit Award Agreement, as applicable, for any reason, any Restricted Stock or RSUs held by such Participant and affected by such conditions shall be forfeited to the Company in return for such consideration as shall be specified in the applicable Award Agreement. The Company and its officers are authorized to reflect such forfeiture of Restricted Stock on the Company's stock ledger.
ARTICLE 9.
TERMINATION OF CONTINUOUS SERVICE
9.1 TERMINATION OF CONTINUOUS SERVICE FOR OPTIONS AND SARS. This
Section 9.1 applies only to Options and SARs. Any vesting of any Award
shall cease upon termination of the Participant's Continuous Service,
and any Award shall be exercisable only to the extent that it was
exercisable on the date of such termination of Continuous Service. Any
Award not exercisable as of the date of termination, and any Award or
portions thereof not exercised within the period specified herein, shall
terminate.
(a) Termination Other than for Cause. Subject to any limitations set forth in the agreement for an Award, and provided that the notice of exercise is provided as required by the Plan prior to the expiration of the Award, the Participant shall be entitled to exercise the Award (i) during the Participant's Continuous Service, and (ii) for a period of three months after the date of termination of the Participant's Continuous Service for reason other than Cause, or such longer period as may be set forth in the Award Agreement.
(b) Termination by Death. Notwithstanding subsection (a), if a Participant's Continuous Service should terminate as a result of the Participant's death, or if a Participant should die within a period of three months after termination of the Participant's Continuous Service under circumstances in which subsection (a) would permit the exercise of the Award following termination, the personal representatives of the Participant's estate or the person or persons who shall have acquired the Award from the Participant by bequest or inheritance may exercise the Award at any time within one year after the date of death, but not later than the expiration date of the Award.
(c) Termination by Disability. Notwithstanding subsection
(a), if a Participant's Continuous Service should terminate by reason of
the Participant's Disability, the Participant may exercise the Award at
any time within one year after the date of termination but not later than
the expiration date of the Award.
(d) Termination for Cause; Breach of Covenant Not to Compete or Nondisclosure Agreement. Notwithstanding anything herein to the contrary, and unless otherwise provided by the Award Agreement, all unexercised Awards granted to the Participant shall terminate immediately if the Participant is terminated for Cause, breaches any obligation under a covenant not to compete with the Company or any of its Subsidiaries, or breaches any obligation under an agreement not to use or disclose proprietary information obtained from or through the Company or any of its Subsidiaries, upon such occurrence.
(e) Extension of Option Termination Date. The Plan Administrator, in its sole discretion, may extend the termination date of an Award granted under the Plan without regard to the preceding provisions of this section. Such extension may be made in the Award Agreement as originally executed or by amendment to the Award Agreement, either prior to or following termination of a Participant's Continuous Service. The Plan Administrator shall have no power to extend the termination date of an Incentive Stock Option beyond the periods provided in subsections (a), (b) and (c) prior to the termination of the Participant's Continuous Service or without the approval of the Participant, which may be granted or withheld in the Participant's sole discretion. Any extension of the termination date of an Incentive Stock Option may be deemed to be the grant of a new Option for purposes of the Code.
9.2 TERMINATION OF CONTINUOUS SERVICE FOR RESTRICTED STOCK AND RSUS. In the event that a Participant terminates Continuous Service with the Company for any reason, including Disability of the Participant, any unvested Restricted Stock or RSUs held by such Participant as of the date of such termination of Continuous Service shall be forfeited to the Company as of the date of termination of Continuous Service unless otherwise provided in the applicable Award Agreement.
ARTICLE 10.
CHANGE IN CONTROL
10.1 SUBSTITUTION OF AWARDS. In the event of a Change in Control Event, any surviving corporation or acquiring corporation may assume any outstanding Award under the Plan or may substitute similar stock awards on an equitable basis of appropriate stock of the Company, or of the surviving corporation or acquiring corporation, which will be issuable in respect of the Common Stock (including an award to acquire the same consideration paid to the stockholders in the Change in Control Event ) for those outstanding under the Plan.
10.2 ACCELERATION OF VESTING. In the event of a Change in Control
Event, then the vesting of Awards held by Participants whose Continuous
Service has not terminated (and, if applicable, the time during which such
Awards may be exercised) shall be accelerated in full. In anticipation of
a Change in Control Event, the Plan Administrator may, upon written notice
to all Participants holding Awards, provide that all unexercised Awards
must be exercised upon the Change in Control Event or within a specified
number of days of the date of such change in Control Event or such Awards
will terminate. In response to such notice, a Participant may make an
irrevocable election to exercise the Participant's Award contingent upon
and effective as of the effective date stated in such notice. Any Award
shall terminate if not exercised upon the time frame stated in the
notice. The Plan Administrator may, in its sole discretion, accelerate
the vesting of any outstanding Award in connection with any proposed or
completed Change in Control Event. Prior to such a Change in Control
Event, the Plan Administrator may, in its sole discretion, terminate any
or all unexercised Awards (after acceleration of vesting) in exchange
for consideration similar to that received by stockholders of Common
Stock of the Company in the Change in Control Event, less the exercise
price required under such Awards. Notwithstanding this Section 10.2 and
Section 1.4, there shall not be a Change of Control Event for purposes
of this Section 10.2 (including, without limitation, any accelerated
vesting) if (a) the transaction or transactions which would otherwise
result in a Change of Control Event are not a complete dissolution or
liquidation of the Company or stockholder approval of a complete
dissolution or liquidation, (b) the persons and entities who are
stockholders of the Company immediately before such transaction or
transactions continue to own, directly or indirectly, more than 2/3
of the outstanding voting securities of the corporation resulting from
such transaction or transactions in substantially the same proportion as
their ownership of the voting securities of the Company outstanding
immediately before such transaction or transactions and (c) the Company
and its Subsidiaries continue operations of an active business
immediately after such transaction or transactions.
ARTICLE 11.
ISSUANCE OF SHARES
11.1 TRANSFER OF SHARES TO PARTICIPANT. As soon as practicable
after (a) a Participant has given the Company written notice of exercise
of an Option and has otherwise met the requirements of Section 6.3, with
respect to an Option, or (b) a Participant has satisfied any applicable
restrictions, terms and conditions set forth in this Plan or in the Stock
Appreciation Award Agreement with respect to a SAR, or (c) a Participant
has satisfied any applicable restrictions, terms and conditions set forth
in this Plan or in the Restricted Stock Award Agreement with respect to
a Restricted Stock Award, or (d) a Participant has satisfied any
applicable restrictions, terms and conditions set forth in this Plan or
in the Restricted Stock Unit Award Agreement with respect to an RSU, the
Company shall register a certificate in such Participant's name for the
number of shares of Common Stock as to which the Award has been exercised
or satisfied and shall, upon the Participant's request, deliver such
certificate to the Participant. In no event shall the Company be
required to transfer fractional shares to the Participant, and in lieu
thereof, the Company may pay an amount in cash equal to the Fair Market
Value of such fractional shares on the date of exercise or vesting, as
applicable.
11.2 LEGEND. All certificates evidencing shares of Common Stock
originally issued pursuant to this Plan or subsequently transferred to
any person or entity, and any shares of capital stock received in respect
thereof, may bear such legends and transfer restrictions as the Company
shall deem reasonably necessary or desirable, including, without
limitation, legends restricting transfer of the Common Stock until there
has been compliance with federal and state securities laws and until the
Participant or any other holder of the Common Stock has paid the Company
such amounts as may be necessary in order to satisfy any withholding tax
liability of the Company.
11.3 COMPLIANCE WITH LAWS. 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 Participant 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. If, after reasonable efforts, the Company is unable to obtain the authority that counsel for the Company deems necessary for the lawful issuance and sale of shares upon exercise of Options or vesting of an Award under the Plan, the Company shall be relieved from any liability for failure to issue and sell shares upon exercise of such Options or vesting of an Award unless and until such authority is obtained.
11.4 INVESTMENT REPRESENTATION. The Company may require any Participant, as a condition precedent to exercising any Option or acquiring or exercising any SAR, Restricted Stock, or RSU, to provide a written representation providing assurances satisfactory to the Company (a) as to the Participant's knowledge and experience in financial and business matters and/or that the Participant has engaged a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters, (b) that the Participant is capable of evaluating, alone or together with the purchaser representative, the merits and risks of acquiring the Common Stock or other security; and (c) that the Participant is acquiring the stock subject to the Option, SAR, Restricted Stock or RSU for such person's own account and not with any present intention of selling or otherwise distributing the stock. Such a representation shall not be required if (1) the issuance of the shares pursuant to an Award has been registered under a then currently effective registration statement under the Securities Act, or (2) as to any particular requirement, a determination is made by counsel for the Company that such representation is not required.
ARTICLE 12.
AMENDMENT AND TERMINATION
12.1 AMENDMENT OF THE PLAN. 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 Award previously granted. Unless the shareholders of the Company shall have given their approval, the total number of shares which may be issued under the Plan shall not be increased, except as provided in Section 4.4, and no amendment shall be made which reduces exercise price for the grant of any Option, SAR or RSU or purchase price for the grant of any Restricted Stock as required by the Plan, except as provided in Section 4.4, or which materially modifies the requirements as to eligibility under the Plan to receive any Award. Subject to the terms and conditions of the Plan, the Plan Administrator may modify, extend or renew outstanding Awards granted under the Plan, except that no such action shall diminish or impair the rights under an Award previously granted without the consent of the Participant.
12.2 TERMINATION OF THE PLAN. This Plan shall not have any fixed Termination Date. The Board of Directors may at any time suspend or terminate the Plan. No such suspension or termination shall diminish or impair the rights under an Award previously granted without the consent of the Participant. Notwithstanding the foregoing, no Award under the Plan may be granted any time after ten years after the Effective Date of the Plan.
ARTICLE 13.
GENERAL PROVISIONS
13.1 TAX OBLIGATIONS.
(a) General. To the extent provided by the terms of an Award Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award by any of the following means (in addition to the right to withhold from any compensation paid to the Participant by the Company, its Parent or Subsidiary) or by a combination of such means: (i) tendering a cash payment; (ii) if and only if permitted by the Plan Administrator, authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid variable award accounting); or (iii) if and only if permitted by the Plan Administrator, delivering to the Company owned and unencumbered shares of Common Stock.
(b) Code Section 409A. To the extent required to avoid
penalties under Code Section 409A, the Plan Administrator intends any
Award issued under the Plan to comply in all respects with Code
Section 409A and related regulations and intends to interpret and
administer any Award issued under the Plan in accordance with Code
Section 409A. Notwithstanding any provision to the contrary, all taxes
associated with participation in the Plan, including any liability
imposed under Code Section 409A, shall be borne by the Participant.
13.2 NO EMPLOYMENT RIGHTS. Nothing contained in this Plan or in any Award granted under the Plan shall confer upon any Participant any right with respect to the continuation of such Participant's Continuous Service 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 Continuous Service or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of the Award.
13.3 NONTRANSFERABILITY OF AWARDS. Awards granted pursuant to
the Plan are not transferable by the Participant other than by will or
the laws of descent and distribution and shall be exercisable during the
Participant's lifetime only by the Participant. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of the Awards
contrary to the provisions hereof, or upon the levy of any attachment or
similar process upon the Award, the Award shall immediately become null
and void. Notwithstanding the foregoing, to the extent specified in an
Award Agreement, an Award may be transferred by a Participant solely to
(1) the Participant's immediate family (children, grandchildren, or
spouse) or trusts or other entities established for the benefit of the
Participant's immediate family; or (2) the trust underlying a
nonqualified deferred compensation plan established and maintained by the
Company, to the extent specifically permitted in the trust agreement.
Any such transfer of an Incentive Stock Option shall result in the
conversion of the Option to a Nonqualified Stock Option.
13.4 PARTICIPANTS IN FOREIGN COUNTRIES. The Plan Administrator
shall have the authority to adopt such modifications, procedures and
subplans as may be necessary or desirable to comply with provisions of
the laws of foreign countries in which the Company may operate to assure
the viability of the benefits from Awards granted to Participants
employed in such countries and to meet the objectives of the Plan.
13.5 OTHER EMPLOYEE BENEFITS. Unless so provided by the applicable
plan, the amount of compensation deemed to be received by a Participant
as a result of the exercise of an Award shall not constitute earnings
with respect to which any other employee benefits of the person are
determined, including without limitation benefits under any pension,
profit sharing, life insurance, or disability or other salary continuation
plan.
13.6 CONFIDENTIALITY OF INFORMATION. Information regarding the grant of Awards under this Plan is confidential and may not be shared with anyone other than the Participant's immediate family and personal financial advisor and other person(s) designated by Participant by power of attorney or assignment.
13.7 SEVERABILITY. If any provision of this Plan is held by any court or governmental authority to be illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions. Instead, each provision held to be illegal or invalid shall, if possible, be construed and enforced in a manner that will give effect to the terms of such provision to the fullest extent possible while remaining legal and valid.
13.8 GOVERNING LAW AND VENUE. This Plan, and all Awards granted under this Plan, shall be construed and shall take effect in accordance with the laws of the State of Colorado without regard to conflicts of laws principles. Resolution of any disputes under the Plan or any Award under the Plan shall only be held in courts in Denver County, Colorado.
13.9 USE OF PROCEEDS. Any cash proceeds received by the Company from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.
Adopted as of the Effective Date as first set forth above.
Prepared by
HOLLAND & HART LLP
ATTORNEYS AT LAW
SUITE 3200
555 SEVENTEENTH STREET
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ASPEN BILLINGS BOISE BOULDER CASPER CHEYENNE COLORADO SPRINGS DENVER DENVER TECH CENTER JACKSON HOLE SALT LAKE CITY SANTA FE WASHINGTON, D.C.
Exhibit 10.2
SCOTT'S LIQUID GOLD-INC.
1997 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
OPTIONEE:
DATE OF GRANT:
AGREEMENT between Scott's Liquid Gold-Inc. (the "Company"), and the above named Optionee ("Optionee"), an employee of the Company or a Subsidiary thereof.
The Company and Optionee agree as follows:
1. Grant of Option. Optionee is hereby granted an Incentive Stock Option, within the meaning of Section 422 of the Code (the "Option"), to purchase Common Stock of the Company pursuant to the Scott's Liquid Gold-Inc. 1997 Stock Option Plan (the "Plan"). The Option and this Agreement are subject to and shall be construed in accordance with the terms and conditions of the Plan, as now or hereinafter in effect. Any terms which are used in this Agreement without being defined and which are defined in the Plan shall have the meaning specified in the Plan.
2. Date of Grant. The date of the grant of the Option is the date first set forth above, the date of the action by the Board of Directors in granting the same.
3. Number and Price of Shares. The number of shares as to which the Option is granted is the number set forth in Schedule 3A to this Agreement. The purchase price per share is the amount set forth in Schedule 3B to this Agreement.
4. Expiration Date. Unless sooner terminated as provided in Section 5.4 or Section 9 of the Plan, the Option shall expire and terminate on the date set forth in Schedule 4 to this Agreement, and in no event shall the Option be exercisable after that date.
5. Manner of Exercise. Except as provided in this Agreement, the Option shall be exercisable, in whole or in part, from time to time, in the manner provided in Section 8 of the Plan.
6. Time of Exercise.
(a) The Option granted hereby shall become vested in and
exercisable by Optionee in the installments, on the dates and subject
to the conditions set forth in Schedule 6 to this Agreement; provided,
however, that Optionee must have been continuously employed by the
Company or a Subsidiary thereof from the date of grant of the Option
until the date specified on Schedule 6 or until the conditions
specified on Schedule 6 have been satisfied.
(b) Upon a Change in Control, this Option shall become fully and immediately vested and exercisable. For purposes of this Option, "Change in Control" means, as may be further limited by Code Section 409A, the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following:
(i) Any third person, including a "group" as defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended from time to time, becomes the beneficial owner of shares of the Company having 50% or more of the total number of votes that may be cast for the election of Directors of the Company.
(ii) The stockholder(s) of the Company approve: (A) any agreement for a merger or consolidation of the Company with another entity, provided that there shall be no change of control if the persons and entities who were the stockholders of the Company immediately before such merger or consolidation continue to own, directly or indirectly, more than two-thirds of the outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the voting securities of the Company outstanding immediately before such merger or consolidation; (B) any sale, exchange or other disposition of all or substantially all of the Company's assets; or (C) a plan of complete dissolution or liquidation of the Company (or a complete dissolution or liquidation of the Company shall otherwise occur).
(iii) There is a consummated sale, exchange or other disposition of greater than 50% in fair market value of the Company's assets, other than in the ordinary course of business, whether in a single transaction or a series of related transactions.
In determining whether subsection (i) has been satisfied, the third person owning shares must be someone other than a person or an affiliate of a person that, as of March 31, 2005, was the beneficial owner of shares of the Company having 20% or more of the total number of votes that may be cast for the election of Directors of the Company. Notwithstanding the foregoing, there shall not be a Change of Control for purposes of this Subsection (b) and thus no acceleration of vesting if (A) the transaction or transactions which would otherwise result in a Change of Control are not a complete dissolution or liquidation of the Company or stockholder approval of a complete dissolution or liquidation, (B) the persons and entities who are stockholders of the Company immediately before such transaction or transactions continue to own, directly or indirectly, more than 2/3 of the outstanding voting securities of the corporation resulting from such transaction or transactions in substantially the same proportion as their ownership of the voting securities of the Company outstanding immediately before such transaction or transactions and (C) the Company and its Subsidiaries continue operations of an active business immediately after such transaction or transactions. The Committee's reasonable determination as to whether an event described in this subsection (b) has occurred shall be final and conclusive.
7. Nontransferability of Option. The Option is not transferable by Optionee other than by Will or the laws of descent and distribution, and the Option shall be exercisable during Optionee's lifetime only by 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.
8. Withholding for Taxes. Optionee shall reimburse the Company, in cash or by personal check to the order of the Company, for any federal, state or local taxes required by law to be withheld with respect to the exercise of the Option or any disqualifying disposition of the Common Stock acquired upon exercise of the Option. The Company or the Subsidiary by whom Optionee is employed shall have the right to deduct from any salary or other payments to be made to Optionee any federal, state or local taxes required by law to be so withheld. The Company's obligation to deliver a certificate representing the Common Stock acquired upon exercise of the Option is subject to the payment by Optionee of any applicable federal, state and local withholding tax.
9. Legends. Certificates representing Common Stock acquired upon exercise of this Option may contain such legends and transfer restrictions as the Company shall deem reasonably necessary or desirable, including, without limitation, legends restricting transfer of the Common Stock until there has been compliance with federal and state securities laws and until Optionee or any other holder of the Common Stock has paid the Company such amounts as may be necessary in order to satisfy any withholding tax liability of the Company resulting from a disqualifying disposition described in Section 422(a) of the Code.
10. Employee Benefits. Optionee agrees that the grant and vesting of the Option and the receipt of shares of Common Stock upon exercise of the Option will constitute special incentive compensation that will not be taken into account as "salary" or "compensation" or "bonus" in determining the amount of any payment under any pension, retirement, profit sharing or other remuneration plan of the Company or any Subsidiary.
11. Amendment. Subject to the terms and conditions of the Plan, the Board of Directors may modify the Option, or accept the surrender of the Option 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 the Option without the consent of the Optionee.
12. Interpretation. The interpretations and constructions of any provision of and determinations on any question arising under the Plan or this Agreement shall be made by the Board of Directors, and all such interpretations, constructions and determinations shall be final and conclusive as to all parties.
13. Receipt of Plan. By entering into this Agreement, Optionee acknowledges: (i) that he or she has received and read a copy of the Plan; and (ii) that this Agreement is subject to and shall be construed in accordance with the terms and conditions of the Plan, as now or hereinafter in effect.
14. Governing Law. This Agreement shall be construed and shall take effect in accordance with the laws of the State of Colorado, without regard to the conflicts of law rules of such State.
15. Miscellaneous. This Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, between the parties with respect hereto. If any provision of this Agreement, or the application thereof, shall for any reason and to any extent be invalid or unenforceable, the remainder of this Agreement and the application of such provision to other circumstances shall be interpreted so as best to reasonably effect the intent of the parties hereto. All notices or other communications which are required to be given or may be given to either party pursuant to the terms of this Agreement shall be in writing and shall be delivered personally or by registered or certified mail, postage prepaid, to the address of the parties as set forth following the signature of such party. Notice shall be deemed given on the date of delivery in the case of personal delivery or on the delivery or refusal date as specified on the return receipt in the case of registered or certified mail. Either party may change its address for such communications by giving notice thereof to the other party in conformity with this Section 15.
IN WITNESS WHEREOF, the Company by a duly authorized officer of the Company and Optionee have executed this Agreement on ___________, effective as of the date of grant.
SCOTT'S LIQUID GOLD-INC.
OPTIONEE
SCHEDULES
TO
INCENTIVE STOCK OPTION AGREEMENT
Schedule
3A Number of Shares of Stock:
3B Purchase Price per Share: $
4 Expiration Date:
6 Vesting Schedule:
Vesting date Monthly on the same date in the month as the Date of Grant, commencing one month after the Date of Grant
Shares that first become exercisable: 1/48 of the total number of shares subject to this Option
Optionee Name
Street Address
City, State Zip Code
Exhibit 10.3
SCOTT'S LIQUID GOLD-INC.
1998 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
OPTIONEE:
DATE OF GRANT:
AGREEMENT between Scott's Liquid Gold-Inc. (the "Company"), and the above named Optionee ("Optionee"), an employee of the Company or a Subsidiary thereof.
The Company and Optionee agree as follows:
Grant of Option.
Optionee is hereby granted an Incentive Stock Option, within the
meaning of Section 422 of the Code (the "Option"), to purchase Common
Stock of the Company pursuant to the Scott's Liquid Gold-Inc. 1998
Stock Option Plan (the "Plan"). The Option and this Agreement are
subject to and shall be construed in accordance with the terms and
conditions of the Plan, as now or hereinafter in effect. Any terms
which are used in this Agreement without being defined and which are
defined in the Plan shall have the meaning specified in the Plan.
Date of Grant.
The date of the grant of the Option is the date first set forth above.
Number and Price of Shares.
The number of shares as to which the Option is granted is the
number set forth in Schedule 3A to this Agreement. The purchase price
per share is the amount set forth in Schedule 3B to this Agreement.
Expiration Date.
Unless sooner terminated as provided in Section 5.4, Section 9 or
Section 10 of the Plan, the Option shall expire and terminate on the date
set forth in Schedule 4 to this Agreement, and in no event shall the
Option be exercisable after that date.
Manner of Exercise.
Except as provided in this Agreement, the Option shall be
exercisable, in whole or in part, from time to time, in the manner
provided in Section 8 of the Plan.
Time of Exercise.
(a) The Option granted hereby shall become vested in and
exercisable by Optionee in the installments, on the dates and subject
to the conditions set forth in Schedule 6 to this Agreement; provided,
however, that Optionee must have been continuously employed by the
Company or a Subsidiary thereof from the date of grant of the Option
until the date specified on Schedule 6 or until the conditions
specified on Schedule 6 have been satisfied.
(b) Upon a Change in Control, this Option shall become fully and immediately vested and exercisable. For purposes of this Option, "Change in Control" means, as may be further limited by Code Section 409A, the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following:
(i) Any third person, including a "group" as defined in
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended,
becomes the beneficial owner of shares of the Company having 50% or
more of the total number of votes that may be cast for the election
of Directors of the Company.
(ii) The stockholder(s) of the Company approve: (i) any
agreement for a merger or consolidation of the Company with another entity,
provided that there shall be no change of control if the persons and
entities who were the stockholders of the Company immediately before
such merger or consolidation continue to own, directly or indirectly,
more than two-thirds of the outstanding voting securities of the
corporation resulting from such merger or consolidation in substantially
the same proportion as their ownership of the voting securities of the
Company outstanding immediately before such merger or consolidation;
(ii) any sale, exchange or other disposition of all or substantially
all of the Company's assets; or (iii) a plan of complete dissolution or
liquidation of the Company (or a complete dissolution or liquidation of
the Company shall otherwise occur).
(iii) There is a consummated sale, exchange or other disposition of greater than 50% in fair market value of the Company's assets, other than in the ordinary course of business, whether in a single transaction or a series of related transactions.
In determining whether subsection (a) has been satisfied, the third person owning shares must be someone other than a person or an affiliate of a person that, as of March 31, 2005, was the beneficial owner of shares of the Company having 20% or more of the total number of votes that may be cast for the election of Directors of the Company. Notwithstanding the foregoing, there shall not be a Change of Control for purposes of this Subsection (b) and thus no acceleration of vesting if (A) the transaction or transactions which would otherwise result in a Change of Control are not a complete dissolution or liquidation of the Company or stockholder approval of a complete dissolution or liquidation, (B) the persons and entities who are stockholders of the Company immediately before such transaction or transactions continue to own, directly or indirectly, more than 2/3 of the outstanding voting securities of the corporation resulting from such transaction or transactions in substantially the same proportion as their ownership of the voting securities of the Company outstanding immediately before such transaction or transactions and (C) the Company and its Subsidiaries continue operations of an active business immediately after such transaction or transactions. The Committee's reasonable determination as to whether an event described in this subsection (b) has occurred shall be final and conclusive.
Nontransferability of Option.
The Option is not transferable by Optionee other than by Will or
the laws of descent and distribution, and the Option shall be
exercisable during Optionee's lifetime only by 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.
Withholding for Taxes.
Optionee shall reimburse the Company, in cash or by personal check
to the order of the Company, for any federal, state or local taxes
required by law to be withheld with respect to the exercise of the
Option or any disqualifying disposition of the Common Stock acquired
upon exercise of the Option. The Company or the Subsidiary by whom
Optionee is employed shall have the right to deduct from any salary
or other payments to be made to Optionee any federal, state or local
taxes required by law to be so withheld. The Company's obligation to
deliver a certificate representing the Common Stock acquired upon
exercise of the Option is subject to the payment by Optionee of any
applicable federal, state and local withholding tax.
Legends.
Certificates representing Common Stock acquired upon exercise of this Option may contain such legends and transfer restrictions as the Company shall deem reasonably necessary or desirable, including, without limitation, legends restricting transfer of the Common Stock until there has been compliance with federal and state securities laws and until Optionee or any other holder of the Common Stock has paid the Company such amounts as may be necessary in order to satisfy any withholding tax liability of the Company resulting from a disqualifying disposition described in Section 422(a) of the Code. Employee Benefits.
Optionee agrees that the grant and vesting of the Option and the receipt of shares of Common Stock upon exercise of the Option will constitute special incentive compensation that will not be taken into account as "salary" or "compensation" or "bonus" in determining the amount of any payment under any pension, retirement, profit sharing or other remuneration plan of the Company or any Subsidiary. Amendment.
Subject to the terms and conditions of the Plan, the Board of Directors may modify the Option, or accept the surrender of the Option 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 the Option without the consent of the Optionee.
Interpretation.
The interpretations and constructions of any provision of and
determinations on any question arising under the Plan or this Agreement
shall be made by the Board of Directors, and all such interpretations,
constructions and determinations shall be final and conclusive as to all
parties.
Receipt of Plan.
By entering into this Agreement, Optionee acknowledges: (i) that
he or she has received and read a copy of the Plan; and (ii) that this
Agreement is subject to and shall be construed in accordance with the
terms and conditions of the Plan, as now or hereinafter in effect.
Governing Law.
This Agreement 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.
Miscellaneous.
This Agreement constitutes the entire understanding and agreement
of the parties with respect to the subject matter hereof and supersedes
all prior and contemporaneous agreements or understandings, inducements
or conditions, express or implied, written or oral, between the parties
with respect hereto. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be invalid
or unenforceable, the remainder of this Agreement and the application
of such provision to other circumstances shall be interpreted so as best
to reasonably effect the intent of the parties hereto. All notices or
other communications which are required to be given or may be given to
either party pursuant to the terms of this Agreement shall be in writing
and shall be delivered personally or by registered or certified mail,
postage prepaid, to the address of the parties as set forth following
the signature of such party. Notice shall be deemed given on the date
of delivery in the case of personal delivery or on the delivery or
refusal date as specified on the return receipt in the case of registered
or certified mail. Either party may change its address for such
communications by giving notice thereof to the other party in conformity
with this Section 15.
IN WITNESS WHEREOF, the Company by a duly authorized officer of the Company and Optionee have executed this Agreement on _____________, effective as of the date of grant.
SCOTT'S LIQUID GOLD-INC.
By:
By: Mark E. Goldstein
Title: Chairman of the Board, President, and C.E.O.
OPTIONEE
SCHEDULES
TO
INCENTIVE STOCK OPTION AGREEMENT
Schedule
3A Number of Shares of Stock:
3B Purchase Price per Share: $
4 Expiration Date:
6 Vesting Schedule: The following shall vest monthly on the same date
in the month as the Date of Grant, commencing one month after the Date
of Grant: 1/48 of the total number of shares subject to this Option.
Optionee Name
Street Address
City, State Zip Code
Exhibit 10.4
SCOTT'S LIQUID GOLD-INC.
2005 INCENTIVE STOCK PLAN
INCENTIVE STOCK OPTION AGREEMENT
PARTICIPANT:
DATE OF GRANT:
AGREEMENT between Scott's Liquid Gold-Inc. (the "Company"), and the above named Participant ("Participant"), an employee of the Company or a Subsidiary thereof.
The Company and Participant agree as follows:
1. Grant of Option. Participant is hereby granted an Incentive Stock Option, within the meaning of Section 422 of the Code (the "Option"), to purchase Common Stock of the Company pursuant to the Scott's Liquid Gold-Inc. 2005 Incentive Stock Plan (the "Plan"). The Option and this Agreement are subject to and shall be construed in accordance with the terms and conditions of the Plan, as now or hereinafter in effect. Any terms which are used in this Agreement without being defined and which are defined in the Plan shall have the meaning specified in the Plan.
2. Date of Grant. The date of the grant of the Option is the date first set forth above.
3. Number and Price of Shares. The number of shares as to which the Option is granted is the number set forth in Schedule 3A to this Agreement. The purchase price per share is the amount set forth in Schedule 3B to this Agreement.
4. Expiration Date. Unless sooner terminated as provided in Sections 4.6, 9, 10 and 13.3 of the Plan, the Option shall expire and terminate on the date set forth in Schedule 4 to this Agreement, and in no event shall the Option be exercisable after that date.
5. Manner of Exercise. Except as provided in this Agreement, the Option shall be exercisable, in whole or in part, from time to time, in the manner provided in Section 6.3 of the Plan.
6. Time of Exercise.
(a) The Option granted hereby shall become vested in and
exercisable by Participant in the installments, on the dates and
subject to the conditions set forth in Schedule 6 to this Agreement;
provided, however, that Participant must have been in Continuous
Service from the date of grant of the Option until the date specified
on Schedule 6 or until the conditions specified on Schedule 6 have been
satisfied.
(b) Upon a Change in Control, this Option shall become fully
and immediately vested and exercisable. Notwithstanding the foregoing,
in accordance with Section 10.2 of the Plan, there shall not be a
Change of Control for purposes of this Subsection (b) and thus no
acceleration of vesting if (A) the transaction or transactions which
would otherwise result in a Change of Control are not a complete
dissolution or liquidation of the Company or stockholder approval of a
complete dissolution or liquidation, (B) the persons and entities who are
stockholders of the Company immediately before such transaction or
transactions continue to own, directly or indirectly, more than 2/3 of
the outstanding voting securities of the corporation resulting from such
transaction or transactions in substantially the same proportion as their
ownership of the voting securities of the Company outstanding immediately
before such transaction or transactions and (C) the Company and its
Subsidiaries continue operations of an active business immediately after
such transaction or transactions. The Committee's reasonable
determination as to whether an event described in this subsection
(b) has occurred shall be final and conclusive.
7. Nontransferability of Option. The Option is not transferable by Participant other than by Will or the laws of descent and distribution, and the Option shall be exercisable during Participant's lifetime only by Participant. 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.
8. Withholding for Taxes. Participant shall reimburse the Company, in cash or by personal check to the order of the Company, for any federal, state or local taxes required by law to be withheld with respect to the exercise of the Option or any disqualifying disposition of the Common Stock acquired upon exercise of the Option. The Company or the Subsidiary by whom Participant is employed shall have the right to deduct from any salary or other payments to be made to Participant any federal, state or local taxes required by law to be so withheld. The Company's obligation to deliver a certificate representing the Common Stock acquired upon exercise of the Option is subject to the payment by Participant of any applicable federal, state and local withholding tax.
9. Legends. Certificates representing Common Stock acquired upon exercise of this Option may contain such legends and transfer restrictions as the Company shall deem reasonably necessary or desirable, including, without limitation, legends restricting transfer of the Common Stock until there has been compliance with federal and state securities laws and until Participant or any other holder of the Common Stock has paid the Company such amounts as may be necessary in order to satisfy any withholding tax liability of the Company resulting from a disqualifying disposition described in Section 422(a) of the Code.
10. Employee Benefits. Participant agrees that the grant and vesting of the Option and the receipt of shares of Common Stock upon exercise of the Option will constitute special incentive compensation that will not be taken into account as "salary" or "compensation" or "bonus" in determining the amount of any payment under any pension, retirement, profit sharing or other remuneration plan of the Company or any Subsidiary.
11. Amendment. Subject to the terms and conditions of the Plan, the Board of Directors may modify the Option, or accept the surrender of the Option 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 the Option without the consent of the Participant.
12. Interpretation. The interpretations and constructions of any provision of and determinations on any question arising under the Plan or this Agreement shall be made by the Board of Directors, and all such interpretations, constructions and determinations shall be final and conclusive as to all parties.
13. Receipt of Plan.
By entering into this Agreement, Participant acknowledges:
(i) that he or she has received and read a copy of the Plan; and
(ii) that this Agreement is subject to and shall be construed in
accordance with the terms and conditions of the Plan, as now or
hereinafter in effect.
14. Governing Law. This Agreement 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.
15. Miscellaneous. This Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, between the parties with respect hereto. If any provision of this Agreement, or the application thereof, shall for any reason and to any extent be invalid or unenforceable, the remainder of this Agreement and the application of such provision to other circumstances shall be interpreted so as best to reasonably effect the intent of the parties hereto. All notices or other communications which are required to be given or may be given to either party pursuant to the terms of this Agreement shall be in writing and shall be delivered personally or by registered or certified mail, postage prepaid, to the address of the parties as set forth following the signature of such party. Notice shall be deemed given on the date of delivery in the case of personal delivery or on the delivery or refusal date as specified on the return receipt in the case of registered or certified mail. Either party may change its address for such communications by giving notice thereof to the other party in conformity with this Section 15.
IN WITNESS WHEREOF, the Company by a duly authorized officer of the Company and Participant have executed this Agreement on __________, effective as of the date of grant.
SCOTT'S LIQUID GOLD-INC.
By:
PARTICIPANT
SCHEDULES
TO
INCENTIVE STOCK OPTION AGREEMENT
Schedule
3A Number of Shares of Stock:
3B Purchase Price per Share:
4 Expiration Date:
6 Vesting Schedule: The following shall vest monthly on the same
date in the month as the Date of Grant, commencing one month after the
Date of Grant: 1/48 of the total number of shares subject to this Option.
7 Additional Conditions to Vesting: Notwithstanding the foregoing,
no portion of the Option shall be vested and exercisable until the
following conditions have been satisfied:
None
Optionee Name
Street Address
City, State Zip Code
Exhibit 10.5
SCOTT'S LIQUID GOLD-INC.
1998 STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
OPTIONEE:
DATE OF GRANT:
AGREEMENT between Scott's Liquid Gold-Inc. (the "Company"), and the above named Optionee ("Optionee"), an employee of the Company or a Subsidiary thereof.
The Company and Optionee agree as follows:
Grant of Option.
Optionee is hereby granted a nonqualified stock option (the
"Option") to purchase Common Stock of the Company pursuant to the
Scott's Liquid Gold-Inc. 1998 Stock Option Plan (the "Plan"). The
Option and this Agreement are subject to and shall be construed in
accordance with the terms and conditions of the Plan, as now or
hereinafter in effect. Any terms which are used in this Agreement
without being defined and which are defined in the Plan shall have
the meaning specified in the Plan. This Option is not intended to
qualify as an incentive stock option within the meaning of Code
Section 422.
Date of Grant.
The date of the grant of the Option is the date first set forth
above.
Number and Price of Shares.
The number of shares as to which the Option is granted is the
number set forth in Schedule 3A to this Agreement. The purchase price
per share is the amount set forth in Schedule 3B to this Agreement.
Expiration Date.
Unless sooner terminated as provided in Section 5.4, Section 9
or Section 10 of the Plan, the Option shall expire and terminate on
the date set forth in Schedule 4 to this Agreement, and in no event
shall the Option be exercisable after that date.
Manner of Exercise.
Except as provided in this Agreement, the Option shall be
exercisable, in whole or in part, from time to time, in the manner
provided in Section 8 of the Plan.
Time of Exercise.
(a) The Option granted hereby shall become vested in and
exercisable by Optionee in the installments, on the dates and subject
to the conditions set forth in Schedule 6 to this Agreement; provided,
however, that Optionee must have been continuously employed by the
Company or a Subsidiary thereof from the date of grant of the Option
until the date specified on Schedule 6 or until the conditions
specified on Schedule 6 have been satisfied.
(b) Upon a Change in Control, this Option shall become fully
and immediately vested and exercisable. For purposes of this Option,
"Change in Control" means, as may be further limited by Code Section
409A, the occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following:
(i) Any third person, including a "group" as defined in
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended, becomes the beneficial owner of shares of the Company having
50% or more of the total number of votes that may be cast for the
election of Directors of the Company.
(ii) The stockholder(s) of the Company approve: (i) any
agreement for a merger or consolidation of the Company with another
entity, provided that there shall be no change of control if the
persons and entities who were the stockholders of the Company
immediately before such merger or consolidation continue to own,
directly or indirectly, more than two-thirds of the outstanding voting
securities of the corporation resulting from such merger or
consolidation in substantially the same proportion as their ownership
of the voting securities of the Company outstanding immediately
before such merger or consolidation; (ii) any sale, exchange or other
disposition of all or substantially all of the Company's assets; or
(iii) a plan of complete dissolution or liquidation of the Company
(or a complete dissolution or liquidation of the Company shall
otherwise occur).
(iii) There is a consummated sale, exchange or other disposition of greater than 50% in fair market value of the Company's assets, other than in the ordinary course of business, whether in a single transaction or a series of related transactions.
In determining whether subsection (a) has been satisfied, the third person owning shares must be someone other than a person or an affiliate of a person that, as of March 31, 2005, was the beneficial owner of shares of the Company having 20% or more of the total number of votes that may be cast for the election of Directors of the Company. Notwithstanding the foregoing, there shall not be a Change of Control for purposes of this Subsection (b) and thus no acceleration of vesting if (A) the transaction or transactions which would otherwise result in a Change of Control are not a complete dissolution or liquidation of the Company or stockholder approval of a complete dissolution or liquidation, (B) the persons and entities who are stockholders of the Company immediately before such transaction or transactions continue to own, directly or indirectly, more than 2/3 of the outstanding voting securities of the corporation resulting from such transaction or transactions in substantially the same proportion as their ownership of the voting securities of the Company outstanding immediately before such transaction or transactions and (C) the Company and its Subsidiaries continue operations of an active business immediately after such transaction or transactions. The Committee's reasonable determination as to whether an event described in this subsection (b) has occurred shall be final and conclusive.
Nontransferability of Option.
The Option is not transferable by Optionee other than by Will or
the laws of descent and distribution, and the Option shall be
exercisable during Optionee's lifetime only by 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.
Withholding for Taxes.
Optionee shall reimburse the Company, in cash or by personal
check to the order of the Company, for any federal, state or local
taxes required by law to be withheld with respect to the exercise of
the Option. The Company or the Subsidiary by whom Optionee is
employed shall have the right to deduct from any salary or other
payments to be made to Optionee any federal, state or local taxes
required by law to be so withheld. The Company's obligation to
deliver a certificate representing the Common Stock acquired upon
exercise of the Option is subject to the payment by Optionee of
any applicable federal, state and local withholding tax.
Legends.
Certificates representing Common Stock acquired upon exercise
of this Option may contain such legends and transfer restrictions as
the Company shall deem reasonably necessary or desirable, including,
without limitation, legends restricting transfer of the Common Stock
until there has been compliance with federal and state securities laws.
Employee Benefits.
Optionee agrees that the grant and vesting of the Option and the
receipt of shares of Common Stock upon exercise of the Option will
constitute special incentive compensation that will not be taken into
account as "salary" or "compensation" or "bonus" in determining the
amount of any payment under any pension, retirement, profit sharing
or other remuneration plan of the Company or any Subsidiary.
Amendment.
Subject to the terms and conditions of the Plan, the Board of
Directors may modify the Option, or accept the surrender of the Option
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 the Option without the consent of
the Optionee.
Interpretation.
The interpretations and constructions of any provision of and
determinations on any question arising under the Plan or this Agreement
shall be made by the Board of Directors, and all such interpretations,
constructions and determinations shall be final and conclusive as to all
parties.
Receipt of Plan.
By entering into this Agreement, Optionee acknowledges: (i) that
he or she has received and read a copy of the Plan; and (ii) that this
Agreement is subject to and shall be construed in accordance with the
terms and conditions of the Plan, as now or hereinafter in effect.
Governing Law.
This Agreement 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.
Miscellaneous.
This Agreement constitutes the entire understanding and agreement
of the parties with respect to the subject matter hereof and supersedes
all prior and contemporaneous agreements or understandings, inducements
or conditions, express or implied, written or oral, between the parties
with respect hereto. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be invalid
or unenforceable, the remainder of this Agreement and the application
of such provision to other circumstances shall be interpreted so as best
to reasonably effect the intent of the parties hereto. All notices or
other communications which are required to be given or may be given to
either party pursuant to the terms of this Agreement shall be in writing
and shall be delivered personally or by registered or certified mail,
postage prepaid, to the address of the parties as set forth following
the signature of such party. Notice shall be deemed given on the date
of delivery in the case of personal delivery or on the delivery or
refusal date as specified on the return receipt in the case of
registered or certified mail. Either party may change its address for
such communications by giving notice thereof to the other party in
conformity with this Section 15.
IN WITNESS WHEREOF, the Company by a duly authorized officer of the Company and Optionee have executed this Agreement on _____________, effective as of the date of grant.
SCOTT'S LIQUID GOLD-INC.
By:
By: Mark E. Goldstein
Title: Chairman of the Board, President, and C.E.O.
OPTIONEE
SCHEDULES
TO
NONQUALIFIED STOCK OPTION AGREEMENT
Schedule
3A Number of Shares of Stock:
3B Purchase Price per Share: $
4 Expiration Date:
6 Vesting Schedule: The following shall vest monthly on the same date
in the month as the Date of Grant, commencing one month after the Date
of Grant: 1/48 of the total number of shares subject to this Option.
Optionee Name
Street Address
City, State Zip Code
Exhibit 10.6
SCOTT'S LIQUID GOLD-INC.
2005 INCENTIVE STOCK PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
PARTICIPANT:
DATE OF GRANT:
AGREEMENT between Scott's Liquid Gold-Inc. (the "Company"), and the above named Participant ("Participant"), an employee of the Company or a Subsidiary thereof.
The Company and Participant agree as follows:
1. Grant of Option.
Participant is hereby granted a nonqualified stock option (the
"Option") to purchase Common Stock of the Company pursuant to the
Scott's Liquid Gold-Inc. 2005 Incentive Stock Plan (the "Plan").
The Option and this Agreement are subject to and shall be construed in
accordance with the terms and conditions of the Plan, as now or
hereinafter in effect. Any terms which are used in this Agreement
without being defined and which are defined in the Plan shall have
the meaning specified in the Plan. This Option is not intended to
qualify as an incentive stock option within the meaning of Code
Section 422.
2. Date of Grant. The date of the grant of the Option is the date first set forth above.
3. Number and Price of Shares. The number of shares as to which the Option is granted is the number set forth in Schedule 3A to this Agreement. The purchase price per share is the amount set forth in Schedule 3B to this Agreement.
4. Expiration Date. Unless sooner terminated as provided in Sections 4.6, 9, 10 and 13.3 of the Plan, the Option shall expire and terminate on the date set forth in Schedule 4 to this Agreement, and in no event shall the Option be exercisable after that date.
5. Manner of Exercise. Except as provided in this Agreement, the Option shall be exercisable, in whole or in part, from time to time, in the manner provided in Section 6.3 of the Plan.
6. Time of Exercise.
(a) The Option granted hereby shall become vested in and
exercisable by Participant in the installments, on the dates and
subject to the conditions set forth in Schedule 6 to this Agreement;
provided, however, that Participant must have been in Continuous
Service from the date of grant of the Option until the date specified
on Schedule 6 or until the conditions specified on Schedule 6 have been
satisfied.
(b) Upon a Change in Control, this Option shall become fully and immediately vested and exercisable. Notwithstanding the foregoing, in accordance with Section 10.2 of the Plan, there shall not be a Change of Control for purposes of this Subsection (b) and thus no acceleration of vesting if (A) the transaction or transactions which would otherwise result in a Change of Control are not a complete dissolution or liquidation of the Company or stockholder approval of a complete dissolution or liquidation, (B) the persons and entities who are stockholders of the Company immediately before such transaction or transactions continue to own, directly or indirectly, more than 2/3 of the outstanding voting securities of the corporation resulting from such transaction or transactions in substantially the same proportion as their ownership of the voting securities of the Company outstanding immediately before such transaction or transactions and (C) the Company and its Subsidiaries continue operations of an active business immediately after such transaction or transactions. The Committee's reasonable determination as to whether an event described in this subsection (b) has occurred shall be final and conclusive.
7. Nontransferability of Option. The Option is not transferable by Participant other than by Will or the laws of descent and distribution, and the Option shall be exercisable during Participant's lifetime only by Participant. 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.
8. Withholding for Taxes. Participant shall reimburse the Company, in cash or by personal check to the order of the Company, for any federal, state or local taxes required by law to be withheld with respect to the exercise of the Option. The Company or the Subsidiary by whom Participant is employed shall have the right to deduct from any salary or other payments to be made to Participant any federal, state or local taxes required by law to be so withheld. The Company's obligation to deliver a certificate representing the Common Stock acquired upon exercise of the Option is subject to the payment by Participant of any applicable federal, state and local withholding tax.
9. Legends. Certificates representing Common Stock acquired upon exercise of this Option may contain such legends and transfer restrictions as the Company shall deem reasonably necessary or desirable, including, without limitation, legends restricting transfer of the Common Stock until there has been compliance with federal and state securities laws.
10. Employee Benefits. Participant agrees that the grant and vesting of the Option and the receipt of shares of Common Stock upon exercise of the Option will constitute special incentive compensation that will not be taken into account as "salary" or "compensation" or "bonus" in determining the amount of any payment under any pension, retirement, profit sharing or other remuneration plan of the Company or any Subsidiary.
11. Amendment. Subject to the terms and conditions of the Plan, the Board of Directors may modify the Option, or accept the surrender of the Option 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 the Option without the consent of the Participant.
12. Interpretation. The interpretations and constructions of any provision of and determinations on any question arising under the Plan or this Agreement shall be made by the Board of Directors, and all such interpretations, constructions and determinations shall be final and conclusive as to all parties.
13. Receipt of Plan. By entering into this Agreement, Participant acknowledges: (i) that he or she has received and read a copy of the Plan; and (ii) that this Agreement is subject to and shall be construed in accordance with the terms and conditions of the Plan, as now or hereinafter in effect.
14. Governing Law. This Agreement 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.
15. Miscellaneous. This Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, between the parties with respect hereto. If any provision of this Agreement, or the application thereof, shall for any reason and to any extent be invalid or unenforceable, the remainder of this Agreement and the application of such provision to other circumstances shall be interpreted so as best to reasonably effect the intent of the parties hereto. All notices or other communications which are required to be given or may be given to either party pursuant to the terms of this Agreement shall be in writing and shall be delivered personally or by registered or certified mail, postage prepaid, to the address of the parties as set forth following the signature of such party. Notice shall be deemed given on the date of delivery in the case of personal delivery or on the delivery or refusal date as specified on the return receipt in the case of registered or certified mail. Either party may change its address for such communications by giving notice thereof to the other party in conformity with this Section 15.
IN WITNESS WHEREOF, the Company by a duly authorized officer of the Company and Participant have executed this Agreement on __________, effective as of the date of grant.
SCOTT'S LIQUID GOLD-INC.
By:
PARTICIPANT
SCHEDULES
TO
NONQUALIFIED STOCK OPTION AGREEMENT
Schedule
3A Number of Shares of Stock:
3B Purchase Price per Share:
4 Expiration Date:
6 Vesting Schedule: The following shall vest monthly on the same date
in the month as the Date of Grant, commencing one month after the Date
of Grant: 1/48 of the total number of shares subject to this Option.
7 Additional Conditions to Vesting: Notwithstanding the foregoing,
no portion of the Option shall be vested and exercisable until the
following conditions have been satisfied:
None
Optionee Name
Street Address
City, State Zip Code
" EXHIBIT 31.1
CERTIFICATION
I, Mark E. Goldstein, certify that:
1. I have reviewed this quarterly report on Form 10-QSB for the quarter ended March 31, 2007 of Scott's Liquid Gold-Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and;
(c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
DATE: May 2, 2007
/s/ Mark E. Goldstein
-----------------------------------
Mark E. Goldstein
President, Chief Executive Officer,
and Chairman of the Board
Principal Executive Officer
|
EXHIBIT 31.2
CERTIFICATION
I, Jeffry B. Johnson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB for the quarter ended March 31, 2007 of Scott's Liquid Gold-Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and;
(c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
DATE: May 4, 2007
/s/ Jeffry B. Johnson
-------------------------------------
Jeffry B. Johnson
Treasurer and Chief Financial Officer
Principal Financial Officer
|
EXHIBIT 32.1
CERTIFICATION OF 10-QSB REPORT
OF
SCOTT'S LIQUID GOLD-INC.
FOR THE QUARTER MARCH 31, 2007
1. The undersigned are the Chief Executive Officer and the Chief Financial Officer of Scott's Liquid Gold-Inc. ("Scott's Liquid Gold"). This Certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This Certification accompanies the 10-QSB Report of Scott's Liquid Gold for the quarter ended March 31, 2007.
2. We certify that such 10-QSB Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such 10-QSB Report fairly presents, in all material respects, the financial condition and results of operations of Scott's Liquid Gold.
This Certification is executed as of May 2, 2007.
/s/ Mark E. Goldstein ------------------------------------ Mark E. Goldstein President, Chief Executive Officer and Chairman of the Board Principal Executive Officer /s/ Jeffry B. Johnson ------------------------------------- Jeffry B. Johnson Treasurer and Chief Financial Officer Principal Financial Officer |