SCOTTS LIQUID GOLD INC (Form: 10-K, Received: 03/29/2013 09:44:26)

SCOTT’S LIQUID GOLD-INC.

[OFFICER/DIRECTOR]

, President

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-13458

SCOTT’S LIQUID GOLD-INC.

(Name of small business as specified in its charter)

Colorado

84-0920811

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

4880 Havana Street, Suite 400, Denver, CO 80239

(Address of principal executive offices and Zip Code)

(303) 373-4860

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.10 Par Value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. ¨ Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ¨		Accelerated filer ¨		Non-accelerated filer ¨		Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) ¨ Yes x No

The aggregate market value of the common stock held by non-affiliates of the issuer was $1,604,772 on June 29, 2012.

As of March 29, 2013, there were 11,201,622 shares of common stock, $0.10 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Part III is incorporated by reference to the Registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be filed within 120 days after December 31, 2012.

CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION

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; competitive factors; any decrease in distribution of (i.e., retail stores carrying) our significant products; continuation of our distributorship agreement for Montagne Jeunesse skin care products and Batiste Dry Shampoos; 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 this Report. The forward-looking statements in this Report speak as of the filing date of this Report. 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.

TABLE OF CONTENTS


		Page
PART I
Item 1.	Business		1
Item 1A.	Risk Factors		8
Item 1B.	Unresolved Staff Comments		11
Item 2.	Properties		11
Item 3.	Legal Proceedings		11
Item 4.	Mine Safety Disclosures		11

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		12
Item 6.	Selected Financial Data		13
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		18
Item 8.	Financial Statements and Supplementary Data		19
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		37
Item 9A.	Controls and Procedures		37
Item 9B.	Other Information		38

PART III
Item 10.	Directors, Executive Officers and Corporate Governance		38
Item 11.	Executive Compensation		38
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		38
Item 13.	Certain Relationships and Related Transactions, and Director Independence		38
Item 14.	Principal Accounting Fees and Services		38

PART IV
Item 15.	Exhibits and Financial Statement Schedules		38

PART I

ITEM 1.

BUSINESS

General

Scott’s Liquid Gold-Inc., a Colorado corporation, was incorporated on February 15, 1954. Through our wholly-owned subsidiaries, we develop, manufacture, market and sell quality household and skin and hair care products. Our most well-recognized product, Scott’s Liquid Gold ^® wood cleaner and preservative, has been sold in the United States for over 60 years. Our Alpha Hydrox ^® skin care brand was one of the first to use alpha hydroxy acids (“AHAs”). Our Neoteric Diabetic ^® products were developed to address the skin conditions of persons living with diabetes. We are the exclusive distributor in the United States of Montagne Jeunesse skin sachets and Batiste Dry Shampoo manufactured by two other companies.

In this Report the terms “we”, “us” or “our” refers to Scott’s Liquid Gold-Inc. and our subsidiaries, collectively. Our business is divided into two operating segments, household products and skin and hair care products.

The following table sets forth the principal products in our household products segment.


Operating Segmen t		Key Products
Household		Scott’s Liquid Gold ^® Wood Cleaner and Preservative
		Scott’s Liquid Gold ^® Wood Wash
		Scott’s Liquid Gold ^® Dust ’N Go Wipes
		Scott’s Liquid Gold ^® Clean Screen
		Touch of Scent ^® Air Freshener

The following table sets forth the principal products in our skin and hair care products segment.


Operating Segment		Key Products
Skin and Hair Care		Alpha Hydrox ^® Skin Care Products
		Neoteric Diabetic ^® Healing Cream
		Neoteric Diabetic ^® Shampoo and Scalp Care
		Neoteric Massage Oils
		Montagne Jeunesse Face Masque Sachets
		Batiste Dry Shampoos

For information on our operating segments, please see Note 8, “Segment Information”, to our Consolidated Financial Statements in Item 8.

Subsequent Event

On February 1, 2013, we consummated the sale of our real estate assets located at 4880 Havana Street, Denver, Colorado, consisting of approximately 10.8 acres of land improved with four buildings containing approximately 241,684 square feet of office, warehouse and manufacturing space, with associated improvements and personal property, and adjacent vacant land of approximately 5.5 acres (together, the “Property”). We sold the Property for a purchase price of $9,500,000 and incurred selling expenses of $579,800, including $570,000 for real estate broker commissions.

Warehouse Lease has an initial term of three years, with options to extend the term for two additional terms of three years each. Rent for the Office Lease is $13.00 per square foot per annum, with annual 3% increases. Rent for the Warehouse Lease is $3.25 per square foot per annum, with annual 3% increases, and we will pay an additional $1.25 per square foot per annum as our share of the purchaser’s operating expenses under the Warehouse Lease (including taxes, insurance and common area maintenance charges). If certain uncontrollable operating expenses increase by more than 5% per year, our share of operating expenses under the Warehouse Lease may be increased.

As of the date of the closing, the principal and interest balance on our long-term debt secured by the Property with Citywide Banks (the “Bank”) was $3,373,961. This debt was repaid in full at closing. We also paid approximately $202,000 at closing for real estate property taxes for 2012. In addition, on February 4, 2013, we paid $909,778 to Summit Financial Resources, L.P. (“Summit”) to repay the outstanding balance on our credit line with Summit and we have maintained a zero loan balance since that time. We made this payment to reduce our interest costs. Please see Note 1(e) to our Consolidated Financial Statements in Item 8 for a discussion of our financing agreement with Summit. Also, in February 2013, we paid certain other financial obligations to suppliers and vendors in the amount of approximately $960,000 and incurred approximately $150,000 in capital expenditures as a result of the sale of our Property. We estimate that our remaining cash from the sale of the Property after the payment of all of the foregoing expenses was approximately $3.3 million.

Because the sale of our Property was consummated after the end of our fiscal year, its effects are not reflected in our financial statements. We believe the sale of our Property will allow us to carry less debt, reduce our interest and other borrowing expenses, satisfy certain outstanding financial obligations, allow us to negotiate better terms with suppliers and vendors, increase the amount we invest in advertising and allow us to pursue potential strategic transactions. We also believe having the Office Lease and Warehouse Lease in place will allow us to continue to reduce and better control our operating costs and expenses.

Strategy

We are focused on strategies that we believe will enhance our long-term financial health and deliver long-term shareholder value. In order to achieve these objectives, we plan to generate continued growth of our existing brands and products, as well as pursue new opportunities to develop, acquire or distribute new brands and products. For 2013, we continue to pursue the following primary goals that we established in 2012: (1) increase sales by strengthening and broadening consumer awareness of our products; (2) add additional products to the mix of products that one or more of our existing major customers already buy from us; (3) add at least one major retailer as a customer; and (4) reduce operating costs and expenses. As discussed below, we believe that we made substantial progress on these goals. One of our primary goals from 2012 was to deal with our Property. As discussed above, we sold the Property on February 1, 2013 and leased back certain portions of the Property.

Household Products

Scott’s Liquid Gold ^® wood cleaner and preservative has been our core product since our inception. It has been sold in the United States for over 60 years. Unlike a furniture polish, our product contains natural oils that penetrate the wood’s surface to clean, replace lost moisture, minimize the appearance of scratches and bring out the natural beauty of wood. We have also introduced an additional wood care product in a wipe form and a wood wash product. Our Dust ’N Go pre-moistened cloth wipes are quick, easy and convenient dusting wipes for wood and numerous other surfaces. Our wood wash product simply and safely cleans all types of wood surfaces.

During the second quarter of 2006, we introduced our mold remediation product “Mold Control 500”. Due to declining sales and distribution, this product was discontinued at the end of 2012. We

attribute this decline to the following three primary factors: (1) generally lower actual consumer demand than anticipated; (2) the product is effective, but expensive; and (3) the product involves a delivery system considered by many not to be consumer friendly.

During the first quarter of 2009, we introduced “Clean Screen”, an affordable, simple and easy way for cleaning electronic screens, especially today’s new sensitive electronics. Clean Screen is a liquid formulated with a state-of-the-art water treatment technology that not only cleans away dirt, but also mineral deposits and other impurities. In 2010, we introduced Clean Screen in a wipe form and marketed the product as “Little Clean Screen”.

Since 1982, we have sold Touch of Scent ^® air fresheners. Our air fresheners offer a unique dispenser with aerosol refills. Touch of Scent ^® air fresheners are available in a wide assortment of beautiful fragrances, which are quick, easy to use and effective.

Household products accounted for 30.5% of our consolidated net sales in 2012 and 38.0% in 2011. We continually evaluate possible new household products to be developed, acquired, manufactured and/or distributed by us.

Skin and Hair Care Products

In early 1992, we began to develop, manufacture, market and sell skin care products under the trade name of Alpha Hydrox ^® . These products include facial care products, a body lotion, a body wash and a foot cream. Our Alpha Hydrox ^® skin care brand was one of the first to use AHAs. Products containing AHAs gently slough off dead skin cells to promote a healthier, more youthful appearance and help to diminish fine lines and wrinkles.

Our first Neoteric Diabetic ^® product was a healing cream introduced in 2001 and a subsequent product was a shampoo and scalp care product introduced in 2011. Both of these products were developed to address the skin conditions of persons living with diabetes, caused by poor blood circulation, and which contain a patented oxygenated oil technology. Our healing cream is a therapeutic moisturizer that provides a clinically proven treatment for dry skin by increasing blood circulation and helping to speed the healing of minor scrapes and cuts. Our shampoo and scalp care product helps to soothe the discomfort of dryness, flaking and itching of the scalp while gently cleaning the hair.

Since 2001, we have been the exclusive distributor in the United States for face masque sachets manufactured by Montagne Jeunesse International Ltd. (“Montagne Jeunesse”). Montagne Jeunesse is based in the United Kingdom. Their sachet products are currently sold in over 70 countries. These masques are sold for single use in unique and attractive packages in a wide assortment of types and fragrances. A significant portion of our business consists of the sale of these sachet products. See “Manufacturing and Suppliers” in this Item 1 below for information on the terms of our agreement with Montagne Jeunesse.

In the fourth quarter of 2009, we became the exclusive distributor in the United States for Batiste Dry Shampoo with the exception of certain warehouse stores and governmental entities. Dry shampoo is a quick and convenient way to refresh hair between washes. Batiste was one of the innovators of dry shampoo. We believe that there is a large and fast-growing market for dry shampoo. In that regard, Church & Dwight Co. Inc. (“Church & Dwight”) acquired Batiste Dry Shampoo in 2011. We continue to be the exclusive distributor for the shampoo under the terms of our distribution agreement with Church & Dwight. The initial term of our agreement with Church & Dwight runs through December 31, 2014 and the agreement will be automatically renewed for additional one year terms, unless terminated. See “Manufacturing and Suppliers” in this Item 1 below for information on the terms of our agreement with Church & Dwight. Church & Dwight is a leading global consumer products company with such well-recognized brand names as Arm & Hammer, Oxiclean and Orajel.

Skin and hair care products accounted for 69.5% of our consolidated net sales in 2012 and 62.0% in 2011. We continually evaluate possible new skin and hair care products as well as other beauty care products to be developed, acquired, manufactured and/or distributed by us.

Marketing and Distribution

We primarily market our products through: (1) trade promotions to support price features, displays and other merchandising of our products by our retail customers; (2) consumer incentives such as coupons and rebates; and (3) consumer marketing in print, social media and television advertising.

Our products are sold nationally, directly through our sales force and indirectly through independent brokers, to mass marketers, drugstores, supermarkets, hardware stores and other retail outlets and to wholesale distributors. In 2012 and 2011, Wal-Mart Stores, Inc. (“Wal-Mart”) accounted for approximately 32% and 33% of our sales of household products, respectively. With regard to our skin and hair care products, Wal-Mart accounted for approximately 18% of sales in both 2012 and 2011. Wal-Mart accounted for approximately 22% and 24% of our aggregate net sales on a consolidated basis in 2012 and 2011, respectively.

In 2012 and 2011, Ulta Salon, Cosmetics & Fragrance, Inc. (“Ulta”) accounted for approximately 16% and 12%, respectively, of our skin and hair care products. During 2012 and 2011, we did not sell household products to Ulta. Ulta accounted for approximately 11% and 8% in 2012 and 2011, respectively, of our aggregate net sales on a consolidated basis.

In 2012 and 2011, Walgreens Co. (“Walgreens”) accounted for approximately 14% and 17%, respectively, of our sales of skin and hair care products. During 2012 and 2011, we did not sell household products to Walgreens. Walgreens accounted for approximately 7% and 11% in 2012 and 2011, respectively, of our aggregate net sales on a consolidated basis. As is typical in our industry, we do not have a long-term contract with Wal-Mart, Ulta, Walgreens or any other retail customer.

We also use our Scott’s Liquid Gold and Neoteric Cosmetics websites for sales of our products directly to consumers. Such sales were approximately 9% and 8% of total sales in 2012 and 2011, respectively.

Our household and skin and hair care products are available in limited distribution in Canada and other foreign countries. Please see Note 8, “Segment Information”, to our Consolidated Financial Statements in Item 8 for information regarding our sales in foreign countries. Currently, foreign sales are made to distributors who are responsible for the marketing of the products, and we are paid for these products in United States currency.

From time to time, our customers return products to us. For our household products, we permit returns only for a limited time. With regard to our skin and hair care products, returns are more frequent under an unwritten industry standard that permits returns for a variety of reasons. In the event a skin and hair care customer requests a return of a product, we will consider the request, and may grant such request in order to maintain or enhance our relationship with the customer, even in the absence of an enforceable right of the customer to do so. Typically, customers that return products to us take a credit on our invoice equal to the original sale price plus a handling charge ranging from 8-10% of the original sales price.

Manufacturing and Suppliers

We owned all of our manufacturing facilities until February 1, 2013. Please see Note 12 to our Consolidated Financial Statements in Item 8 for information on the sale of our real estate assets and our leasing back certain of the manufacturing facilities that we sold. We own and operate all of our manufacturing equipment. We manufacture all of our products with the exception of the following products: (1) those products for which we act as a distributor; (2) our Scott’s Liquid Gold ^® Dust ’N Go wipes; and (3) our Little Clean Screen product. For all of our products, we must maintain sufficient inventories to ship most orders as they are received.

Quality control is enforced at all stages of production, as well as upon the receipt of raw materials from suppliers. Raw materials are purchased from a number of suppliers and, at the present time, are readily available. However, we do not have long term contracts with our suppliers and any contracts we do have with suppliers may be terminated at any time. Our sole supply for the oxygenated oil used in our Neoteric Diabetic ^® skin care products is a French company with which we have a non-exclusive supply agreement. We believe that we have good relationships with all of our suppliers.

Most of our manufacturing operations, including most packaging, are highly automated, and, as a result, our manufacturing operations are not labor intensive, nor, for the most part, do they involve extensive training. We currently operate on a one-shift basis. Our manufacturing facilities are capable of producing substantially more quantities of our products without any expansion, and, for that reason, we believe that our physical plant facilities are adequate for the foreseeable future.

In 2001, we commenced purchases of skin care sachets from Montagne Jeunesse under a distributorship agreement covering the United States. On May 4, 2005, our wholly-owned subsidiary, Neoteric Cosmetics, Inc. (“Neoteric”), entered into a new distribution agreement with Montagne Jeunesse. Pursuant to this new agreement, Neoteric is the exclusive distributor to market and sell Montagne Jeunesse’s skin care sachets in the United States. The initial term was for 18 months, but the agreement continues until it is terminated by either party giving to the other party no less than three or six months’ written notice of termination, depending on the reason for termination. To date, neither party has provided such notice. As a practical matter, we believe that the continuation of the distribution agreement is dependent on maintaining our good relationship with Montagne Jeunesse.

Under the terms of the agreement, Neoteric agreed, among other things: (1) not to distribute during the duration of the agreement and for 36 months thereafter any goods of the same description as and which compete with the Montagne Jeunesse products; (2) to use our best endeavors to develop, promote and sell the products in the United States and to expand the sale of the products to all potential purchasers by all reasonable and proper means; (3) to purchase certain core products; and (4) to maintain an inventory of the products for our own account for sale of these products throughout the United States. Montagne Jeunesse agreed to use all reasonable endeavors to meet all of our orders for the products to the extent that such orders do not exceed the forecast that we provide them periodically for each type of product. We purchase the products for the published list prices as established by Montagne Jeunesse from time to time with the provision that they are required to give us three months prior written notice of any changes in the published list prices. Neither party may assign or transfer any rights or obligations under the agreement or subcontract the performance of any obligation.

The agreement may be terminated for a material breach if the breaching party has failed to remedy the breach within 30 days after receipt of notice in writing and for certain other events. Montagne Jeunesse may terminate the agreement if: (1) Neoteric changes its organization or methods of business in a way viewed by Montagne Jeunesse as less effective or (2) there is a change in control of Neoteric.

In January of 2012, we entered into a distribution agreement with Church & Dwight allowing us to act as the exclusive distributor of Batiste Dry Shampoo products in the United States. Church & Dwight still has the right to sell Batiste products to government agencies and departments, as well as warehouse clubs and multinational superstores or hypermarkets. The agreement requires us to satisfy certain annual sales objectives. If we fail to purchase a sufficient amount of Batiste Dry Shampoo products, Church & Dwight may terminate the agreement, or we may lose our exclusive distribution rights. This minimum amount will increase each year. We have also agreed to spend a minimum amount each year for advertising and sales promotion in support of Batiste Dry Shampoo products.

The agreement provides that we will not be permitted to manufacture, distribute or sell any products that are competitive with Batiste Dry Shampoo products. The initial pricing terms for the Batiste products were negotiated with Church & Dwight, but may be increased by Church & Dwight at any time upon 90 days’ prior written notice of any price increase. While the agreement may be terminated in the case of an uncured breach, upon a change in control, or upon our violation of export control laws, the initial term of the agreement will be three years and will automatically renew for successive one year terms upon written notice by either party.

Competition

Our business is highly competitive in both household and skin and hair care products. We compete in both categories primarily on the basis of quality and the distinguishing characteristics of our products.

The wood care, air freshener, and clean screen product categories are dominated by three to five companies significantly larger than us and each of these competitors produces several competing products. Irrespective of the foregoing, we maintain a visible position in the wood care category, but do not have sufficient information to make an accurate representation as to the market share of our products.

The skin and hair care category is also highly competitive. Several competitors are significantly larger than us and each of these competitors produces several competing products. Some of these companies also manufacture products with AHAs with which our Alpha Hydrox ^® products must compete. Because of the number of varied products produced by our competitors, we cannot make an accurate representation as to the market share of our skin and hair care products.

Regulation

We are subject to various federal, state and local laws and regulations that pertain to the type of consumer products that we manufacture and sell. Many chemicals used in consumer products, some of which are used in several of our product formulations, have come under scrutiny by various state governments and the Federal government. These chemicals are called volatile organic compounds (“VOC’s”), which arguably contribute to the formation of ground level ozone. Many states as well as the Federal government have passed regulations that limit the amount of VOC’s allowed in various categories of consumer products. All of our products currently meet the most stringent VOC regulations and may be sold throughout the United States. Any new or revised VOC regulations developed by various states or the Federal government may apply to our products and could potentially require reformulation of those products in the future. Limitation of VOC content in consumer products by both state and Federal governments will continue to be part of regulatory efforts to achieve compliance with clean air regulations. We continue to monitor all environmental regulatory activities and believe that we have done all that is necessary to satisfy the current requirements of the Federal Clean Air Act and the laws of various state governments.

Many of our skin care products, most of which contain AHAs, are considered cosmetics within the definition of the Federal Food Drug and Cosmetic Act (the “FFDCA”). The FFDCA defines

cosmetics as products intended for cleansing, beautifying, promoting attractiveness or altering the appearance without affecting the body’s structure or functions. Our cosmetic products are subject to the regulations under the FFDCA and the Fair Packaging and Labeling Act (the “FPLA”). The relevant laws and regulations are enforced by the U.S. Food and Drug Administration (the “FDA”). Such laws and regulations govern the ingredients and labeling of cosmetic products and set forth good manufacturing practices for companies to follow. Although FDA regulations require that the safety of a cosmetic ingredient be substantiated prior to marketing, there is no requirement that a company submit the results of any testing performed or any other data or information with respect to any ingredient to the FDA.

The FDA’s National Center for Toxicological Research has periodically been investigating the effect of long term exposure to AHAs since 2003. On December 31, 2003, the FDA published a call for data on certain ingredients in various products, including AHAs that are part of wrinkle remover products. Manufacturers were asked to submit any data supporting the reclassification of these cosmetic products as over-the-counter drugs. In January 2005, the FDA issued final guidance to the effect that products containing AHAs should alert users that those products may increase skin sensitivity to sun and possible sunburn and the steps to avoid such consequences. On October 27, 2008, FDA published a set of Q&A’s that dealt with both long term exposure and drug/cosmetic issues.

With respect to the drug/cosmetic issue, the FDA restated its traditional position that certain AHA products intended for therapeutic use, such as acne treatments or skin lighteners, are considered drugs. Other AHA products, including those marketed by us, are considered cosmetics. The Q&A also reported on the results of two studies on the issue of skin damage caused by UV rays, and the potential photocarcinogenicity of AHA products. The studies concluded that applying AHA products to the skin resulted in increasing UV sensitivity, but that the effect was completely reversible. In addition another study on potential photocarcinogenesis found that AHA products had no effect on the process. Accordingly, we lawfully market our products as cosmetics, and our labeling fully complies with the FDA’s guidance.

Our advertising is subject to regulation under the Federal Trade Commission Act and related regulations, which prohibit the false and misleading claims in advertising. We believe that all of our labeling and promotional materials comply with these regulations.

Employees

We employ 67 persons of which 29 work in plant and production related functions and 38 work in administrative, sales and advertising functions. No contracts exist between us and any union. We monitor wage and salary rates in the Rocky Mountain area and pursue a policy of providing competitive compensation to our employees. The compensation of our executive officers is under the review of the Compensation Committee of our Board of Directors. Fringe benefits for our employees include medical, vision and dental plans, short-term disability, life insurance, a 401(k) plan with matching contributions for employees earning $35,000 or less per annum and an employee stock ownership (ESOP) plan. We consider our employee relations to be satisfactory with the average tenure of our employees to be approximately 15 years.

Patents and Trademarks

At present, we own one patent covering an ingredient used in some of our skin care products. Additionally, we actively use our registered trademarks for Scott’s Liquid Gold ^® , Touch of Scent ^® , Alpha Hydrox ^® and Neoteric ^® in the United States and have registered trademarks in a number of additional countries. Our registered trademarks concern names and logos relating to our products as well as the design of boxes for certain of our products.

Available Information and Code of Ethics

We will make available free of charge through the website http://www.businesswire.com/cnn/slgd.htm, this annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and amendments to such reports, as soon as reasonably practicable after we electronically file or furnish such material with the Securities and Exchange Commission (the “SEC”). These reports are also available through a link on our website (www.scottsliquidgold.com). Information on our website is not incorporated by reference into this Report and should not be considered part of this document. We will provide upon request (see below for instructions) and at no charge electronic or paper copies of these filings with the SEC (excluding exhibits).

We will also provide to any person without charge, upon request (see below for instructions), a copy of our code of business conduct and ethics.

A request for our reports filed with the SEC or our code of business conduct and ethics may be made to: Corporate Secretary, Scott’s Liquid Gold-Inc., 4880 Havana Street, Suite 400, Denver, Colorado 80239.

ITEM 1A.

RISK FACTORS.

The following is a discussion of certain risks that may affect our business. These risks may negatively impact our existing business, future business opportunities, our financial condition or our financial results. In such case, the trading price of our common stock could also decline. Additional risks and uncertainties not presently known to us, or that we currently see as immaterial, may also negatively impact our business.

We need to increase our revenues and/or further reduce our costs in order to become profitable.

We have experienced significant losses over an extended number of years. These losses result primarily from declining sales of our skin care products and our primary household products. Maintaining or increasing our revenues is uncertain and involves a number of factors including consumer acceptance of our products, distribution of our products and other matters described below.

Our cash flow is dependent upon operating cash flow, available cash and available funds under our financing agreements with Summit and Wells Fargo Bank, National Associations (“Wells Fargo”).

Because we are dependent on our operating cash flow, any loss of a significant customer, any further decreases in the distribution of our skin and hair care or household products, 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. Our financing agreement with Summit was amended on March 16, 2011 (effective March 1, 2011) and then again on June 29, 2012 (effective July 1, 2012). The agreement has a term that expires on January 1, 2014, but it may be renewed for additional 12 month periods unless either party elects to cancel in writing at least 60 days prior to January 1, 2014 and thereafter on the anniversary date of each 12 month period. On March 16, 2011, under a consent agreement from Summit, we entered into an agreement that enables us to sell the receivables of our largest customer to Wells Fargo. Except for these agreements, we have no arrangements for any external financing of debt or equity, and we are not certain any such financing would be available on acceptable terms. In order to improve our operating cash flow, we need to achieve profitability, and/or further reduce our costs.

Current economic conditions may materially and adversely impact our business.

The turmoil in the investment market of the United States, the tightening of credit and relatively high level of unemployment in the United States have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility and possibly a reduction in business activity generally. A continuation of these conditions could have, among other things, the following potential negative effects: (1) a reduction in spending of consumers in general including in the area of household products and skin and hair care products, which could reduce our sales; (2) the potential increase in bad debts or reserve for bad debts affecting our financial condition or cash flow; and (3) exposure to any increased interest expense to the extent that any financing or refinancing could be at costs higher than our existing debt.

Sales of our existing products are affected by changing consumer preferences.

Our primary market is retail stores in the United States which sell to consumers or end users in the mass market. Consumer preferences can change rapidly and are affected by new competitive products. This situation is true for both skin and hair care and household products and has affected our products. For example, we believe that our Alpha Hydrox ^® products with AHAs are effective in helping to diminish fine lines and wrinkles, but consumers may change permanently or temporarily to other products using other technologies or otherwise viewed as “new”. Any changes in consumer preferences can materially affect the sales and distribution of our products and thereby our revenues and results of operations.

In both skin and hair care and household products, we compete every day against the largest consumer product companies in the United States.

Our large competitors regularly introduce new products and spend considerably more than we can on advertising. The distribution of our products and sales can be adversely impacted by the actions of our competitors.

We have limited resources to promote our products with effective advertising.

We believe the growth of our net sales is substantially dependent upon our ability to introduce our products to current and new consumers through advertising and marketing. At present, we have limited resources compared to many of our competitors to spend on advertising and marketing. Advertising, particularly television advertising, can be important in reaching consumers, although the effectiveness of any particular advertisement cannot be predicted. Additionally, we may not be able to obtain optimal advertising placements at our current advertising budget. Our limited resources to promote our products through advertising may adversely affect our net sales and operating performance.

Maintaining or increasing our revenues is dependent, in part, on the introduction of new products that are successful in the marketplace.

If we are not successful in making ongoing sales of our newer products to retail stores or these products are not well received by consumers, our revenues could be materially and adversely affected.

A loss of one or more of our major customers could have a material adverse effect on our product sales.

For more than a majority of our sales, we are dependent upon sales to major customers, including Wal-Mart, which is our largest customer, Ulta, which is our second largest customer and Walgreens, which is our third largest customer. The easy access of consumers to our products is dependent upon major retail stores and other retail stores carrying our products. The willingness of these customers (i.e.,

retail stores) to carry any of our products depends on various matters, including the level of sales of the product at their stores. Any declines in sales of a product to consumers can result in the loss of retail stores as our customers and the corresponding decreases in the distribution of the product. It is uncertain whether the consumer base served by these stores would purchase our products at other retail stores. In the past, sales of our products have been affected by retail stores which discontinue a product or carry the product in a lesser number of stores.

A significant part of our sales of skin and hair care products are represented by the Montagne Jeunesse sachet products and Batiste Dry Shampoo products, each of which depends upon the continuation of our distributorship agreement with the manufacturers of these products.

Our distributorship agreement with Montagne Jeunesse does not have a fixed term, but continues until it is terminated by either party giving the other party no less than three or six months’ written notice of termination, depending on the reason for termination. To date, neither party has provided such notice. As a practical matter, we believe that the continuation of our agreement with Montagne Jeunesse is dependent upon maintaining our good relationship with them. Our distribution agreement with Church & Dwight, the manufacturer of Batiste Dry Shampoo products, has an initial term of three years and, following this term, may be automatically renewed. If our agreements with Montagne Jeunesse or Church & Dwight are terminated, we may no longer be able to distribute Montagne Jeunesse or Batiste Dry Shampoo products on an exclusive basis, or at all, and sales in our skin and hair care segment would be adversely affected.

We face the risk that raw materials for our products may not be available or that costs for these materials will increase, thereby affecting either our ability to manufacture the products or our gross margin on the products.

We obtain our raw materials from third party suppliers, one of which is a sole source supplier. We have no long term contracts with our suppliers; and, if a contract exists, it is subject to termination or cost increases. We may not have sufficient raw materials for production of products manufactured by us if there is a shortage in raw materials or one of our suppliers terminates our relationship. In addition, changing suppliers could involve delays that restrict our ability to manufacture or buy products in a timely manner to meet delivery requirements of our customers. Our suppliers of products which we distribute can also be subject to the same risk with their vendors.

Our sales are affected adversely by returns.

In our industry, our customers may be given authorization by us to return products. These returns result in refunds, a reduction of our revenues and usually the need to dispose of the resulting inventory at discounted prices. Accordingly, the level of returns can significantly impact our revenues and cash flow. See information about returns in “Results of Operations” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Changes in the regulation of our products, including environmental regulations, could have an adverse effect on the distribution, cost or function of our products.

Regulations affecting our products include requirements of the FDA for cosmetic products and environmental regulations affecting emissions from our products. In the past, the FDA has mentioned the treatment of products with AHAs as drugs, which could make our production and sale of certain Alpha Hydrox ^® products more expensive or prohibitive. Also, in the past, we were required to change the formulation of our household products to comply with environmental regulations and will continue to do so as required.

Any adverse developments in litigation could have a material impact on us.

We are subject to lawsuits from time to time in the ordinary course of business. While we expect those lawsuits not to have a material effect on us, an adverse development in any such lawsuit or the insurance coverage for a lawsuit could materially and adversely affect our financial condition and cash flow.

Any loss of our key executives or other personnel could harm our business.

Our success has depended on the experience and continued service of our executive officers and key employees. If we fail to retain these officers or key employees, our ability to continue our business and effectively compete may be substantially diminished. Because of our size, we must rely in many departments within our company on one or two key employees. The loss of any one of these employees could slow our product development, production of a product and sale and distribution of a product.

Our stock price can be volatile and can decline substantially.

Our stock is traded on the OTC Bulletin Board. The volume of our stock varies but is relatively limited. As a result, any events affecting us can result in volatile movements in the price of our stock and can result in significant declines in the market price of our stock.

ITEM 1B.

UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2.

PROPERTIES.

Our facilities, located in Denver, Colorado, which we owned until February 1, 2013, consisted of four connected buildings and a parking garage (approximately 241,684 square feet in total) and about 16.3 acres of land. These buildings range in age from approximately 16 to 39 years (126,600 square feet having been added in 1995 and 1996). As described above under Item 1, “Business,” we sold the Property on February 1, 2013 and leased a portion of our facilities back from the purchaser. Our facilities house our corporate headquarters and all of our manufacturing and warehouse operations, which are used by both of our operating segments. Until the sale of the Property on February 1, 2013, our facilities served as as collateral for a $5.2 million bank loan with a principal balance at December 31, 2012 of $3.4 million. Please see Note 12 to our Consolidated Financial Statements in Item 8 for information on the sale of our facilities, the leasing back of certain of the facilities that we sold and the repayment of our bank loan. We believe that our current leased space will provide capacity for growth for the foreseeable future.

ITEM 3.

LEGAL PROCEEDINGS.

We are subject to lawsuits from time to time in the ordinary course of business. While we expect those lawsuits not to have a material effect on us, an adverse development in any such lawsuit could materially and adversely affect our financial condition and cash flow.

ITEM 4.

MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our $0.10 par value common stock is traded on the OTC Bulletin Board (a regulated quotation service) under the ticker symbol “SLGD”. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The high and low prices of our common stock as traded on the OTC Bulletin Board were as follows.


2012 Three Months Ended					2011 Three Months Ended
	High		Low			High		Low
March 31	$	0.28	$	0.17	March 31	$	0.51	$	0.20
June 30	$	0.21	$	0.20	June 30	$	0.52	$	0.30
September 30	$	0.32	$	0.13	September 30	$	0.35	$	0.31
December 31	$	0.39	$	0.14	December 31	$	0.35	$	0.16

Shareholders

As of March 29, 2013, based on inquiry, we had approximately 772 shareholders of record.

Dividends

We did not pay any cash dividends during the two most recent fiscal years. No decision has been made as to future dividends. See “Results of Operations—Liquidity and Capital Resources” for information concerning restrictions on our ability to pay dividends.

Equity Plans

The following table provides, as of December 31, 2012, information regarding our 1998 and 2005 Stock Option Plans. The 1998 plan has expired, but options under that plan remain outstanding. We also have an employee stock ownership plan which invests only in our common stock, but which is not included in the table below.


Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		1,387,350	$	0.25		1,570,650
Equity compensation plans not approved by security holders		0		0		0

Total		1,387,350	$	0.25		1,570,650

ITEM 6.

SELECTED FINANCIAL DATA.

Not applicable.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Critical Accounting Policies

We have identified the policies below as critical to our business operations and the understanding of our results of operations. These policies involve significant judgments, estimates and assumptions by us. For a detailed discussion on the application of these and other accounting policies, see Note 1 to our Consolidated Financial Statements in Item 8.

Revenue Recognition

Our revenue recognition policy is significant because the amount and timing of revenue is a key component of our results of operations. We follow guidance issued by the Financial Accounting Standards Board (“FASB”), which requires that certain criteria be met in order to recognize revenue. If these criteria are not met, then the associated revenue is deferred until it is met. In our case, the criteria generally are met when we have an arrangement to sell a product, we have delivered the product in accordance with that arrangement, the sales price of the product is determinable and we believe that we will be paid for the sale.

We establish reserves for customer returns of our products and customer allowances. We estimate these reserves based upon, among other things, an assessment of historical trends, information from customers and anticipated returns and allowances related to current sales activity. These reserves are established in the period of sale and reduce our revenue in that period.

Our reserve for customer allowances includes primarily reserves for trade promotions to support price features, displays and other merchandising of our products to our customers. The actual level of returns and customer allowances are influenced by several factors, including the promotional efforts of our customers, changes in mix of our customers, changes in the mix of the products we sell and the maturity of the product. We may change our estimates based on actual results and consideration of other factors that cause returns and allowances. In the event that actual results differ from our estimates, the results of future periods may be impacted.

We also establish reserves for coupons, rebates and certain other promotional programs for consumers. We estimate these reserves based upon, among other things, an assessment of historical trends and current sales activity. These reserves are recorded as a reduction of revenue at the later of the date at which the revenue is recognized or the date at which the sale incentive is offered. In the event that actual results differ from our estimates, the results of future periods may be impacted.

We have also established an allowance for doubtful accounts. We estimate this allowance based upon, among other things, an assessment of the credit risk of specific customers and historical trends. We believe our allowance for doubtful accounts is adequate to absorb any losses which may arise. In the event that actual losses differ from our estimates, the results of future periods may be impacted.

Income Taxes

As of December 31, 2012, we have net deferred income tax assets of approximately $4,212,000 which primarily relate to net operating loss carryforwards, expenses that are not yet deductible for tax purposes and tax credit carryforwards. These assets are offset by deferred income tax liabilities for

differences in the book and tax bases of property and equipment. The net deferred tax asset is fully reserved by a valuation allowance. The valuation allowance represents our determination that, more likely than not, we will be unable to realize the value of such assets at this time due to the uncertainty of future profitability.

Inventory Valuation and Reserves

Our inventory is valued at the lower of cost or market, cost being determined under the first-in, first-out method. We estimate an inventory reserve for slow moving and obsolete products and raw materials based upon, among other things, an assessment of historical and anticipated sales of our products. In the event that actual results differ from our estimates, the results of future periods may be impacted.

Long-Lived Assets and Assets Held for Sale

Please refer to Note 1(i) of our Consolidated Financial Statements in Item 8 as to our determination that there has been no impairment in the carrying values of our long-lived assets at December 31, 2012. However, please refer to the same note as to our determination to reclassify our long-lived assets as “held for sale”.

Recently Issued Accounting Pronouncements

We have considered recently issued accounting pronouncements and do not believe that such pronouncements are of significance or potential significance to us.

Results of Operations

Our consolidated net sales for 2012 were $16,041,400 versus $15,616,300 for 2011, an increase of $425,100 or 2.7%. We saw a 14.9% increase in net sales of our own line of skin care products and a 15.4% increase in net sales of the skin and hair care products that we distribute for other companies. These increases were offset in part by a 17.6% decrease in net sales of our household products. The reasons for the decrease in the sales of our household products are described below.

Our net loss for 2012 was $1,371,800 versus a net loss $633,800 for 2011. The increased loss for 2012 compared to 2011 resulted primarily from: (1) an impairment to the carrying value of our facilities as detailed below; (2) a reclassification of our facilities to assets “held for sale” and related impairment as detailed below; (3) increases in trade promotions to our customers; (4) increases in costs of sales as detailed below; and (5) increases in operating expenses as detailed below.

Summary of Results as a Percentage of Net Sales


	Year Ended December 31,
	2012			2011
Net sales
Household products		30.5	%		38.0	%
Skin and hair care products		69.5	%		62.0	%

Total net sales		100.0	%		100.0	%
Cost of sales		56.6	%		54.8	%

Gross profit		43.4	%		45.2	%
Other revenue		1.5	%		1.0	%

		44.9	%		46.2	%
Operating expenses		46.2	%		48.8	%
Loss on impairment of long-lived assets		1.8	%		0	%
Loss on impairment of assets held for sale		3.6	%		0	%

Interest expense		1.8	%		1.5	%

		53.4	%		50.3	%

(Loss) income before taxes		(8.6	%)		(4.1	%)

Our gross margins may not be comparable to those of other companies because some companies include all of the costs related to their distribution network in cost of sales. In contrast, other companies, like us, exclude a portion of these costs (i.e., freight out to customers) from gross margin. Instead, we include them as part of selling expenses. See Note 1(n), “Operating Costs and Expenses Classification”, to our Consolidated Financial Statements in Item 8.

Comparative Net Sales


	Year Ended December 31,				Percentage Increase
	2012		2011		(Decrease)
Scott’s Liquid Gold ^® and other household products	$	4,895,600	$	5,941,100		(17.6	%)

Total household products		4,895,600		5,941,100		(17.6	%)

Alpha Hydrox ^® , Diabetic cream and shampoo and other skin care products		4,499,800		3,915,900		14.9	%
Montagne Jeunesse and Batiste Dry Shampoo		6,646,000		5,759,300		15.4	%

Total skin and hair care products		11,145,800		9,675,200		15.2	%

Total net sales	$	16,041,400	$	15,616,300		2.7	%

During 2012, net sales of skin and hair care products accounted for 69.5% of consolidated net sales compared to 62.0% in 2011. The net sales of these products were $11,145,800 in 2012 compared to $9,675,200 in 2011, an increase of $1,470,600 or 15.2%.

The net sales of our Alpha Hydrox ^® and other manufactured skin care products were $4,499,800 in 2012 versus $3,915,900 in 2011, an increase of $583,900 or 14.9%. This increase is primarily attributable to increased distribution to new and existing customers and the improved placement of our products at existing customers.

The net sales of Montagne Jeunesse and Batiste Dry Shampoo were $6,646,000 in 2012 versus $5,759,300 in 2011, an increase of $886,700 or 15.4%. This increase is primarily attributable to increased distribution at new and existing customers and the improved placement of our products at existing customers.

Sales of household products for 2012 accounted for 30.5% of consolidated net sales compared to 38.0% for the same period in 2011. During 2012, the sales of our household products were $4,895,600 as compared to $5,941,100 for the same period in 2011, a decrease of $1,045,500 or 17.6%. This decrease

reflects primarily decreased distribution in our Clean Screen and Little Clean Screen products. We believe the decline in sales of Clean Screen is the result of new competitors in the segment including competitors with significant name brand recognition. We believe that this trend is likely to continue impacting our net sales going forward, as our competitors continue to gain market share in this area.

Due to the decline in sales and distribution of Mold Control 500, this product was discontinued at the end of 2012. We attribute this decline to the following three primary factors: (1) generally lower actual consumer demand than anticipated; (2) the product is effective, but expensive; and (3) the product involves a delivery system considered by many not to be consumer friendly.

We paid our customers a total of $1,735,700 in 2012 versus $1,315,200 in 2011, an increase of $420,500 or 32% for trade promotions to support price features, displays and other merchandising of our products. We made a strategic decision this year to invest more in the promotion and marketing of our products. Our primary goal was to obtain additional distribution with our existing customers, better product placement in the stores with these customers and to obtain distribution with new customers. We believe our increased net sales in our skin and hair products segment during the latter part of 2012 has demonstrated the early benefits of our decision to increase spending in support of promotions and marketing.

On a consolidated basis, cost of sales was $9,074,700 for 2012 compared to $8,553,500 for 2011, an increase of $521,200 or 6.1%, on a net sales increase of 2.7%. As a percentage of consolidated net sales, cost of sales was 56.6% in 2012 versus 54.8% in 2011.

The cost of sales for our skin and hair care products was 53.7% of net sales in both 2012 and 2011. The costs of sales for our household products increased to 63.1% of net sales in 2012 as compared to 57.9% in 2011. This increase primarily reflect more spending on trade promotions in 2012 as compared to 2011, more obsolete inventory charged to expense in 2012 as compared to 2011, and increases in our costs for certain raw materials.

Operating Expenses, Interest Expense and Other Income


	Year Ended December 31,				Percentage Increase
	2012		2011		(Decrease)
Operating Expenses
Advertising	$	320,200	$	773,300		(58.6	%)
Selling		4,305,200		4,527,100		(4.9	%)
General and administrative		2,792,200		2,318,100		20.5	%
Impairment of long-lived assets		286,900		0		100.0	%
Impairment on assets held for sale		579,800		0		100.0	%

Total operating expenses	$	8,284,300	$	7,618,500		8.7	%

Rental and Other Income	$	240,400	$	159,200		51.0	%

Interest Expense	$	294,600	$	237,300		24.1	%

Our operating expenses increased by $665,800 in 2012 when compared to 2011 or 8.7%. These expenses consist primarily of advertising, selling, general and administrative expenses, an impairment of long-lived assets and an impairment on assets held for sale, which are discussed below.

Advertising expenses for 2012 were $320,200 compared to $773,300 for 2011, a decrease of $453,100 or 58.6%. The decrease relates primarily to the cost of a national television campaign for Scott’s Liquid Gold ^® wood cleaner and preservative in the fourth quarter of 2011 as well as a national coupon drop that was part of the same marketing program. We did not do a similar national television campaign and coupon drop in 2012.

Selling expenses for 2012 were $4,305,200 compared to $4,527,100 for 2011, a decrease of $221,900 or 4.9%. The decrease was comprised primarily of the following three factors: (1) a decrease in the costs of displays for certain of our products; (2) a decrease in shipping and handling costs; and (3) a decrease in postage expense for sampling programs.

General and administrative expenses for 2012 were $2,792,200 compared to $2,318,100 for 2011, an increase of $474,100 or 20.5%. This increase is attributable to the following three primary factors: (1) recent changes in personnel within our finance and accounting group; (2) an increase in expenses for audit fees and legal fees, including legal fees incurred in connection with the sale of our real estate assets; and (3) an increase in repairs and maintenance costs for our real estate assets.

The impairment of our long-lived assets for 2012 was $286,900 compared to $0 for 2011. The increase is due to an impairment to the carrying value of our facilities as discussed in Note 1(i) of our Consolidated Financial Statements in Item 8.

The impairment of our assets held for sale for 2012 was $579,800 compared to $0 for 2011. The increase is due to a reclassification of our long-lived assets to assets “held for sale” as discussed in Note 1(i) of our Consolidated Financial Statements in Item 8.

Rental and other income in 2012 of $240,400 included $152,100 of net rental receipts, $2,500 in interest earned on our cash reserves and other income of $85,800. This compares to total rental and other income for 2011 of $159,200 which included $153,100 of net rental receipts, $4,900 in interest earned on our cash reserves and other income of $1,200. The increase in other income is due primarily to the sale of certain manufacturing equipment that was no longer required.

Interest expense for 2012 was $294,600 and included $98,000 in administrative fees incurred relative to the sale of accounts receivable invoices to Summit. Interest expense for 2011 was $237,300 and included $64,500 in administrative fees paid to Summit. The increase is due to higher borrowings under our line of credit with Summit to fund increased gross sales activity and trade promotions.

During 2012 and 2011, our expenditures for research and development were insignificant.

Liquidity and Capital Resources

Citywide Loan

Please see Note 4 to our Consolidated Financial Statements in Item 8 for information on our loan with Citywide Banks (the “Bank”) for $5,156,600 secured by the land, building and fixtures at our Denver, Colorado facilities with an outstanding principal balance at December 31, 2012 of $3,363,300. In addition, please see Note 12 to our Consolidated Financial Statements in Item 8 for information regarding our repayment of this loan in connection with our sale of our Property.

Financing Agreements

Please see Note 1(e) to our Consolidated Financial Statements in Item 8 for a discussion of our financing agreements with Summit and Wells Fargo. Note 1(e) also includes a discussion of the accounting treatment of the funds borrowed pursuant to these agreements. In addition, please see Note 12 to our Consolidated Financial Statements in Item 8 for information regarding the repayment of our credit line with Summit in connection with our sale of our Property.

Liquidity

At December 31, 2012, we had $253,900 in cash and approximately $298,600 of our credit line with Summit was available for future borrowing. Our net cash provided by operating activities in 2012 decreased by $455,000 to $17,900 as compared to 2011. For 2012, the primary components of working capital (exclusive of cash that was $322,000 less at December 31, 2012 compared to December 31, 2011) that significantly affected operating cash flows are the following: (1) trade receivables, net were $521,300 more at December 31, 2012 than at December 31, 2011 due primarily to increased gross sales activity and the timing of receiving payment; (2) obligations collateralized by those receivables and inventory were $924,300 more at December 31, 2012 than at December 31, 2011 due primarily to higher borrowings under our line of credit with Summit to fund increased gross sales activity and trade promotions and a reduction in accounts payable and other accrued expenses; (3) inventory at December 31, 2012 was $43,400 less than at December 31, 2011 due primarily to timing differences in the receipt of our inventory; and (4) accounts payable and other accrued expenses at December 31, 2012 were $351,400 less than at December 31, 2011 due primarily to the timing of making payments and lower accruals for payroll and benefits, trade promotions and an insurance claim.

We anticipate that our existing cash, especially given the cash proceeds from the sale of our real estate assets, and our cash flow from operations, together with our current borrowing arrangements with Summit and Wells Fargo, will be sufficient to meet our cash requirements for the next 12 months. We expect to make capital expenditures of approximately $150,000 for 2013 as a result of the sale of our real estate assets on February 1, 2013. Please see Note 12 to our Consolidated Financial Statements in Item 8 for information on the sale of our real estate assets.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Scott’s Liquid Gold-Inc.

Denver, Colorado

We have audited the accompanying consolidated balance sheets of Scott’s Liquid Gold-Inc. and subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Scott’s Liquid Gold-Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

/s/ EKS&H LLLP

March 29, 2013

Denver, Colorado

Consolidated Statements of Operations


	Year Ended December 31,
	2012			2011
Net sales	$	16,041,400		$	15,616,300
Operating costs and expenses:
Cost of sales		9,074,700			8,553,500
Advertising		320,200			773,300
Selling		4,305,200			4,527,100
General and administrative		2,792,200			2,318,100
Loss on impairment of long-lived assets		286,900			0
Loss on impairment of assets held for sale		579,800			0

		17,359,000			16,172,000

Loss from operations		(1,317,600	)		(555,700	)
Rental and other income		240,400			159,200
Interest expense		(294,600	)		(237,300	)

Loss before income taxes		(1,371,800	)		(633,800	)
Income tax expense		0			0

Net loss	$	(1,371,800	)	$	(633,800	)

Net loss per common share :
Basic	$	(0.13	)	$	(0.06	)

Diluted	$	(0.13	)	$	(0.06	)

Weighted average shares outstanding:
Basic		10,934,945			10,898,800

Diluted		10,934,945			10,898,800

See accompanying notes to these Consolidated Financial Statements.

Consolidated Balance Sheets


	December 31,
	2012			2011
Assets
Current assets:
Cash and cash equivalents	$	253,900		$	575,900
Trade receivables, net		969,200			447,900
Inventories, net		1,975,800			2,019,200
Prepaid expenses		139,100			133,400

Total current assets		3,338,000			3,176,400
Property, plant and equipment, net		467,400			10,632,100
Assets held for sale		8,907,600			0
Other assets		82,800			68,400

Total assets	$	12,795,800		$	13,876,900

Liabilities and Shareholders’ Equity
Current liabilities:
Obligations collateralized by receivables and inventory	$	1,201,400		$	277,100
Accounts payable		1,371,600			1,442,700
Accrued payroll and benefits		509,200			579,200
Accrued property taxes		227,900			230,600
Other accrued expenses		19,700			227,300
Current maturities of long-term debt		352,600			340,800

Total current liabilities		3,682,400			3,097,700
Long-term debt, net of current maturities		3,010,700			3,363,400

Total liabilities		6,693,100			6,461,100
Commitments and contingencies
Shareholders’ equity:
Common stock; $0.10 par value, authorized 50,000,000 shares; issued and outstanding 10,937,000 shares (2012) and 10,907,000 shares (2011)		1,093,700			1,090,700
Capital in excess of par		5,502,600			5,446,900
Retained earnings (deficit)		(493,600	)		878,200

Total shareholders’ equity		6,102,700			7,415,800

Total liabilities and shareholders’ equity	$	12,795,800		$	13,876,900

See accompanying notes to these Consolidated Financial Statements.

Consolidated Statements of Shareholders’ Equity


	Common Stock				Capital in Excess of Par		Retained Earnings (deficit)			Total
	Shares		Amount		Capital in Excess of Par		Retained Earnings (deficit)			Total
Balance, December 31, 2010		10,898,500	$	1,089,900	$	5,373,100	$	1,512,000		$	7,975,000
Stock-based compensation		0		0		72,800					72,800
Stock options exercised		8,500		800		1,000					1,800
Net loss								(633,800	)		(633,800	)

Balance, December 31, 2011		10,907,000	$	1,090,700	$	5,446,900	$	878,200		$	7,415,800
Stock-based compensation		0		0		53,600					53,600
Stock options exercised		30,000		3,000		2,100					5,100
Net loss								(1,371,800	)		(1,371,800	)

Balance, December 31, 2012		10,937,000	$	1,093,700	$	5,502,600	$	(493,600	)	$	6,102,700

See accompanying notes to these Consolidated Financial Statements.

Consolidated Statements of Cash Flows


	Year Ended December 31,
	2012			2011
Cash flows from operating activities:
Net loss	$	(1,371,800	)	$	(633,800	)

Adjustment to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		420,300			502,300
Impairment of long-lived assets		286,900			0
Impairment on assets held for sale		579,800			0
Stock-based compensation		53,600			72,800
(Gain) loss on disposal of assets		(25,800	)		3,000
Change in operating assets and liabilities:
Trade receivables		(521,300	)		388,500
Inventories		43,400			(337,700	)
Prepaid expenses and other assets		(20,100	)		68,600
Net proceeds on obligations collateralized by receivables and inventory		924,300			(63,800	)
Accounts payable and accrued expenses		(351,400	)		473,000

Total adjustments to net loss		1,389,700			1,106,700

Net Cash Provided by Operating Activities		17,900			472,900

Cash flow from investing activities:
Proceeds from sale of property, plant and equipment		26,600			0
Purchase of property, plant and equipment		(30,700	)		(49,400	)

Net Cash Used by Investing Activities		(4,100	)		(49,400	)
Cash flow from financing activities:
Principal payments on long-term debt		(340,900	)		(330,100	)
Proceeds from exercise of stock options		5,100			1,800

Net Cash Used by Financing Activities		(335,800	)		(328,300	)

Net (Decrease) Increase in Cash and Cash Equivalents		(322,000	)		95,200
Cash and Cash Equivalents, beginning of year		575,900			480,700
Cash and Cash Equivalents, end of year	$	253,900		$	575,900

Supplemental disclosures:
Cash paid during the period for interest	$	294,800		$	237,400

See accompanying notes to these Consolidated Financial Statements.

Note 1. Organization and Summary of Significant Accounting Policies

(a)	Company Background and Management’s Plans

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, the “Company”, “we”, “our”, or “us”) develop, manufacture, market and sell quality household and skin and hair care products. We are also an exclusive distributor in the United States of Montagne Jeunesse skin sachets and Batiste Dry Shampoo manufactured by two other companies. Our business is comprised of two segments, household products and skin and hair care products.

We have experienced significant losses over an extended number of years primarily attributable to sales declines and have used a significant amount of our cash reserves to fund operations and for debt service. To address these trends, we have implemented cost reduction initiatives, entered into financing agreements (please see Note 1(e) for information on our financing agreements) and continue to focus on existing and new product sales and distribution at improved margins to increase our cash provided by operations.

We anticipate that our existing cash, especially given the cash proceeds from the sale of our real estate assets, and our cash flow from operations, together with our current borrowing arrangements with Summit Financial Resources, L.P. (“Summit”) and Wells Fargo Bank, National Association (“Wells Fargo”) will be sufficient to meet our cash requirements for the next 12 months. We expect to make capital expenditures of approximately $150,000 for 2013 as a result of the sale of our real estate assets on February 1, 2013. Please see Note 12 for information on the sale of our real estate assets.

(b)	Principles of Consolidation

Our consolidated financial statements include our accounts and those of our wholly-owned 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 requires us to make estimates and assumptions that affect the reported amounts in our financial statements 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. Significant estimates include, but are not limited to, the realization of deferred tax assets, reserves for slow moving and obsolete inventory, customer returns and allowances, coupon redemptions and stock-based compensation. Actual results could differ from our estimates.

(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)	Sale of Accounts Receivable

On November 3, 2008, effective as of October 31, 2008, we entered into a financing agreement with Summit for the purpose of improving working capital. The financing agreement with Summit was amended on March 12, 2010, March 16, 2011 (effective March 1, 2011) and then again on June 29, 2012 (effective July 1, 2012). The agreement has a term that expires on January 1, 2014, but it may be renewed for additional 12 month periods unless either party elects to cancel in writing at least 60 days prior to January 1, 2014 and thereafter on the anniversary date of each 12 month period.

The agreement provides for a factoring line up to $1.5 million and is secured primarily by accounts receivable, inventory, any lease in which we are a lessor and all investment property and guarantees by our active subsidiaries. Under the agreement, Summit will make loans at our request and in its discretion based on: (i) its purchases of our receivables, with recourse against us, at an advance rate of 85% (or such other percentage determined by Summit in its discretion) and (ii) our inventory not to exceed certain amounts, including an aggregate maximum of $500,000. Prior to the recent amendment on June 29, 2012, advances under the agreement had an interest rate of 1.5% over the prime rate (as published in The Wall Street Journal) for the accounts receivable portion of the advances and 4.0% over the prime rate for the inventory portion of the borrowings. The recent amendment reduced these interest rates to 1.0% over the prime rate for the accounts receivable portion and 2.5% over the prime rate for the inventory portion. Consequently, our interest cost adjusts with changes in the prime rate. At December 31, 2012, the prime rate was 3.25%.

In addition, prior to the recent amendment on June 29, 2012, there was an administrative fee of 1.0% per month on the average monthly outstanding loan on the receivable portion of any advance and 1.35% per month on the average monthly outstanding loan on the inventory portion of any advance. The recent amendment reduced these administrative fees to 0.85% per month on the average monthly outstanding loan on the receivable portion of any advance if the average quarterly loan in the prior quarter was less than or equal to $1,000,000, and to 0.75% if the average quarterly loan in the prior quarter was greater than $1,000,000 and to 1.0% per month on the average monthly outstanding loan on the inventory portion of any advance.

The agreement provides that neither we nor our active subsidiaries may engage in a change in control transaction without the prior written consent of Summit. Events of default include, but are not limited to, our failure to make a payment when due or a default occurring on any of our other indebtedness.

In 2012, we sold approximately $11,415,500 of our accounts receivables to Summit for approximately $9,703,200. As the advance rate on these accounts receivables was 85%, we retained an interest equal to 15% of those accounts receivables. At December 31, 2012, approximately $298,600 of this credit line was available for future factoring of accounts receivable invoices. On February 4, 2013, we paid $909,778 to Summit to repay the outstanding balance on our credit line and we have maintained a zero loan balance since that time.

We report these transactions using the authoritative guidance of the Financial Accounting Standards Board (“FASB”) as a secured borrowing rather than as a sale. As a result, affected accounts receivable are reported under Current Assets within our Consolidated Balance Sheets as “Trade receivables, net.” Similarly, the net liability owing to Summit appears as “Obligations collateralized by receivables and inventory” within the Current Liabilities section of our Consolidated Balance Sheets. Net proceeds received on obligations collateralized by receivables and inventory appear as cash provided by operating activities within our Consolidated Statements of Cash Flow.

On March 16, 2011, under a consent agreement from Summit, we entered into a financing agreement with Wells Fargo for the purpose of further lowering the cost of borrowing associated with the financing of our accounts receivable. Pursuant to this agreement, we may sell accounts receivables from our largest customer, Wal-Mart Stores, Inc. (“Wal-Mart”), at a discount to Wells Fargo; provided, however, that Wells Fargo may reject offers to purchase such receivables in its discretion. These receivables may be purchased by Wells Fargo at a cost to us equal to LIBOR plus 1.15% per annum. The LIBOR rate used depends on the days to maturity of the receivable sold, typically ranging from 102 to 105 days. At December 31, 2012, Wells Fargo used the 104-day LIBOR rate of 0.51%.

The agreement has no fixed termination date, but continues unless terminated by either party giving 30 days prior written notice to the other party. In 2012, we sold approximately $3,641,900 of our relevant accounts receivable to Wells Fargo for approximately $3,578,200. The difference between the invoiced amount of the receivable and the cash that we received from Wells Fargo is a cost to us. This cost is in lieu of any cash discount our customer would have been allowed and, thus, is treated in a manner consistent with standard trade discounts granted to our customers.

The reporting of the sale of accounts receivables to Wells Fargo is treated as a sale rather than as a secured borrowing. As a result, affected accounts receivables are relieved from the Company’s financial statements upon receipt of the cash proceeds.

(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 this reserve based upon historical and anticipated sales. Amounts are stated in Note 2.

(g)	Property, Plant and Equipment

Property, plant and equipment are recorded at historical cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets ranging from three to 45 years. Building structures and building improvements are estimated to have useful lives of 35 to 45 years and three to 20 years, respectively. Production equipment and production support equipment are estimated to have useful lives of 15 to 20 years and three to 10 years, respectively. Office furniture and office machines are estimated to have useful lives of 10 to 20 and three to five years, respectively. Carpets, drapes and company vehicles are estimated to have useful lives of five to 10 years. Maintenance and repairs are expensed as incurred. Improvements that extend the useful lives of the asset 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 and trade receivables. We maintain our cash balances in the form of bank demand deposits with financial institutions that we believe are creditworthy. Periodically throughout the year, we have 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, accounts payable and accrued expenses approximate fair value due to the short-term nature of these financial instruments. Our long-term debt bears interest at a fixed rate that adjusts annually on the anniversary date to the then prime rate. The carrying value of our long-term debt approximates fair value as of December 31, 2012.

(i)	Long-Lived Assets and Assets Held for Sale

We follow FASB authoritative guidance as it relates to the proper accounting treatment for the impairment or disposal of long-lived assets. This guidance 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.

As of December 31, 2011, due to changes in the real estate market in Denver, Colorado, we conducted an evaluation into the fair value impairment of our property, plant and equipment with particular attention to our land and office, warehouse and manufacturing buildings (the “Facilities”). The Facilities

have an original cost of $17,485,800 and a depreciated book value at December 31, 2011 of approximately $10,068,900. We evaluated the value of the Facilities using both an income capitalization approach and a market value approach. This evaluation returned a range of fair value estimates between approximately $10.1 million to $10.6 million. Based upon this evaluation, we found there to be no impairment in the carrying values of our long-lived assets at December 31, 2011.

However, at September 30, 2012, due to recent developments in the commercial real estate market in which our Facilities are located, we found there to be an impairment of $286,900 in the carrying values of our long-lived assets. We determined the impairment amount after concluding that the low end of the range of fair value estimates at September 30, 2012 should be $9.5 million and the depreciated book value of the Facilities at September 30, 2012 was $9,786,900.

The impact of the impairment appears on our Consolidated Statements of Operations as an expense of $286,900 under “Loss on impairment of long-lived assets” and a reduction of $286,900 to our “Property, plant and equipment, net” on our Consolidated Balance Sheets.

On November 5, 2012, pursuant to FASB authoritative guidance, we classified the Facilities as an asset “held for sale.” Upon classification as “held for sale”, the long-lived asset is measured at the lower of its carrying value or fair value less cost to sell, depreciation is ceased and the asset is separately presented on our Consolidated Balance Sheets. The impact of the classification as “held for sale” appears on our Consolidated Statements of Operations as an expense of $579,800 under “Loss on impairment of Assets Held for Sale”, a reduction of $8,907,600 to our Property, plant and equipment, net” on our Consolidated Balance Sheets and a new asset of $8,907,600 under “Assets Held for Sale” on our Consolidated Balance Sheets.

On February 1, 2013, we sold our Facilities for $9.5 million. Please see Note 12 for information on the sale of our Facilities.

(j)	Income Taxes

We follow FASB authoritative guidance for the 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.

Taxes are reported based on tax positions that meet a more-likely-than-not standard and that are measured at the amount that is more-likely-than-not to be realized. Differences between financial and tax reporting which do not meet this threshold are required to be recorded as unrecognized tax benefits. We classify penalty and interest expense related to income tax liabilities as an income tax expense. There are no significant interest and penalties recognized in the statement of operations or accrued on the balance sheet.

(k)	Revenue Recognition

Our revenue recognition policy is significant because the amount and timing of revenue is a key component of our results of operations. We follow guidance issued by the FASB, which requires that certain criteria be met in order to recognize revenue. If these criteria are not met, then the associated revenue is deferred until it is met. In our case, the criteria generally are met when we have an arrangement to sell a product, we have delivered the product in accordance with that arrangement, the sales price of the product is determinable and we believe that we will be paid for the sale.

We establish reserves for customer returns of our products and customer allowances. We estimate these reserves based upon, among other things, an assessment of historical trends, information from customers and anticipated returns related to current sales activity. These reserves are established in the period of sale and reduce our revenue in that period.

At December 31, 2012 and December 31, 2011 approximately $468,400 and $636,500, respectively, had been reserved for as a reduction of accounts receivable, and approximately $0 and $85,000, respectively, had been reserved as current liabilities. Trade promotions to our customers and incentives such as coupons and rebates to the consumer are deducted from gross sales and totaled $1,735,700 and $1,315,200 for the years ended December 31, 2012 and 2011, respectively.

(l)	Advertising Costs

Advertising costs are expensed as incurred.

(m)	Stock-based Compensation

During 2012, we granted 100,000 options for shares of our common stock to an executive officer at a price of $0.24 per share and 25,000 options for shares of our common stock to our controller at a price of $0.17 per share. The options which vest ratably over forty-eight months, or upon a change in control, and which expire after five years, were granted at 120% of the market value as of the date of grant.

The weighted average fair market value of the options granted in the years ended December 31, 2012 and 2011 were estimated on the date of grant, using a Black-Scholes option pricing model with the following assumptions:


	2012			2011
Expected life of options (using the “simplified method)		4.5 years			4.5 years
Average risk-free interest rate		0.8	%		0.9	%
Average expected volatility of stock		143	%		98	%
Expected dividend rate		None			None

Compensation cost related to stock options recognized in operating results (included in general and administrative expenses) under authoritative guidance issued by the FASB was $53,600 and $72,800 in the twelve months ended December 31, 2012 and 2011, respectively. Approximately $78,800 of total unrecognized compensation costs related to non-vested stock options is expected to be recognized over the next forty-eight months. In accordance with this same authoritative guidance, there was no tax benefit from recording the non-cash expense as it 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)	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 as selling expenses. Other selling expenses consist primarily of wages and benefits for sales and sales support personnel, travel, brokerage commissions and promotional costs, as well as certain other indirect costs. Shipping and handling costs totaled $1,487,300 and $1,514,400, for the years ended December 31, 2012 and 2011, respectively.

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.

(o)	Recently Issued Accounting Pronouncements

We have considered recently issued accounting pronouncements and do not believe that such pronouncements are of significance or potential significance to us.

Note 2: Inventories

Inventories, consisting of materials, labor and overhead at December 31 were comprised of the following:


	2012			2011
Finished goods	$	959,100		$	1,191,000
Raw materials		1,079,600			1,067,200
Inventory reserve for obsolescence		(62,900	)		(239,000	)

	$	1,975,800		$	2,019,200

Note 3: Property, Plant and Equipment

Property, plant and equipment at December 31 were comprised of the following:


	2012			2011
Land	$	0		$	1,091,500
Buildings		0			16,394,300
Production equipment		5,004,900			6,053,700
Office furniture and equipment		1,211,800			1,519,400
Other		34,200			34,200

		6,250,900			25,093,100
Less accumulated depreciation		(5,783,500	)		(14,461,000	)

	$	467,400		$	10,632,100

Depreciation expense for the years ended December 31, 2012 and 2011 was $420,300 and $476,700, respectively. Please see Note 12 for information on the sale of our land and buildings.

Note 4: Debt

On June 28, 2006, we entered into a loan with a fifteen year amortization with Citywide Banks (the “Bank”) for $5,156,600 secured by the land, building and fixtures at our Denver, Colorado facilities. Interest on the bank loan is at the prime rate as published in The Wall Street Journal, adjusted annually each June. At December 31, 2012, this rate was 3.25%. The loan requires 180 monthly payments of approximately $38,200 each. We believe, based upon both an income capitalization approach and a market value approach, that the real property assets securing the loan significantly exceed the principal amount outstanding under the loan agreement. Nevertheless, the loan agreement contains a number of covenants, including the requirement for us to maintain a current ratio through November 30, 2012 of at least 0.9:1.0 and thereafter of at least 1.0:1.0, and a ratio of consolidated long-term debt to consolidated net worth of not more than 1.0:1.0. These ratios are to be calculated in accordance with generally accepted accounting principles in the United States. We may not declare any dividends that would result in a violation of either of these covenants.

With regard to our current ratio, our loan agreement with the Bank was temporarily modified on August 10, 2012, to change our current ratio during the period from April 1, 2012 through November 30, 2012 to 0.9:1.0 from 1.0:1.0. We agreed to pay to the Bank a one-time modification fee of $17,500. The modification was necessary because our current ratio decreased to below 1.0:1.0 during the second quarter of 2012. The modification enabled us to remain in compliance with the terms of the loan agreement with respect to the ratio through November 30, 2012 and avoid being deemed in default under the loan agreement through such date for failing to comply with the original current ratio requirement. At December 31, 2012, our current ratio was 0.9:1.0 and we were not in compliance with our current ratio covenant. However, our loan with the Bank was repaid in full at the closing of our real estate assets. Please see Note 12 for information on sale of our real estate assets on February 1, 2013.

Affirmative covenants in the loan agreement with the Bank included, among other things, compliance in all material respects with applicable laws and regulations and compliance with our agreements with other parties that materially affect our financial condition. Negative covenants in the loan agreement include, among other things, that without the consent of the Bank, we do not: (1) sell, lease or grant a security interest in our assets; (2) engage in any business activity substantially different than those in which we are presently engaged; (3) sell assets out of the ordinary course of business; or (4) purchase another entity or an interest in another entity.

Long-term debt at December 31 is presented below:


	2012		2011
Bank loan	$	3,363,300	$	3,704,200
Less current maturities		352,600		340,800

Long-term debt	$	3,010,700	$	3,363,400

Maturities of long-term debt for the years 2013 through 2017 are $352,600, $364,400, $376,600, $388,900, $402,200 and $1,478,600 thereafter. Please see Note 12 for information on the repayment of our long-term debt on February 1, 2013.

Please see Note 1(e) for a discussion of our financing agreements with Summit and Wells Fargo. Note 1(e) also includes a discussion of the accounting treatment of the funds borrowed pursuant to these agreements.

Note 5: Income Taxes

The provision for income tax for the years ended December 31 is as follows:


	2012			2011
Current provision (benefit):
Federal	$	0		$	0
State		0			0

Total current provision (benefit)		0			0

Deferred provision (benefit):
Federal		(407,800	)		(144,000	)
State		(36,600	)		(11,600	)
Valuation allowance		444,400			155,600

Total deferred provision (benefit)		0			0

Provision (benefit):
Federal		0			0
State		0			0

Total provision (benefit)	$	0		$	0

Income tax expense (benefit) at the statutory tax rate is reconciled to the overall income tax expense (benefit) as follows:


	2012			2011
Federal income tax at statutory rates	$	(466,400	)	$	(213,800	)
State income taxes, net of federal tax effect		(41,900	)		(19,200	)
Change in unrecognized benefit		24,900			67,900
Other		39,000			9,500

Total		(444,400	)		(155,600	)
Change in valuation allowance		444,400			155,600

Provision for income taxes	$	0		$	0

Deferred income taxes are based on estimated future tax effects of differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes given the provision of enacted tax laws. The net deferred tax assets and liabilities as of December 31, 2012 and 2011 are comprised of the following:


	2012			2011
Deferred tax assets:
Net operating loss carryforwards	$	4,531,300		$	3,988,700
Tax credit and other carryforwards		255,200			255,200
Trade receivables		20,900			22,600
Inventories		16,600			93,900
Accrued vacation		157,100			184,500
Other		44,300			38,100

Total deferred taxes		5,025,400			4,583,000

Deferred tax liability:
Accumulated depreciation for tax purposes		(813,400	)		(815,400	)

Total deferred tax liabilities		(813,400	)		(815,400	)

Net deferred tax asset, before allowance		4,212,000			3,767,600
Valuation allowance		(4,212,000	)		(3,767,600	)
Net deferred tax asset	$	0		$	0

At December 31, 2012, we had federal net operating loss carryforwards of approximately $11,721,300 and federal tax credit carryforwards related to research and development efforts of approximately $255,200, both of which expire over a period ending in 2032. State tax loss carryforwards at December 31, 2012 are approximately $17,870,100 expiring over a period ending in 2032.

A valuation allowance was established due mainly to the uncertainty relating to the future utilization of net operating loss carryforwards. The valuation allowance was further increased by $251,100 and $155,600 for 2012 and 2011, respectively, primarily related to uncertainty as to realization of our operating losses and tax credits for these years. The amount of the deferred tax assets considered realizable could be adjusted in the future based upon changes in circumstances that result in a change in our assessment of our ability to realize those deferred tax assets through the generation of taxable income or other tax events.

We adhere to the authoritative guidance with respect to accounting for uncertainty in income taxes. This guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It requires that we recognize in our consolidated financial statements, only those tax positions that are “more-likely-than-not” of being sustained as of the adoption date, based on the technical merits of the position. As a result of the implementation of this guidance, each year we perform a comprehensive review of our material tax positions.

As a result of this review, we identified certain deferred tax assets that need to be adjusted. As of December 31, 2012 and December 31, 2011, we identified approximately $412,100 and $345,000 of related tax positions, respectively.


	2012		2011
Balance at January 1,	$	345,000	$	161,800
Additions based on tax positions related to current year		67,100		198,000
Reductions for tax positions of prior years		0		(14,800	)

Balance at December 31,	$	412,100	$	345,000

Due to our net operating loss position and valuation allowance against our net deferred tax assets, the recognition of the unrecognized tax benefits detailed above would not affect our effective tax rate. We do not expect that the amount of unrecognized benefits will change significantly within the next 12 months.

Our policy is to recognize interest and penalties related to uncertain tax benefits in income tax expense. As a result of our net operating loss carryforward position, we have no accrued interest or penalties related to uncertain tax positions as of December 31, 2012 or December 31, 2011.

We and our subsidiaries are subject to the following material taxing jurisdictions: United States and Colorado. The tax years that remain open to examination by the Internal Revenue Service are 2009 through 2012. However, due to our net operating loss carryforwards from prior periods, the Internal Revenue Service could potentially review the losses back to 2000. The tax years that remain open to examination by the state of Colorado are 2008 through 2012.

Note 6: Shareholders’ Equity

In 1997, an incentive stock option plan was adopted for our employees. This plan expired on November 7, 2007. Accordingly, no shares are available for the grant of options under that plan. In 1998 and 2005, stock option plans for our employees, officers and directors were adopted. The 1998 plan expired on November 27, 2008. Accordingly no shares are available for the grant of options under that plan.

At the Annual Shareholders’ Meeting in May 2011, shareholders approved an amendment to the 2005 Plan to increase the number of shares issuable under the plan from 1,500,000 shares to a total of 3,000,000 shares. Options granted before May 2011 are granted at not less than current market price of the stock on the date of grant and are exercisable from five to ten years from the grant date. Options granted after May 2011, pursuant to the plan amendment in May, are required to be granted at not less than the higher of (1) 120% of current market price on the date of grant or (2) the average of market price over the prior 30 trading days. Further, pursuant to the amendment the number of options granted to an executive officer or director cannot exceed 200,000, except to the extent such limit had already been exceeded at the time of the amendment. The options granted in 2012 and 2011 are vested each month over a four-year period or upon a change in control.


	1997 Plan					1998 Plan					2005 Plan
	Number of Shares			Average Option Price Per Share		Number of Shares			Average Option Price Per Share		Number of Shares			Average Option Price Per Share
Maximum number of shares under the plans		300,000					1,100,000					3,000,000

Outstanding, December 31, 2010		240,500		$	0.82		296,900		$	0.71		1,396,150		$	0.25
Granted in 2011		0			0		0			0		30,000			0.37
Exercised		0			0		0			0		(8,500	)		0.21
Cancelled/Expired		0			0		0			0		0			0

Outstanding, December 31, 2011		240,500		$	0.82		296,900		$	0.71		1,417,650		$	0.25
Granted in 2012		0					0					125,000			0.23
Exercised		0					0					(30,000	)		0.17
Cancelled/Expired		(240,500	)	$	0.82		(172,900	)	$	0.71		(249,300	)		0.42

Outstanding, December 31, 2012		0					124,000					1,263,350		$	0.22

Available for issuance, December 31, 2012		None					None					(a)1,570,650

(a)	Options available under the 2005 plan are limited by the amount of options outstanding under the 1997 and 1998 Plans. As the options outstanding under these earlier plans expire, the number of shares available for issuance under the 2005 Plan will increase accordingly.

A summary of additional information related to the options outstanding as of December 31, 2012 is as follows:


	Options Outstanding and Exercisable
	Weighted Average
Range of Exercise Prices	Number Outstanding		Remaining Contractual Life		Exercise Price
$0.17—$0.82		1,387,350		2.1 years	$	0.25

Total		1,387,350		2.1 years	$	0.25

We have an Employee Stock Ownership Plan (“Plan”) to provide retirement benefits for our employees. The Plan is designed to invest primarily in our common stock and is non-contributory on the part of our employees. Contributions to the Plan are discretionary as determined by our Board of Directors. We expense the cost of contributions to the Plan. No contributions were made to the Plan in 2012 or 2011.

Note 7: Earnings per Share

We present basic and diluted earnings or loss per share in accordance with authoritative guidance which establishes standards for computing and presenting basic and diluted earnings per share. Per share data is determined by using the weighted average number of common shares outstanding. Common equivalent shares are considered only for diluted earnings per share, unless considered anti-dilutive. Common equivalent shares, determined using the treasury stock method, result from stock options with exercise prices that are below the average market price of the common stock.

The potentially dilutive securities are comprised of outstanding stock options of 1,387,350 and 1,955,050 at December 31, 2012 and 2011, respectively, a decrease of 567,700 or 29%. This decrease is due primarily to stock options expiring as well as a more limited number of stock options being exercised.

A reconciliation of the weighted average number of common shares outstanding for the years ended December 31 is as follows:


	2012		2011
Common shares outstanding, beginning of the year		10,907,000		10,898,500
Weighted average common shares issued		27,945		300

Weighted average number of common shares outstanding		10,934,945		10,898,800
Dilutive effect of common share equivalents		0		0

Diluted weighted average number of common shares outstanding		10,934,945		10,898,800

We have authorized 20,000,000 shares of preferred stock issuable in one or more series, none of which are issued or outstanding as of December 31, 2012.

Stock options outstanding which have been excluded from diluted shares outstanding due to their antidilutive effect totaled 1,387,350 at December 31, 2012 and 1,955,050 at December 31, 2011.

Note 8: Segment Information

We operate in two different segments: household products and skin and hair care products. Our products are sold nationally and internationally (primarily Canada), directly through our sales force and indirectly through independent brokers, to mass merchandisers, drugstores, supermarkets, hardware stores and other retail outlets and to wholesale distributors. Management has chosen to organize our business around these segments based on differences in the products sold.

Accounting policies for our segments are the same as those described in Note 1. We evaluate segment performance based on segment income or loss before income taxes.

The following provides information on our segments as of and for the years ended December 31:


	2012					2011
	Household Products			Skin and Hair Care Products		Household Products			Skin and Hair Care Products
Net sales to external customers	$	4,895,600		$	11,145,800	$	5,941,100		$	9,675,200

(Loss) income before income taxes	$	(1,985,600	)	$	613,800	$	(934,500	)	$	300,700

Identifiable assets	$	2,388,200		$	3,905,600	$	2,376,700		$	3,549,400

The following is a reconciliation of segment information to consolidated information:


	2012			2011
Net sales to external customers	$	16,041,400		$	15,616,300

(Loss) income before income taxes	$	(1,371,800	)	$	(633,800	)

Consolidated (loss) income before income taxes	$	(1,371,800	)	$	(633,800	)

Identifiable assets	$	6,508,800		$	5,926,100
Corporate assets		6,287,000			7,950,800

Consolidated total assets	$	12,795,800		$	13,876,900

Corporate assets noted above are comprised primarily of our cash and property and equipment not directly associated with manufacturing, warehousing, shipping and receiving activities.

We attribute our net sales to different geographic areas based on the location of the customer. All of our long-lived assets are located in the United States. For the year ended December 31, revenues for each geographical area are as follows:


	2012		2011
United States	$	15,975,800	$	15,485,300
Foreign countries		65,600		131,000

Total net sales	$	16,041,400	$	15,616,300

In 2012 and 2011, Wal-Mart accounted for approximately $3,577,800 and $4,165,000, respectively, of our consolidated net sales, Ulta Salon, Cosmetics & Fragrance, Inc. (“Ulta”) accounted for approximately $1,742,000 and $1,188,600, of our consolidated net sales, respectively and Walgreens Co. (“Walgreens”) accounted for approximately $1,110,500 and $1,818,600 of our consolidated net sales, respectively. We sell both household products and skin and hair care products to Wal-Mart, but we sell only skin and hair care products to Ulta and Walgreens. These customers are not related to us.

The outstanding trade receivables from Wal-Mart accounted for 8.7% and 15.0% of our total trade receivables at December 31, 2012 and 2011, respectively. The outstanding trade receivables from Ulta accounted for 19.4% and 9.9% of our total trade receivables at December 31, 2012 and 2011, respectively. The outstanding trade receivables from Walgreens accounted for 15.0% and 10.5% of our total trade receivables at December 31, 2012 and 2011, respectively. A loss of one or more of these customers could have a material adverse effect on us because it is uncertain whether our consumer base served by these customers would purchase our products at other retail outlets. No long-term contracts exist between us and these customers or any other customer.

Note 9: Retirement Plans

We have a 401(k) Profit Sharing Plan (“401(k) Plan”) covering our full-time employees who have completed four months of service as defined in the 401(k) Plan, and are age 18 or older. Participants may

defer up to 75% of their compensation up to the maximum limit determined by law. We may make discretionary “matching” contributions up to a maximum of 6% of each participant’s compensation, but only for those employees earning no more than $35,000 annually. Additionally, we can make discretionary “profit sharing” contributions to eligible employees. Participants are always fully vested in their contributions, matching contributions and allocated earnings thereon. Vesting in our profit sharing contribution is based on years of service, with a participant fully vested after five years. Our Company matching contributions totaled $2,500 and $2,900, in 2012 and 2011, respectively. We have made no discretionary profit sharing contributions in 2012 and 2011.

Note 10. Commitments and Contingencies

Leases

We have entered into various operating lease agreements, primarily for office equipment. Annual rental expense under these leases totaled $77,400 and $72,800, in 2012 and 2011, respectively. Minimum annual rental payments under noncancellable operating leases are approximately $69,100, $45,600 and $5,500 for the years ending December 31, 2013, 2014 and 2015, respectively. Presently we have no lease commitments beyond 2015.

In October 2009, we entered into a five-year operating lease agreement for one floor of our five-story office building to an established subsidiary of an international company. We began to receive rent payments in November 2009 that will continue through October 2014. These rent payments include annual rental escalations of between 3.7% and 4.2%. In August 2010, we entered into a two-year lease for one-half of a floor of our office building to an unrelated third party. We began to receive rent payments in February 2011. However, these payments stopped at the end of December 2011 when the tenant vacated the space due to financial difficulties. In September of 2012, we entered into a lease expiring December 31, 2015 for one-half of a floor of our office building. We began to receive rent payments in November 2012. In December of 2012, we entered into a lease expiring March 31, 2016 for one of our warehouse buildings. Rent payments are not due until May 2013. In connection with the sale of our real estate assets, we assigned the foregoing leases to the purchaser. Please see Note 12 for information on the sale of our real estate assets.

Note 11. Valuation and Qualifying Accounts


	Balance at beginning of year		Additions charged to expense		Deductions		Balance at end of year
Year ended December 31, 2011
Returns and allowances and doubtful accounts reserve	$	364,300	$	1,618,900	$	1,346,700	$	636,500
Year ended December 31, 2012
Returns and allowances and doubtful accounts reserve	$	636,500	$	1,978,800	$	2,146,900	$	468,400

Note 12. Subsequent Event

On February 1, 2013, we consummated the sale of our real estate assets located at 4880 Havana Street, Denver, Colorado, consisting of approximately 10.8 acres of land improved with four buildings containing approximately 241,684 square feet of office, warehouse, and manufacturing space, with associated improvements and personal property, and adjacent vacant land of approximately 5.5 acres (together, the “Property”). We sold the Property for a purchase price of $9,500,000 and incurred selling expenses of $579,800, including $570,000 for real estate brokerage commissions.

In connection with the sale, we leased back from the purchaser approximately 16,078 square feet of office space (the “Office Lease”) and approximately 113,620 square feet of manufacturing and warehouse space (the “Warehouse Lease”) currently used by us. Each of the Office Lease and the Warehouse Lease has an initial term of three years, with options to extend the term for two additional terms of three years each. Rent for the Office Lease is $13.00 per square foot per annum, with annual 3% increases. Rent for the Warehouse Lease is $3.25 per square foot per annum, with annual 3% increases, and we will pay an additional $1.25 per square foot per annum as our share of the purchaser’s operating expenses under the Warehouse Lease (including taxes, insurance and common area maintenance charges). If certain uncontrollable operating expenses increase by more than 5% per year, our share of operating expenses under the Warehouse Lease may be increased.

As of the date of the closing, the principal and interest balance on our long-term debt secured by the Property with the Bank was $3,373,961. This debt was repaid in full at closing. We also paid approximately $202,000 at closing for real estate property taxes for 2012. In addition, on February 4, 2013, we paid $909,778 to Summit to repay the outstanding balance on our credit line with Summit and we have maintained a zero loan balance since that time. We made this payment to reduce our interest costs. Please see Note 1(e) for a discussion of our financing agreement with Summit. Also, in February 2013, we paid certain other financial obligations to suppliers and vendors in the amount of approximately $960,000 and we incurred approximately $150,000 in capital expenditures as a result of the sale of our Property. We estimate that our remaining cash from the sale of the Property after the payment of all of the foregoing expenses was approximately $3.3 million.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.

CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

As of December 31, 2012, 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 as of December 31, 2012.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, including the Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012, based on the criteria for effective internal control described in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2012.

This report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permits us to provide only management’s report in this Report.

This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the quarter ended December 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION.

None.

PART III

For Part III, the information set forth in our definitive Proxy Statement for our Annual Meeting of Shareholders to be filed within 120 days after December 31, 2012, hereby is incorporated by reference into this Report.

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

ITEM 11.

EXECUTIVE COMPENSATION.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Exhibits

See Exhibit Index at page 40 of this Report

Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Operations for the years ended December 31, 2012 and 2011

Consolidated Balance Sheets as of December 31, 2012 and 2011

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2012 and 2011

Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011

Notes to Consolidated Financial Statements

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


SCOTT’S LIQUID GOLD-INC., a Colorado corporation

By:		/s/ Mark E. Goldstein
		Mark E. Goldstein, President and Chief Executive Officer (Principal Executive Officer)

By:		/s/ Barry J. Levine
		Barry J. Levine, Treasurer, Chief Financial Officer and Chief Operating Officer
		(Principal Financial and Accounting Officer)

Date:		March 29, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Date	Name and Title	Signature
March 29, 2013	Mark E. Goldstein,
	Director, President and Chief Executive Officer
March 29, 2013	Jeffrey R. Hinkle, Director	/s/ Mark E. Goldstein
March 29, 2013	Dennis H. Field, Director	Mark E. Goldstein, for himself and as
March 29, 2013	Jeffry B. Johnson, Director	Attorney-in-Fact for the named directors
March 29, 2013	Gerald J. Laber, Director	who constitute all of the members of the
March 29, 2013	Phil Neri, Director	the Board of Directors and for the named officers

March 29, 2013	Barry J. Levine, Treasurer, Chief Financial Officer and Chief Operating Officer

EXHIBIT INDEX


Exhibit Number		Document

3.1		Restated Articles of Incorporation, as amended and restated through May 1, 1996, incorporated by reference to Exhibit 3.1 of our Annual Report on Form 10-KSB for the year ended December 31, 2007.

3.2		Bylaws, as amended through July 13, 2011, incorporated by reference to Exhibit 99.1 of our Current Report on Form 8-K filed on July 19, 2011.

4.1		Change in Terms Agreement with Citywide Banks, dated June 28, 2006, between us and Citywide Banks, incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on June 30, 2006.

4.2		Business Loan Agreement, dated June 28, 2006, between us and Citywide Banks, incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed on June 30, 2006.

4.3		Addendum to Loan Documents, dated June 28, 2006, incorporated by reference to Exhibit 10.3 of our Current Report on Form 8-K filed on June 30, 2006.

4.4		Promissory Note dated June 7, 2006 by us to Citywide Banks; Deed of Trust dated June 7, 2006 among us, Citywide Banks and the Public Trustee of the City and County of Denver, Colorado; Assignment of Rents dated June 7, 2006 between us and Citywide Banks; letter agreement dated June 7, 2006 regarding the change in the amount under the existing bank line of credit with Citywide Banks, incorporated by reference to Exhibit 10.0 of our Current Report on Form 8-K filed on June 12, 2006.

4.5		Second Amendment to Shareholder Rights Agreement, dated as of January 6, 2012, between the Company and Broadridge Corporate Issuer Solutions, Inc., as Rights Agent, incorporated by reference to Exhibit 4.1 of our Current Report on Form 8-K filed with the Commission on January 10, 2012.

10.1*		Scott’s Liquid Gold-Inc. Health and Accident Plan, Plan Document and Summary Plan Description Amended and Restated Effective October 1, 2003 incorporated by reference to Exhibit 10.1 of our Annual Report on Form 10-K for the year ended December 31, 2004.

10.2		Scott’s Liquid Gold & Affiliated Companies Employee Benefit Health And Welfare Plan Amendment #1-2004 incorporated by reference to Exhibit 10.2 of our Annual Report on Form 10-K for the year ended December 31, 2004.

10.3*		Form of Indemnification Agreement for executive officers and directors.

10.4		Agreement dated as of May 3, 2005 between Montagne Jeunesse International Ltd. and Neoteric Cosmetics, Inc., incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

10.5*		Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan and Trust Agreement, Amended and Restated Effective January 1, 2001; and Second Amendment to Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan, effective as of January 1, 2003, incorporated by reference to Exhibit 10.6 of our annual Report on Form 10-K for the year ended December 31, 2003.

10.6*		Third Amendment to Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan, effective March 28, 2005, incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

10.7*		Scott’s Liquid Gold-Inc. 1998 Stock Option Plan, incorporated by reference to Exhibit 4.3 of our Registration Statement No. 333-51710, filed with the Commission on December 12, 2000.

10.8*		2005 Stock Incentive Plan, as amended, incorporated by reference to Exhibit 4 of our Registration Statement No. 333-156191, filed with the Commission on December 16, 2008.

10.9		Product Development, Production and Marketing Agreement with Modec, Inc. dated April 4, 2006, incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.


Exhibit Number		Document

10.10		Amendment to Modec Agreement dated November 9, 2007, incorporated by reference to Exhibit 10.12 of our Annual Report on Form 10-KSB for the year ended December 31, 2007.

10.11		Form of 1997 Stock Option Plan Incentive Stock Option Agreement, incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form 10-QSB for the quarter ended March 31, 2007.

10.12		Form of 1998 Stock Option Plan Incentive Stock Option Agreement, incorporated by reference to Exhibit 10.3 of our Quarterly Report on Form 10-QSB for the quarter ended March 31, 2007.

10.13		Form of 2005 Stock Option Plan Incentive Stock Option Agreement, incorporated by reference to Exhibit 10.4 of our Quarterly Report on Form 10-QSB for the quarter ended March 31, 2007.

10.14		Form of 1998 Stock Option Plan Nonqualified Stock Option Agreement, incorporated by reference to Exhibit 10.5 of our Quarterly Report on Form 10-QSB for the quarter ended March 31, 2007.

10.15		Form of 2005 Stock Incentive Plan Nonqualified Stock Option Agreement, incorporated by reference to Exhibit 10.6 of our Quarterly Report on Form 10-QSB for the quarter ended March 31, 2007.

10.16		Financing Agreement and Addendum to Financing Agreement, both dated October 31, 2008, between Summit Financial Resources, L.P. and the Company, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Commission on November 4, 2008.

10.17		Guarantees, dated October 31, 2008, by SLG Plastics, Inc. Advertising Promotions Incorporated, Colorado Product Concepts, Inc., Neoteric Cosmetics, Inc., and SLG Chemicals, Inc., incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Commission on November 4, 2008.

10.18		First Amendment to Financing Agreement dated March 12, 2009 between Summit Financial Resources, L.P. and the Company, incorporated by reference to Exhibit 10.18 of our Annual Report on Form 10-K for the year ended December 31, 2008.

10.19		Second Amended and Restated Financing Agreement and Addendum to dated March 16, 2011 between Summit Financial Resources, L.P. and the Company, incorporated by reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-K filed with the Commission on March 29, 2011.

10.20		Receivables Purchase Agreement dated March 16, 2011 between Wells Fargo Bank, National Association and Scott’s Liquid Gold, Inc., incorporated by reference to Exhibit 10.20 of the Company’s Annual Report on Form 10-K filed with the Commission on March 29, 2011.

10.21		Receivables Purchase Agreement dated March 16, 2011 between Wells Fargo Bank, National Association and Neoteric Cosmetics, Inc., incorporated by reference to Exhibit 10.21 of the Company’s Annual Report on Form 10-K filed with the Commission on March 29, 2011.

10.22**		Distribution Agreement, dated January 1, 2012, between Church & Dwight UK Limited and Neoteric Cosmetics, Inc.

10.23		First Amendment to the Second Amended and Restated Financing Agreement, dated June 29, 2012, between Summit Financial Resources, L.P. and the Company, incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed with the Commission on July 2, 2012.


Exhibit Number		Document

10.24		Purchase and Sale Agreement, dated November 21, 2012, between the Company and Havana Gold, LLC.

10.25		Real Property Lease (Warehouse Lease), dated February 1, 2013, between the Company and Havana Gold, LLC.

10.26		Real Property Lease (Office Lease), dated February 1, 2013, between the Company and Havana Gold, LLC.

21		List of Subsidiaries, incorporated by reference to Exhibit 21 of the Company’s Annual Report on Form 10-K filed with the Commission on March 29, 2011.

23		Consent of EKS&H LLLP.

24		Powers of Attorney.

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.

101.INS****		XBRL Instance Document.

101.SCH****		XBRL Taxonomy Extension Schema Document.

101.CAL****		XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB****		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE****		XBRL Taxonomy Extension Presentation Linkbase Document.

*	Management contract or compensatory plan or arrangement.

**	Confidential portions of this agreement have been redacted pursuant to a confidential treatment request filed separately with the Commission.

***	Furnished, not filed.

****

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and is otherwise not subject to liability under these sections.

E XHIBIT 10.3

F ORM O F

INDEMNIFICATION AGREEMENT

SCOTT’S LIQUID GOLD-INC.

This Agreement is made and entered into as of [ ] between Scott’s Liquid Gold-Inc., a Colorado corporation (the “Corporation”), and [ ] of Denver, Colorado [(“Officer”)/(“Director”)].

RECITALS:

A. At the request of the Corporation, [Officer/Director] currently serves as [an executive officer/a director] of the Corporation (as defined below). As such, [Officer/Director] may be subjected to claims, suits or proceedings.

B. [Officer/Director] has indicated that it was and is a condition of [Officer/Director]’s acceptance and continuing in such service that, among other things, the Corporation agrees to indemnify [Officer/Director] against liabilities, expenses and costs incurred in connection with any such claims, suits or proceedings, in accordance with, and to the fullest extent permitted by, the Colorado Business Corporation Act; and

C. The Corporation’s Articles of Incorporation and the Colorado Business Corporation Act contemplate that contracts may be made between the Corporation and officers or directors with respect to indemnification.

AGREEMENT:

Now, therefore, in consideration of [Officer/Director]’s acceptance and continuation of service as [an executive officer/a director] after the date of this Agreement, and in consideration of the mutual covenants stated herein, the parties agree as follows:

1. Definitions . As used in this Agreement, the following terms have the following meanings:

(a) Act . The term “Act” means the Colorado Business Corporation Act as it exists on the date of this Agreement and as it may be hereafter amended from time to time. In the case of any amendment of the Colorado Business Corporation Act after the date of this Agreement, when used in reference to an act or omission occurring prior to effectiveness of such amendment, the term “Act” shall include such amendment only to the extent that the amendment permits the Corporation to provide broader indemnification rights than the Colorado Business Corporation Act permitted the Corporation to provide at the date of this Agreement and prior to the amendment.

(b) Officer . As used in reference to a position of officer, the term “executive officer” means an executive officer of the Corporation and, while an executive officer of the Corporation, such officer’s serving at the Corporation’s request as a director, officer, agent, associate, employee, fiduciary, manager, member, partner, promoter, or a trustee of, or holding a similar position with, any corporation, partnership, joint venture, trust, other enterprise or person or employee benefit plan. The term “executive officer” also includes, unless the context otherwise requires, the estate or personal representative of an executive officer. The term “executive officer” shall also include any such broader definition of officer as may be provided in the Act with amendments after the date of this Agreement.

(c) Proceeding . The term “proceeding” means any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative, and whether formal or informal.

2. Agreement to Indemnify . The Corporation shall indemnify, and keep indemnified, [Officer/Director] in accordance with, and to the fullest extent permitted and/or required by, the Act from and against any judgments, penalties, fines (including but not limited to ERISA excise taxes), amounts paid in settlement and reasonable expenses (including but not limited to expenses of investigation and preparation and fees and disbursements of [Officer/Director]’s counsel, accountants or other experts) actually incurred by [Officer/Director] in connection with any proceeding in which [Officer/Director] was or is made a party or was or is involved (for example, as a witness) because [Officer/Director] is or was [an executive officer/a director] of the Corporation.

3. Insurance . So long as [Officer/Director] may be subject to any possible proceeding by reason of the fact that [Officer/Director] is or was [an executive officer/a director] of the Corporation, to the extent the Corporation maintains an insurance policy or policies providing directors’ and officers’ liability insurance, [Officer/Director] shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage applicable to any then current [executive officer/director] of the Corporation.

4. Advances . In the event of any proceeding in which [Officer/Director] is a party or is involved and which may give rise to a right of indemnification from the Corporation pursuant to this Agreement, following written request to the Corporation by [Officer/Director], the Corporation shall pay to [Officer/Director], in accordance with and to the fullest extent permitted and/or required by the Act, amounts to cover reasonable expenses incurred by [Officer/Director] in such proceeding in advance of its final disposition upon receipt of (a) a written affirmation by [Officer/Director] of [Officer/Director]’s good faith belief that [Officer/Director] has met any applicable standard of conduct; (b) a written undertaking executed by or on behalf of [Officer/Director] to repay the advance if it shall ultimately be determined that [Officer/Director] did not meet such standard of conduct; and (c) satisfactory evidence as to the amount of such expenses.

5. Burden of Proof . If under applicable law, the entitlement of [Officer/Director] to be indemnified or advanced expenses hereunder depends upon whether a standard of conduct has been met, the burden of proof of establishing that [Officer/Director] did not act in accordance with such standard shall rest with the Corporation. [Officer/Director] shall be presumed to have acted in accordance with such standard and to be entitled to indemnification or the advancement of expenses (as the case may be) unless, based upon a preponderance of the evidence, it shall be determined that [Officer/Director] has not met such standard. Such determination and any evaluation as to the reasonableness of amounts claimed by [Officer/Director] shall be made by the Board of Directors of the Corporation or such other body or persons as may be permitted by the Act. For purposes of this Agreement, unless otherwise expressly stated, the termination of any proceeding by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that [Officer/Director] did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

6. Notice to the Corporation . [Officer/Director] shall notify the Secretary of the Corporation in writing of any matter for which [Officer/Director] intends to seek indemnification hereunder as soon as reasonably practicable following the receipt by [Officer/Director] of written notice thereof; provided , however, that delay in so notifying the Corporation shall not constitute a waiver or release by [Officer/Director] of rights hereunder.

7. Counsel for Proceeding . In the event of any proceeding in which [Officer/Director] is a party or is involved and which may give rise to a right of indemnification hereunder, the Corporation shall have the right to retain counsel reasonably satisfactory to [Officer/Director] to represent [Officer/Director] and any others the Corporation may designate in such proceeding. In any such proceeding, [Officer/Director] shall have the right to retain [Officer/Director]’s own counsel, but the fees and expenses of such counsel shall be at the expense of [Officer/Director] unless (a) the retention of such counsel has been specifically authorized by the Corporation; (b) representation of [Officer/Director] and another party by the same counsel would be inappropriate, in the reasonable judgment of [Officer/Director], due to actual or potential differing interests between them (as might be the case for representation of both the Corporation and [Officer/Director] in a proceeding by or in the right of the Corporation); (c) the counsel retained by the Corporation and satisfactory to [Officer/Director] has advised [Officer/Director], in writing, that such counsel’s representation of [Officer/Director] would be likely to involve such counsel in representing differing interests which could adversely affect either the judgment or loyalty of such counsel to [Officer/Director], whether it be a conflicting, inconsistent, diverse or other interest; or (d) the Corporation shall fail to retain counsel for [Officer/Director] in such proceeding. Notwithstanding the foregoing, if an insurance carrier has supplied directors’ and officers’ liability insurance covering a proceeding and is entitled to retain counsel for the defense of such proceeding, then the insurance carrier shall retain counsel to conduct the defense of such proceeding unless [Officer/Director] and the Corporation concur in writing that the insurance carrier’s

doing so is undesirable. The Corporation shall not be liable under this Agreement for any settlement of any proceeding effected without its written consent. The Corporation shall not settle any proceeding in any manner which would impose any penalty or limitation on [Officer/Director] without [Officer/Director]’s written consent. Consent to a proposed settlement of any proceeding shall not be unreasonably withheld by either the Corporation or [Officer/Director].

8. Enforcement . The Corporation acknowledges that [Officer/Director] is relying upon this Agreement in serving as [an executive officer/a director] of the Corporation. If a claim for indemnification or advancement of expenses is not paid in full by the Corporation within ninety (90) days after a written claim has been received from [Officer/Director] by the Corporation, [Officer/Director] may at any time bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in such suit, [Officer/Director] shall also be entitled to be paid all reasonable fees and expenses (including without limitation fees of counsel) in bringing and prosecuting such claim. Whether or not [Officer/Director] has met any applicable standard of conduct, the Court in such suit may order indemnification or the advancement of expenses as the Court deems proper (subject to any express limitation of the Act). Further, the Corporation shall indemnify [Officer/Director] from and against any and all expenses (including attorneys’ fees) and, if requested by [Officer/Director], shall (within ten business days of such request) advance such expenses to [Officer/Director], which are incurred by [Officer/Director] in connection with any claim asserted against or suit brought by [Officer/Director] for recovery under any directors’ and officers’ liability insurance policies maintained by the Corporation, regardless of whether [Officer/Director] is unsuccessful in whole or in part in such claim or suit.

9. Proceedings by [Officer/Director ] . The Corporation shall indemnify [Officer/Director] and advance expenses to [Officer/Director] in connection with any proceeding (or part thereof) initiated by [Officer/Director] only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

10. Nonexclusivity . The rights of [Officer/Director] for indemnification and advancement of expenses under this Agreement shall not be deemed exclusive of, or in limitation of, any rights to which [Officer/Director] may be entitled under Colorado law, the Corporation’s Articles of Incorporation or Bylaws, vote of stockholders or otherwise.

11. Miscellaneous .

(a) Effectiveness . This Agreement is effective for, and shall apply to, (i) any claim which is asserted or threatened before, on or after the date of this Agreement but for which no action, suit or proceeding has actually been brought prior to the date of this Agreement and (ii) any action, suit or proceeding which is threatened before, on or after the date of this Agreement but which is not pending prior to the date of this Agreement. Thus, this Agreement shall not apply to any action, suit or proceeding which has actually been brought before the date of this Agreement. So long as the foregoing standard of effectiveness has been satisfied, this Agreement shall be effective for and shall be applied to acts or omissions prior to, on or after the date of this Agreement.

(b) Survival; Continuation . The rights of [Officer/Director] hereunder shall inure to the benefit of the [Officer/Director] (even after [Officer/Director] ceases to be [an executive officer/a director]), [Officer/Director]’s personal representative, heirs, executors, administrators and beneficiaries; and this Agreement shall be binding upon the Corporation, its successors and assigns. The rights of [Officer/Director] under this Agreement shall continue so long as [Officer/Director] may be subject to any possible proceeding because of the fact that [Officer/Director] was [an executive officer/a director] of the Corporation. If the Corporation sells, leases, exchanges or otherwise disposes of, in a single transaction or series of related transactions, all or substantially all of its property and assets, the Corporation shall, as a condition precedent to such transaction, cause effective provision to be made so that the person or entity acquiring such property and assets shall become bound by and replace the Corporation under this Agreement.

(d) Severability . If any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law and all other provisions shall remain in full force and effect.

(e) Amendment . No amendment, termination or cancellation of this Agreement shall be effective unless in writing signed by the Corporation and [Officer/Director].

(f) Other Payments . The Corporation shall not be liable under this Agreement to make any payment in connection with any proceeding against or involving [Officer/Director] to the extent [Officer/Director] has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder. [Officer/Director] shall repay to the Corporation the amount of any payment the Corporation makes to [Officer/Director] under this Agreement in connection with any proceeding against or involving [Officer/Director], to the extent [Officer/Director] has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of such amount.

(g) Subrogation . In the event of payment under this Agreement the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of [Officer/Director], who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Corporation effectively to bring suit to enforce such rights.

(h) Headings . The headings in this Agreement are for convenience only and are not to be considered in construing this Agreement.

(i) Counterparts . This Agreement may be executed in counterparts, both of which shall be deemed an original, and together shall constitute one document.

The parties have executed this Agreement as of the day and year first above stated.

Exhibit 10.22

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act. Omitted information, marked “[***]” in this Exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Distribution Agreement

This Distribution Agreement is made as of January 1, 2012 (the “Effective Date”) between Church & Dwight UK Limited with offices at Wear Bay Road, Folkestone, Kent, CT 196PG (“C&D”) and Neoteric Cosmetics, Inc., with offices at 4880 Havana Street, P.O. Box 39-S, Denver, CO 80239-0019(“Distributor”) (the “Agreement”).

W I T N E S S E T H :

WHEREAS, C&D and/or one or more of its affiliates manufactures and/or markets, sells and distributes various products throughout the world and is interested in having Distributor market, sell and distribute certain of C&D’s products; and

WHEREAS, Distributor wishes to market, sell and distribute certain of C&D’s products in certain specified territories in accordance with the terms and conditions hereinafter set forth;

NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein the parties hereto do hereby agree as follows:

1. APPOINTMENT. C&D hereby appoints Distributor, and Distributor hereby accepts such appointment, as the exclusive distributor in the United States of America (“Territory”) for the products of C&D in the Territory as indicated on the attached “Exhibit A” (“Products”) which such Products may include products of C&D and/or its affiliates; provided, however, that Distributor shall not sell directly or indirectly to the United Nations. However, C&D reserves the right, (i) to sell and distribute, directly or indirectly, Products to government agencies and departments of the Territory, Canadian, Australian, Mexican, United Kingdom and French Governments in the Territory; (ii) to sell and distribute, directly or indirectly, Products to any retailers in the Territory listed on “Exhibit C” (“Retailer Exceptions”); or (iii) to sell and distribute, directly or indirectly, in the Territory any other products of C&D or its affiliates. C&D also reserves the right to add or delete Products upon sixty (60) days’ notice to Distributor and upon immediate notice in the event of Force Majeure (as hereinafter defined).

2. TERM. Unless terminated earlier under other provisions hereof, this Agreement shall be for an initial term of three (3) years, commencing as the Effective Date (“Initial Term”), and shall thereafter automatically renew for successive one (1) year renewal terms, subject to being terminated at the end of the Initial Term, or any subsequent one (1) year renewal term, upon at least ninety (90) days prior written notice given by either party to the other party. As used below, “Calendar Year” herein refers to twelve month period from January 1st to December 31st; provided however that the first Calendar Year of the Initial Term shall commence as of the Effective Date and end on December 31, 2012.

3. INTELLECTUAL PROPERTY. (a) As between C&D and Distributor, C&D retains the sole and exclusive rights in all the intellectual property, including without limitation the trademarks and trade dress, copyrightable material, domain names, generic top-level domain name (gTLD), and patents used on and/or in connection with any of the Products whether used on Products, packaging, labeling, advertising, sales promotion materials, or otherwise. Distributor shall not attempt directly or indirectly to register any of said intellectual property (“Intellectual Property”) or anything confusingly similar thereto, and shall not at any time do, or cause to be done, any act or thing impairing or tending to impair any of the Intellectual Property. Upon any termination of this Agreement Distributor shall promptly discontinue all use of the Intellectual Property (including without limitation any advertising and sales promotion materials depicting or embodying any of the Intellectual Property).

(b) Except as approved by C&D as provided under paragraph 6(a) hereof, Distributor shall not in any way alter, or permit the alteration of, the content, composition, presentation, container, packaging, or trademarks of any of the Products as supplied by C&D or other parties approved by C&D; except Distributor may repackage from plastic wrap to cardboard and use commercial stickers such as “Try Me Free” or “Buy One Get One Free”. Any material breach of this provision shall subject Distributor to immediate termination under the terms of this Agreement. Any and all use of any of the Intellectual Property by Distributor shall inure to the benefit of C&D, and Distributor shall assist C&D or its designee, at C&D’s expense, with any requested proof of use, or anything else reasonably requested by C&D or its designee, to register, maintain, or defend any of the Intellectual Property.

(c) Distributor shall notify C&D promptly of (i) any claim or action alleging that Distributor’s activities relating to the Products and the Intellectual Property are infringing upon the intellectual property rights of others and (ii) any infringement of any of the Intellectual Property by others which comes to Distributor’s attention. C&D and/or its affiliates shall have the right, but shall not be obligated, through attorneys of its own selection, to take exclusive charge of the defense of any such claim or action and to institute such legal action, if any, as it deems appropriate against any infringement of the Intellectual Property. Distributor shall make available any relevant records, papers, samples, information, and other items; and shall otherwise assist and cooperate with C&D in any such claims or actions as reasonably requested by C&D.

4. COMPETITIVE PRODUCTS. Except for the products, if any, listed on the attached “Exhibit B,” which Distributor is already handling on the effective date of this Agreement (“Competitive Product Exceptions”), Distributor shall not, during the term of this Agreement, manufacture, distribute or sell any products which are competitive with the Products in the dry shampoo category. Distributor shall notify C&D before Distributor begins to manufacture, distribute or sell, during the term of this Agreement, any products which are competitive with Products; and in the event Distributor commences such manufacture, distribution, or sale, C&D shall have the right to terminate this Agreement at any time upon at least sixty (60) days prior written notice to Distributor.

5. SOURCE AND PAYMENT. (a) Distributor shall obtain Products only from C&D or such other parties as may be approved by C&D in writing at prices and upon payment terms as established and revised by C&D or such other parties from time to time. C&D’s initial prices, payment terms, and any additional terms of sale are as set forth in “Exhibit D” “Prices and Payment” hereto. C&D shall give Distributor at least ninety (90) days’ prior written notice of any increase in C&D’s prices for the Products. Unless and until otherwise stipulated by C&D in writing: (i) C&D’s prices for Products shall be CIF Denver (Incoterms 2010) prices; (ii) risk of loss or damage with respect to any Products shall pass to Distributor at the time and place of delivery of those products to

Distributor or a carrier CIF Denver (Incoterms 2010), and (iii) title with respect to any products shall pass to Distributor at the time and place of delivery of those products to Distributor or a carrier CIF Denver (Incoterms 2010). Where Distributor requires delivery of any consignment of the Products by airfreight, the Distributor shall be solely responsible for the costs of carriage and insurance from the airport of departure unless otherwise agreed with C&D. Distributor shall be invoiced, and shall make payment, in USD.

(b) Subject to availability, C&D shall use commercially reasonable efforts to have each order for Products shipped by the requested ship date or as soon as reasonably possible thereafter, so long as the order is received by C&D in writing at least eight (8) weeks before the requested ship date. No claim for non-delivery of any order or part thereof or for any breakage, leakage, short delivery or damaged goods will be considered by C&D unless written notice thereof is received by C&D within seven (7) days of Distributor’s receipt of the relevant Products(s). C&D may satisfy any such claim which is valid by, at its option, either granting appropriate Product credit or by shipping replacement Products. No cash credit will be given. In the event of any discrepancy between the terms and conditions of any order for Products submitted by Distributor and this Agreement, this Agreement shall govern. C&D reserves the right in its sole discretion, at any time, to limit the quantities of any Products sold to Distributor.

6. SALES AND DISTRIBUTION . (a) Distributor shall exert Distributor’s commercially reasonable best efforts to promote and increase the sale and distribution of Products in the Territory, while maintaining the reputation of the Products.

(b) In the event a recall of any of the Products is required, Distributor shall identify the customers to which Distributor directly sold those Products and shall immediately provide notice of any recall to such direct customers maintained in Distributor’s records. All third-party fees, costs, expenses, penalties, fines and other liabilities relating to such recall shall be borne solely by C&D, except that Distributor shall bear such recall costs and expenses to the extent such recall is implemented as a result of Distributor’s negligence or breach of its obligations under this Agreement. Distributor shall maintain and endeavor to have Distributor’s customers maintain (and, upon at least twenty-four (24) hours prior written notice, shall permit one or more C&D designees to review during normal business hours) records clearly delineating the third parties to whom Products were directly sold or otherwise distributed and which lot(s), by lot number, were shipped to such third parties.

(c) Distributor shall not export any Products, or knowingly sell any Products for export, outside the Territory. Furthermore, Distributor shall not solicit orders for the Products from any firm, company, or other legal entity outside the Territory, it being the understanding and intention of the parties hereto that Distributor will concentrate Distributor’s efforts, relating to the Products, in the Territory; provided that, Distributor shall be permitted to sell Products to such e-retailers based in the Territory in such amounts as Distributor provides for in its forecasts furnished to C&D pursuant to Section 8(f) hereof. Distributor shall also be responsible for ensuring that any and all Products purchased by Distributor are imported into the Territory and not diverted to any other country or territory. In the event C&D becomes aware of any such export or diversion, C&D shall have the right to terminate this Agreement immediately upon written notice to Distributor, without prejudice to any other actions or remedies available to C&D. C&D shall have the right at any time during normal business hours to have its representatives inspect Distributor’s inventories of the Products wherever they may be located.

(d) Distributor (i) acknowledges that C&D is subject to the UK Bribery Act, the US Foreign Corrupt Practices Act as well as anti-bribery and anti-corruption laws in various other jurisdictions, (ii) agrees herein that it shall comply in all respects with such laws, rules and regulations related

thereto, including the comparable laws of all jurisdictions where it or its agents are conducting business, (iii) shall cooperate with C&D and its designees at its expense in any inquiry or investigation of Distributor’s or its agents’ conduct or presumed conduct related to compliance or failure to comply with any of the foregoing, and (iv) shall provide written confirmation of its compliance with the foregoing not more than once per each year during the Term upon written request by C&D.

7. SALES OBJECTIVES . (a) It is anticipated that, for the period January 1, 2012 through December 31, 2012, Distributor’s value of purchases of Products will be equal to at least those values on Exhibit D attached hereto.

(b) In the event Distributor’s purchases of Products for any Calendar Year of this Agreement are less than the above anticipated amount for that Calendar Year, C&D shall have the right to terminate this Agreement in whole or in part or to change Distributor’s appointment hereunder from C&D’s exclusive distributor of the Products to a non-exclusive distributor of the Products in the Territory upon at least ninety (90) days prior written notice given within sixty (60) days after the end of that Calendar Year, unless the short-fall in purchases resulted from C&D’s failure or inability to fill orders properly submitted by Distributor at least eight (8) weeks before the requested ship date.

8. ADVERTISING AND SALES PROMOTION . (a) Distributor shall be free to carry on advertising and sales promotion activities for the Products in the Territory; however, Distributor shall submit to C&D via e-mail, for review and approval in advance before use, all proposed advertising and sales promotion materials developed by Distributor for the Products. The use of C&D’s Intellectual Property in the context of such promotion shall be subject to the conditions set forth in Article 3(a) above.

(b) C&D shall not be responsible for any advertising and sales promotion expenditures, expenses or commitments incurred by Distributor which C&D has not specifically agreed in writing to pay, or reimburse Distributor for; notwithstanding that the related marketing, advertising, or sales promotion plan may have been approved by C&D.

(c) C&D may help support the advertising and sales promotion of the Products in the Territory in such amount and manner and at such times as C&D in its absolute discretion, after consultation with Distributor, deems appropriate from time to time to coordinate, or assist with, Distributor advertising and sales promotion activities for the Products.

(d) During each Calendar Year of this Agreement Distributor shall incur expenditures for the advertising and sales promotion of the Products in the Territory equal to at least [***] of Distributor’s Net Sales of Products during that Calendar Year. C&D reserves the right itself or through its designee to audit Distributor’s expenditures for the advertising and sales promotion of the Products and C&D shall bear the cost of any such audit.

(e) At least ninety (90) days before the commencement of each Calendar Year of this Agreement, Distributor shall formulate and submit via e-mail for C&D’s opinion and advice, sales forecasts by product and SKU, and detailed proposals as to marketing plans, sales budget, and advertising and sales promotion budget for the Products in each country of the Territory for the then ensuing Calendar Year. After receiving and considering such information and advice, Distributor shall adopt a plan and such budgets for such Calendar Year and provide C&D via e-mail with copies thereof in English at least ninety (90) days before the commencement of such Calendar Year. Distributor shall thereafter advise C&D via e-mail of any substantial deviations from such plan and budgets.

(f) On or before the first day of each Quarter the Distributor shall submit via e-mail a written report setting forth its forecast of the amount of each Product which it expects to purchase from C&D for delivery each month during the following nine (9) month period.

(g) Distributor shall keep in stock a minimum of one (1) month’s supply of Products based on the forecast provided under Article 8(f). C&D reserves the right to cancel all or part of an order submitted if the Distributor builds stocks in excess of this forecast level, without the knowledge and agreement of C&D. Distributor shall submit to C&D via e-mail a stock level report in accordance with Article 8(f).

(h) Distributor is responsible for any and all listing fees and merchandising expenses associated with the marketing, advertising, and sales promotion of the Products; provided, however that C&D shall have the right but not the obligation to purchase at any time the listing and all associated arrangements attached thereto from the Distributor at a negotiated price which shall in no event be greater than the price paid by Distributor.

9. CONFIDENTIAL INFORMATION. “Confidential Information” shall mean all information one party provides to the other party with the exception of only the following:

a) information that as of the time of receipt by the receiving party is in the public domain or subsequently enters the public domain without the fault of the receiving party;

b) information that at the time of receipt by the receiving party was already known to the receiving party as evidenced by appropriate written records.

Confidential Information shall be used by the receiving party only during the term of, and for purposes of, this Agreement. At all times during and after the term of this Agreement, the receiving party shall maintain in confidence and shall see that the receiving party’s shareholders, directors, employees and agents to whom the receiving party has furnished Confidential Information maintain in confidence all Confidential Information. The Confidential Information shall be disclosed by the receiving party only (i) to the receiving party’s shareholders, directors, employees and agents whose duties require possession thereof in carrying out the receiving party’s activities under this Agreement or (ii) if legally compelled (by oral questions, interrogatories, requests for information or documents, subpoena, civil or criminal investigative demand, or similar process) or required by any governmental or regulatory authority. Such disclosure to governmental or regulatory authorities, however, shall be in such manner as to have the relevant Confidential Information maintained in confidence by such authorities to the extent possible under applicable laws and regulations and the receiving party shall provide notice promptly to the disclosing party of such request for information from such authorities so that it may seek an appropriate protective order or other appropriate remedy. Upon written request, the receiving party shall promptly return to the disclosing party any and all copies of Confidential Information or certify destruction thereof.

10. REPORTS. (a) Within (20) twenty days after the end of each month during the term of this Agreement, Distributor shall submit via e-mail a complete and accurate written report setting forth, by product and SKU, Distributor’s Net Unit Sales of Products, and Distributor’s Net Sales of Products, during that month and during the Calendar Year to date as at the end of that month, and Distributor’s inventory of Products as at the end of that month.

(b) C&D shall have the right to request that the foregoing information be submitted in a format or on forms furnished by C&D, including a comparison (by percentage change, or otherwise) of such information with comparable information for the immediately preceding Calendar Year, if any.

(c) As used in this Agreement, the term “Net Sales of Products” during a period means the amounts (exclusive of separately stated transportation charges and taxes) invoiced by Distributor to Distributor’s customers for Products sold during that period, net of amounts credited or refunded during that period for returned Products, but not net of cash discounts for prompt payment. As used herein the term “Net Unit Sales of Products” during a period means the aggregate number of sold units of the Products invoiced by Distributor during that period, after deduction of the number of returned units of those Products for which credit or a refund has been extended by Distributor during that period.

11. RECORDS. Distributor shall maintain (and shall, during the term of this Agreement and for one year thereafter, permit C&D representatives to examine, upon at least two (2) days’ notice and during normal business hours) books and records, including copies of invoices, substantiating the sale of any Product sold by Distributor. Such invoices shall be maintained by Distributor for at least one year after the year during which the originals of such invoices were rendered and shall show the full name and address of the purchaser (and of the consignee, if different from the purchaser).

12. RELATIONSHIP; AFFILIATES. (a) Distributor’s conduct of business pursuant to this Agreement shall be on Distributor’s own behalf and not in any way on C&D’s behalf or as an agent of C&D. The expenses, credit risks and other risks associated with such conduct shall be borne solely by Distributor. Neither party shall have the right to enter into any contract or incur any commitment on behalf of the other party.

(b) As used herein, an “affiliate” of a party hereto is any person, corporation, partnership, or other legal entity, that directly or indirectly (i) owns or controls at least 50% of the ownership or controlling interests in such party hereto, or (ii) is at least 50% owned or controlled by such party hereto, or (iii) is at least 50% owned and controlled by a third party that also directly or indirectly owns or controls at least 50% of the ownership or controlling interests in such party hereto.

13. TERMINATION. (a) A party hereto may terminate this Agreement upon written notice to the other party in the event:

(i) the other party breaches any obligation under this Agreement and such breach is not remedied within ten (10) days in the case of failure to make a payment when due, and otherwise within thirty (30) days, after written notice thereof is given by the party not in default; or

(ii) the other party is nationalized, or is adjudicated to be bankrupt or insolvent, or makes an assignment of its business or assets for the benefit of creditors, or voluntary or involuntarily becomes involved in any bankruptcy or insolvency proceedings for the benefit of creditors, or for the protection of its business or assets from creditors.

(b) C&D may also terminate this Agreement or change Distributor’s appointment hereunder from our exclusive distributor to a non-exclusive distributor of the Products in the Territory upon written notice to Distributor, if:

(i) there is any direct or indirect material change in the effective ownership and control of Distributor; or

(ii) Distributor does not fully comply with all applicable Territory, United Kingdom, U.S. and non-U.S. export control laws, including, but not limited to, the U.S. Export Administration Regulations or re-exports, sells, or transfers any Products directly or indirectly through third parties to individuals or entities on the U.S. Department of Treasury’s list of Specially Designated Nationals and Blocked Persons or on the U.S. Department of Commerce’s Entity List, Denied Persons List, or Unverified List (collectively, “Restricted Parties Lists”) or does not fully comply with all applicable Territory, U.S. and non-U.S. anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, U.K. Bribery Act or engages or retains any other party to distribute the Products without C&D’s prior written approval, which will require the other party to agree to these same terms and conditions.

(c) Any termination of this Agreement shall be without prejudice to the right of the party not in default to recover any payments due to it hereunder and without prejudice to any other rights or remedies the party not in default may have to recover damages, or otherwise, as a result of the breach or default of the other party.

(d) Distributor shall not be entitled to any termination indemnity or compensation upon termination of this Agreement specifically for Distributor’s efforts to develop the market for the Products in the Territory; it being understood and agreed by Distributor that Distributor shall look solely to Distributor’s margin on Products sold by Distributor in the Territory pursuant to this Agreement for any reward or compensation for developing the market for the Products in the Territory, or for any other activities undertaken by Distributor, in connection with this Agreement.

(e) Upon termination of this Agreement pursuant to this Section 13, C&D shall have the option for six (6) months to purchase from Distributor any part or all, at C&D’s discretion, of Distributor’s remaining inventory of Products at Distributor’s landed costs (purchase price plus insurance and freight for such Products) at the time and place of their arrival in the Territory, of so much of the purchased inventory as is good, saleable and current, and Distributor shall not sell any Products to any third party, except as expressly provided in Paragraph 13(g) below.

(f) For purposes of such option, Distributor shall, within ten (10) days after any termination of this Agreement, provide C&D with a written report delineating the amount of each of the different types of Products in such inventory as of the termination date (the “Termination Date”). Beginning thirty (30) days after the Termination Date, or after such inventory report is furnished to C&D, whichever is later, and continuing unless and until C&D elects to purchase a Product in such inventory, Distributor shall be permitted to sell the remaining inventory subject to the provisions of Paragraphs 3 and 6(c) hereof, but in no event shall Distributor sell or otherwise dispose of any such inventory later than six (6) months after the Termination Date of this Agreement.

(g) Any inventory remaining after such six (6) month period shall be destroyed or scrapped by Distributor at Distributor’s expense in accordance with all applicable environmental and other laws and regulations. If requested by C&D, Distributor shall furnish C&D with a certificate of destruction, in such form as C&D may reasonably request, with respect to such remaining inventory which is to be destroyed or scrapped by Distributor.

(h) Upon termination of this Agreement pursuant to this Section 13, C&D shall be entitled to cancel all orders placed by the Distributor prior to the termination date whether or not such orders have been accepted by C&D without incurring any damages or liability of whatever nature to the Distributor.

14. INDEMNIFICATION; INSURANCE. (a) Distributor shall indemnify, defend and hold C&D, its affiliates, and their respective directors, officers, employees and agents (as applicable, a “C&D Indemnitee”) harmless against any and all claims, suits, demands, proceedings, losses, costs and expenses (including reasonable attorney fees and costs of defense) which may be brought against, suffered, or incurred by any of them due to (i) a breach by Distributor of any of its obligations or warranties under this Agreement not timely cured, or (ii) any failure or breach by Distributor or its affiliates or agents to store, distribute or transport the Products in compliance with thisAgreement and all applicable laws including without limitation claims from retail trade/consumers for non-delivery of any order or part thereof or for any breakage, leakage, short delivery or damaged goods.

(b) C&D shall indemnify, defend, and hold Distributor, its directors, officers, employees and agents (as applicable, a “Distributor Indemnitee”) harmless against any and all claims, suits, demands. proceedings, costs and expenses (including reasonable attorney fees and costs of defense) harmless which may be brought against, suffered, or incurred by any of them due to (i) a breach by C&D of any of C&D’s obligations or warranties under this Agreement; (ii) a proven claim that the Products, or any part thereof, furnished hereunder constitute an infringement of any patent, copyright or trademark; (iii) material violation of applicable laws and regulations in the Territory relating to the Products, including without limitation as to their manufacture, raw material content, supply, and labeling (in particular without limitation labeling as to jurisdiction of origin, and cosmetic products rules or regulations); or (iv) accidents, occurrences, injuries or losses to or for any persons or property due to or resulting from, in whole or part, the design or manufacture of the Products by C&D.

(c) Procedure. The Distributor Indemnitee or the C&D Indemnitee (as applicable, the “Indemnified Party”) shall give the other party (the “Indemnifying Party”) prompt written notice of any claim made pursuant to the foregoing indemnifications (as applicable, a “Claim”), including any inquiry or investigation by a government agency that the Indemnified Party believes may involve or expect to lead to a Claim. The Indemnifying Party shall have the responsibility of contesting, defending, litigating, settling or satisfying any Claim made against the Indemnified Party. The Indemnified Party shall have the right to be represented by separate counsel at the Indemnified Party’s expense in connection with any such Claim. The Indemnifying Party shall not settle any such Claim without the Indemnified Party’s prior written consent, which consent shall not be unreasonably withheld.

(d) Distributor shall maintain during the term of this Agreement the following types of insurance with the limits specified below which shall provide that C&D is an additional insured under all the policies for such insurance:

Kind of Insurance Limits of Liability

Commercial General Liability

US $1,000,000 Combined Single Limit; US$2,000,000 Aggregate (or equivalent)

Property Damage

US $1,000,000 Combined Single Limit; US$2,000,000 Aggregate (or equivalent)

(e) Distributor shall upon request of C&D provide C&D with Certificates of Insurance coverage showing that Distributor possesses the above insurance at the stated limits and which provides that said insurance cannot be canceled while this Agreement is in effect or except after ten (10) days’ prior written notice to C&D in which event C&D may terminate this Agreement with immediate effect.

15. ASSIGNABILITY; NOTICE . This Agreement shall not be assignable by either party without the other party’s prior written consent. Notice to a party pursuant to this Agreement shall be deemed given if (a) personally delivered, or (b) sent via an international courier, postage or fees prepaid or (c) by other internationally recognized registered or certified mail to such party at its address set forth in this Agreement. A party may change its address for notice upon written notice to the other party. Notice is effective upon the earlier of actual receipt or the date indicated in a proof of delivery receipt from an international courier or internationally recognized mail carrier.

16. INTERPRETATION; DISPUTES .

GOVERNING LAW. The validity, construction and interpretation of this Agreement shall be governed by the laws of England. Both Distributor and C&D agree to submit to the exclusive jurisdiction of courts of competent jurisdiction in England for the resolution of any disputes that may arise under this Agreement. The United Nations Convention on Contracts for the International Sale of Goods (1980) shall not apply to this Agreement.

17. FORCE MAJEURE . Neither party shall be liable to the other for any default hereunder which is due to cause beyond the reasonable control of the party in default, including but not limited to the actions or inactions of any government agency or instrumentality, breakdown of plant or machinery or shortages of labor, fuel, transportation or materials, fires, floods, earthquakes, war, riots or insurrections or any other contingency interfering with the production, supply, transportation, acceptance or use of any products covered by this Agreement (collectively “Force Majeure”). If either party shall seek to rely on Force Majeure, it shall give written notice to the other indicating the details of the act which it claims has put due performance of its obligations beyond its control.

18. ENTIRE AGREEMENT . This Agreement, including the exhibits referred to and incorporated by reference herein that form a part of this Agreement, contain the entire understanding of the parties with respect to the subject matter of this Agreement. There are no representations, promises, warranties, covenants or undertakings other than those expressly set forth in or provided for in this Agreement. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the transactions contemplated by this Agreement and, in particular this Agreement shall supersede and cancel any and all prior written or oral agreements between the parties hereto and any of their affiliates without limitation, including that certain Heads of Terms of Agreement commencing as of 01.04.09 by and between Vivalis Limited, as predecessor in interest to C&D, and Neoteric Cosmetics, Inc. Executed copies of the signature page of this Agreement transmitted electronically in Portable Document Format (“PDF”) shall be treated as originals, fully binding and with full legal force and effect, and the parties waive any rights they may have to object to such treatment.

IN WITNESS WHEREOF, the parties hereto have caused this Distribution Agreement to be executed by their respective duly authorized representatives as of the date first written above.


NEOTERIC COSMETICS, INC.		CHURCH & DWIGHT UK LIMITED

By:	/s/ Jeffrey R. Hinkle	By:	/s/ Andrew Routley
Name:	Jeffrey R. Hinkle	Name:	Andrew Routley
Title:	EVP, Corporate Development	Title:	Managing Director

Exhibit A

PRODUCTS


X3 CODE		DESCRIPTION
532096		Batiste Dry Shampoo Original Aerosol 150ml 2 x 3 pack
532095		Batiste Dry Shampoo Blush—Aerosol 150ml 2 x 3 pack
530329		Batiste Dry Shampoo Original 50ml
530330		Batiste Dry Shampoo Blush 50ml
530925		Batiste Dry Shampoo Diva 150ml
532529		Batiste Dry Shampoo Light 200ml
532530		Batiste Dry Shampoo Medium 200ml
532531		Batiste Dry Shampoo Dark 200ml
532413		Batiste Dry Shampoo Original 200ml
532415		Batiste Dry Shampoo Blush 200ml
532417		Batiste Dry Shampoo Diva 200ml
532415		Batiste Dry Shampoo Boho 200ml
532418		Batiste Dry Shampoo Fresh 200ml
532420		Batiste Dry Shampoo Brit 200ml
532798		Batiste Dry Shampoo Wild 200ml
502043		Batiste Dry Shampoo Cherry 200ml
TBD		Batiste Dry Shampoo Lace 200ml

Exhibit B

“ COMPETITIVE PRODUCT EXCEPTIONS ”

None

Exhibit C

“ RETAILER EXCEPTIONS ”

Multinational membership warehouse clubs

Multinational membership wholesale clubs

Multinational hypermarkets

Exhibit D

“PRICES AND PAYMENT ”

It is anticipated that, for period from January 1, 2012 through December 31, 2012, Distributor’s value of purchases of Products in USD, at the CIF Denver (Incoterms 2010) prices paid by Distributor, will be at least [***] excluding VAT.

After the first Calendar Year of this Agreement, if this Agreement continues in effect and unless otherwise expressly agreed in writing, it is anticipated that each Calendar Year Distributor will increase Distributor value of purchases of Products in USD by at least [***] percent over the prior Calendar Year exclusive of any increases attributable to price increases.

Payment Terms:

Net sixty (60) days in USD from C&D invoice date.


Bank Name:		*[]**
		*[]**
		*[]**
Bank Account Number:		*[]**
Bank Account Name:		*[]**

All bank charges, local charges, taxes, assessments, tariffs occurring in the Territory, and insurance shall be borne by Distributor.

If payment is not made within said time future purchase orders shall automatically be cancelled and any reorders shall be subject to the terms of any subsequent amended price list with full payment required at least five (5) days before the Products leave the C&D factory.

Other Terms of Sale:


X3 CODE	DESCRIPTION	Price CIF
532096	Batiste Dry Shampoo Original—Aerosol 150ml 2 x 3 pack	$ *[]**
532095	Batiste Dry Shampoo Blush—Aerosol 150ml 2 x 3 pack	$ *[]**
530329	Batiste Dry Shampoo Original 50ml	$ *[]**
530330	Batiste Dry Shampoo Blush 50ml	$ *[]**
530925	Batiste Dry Shampoo Diva 150ml	$ *[]**
532529	Batiste Dry Shampoo Light 200ml	$ *[]**
532530	Batiste Dry Shampoo Medium 200ml	$ *[]**
532531	Batiste Dry Shampoo Dark 200ml	$ *[]**
532413	Batiste Dry Shampoo Original 200ml	$ *[]**
532415	Batiste Dry Shampoo Blush 200ml	$ *[]**
532417	Batiste Dry Shampoo Diva 200ml	$ *[]**
532415	Batiste Dry Shampoo Boho 200ml	$ *[]**
532418	Batiste Dry Shampoo Fresh 200ml	$ *[]**
532420	Batiste Dry Shampoo Brit 200ml	$ *[]**
532798	Batiste Dry Shampoo Wild 200ml	$ *[]**
502043	Batiste Dry Shampoo Cherry 200ml	$ *[]**
TBD	Batiste Dry Shampoo Lace 200ml	$ *[]**

EXHIBIT 10.24

PURCHASE AND SALE AGREEMENT

SCOTT’S LIQUID GOLD-INC., SELLER

HAVANA GOLD, LLC, PURCHASER

November 21, 2012

TABLE OF CONTENTS


		Page
ARTICLE 1 PURCHASE AND SALE; LEASEBACK			1
Section 1.1	Purchase and Sale		1
Section 1.2	Purchase Price; Payment of the Purchase Price		1
Section 1.3	Personal Property		1
Section 1.4	Leaseback to Seller		2

ARTICLE 2 CLOSING			3
Section 2.1	Closing		3
Section 2.2	Seller’s Closing Items		3
Section 2.3	Purchaser’s Closing Items		4
Section 2.4	Other Closing Documents		4
Section 2.5	Conditions to Purchaser’s Obligations		5

ARTICLE 3 CLOSING AND POST-CLOSING ADJUSTMENTS			11
Section 3.1	Closing Adjustments		11
Section 3.2	Collection of Receivables		12
Section 3.3	Leasing Commissions		13
Section 3.4	Post-Closing Apportionments		13

ARTICLE 4 DEFAULT			14
Section 4.1	Default and Termination		14

ARTICLE 5 CASUALTY AND CONDEMNATION			14
Section 5.1	Casualty		14
Section 5.2	Condemnation		15

ARTICLE 6 OPERATION OF THE PROPERTY; LEASING; TERMINATION OF CONTRACTS			15

ARTICLE 7 GENERAL DISCLAIMER; ENVIRONMENTAL RELEASE			17
Section 7.1	General Disclaimer		17
Section 7.2	Environmental Report; Environmental Release		19

ARTICLE 8 MISCELLANEOUS			19
Section 8.1	Special Districts		19
Section 8.2	Confidentiality, Distribution of Information		20
Section 8.3	Authority of Seller and Purchaser		20
Section 8.4	Brokers		20
Section 8.5	Assignability		21
Section 8.6	Notices		21
Section 8.7	Binding Effect		23
Section 8.8	Entire Agreement; Modification		23
Section 8.9	Headings		23
Section 8.10	No Merger		23


Section 8.11	Counterparts	23
Section 8.12	Severability	23
Section 8.13	No Waiver	23
Section 8.14	U.S. Dollars	23
Section 8.15	Construction of Agreement	23
Section 8.16	Governing Law; Attorneys’ Fees	23
Section 8.17	Recordation	24
Section 8.18	Relationship of Parties	24
Section 8.19	Exhibits; Section References	24
Section 8.20	Date of This Agreement	24
Section 8.21	Intentionally Omitted	24
Section 8.22	Time of Essence	24
Section 8.23	OFAC Representation of Purchaser	24
Section 8.24	Cap on Limited Representations of Seller	24
Section 8.25	Section 1031 Exchange	25


Exhibits:
Exhibit A -		Legal Description
Exhibit B -		Forms of Closing Documents
Exhibit C -		Tenant Estoppel Letter
Exhibit D -		Seller’s Certificate
Exhibit E -		Copies Provided to Purchaser
Exhibit F -		Form of Seller Leases

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (“Agreement”) is entered into by SCOTT’S LIQUID GOLD-INC., a Colorado corporation (the “Seller”), and HAVANA GOLD, LLC, a Colorado limited liability company (the “Purchaser”).

ARTICLE 1

PURCHASE AND SALE; LEASEBACK

Section 1.1 Purchase and Sale . Subject to the terms and provisions in this Agreement, Seller agrees to sell to Purchaser and Purchaser agrees to purchase from Seller the parcel of land described in Exhibit A to this Agreement, and the buildings, fixtures and other improvements located on that land, known as the “Scott’s Liquid Gold Campus”, with an address of 4880 Havana Street, Denver, Colorado 80239 (the “Property”), along with (i) all easements, servitudes and other rights now belonging or appertaining to the Property, (ii) all right, title and interest of the Seller in and to any land lying in the bed of any street, road, avenue or alley, open or closed, adjoining the Property and to their center line, and (iii) the Personal Property described in Section 1.3.

Section 1.2 Purchase Price; Payment of the Purchase Price . The purchase price of the Property and Personal Property is $9,500,000.00 (the “Purchase Price”). The Purchase Price (subject to the prorations to be made under this Agreement) is payable by Purchaser as follows:

a. Deposit . Within one (1) business day after the execution of this Agreement by all parties hereto, Purchaser shall deliver a deposit payment in the amount of $1,000,000.00 (together with all interest earned thereon, the “Deposit”) to Chicago Title Insurance Company (the “Escrow Agent”), at its offices at 1875 Lawrence St., Suite 1300, Denver, CO 80202, Attention: Ms. Teresa Hott. The Deposit is to be held by the Escrow Agent pursuant to the provisions of this Agreement. Unless this Agreement has been properly terminated by Purchaser pursuant to Section 2.5d(i) below, the Deposit shall be nonrefundable to Purchaser after the final day of the Inspection Period (as hereinafter defined), except in the event of an uncured Seller default or as otherwise specifically provided in Section 2.5 or Article 5.

b. Balance of Purchase Price . The balance of the Purchase Price of $8,500,000.00 shall be paid to Seller on the Closing Date (as hereinafter defined) in immediately available good funds, which payment shall be made by wire transfer to the Escrow Agent on or before 2:00 p.m. Mountain Time on the Closing Date, and the Escrow Agent shall deliver both the balance of the Purchase Price and the Deposit to Seller.

Section 1.3 Personal Property . Included in the sale of the Property is all of the Seller’s right, title and interest in and to the following (the “Personal Property”):

a. Leases . All leases and rental agreements in effect as of the Closing (as hereinafter defined) with respect to the Property (the “Leases”), together with any security deposits and guaranties of any Leases;

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b. Contracts . The service, supply, leasing, maintenance and other contracts entered into in connection with the operation, leasing, maintenance and repair of the Property and the Personal Property, except those which Purchaser requests in writing during the Inspection Period that Seller terminate, subject to Article 6 (the “Contracts”);

c. Licenses, Permits and Warranties . To the extent they may be transferred by Seller and are in existence and effect (i) all licenses, permits, approvals and authorizations required for the ownership, use and operation of the Property; and (ii) warranties covering any portion of the Property;

d. Surveys and Plans . All existing surveys, blueprints, drawings, plans and specifications (including, without limitation, structural, HVAC, mechanical and plumbing plans and specifications) in Seller’s possession;

e. Leasing Materials . All tenant lists, lease files, lease booklets, manuals and promotional and advertising materials concerning the Property or used in connection with the operation of the Property, exclusive of any internal books and records of Seller maintained at any of Seller’s offices, internal appraisals and/or evaluations of the Property, budgets and any other privileged or proprietary information; and

f. Other Personal Property . All other tangible and intangible personal property owned by Seller and used in connection with the Property, including, without limitation and to the extent assignable to Purchaser, the furniture, fixtures, inventory, equipment, operating supplies, tools, machinery and other personal property which are now located on or attached to the Property, but excluding (i) any names or marks of Seller or any affiliates of Seller, (ii) the accounts and other property reserved by Seller under Section 3.1.e below, and (iii) any personal property used in or related to the conduct of Seller’s business, including without limitation the furniture, fixtures, inventory, equipment, operating supplies, tools, machinery and other personal property located in the first floor mailroom, the third floor computer room, or on the fourth or fifth floors of the office building commonly known as Building A, or in the warehouses commonly known as Buildings B, C and D (collectively, the “Other Personal Property”). The parties shall agree prior to the final day of the Inspection Period upon the list of the Other Personal Property to be included in the sale and conveyed to Purchaser hereunder.

Section 1.4 Leaseback to Seller . At the Closing, Seller and Purchaser shall enter into one or more leases in substantially the form of Exhibit F-1 and Exhibit F-2 attached hereto and incorporated herein by this reference (collectively, the “Seller Leases”), pursuant to which Purchaser shall lease to Seller portions of the buildings and land included within the Property, consisting of approximately 113,620 square feet of warehouse and manufacturing space within the buildings known as Buildings C and D, approximately 16,078 square feet of office space on the fourth floor of the building known as Building A and the computer room located on the third floor of that Building, associated underground and surface parking, the tank farm, and the railroad tracks, in each case at the locations shown on the site plan attached to the Seller Leases, for the term, at the rental rates, and on the other conditions set forth in the Seller Leases.

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ARTICLE 2

CLOSING

Section 2.1 Closing . The closing of the purchase and sale of the Property (“Closing”) shall be held on the date that is ninety (90) days from the final day of the Inspection Period, or on such earlier date as the parties may agree in writing (the “Closing Date”), at 10:00 a.m. Mountain Time, at the offices of the Escrow Agent. Purchaser shall have a one-time option to extend the Closing Date by up to 30 days, by delivery of written notice to Seller on or before the date that is 15 days prior to the originally scheduled Closing Date, specifying the date to which Purchaser elects to extend the Closing. Time is of the essence with respect to the obligations of Seller and Purchaser to close the purchase and sale pursuant to this Agreement on the Closing Date, except as expressly provided in this Agreement.

Section 2.2 Seller’s Closing Items . At the Closing, Seller agrees to execute, deliver and/or provide to Purchaser, or cause to be executed, delivered and provided to Purchaser, the following with respect to the Property:

a. Deed . A special warranty deed (the “Deed”) conveying fee title to the Property to Purchaser, subject to the Permitted Exceptions (as hereinafter defined), substantially in the form attached as Exhibit B-1 to this Agreement;

b. Assignment of Leases . An assignment to and assumption by Purchaser of the Leases for the Property and any lease guaranties or similar rights, including the Leases which are listed on the Rent Roll (as hereinafter defined) and those executed in accordance with Article 6, substantially in the form attached as Exhibit B-2 to this Agreement;

c. Assignment of Contracts . An assignment to and assumption by Purchaser of the Contracts delivered or made available to Purchaser during the Inspection Period (except those which Purchaser requests in writing during the Inspection Period that Seller terminate and that have been terminated in accordance with Article 6 below), and of those entered into in accordance with Article 6, substantially in the form attached as Exhibit B-3 to this Agreement;

d. Bill of Sale . A bill of sale transferring Seller’s interest in the other Personal Property to Purchaser, substantially in the form attached as Exhibit B-4 to this Agreement;

e. Non-Foreign Affidavit . An affidavit stating that Seller is not a “foreign person” within the meaning of Section 1445 of the Internal Revenue Code, substantially in the form attached as Exhibit B-5 to this Agreement;

f. Tenant Estoppel Letters . The tenant estoppel letters to be obtained in accordance with Section 2.5b, and any Seller’s certificate, if Seller so elects, delivered pursuant to Section 2.5b, substantially in the forms attached as Exhibit C to this Agreement; provided that if any Lease provides for a different form of tenant estoppel letter, the form attached to such Lease shall be used;

g. Seller Leases . The Seller Leases, substantially in the form attached as Exhibits F-1 and F-2 to this Agreement;

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h. Leases and Contracts . Originals of all Leases, Contracts and other similar documentary items of Personal Property in the possession of Seller, as well as any and all building plans, surveys, site plans, landscaping plans, development plans, specifications and drawings concerning the Property which are in the possession of Seller; provided, if an original is not available, a photocopy will be acceptable;

i. Authorization Documents . Certified copies of resolutions or other authorizing documentation approving the execution and delivery of this Agreement and the other documents delivered and to be delivered under it by Seller, the performance by Seller of its obligations under this Agreement and such other documents and the consummation by Seller of the transactions contemplated hereby, including, without limitation, certificates of incumbency;

j. Owner’s Title Policy . The Title Policy referred to in Section 2.5c, which may be delivered a reasonable time after the Closing if that is the customary practice of the Title Insurer (as hereinafter defined), provided that a marked pro forma policy or marked commitment reflecting the exceptions to be contained in the policy is delivered at the Closing;

k. Notices to Tenants . A notice to the tenants of the Property informing them of the sale of the Property to Purchaser; and

l. Other Property . Any bonds, warranties or guarantees which are applicable to the Property and Personal Property and which are in Seller’s possession or control and, to the extent in the possession or control of Seller and except as may be retained by Seller pursuant to the Seller Leases, all keys and combinations to locks for the Property with identification of the lock to which each key or combination fits.

Section 2.3 Purchaser’s Closing Items . At the Closing, Purchaser agrees to execute, deliver and/or provide to Seller, or cause to be executed, delivered and/or provided to Seller, the following:

a. Authorization Documents . Certified copies of resolutions or other authorizing documentation approving the execution and delivery of this Agreement and the other documents delivered and to be delivered under it by Purchaser, the performance by Purchaser of its obligations under this Agreement and such other documents and the consummation by Purchaser of the transactions contemplated hereby, including, without limitation, certificates of incumbency;

b. Purchase Price . The balance of the Purchase Price as provided in Section l.2b;

c. Assignments . The assignment and assumption agreements executed and delivered by Seller pursuant to Section 2.2b and 2.2c; and

d. Seller Leases . The Seller Leases executed and delivered by Seller pursuant to Section 2.2g.

Section 2.4 Other Closing Documents . In addition to the documents referred to in Sections 2.2 and 2.3, each party agrees to execute and deliver at the Closing such other documents as may be required by this Agreement, or as may be agreed upon during the Inspection Period, or as may be necessary to carry out its obligations under this Agreement.

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Section 2.5 Conditions to Purchaser’s Obligations . The obligation of Purchaser to purchase the Property pursuant to this Agreement is subject to the fulfillment on or prior to the Closing Date, as provided below, of each of the following conditions, except to the extent waived by Purchaser:

a. Seller’s Representations and Warranties . All representations and warranties of Seller set forth in Section 2.5d(iii) shall be true in all material respects as of the Closing Date;

b. Tenant Estoppel Letters . Seller shall have obtained estoppel letters substantially in the form (and a qualification such as to a tenant’s actual knowledge shall be acceptable) attached hereto as Exhibit C from the following tenants: Alstom Power, Inc. and Tetra Tech, Inc. Seller shall provide copies of the estoppel letters (with the information inserted by Seller) to Purchaser prior to their delivery to the tenants, and Purchaser shall have two business days after they are delivered to suggest any changes to the estoppel letters. Seller agrees to use reasonable efforts to obtain estoppel letters from all tenants which occupy space in the buildings by three business days prior to the Closing, and shall deliver copies of the signed estoppel letters to Purchaser within two business days after they are received by Seller. If on the Closing Date Seller has not obtained estoppel letters from all such tenants, Seller may elect, subject to its right to extend the Closing as provided below, to execute and deliver to Purchaser at the Closing its own certificate in the form attached as Exhibit D with respect to space leased to tenants who have not delivered estoppel letters. Seller shall be deemed to have represented and warranted that to the actual knowledge of the Employees (as defined in Section 2.5d(iii)) each item of information contained in its certificate delivered to Purchaser as to each of those Leases is accurate, which representations and warranties shall survive for a period terminating on the earlier of (i) one year from the Closing Date or (ii) the date on which Purchaser has received an executed estoppel letter signed by the tenant under the Leases in question confirming such item of information. If Seller has not obtained estoppel letters from all such tenants by the Closing Date, Seller may adjourn the Closing Date for up to 30 days to allow it additional time to satisfy this requirement (but without waiving the right to deliver its own certificates at the end of the adjournment period), by giving written notice to Purchaser which is delivered at least two days prior to the scheduled Closing Date. Seller and Purchaser agree to cooperate with each other and to use good faith efforts for up to three months after the Closing to obtain any tenant estoppel letters which have not been obtained by the Closing with respect to Leases which will still be in effect for at least six months after the Closing.

c. Title Evidence; Survey .

(i) Title Evidence . Seller has delivered or within seven days after the date of this Agreement shall deliver to Purchaser a preliminary title insurance commitment (the “Commitment”) issued by the Escrow Agent as the title insurer (the “Title Insurer”) showing the status of record title to the Property, together with copies of all recorded documents listed as exceptions to title on Schedule B-2 of the Commitment (collectively, the “Exception Documents”). Seller shall pay the base premium for an “extended” owner’s title insurance policy, which policy shall be an ALTA Owner’s Policy - 2006 (the “Title Policy”), to be issued to Purchaser pursuant to the Commitment, and Purchaser shall pay the cost, if any, for the endorsements it wants to the Title Policy. Seller agrees to deliver to the Escrow Agent at the Closing a mechanic’s lien affidavit reasonably acceptable to the Title Insurer certifying that all work on the Property requested by Seller or its employees or agents has been paid in full or that provision has been made by Seller for payment in full in the ordinary course of business. The Commitment and the Exception Documents, together with any New Survey (as hereinafter defined) that Purchaser elects to obtain pursuant to subsection (vi) below, are referred to as the “Title Materials.”

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(ii) Title Objections; Permitted Encumbrances . If, from its review of the Title Materials, Purchaser believes that any encroachment on the Property or any exception to title shown in the Title Materials would, in Purchaser’s reasonable judgment, adversely affect the Property (“Title Objections”), Purchaser shall deliver to Seller written notice (the “Objection Notice”) of the Title Objections no later than 10 days after it has received the Commitment and the Exception Documents. During the seven-day period following Seller’s receipt of the Objection Notice, Seller may elect (but shall have no obligation) to remove or cure or, with Purchaser’s consent, which consent shall not be unreasonably withheld, to obtain at Seller’s expense title insurance over any Title Objections (the “Cure Period”). If Seller does not elect to or is unable to remove or cure or, with Purchaser’s consent, to obtain title insurance over all such Title Objections prior to the end of the Cure Period, Seller shall so notify Purchaser in writing and Purchaser may, by written notice (the “Election Notice”) given to Seller within five days after such notice is given by Seller elect:

(1) if requested by Seller, to grant Seller an additional period of up to 30 days to cure or remove or, if applicable, to obtain title insurance over all uncured or unremoved Title Objections and, if Closing is scheduled to occur during such time period, the date of Closing shall be extended accordingly; or

(2) to waive all uncured or unremoved Title Objections; or

(3) to terminate this Agreement, whereupon the Deposit shall be returned to Purchaser, after which Seller and Purchaser shall have no further obligation or liability hereunder except as otherwise expressly provided in this Agreement.

If Seller does not receive an Objection Notice within such 10-day period, or after receiving an Objection Notice does not receive an Election Notice within such five-day period referred to above, Purchaser shall be deemed to have accepted the status of title to the Property as disclosed by the Title Materials, and to have waived any uncured and unremoved Title Objections.

(iii) Permitted Exceptions . Any matter that is disclosed in the Title Materials, and to which Purchaser does not object pursuant to subsection (ii) or (iv) (or to which Purchaser so objects but subsequently waives or consents to title insurance over) other than the Liens (as defined in subsection (v)) shall be “Permitted Exceptions.”

(iv) Additional Defect of Title . If, at any time prior to the Closing, Purchaser receives written notice or written evidence (including without limitation a revised Commitment) of any encumbrance on or defect in title to the Property that is not a Permitted Exception and that was not disclosed in the Title Materials, and which would otherwise qualify for an Objection Notice (an “Additional Title Objection”), Purchaser shall give Seller written notice of the Additional Title Objection no later than five days after the date on which Purchaser receives written notice or written evidence of it, which shall be subject to the same rights, requirements, elections and waivers as an Objection Notice and Election Notice given under subsection (ii).

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(v) Seller’s Obligation to Remove Certain Liens . Notwithstanding anything to the contrary in this Section 2.5c. Seller shall be obligated to remove from title to the Property at Closing, and without any extension of the Closing Date, (a) any deeds of trust and mortgages and (b) other monetary liens which do not exceed an aggregate amount of $10,000 (provided Seller shall be deemed to have “removed” the monetary liens if the Title Insurer is willing to issue the title policy without exception for the monetary liens), which in either case encumber the Property as of Closing (collectively, the “Liens”), and Purchaser agrees that Seller may use the proceeds of the Purchase Price for that purpose. Furthermore, the Liens shall not constitute Permitted Exceptions regardless of whether they are disclosed by the Title Materials or objected to by Purchaser, and Purchaser shall have no obligation to object to the Liens under either subsection (ii) or (iv).

(vi) Survey . Seller has delivered to Purchaser an existing ALTA/ACSM Land Survey prepared by Drexel, Barrell & Co. dated February 27, 2008 (the “Prior Survey”). Purchaser shall be responsible for obtaining and paying for any update of the Prior Survey desired by Purchaser (the “New Survey”). If Purchaser does elect to obtain a New Survey, the failure to obtain it during the time period provided for Purchaser’s review of the Title Materials and issuance of an Objection Notice shall not extend that period. In addition, the Title Policy shall only insure over those standard exceptions that relate to survey matters to the extent that Purchaser obtains and furnishes to the Title Insurer a New Survey that is acceptable to the Title Insurer for such purpose.

d. Inspection of the Property .

(i) Access Prior to Closing; Rent Roll; Inspection Period . At any time prior to the Closing Date, Purchaser and its authorized agents and employees shall have the right to enter the Property during reasonable business hours for the purposes of conducting environmental and other studies and inspections, provided that those operations are conducted in such a manner as not to damage the Property. Seller shall, within seven days after the date of this Agreement, provide Purchaser a list of all Contracts in effect on the date of this Agreement and a rent roll (the “Rent Roll”) for the last calendar month ending prior to the date of this Agreement, listing all of the existing Leases, the status of rental payment by all tenants under those Leases, the amount of security deposits held under each of those Leases, any leasing commissions owed or payable under those Leases, and whether any notice of default (which has not been cured) has been given to or received from any tenants under those Leases. Within seven days after the date of this Agreement, Seller shall make available at Seller’s offices, for inspection and copying by Purchaser, copies of all of the items listed on Exhibit E that are in the possession of Seller. The Contracts, the Rent Roll and the other materials listed on Exhibit E are together referred to as the “Inspection Materials.” Seller makes no warranty or representation as to the accuracy, correctness or completeness of the information contained in any of the Inspection Materials. The same are being provided to Purchaser for Purchaser’s informational purposes only with the understanding and agreement that Purchaser will undertake its own soils, environmental, and other evaluations, and obtain other studies and reports, in order to satisfy itself with the condition of the Property. Seller shall retain ownership of all Inspection Materials delivered to Purchaser pursuant to this Section prior to Closing. All entries, studies and inspections shall be conducted so as not to disturb any tenants or unreasonably interfere with the operation or management of the Property. Purchaser shall advise Seller at least 24 hours in advance of any such entry, study or inspection and of the name or names of the persons who will be making, and the nature of, the entry, study or inspection. Seller or its authorized employee or agent shall have the right to be present during each such entry, study and inspection and at any time

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Purchaser or its agents or employees discusses or wants to discuss any of the Leases with any tenants; provided that Seller’s presence shall not be required as long as Seller has been given the 24 hour advance notice. All entries on and inspections or studies of the Property shall be at the sole risk and expense of Purchaser, and Purchaser shall indemnify and hold Seller harmless from and against any and all liens, claims, demands, injuries, damages, costs, expenses (including also reasonable attorney’s fees) or liability incurred by or asserted against Seller or the Property as a result of, or in any way arising out of, any of those entries, inspections or studies occurring prior to the Closing, which obligations shall survive the Closing or any termination of this Agreement for a period of one year.

If for any reason Purchaser, in its sole discretion, is not satisfied with the Leases, Contracts, Inspection Materials, environmental inspections, studies or reports, or any other items it reviews or if it determines that the Property is not suitable for Purchaser’s intended use, Purchaser shall have the right to terminate this Agreement by giving notice to Seller to that effect on or before the date which is 30 days from the date of this Agreement (the “Inspection Period”), time being of the essence, in which event this Agreement shall terminate and neither party shall have any further obligations or liability under this Agreement except as expressly provided herein; otherwise Purchaser shall be deemed to be satisfied with the condition of the Property and its suitability for Purchaser’s use and this Agreement shall continue in full force and effect.

If this Agreement is terminated in whole or in part for any reason, then (a) within 30 days after termination, Purchaser shall repair any damage caused by any of those entries, inspections or studies so as to restore the Property which is the subject of the termination as nearly as possible to its same condition before the damage, (b) within the same 30 day period Purchaser shall return to Seller originals (including copies delivered to Purchaser in lieu of originals) of all documents it obtained from Seller with respect to that Property, and (c) Purchaser shall maintain in confidence as required in Section 8.2 the information it obtained about the Property.

(ii) Sale “As Is” . Purchaser agrees and acknowledges that, except as set forth in subsection (iii) and as provided further in Article 7:

(1) Purchaser is acquiring the Property in its “as is” condition;

(2) Purchaser is relying upon the results of its own investigation concerning the Property; and

(3) SELLER HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, TO PURCHASER OR TO ANY OTHER PERSON OR ENTITY ABOUT THE PHYSICAL CONDITION OF THE PROPERTY OR ITS SUITABILITY FOR ANY USE OR PURPOSE, INCLUDING BUT NOT LIMITED TO CURRENT OR PAST COMPLIANCE WITH ENVIRONMENTAL AND HAZARDOUS WASTE LAWS, AND PURCHASER SHALL MAKE ITS OWN DETERMINATION AS TO THE CONDITION OF THE PROPERTY AND ITS SUITABILITY FOR PURCHASER’S PURPOSES, AS TO WHETHER HAZARDOUS OR TOXIC MATERIALS WERE USED, RELEASED OR STORED ON THE PROPERTY OR CONSTITUTE A PRESENT HAZARD WITH RESPECT TO THE PROPERTY, AND OTHERWISE.

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(iii) Limited Representations of Seller . Notwithstanding anything herein to the contrary, Seller warrants and represents to Purchaser that to the current actual knowledge of Mark E. Goldstein and Jeffrey R. Hinkle (the “Employees”), without inquiry or investigation:

(1) Except as (i) revealed in any environmental reports obtained by Purchaser or made available to Purchaser by Seller or (ii) would not have a material adverse effect on the Property or the business of Seller operated thereon, (x) neither the Property nor Seller are in material violation of any Environmental Law (as hereinafter defined) and they are not subject to any pending or threatened litigation or inquiry by any governmental authority or to any remedial action or obligations under any Environmental Law; (y) no underground storage tanks are now located on the Property; and (z) no hazardous substances or toxic wastes have been disposed of or are now located on the Property in violation of applicable Environmental Law. As used herein, the term “Environmental Law” shall mean any law, statute, ordinance, rule, regulation, order or determination of any governmental authority or agency affecting the Property and pertaining to the environment including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1982 and the Resource Conservation and Recovery Act of 1986.

(2) There is no litigation pending or threatened against or with respect to the Property that does or could materially adversely affect the Property or Seller’s ability to consummate this sale.

(3) There is no condemnation or similar proceeding currently pending or threatened against the Property.

(4) The list of Contracts and the Rent Roll to be furnished to Purchaser under Section 2.5d(i) shall be complete and correct in all material respects.

(5) Seller owns title to the Property and the landlord’s interest in the Leases described on the Rent Roll delivered to Purchaser.

(6) The Leases are in full force and effect without current material default by Seller, except as may be disclosed in documents (including tenant estoppel letters) made available to Purchaser; no party has been granted any license, lease, or other material right relating to the use or possession of the Property except pursuant to the Leases, the Permitted Exceptions, or except as otherwise disclosed in writing to Purchaser.

(7) There are no contracts, other than this Agreement, or other material obligations, other than those matters set forth in the Title Materials, Leases and Contracts, outstanding (i) for the sale, exchange or transfer of the Property or any portion thereof or the business operated thereon by Seller, or (ii) creating or imposing any material burdens, obligations or restrictions on the use or operation of the Property and the business conducted on it.

(8) There are no management agreements, leasing agent agreements, building service agreements, or other agreements to which Seller is a party or an assignee, relating to the operation or management of the Property which will survive Closing and be binding on Purchaser, except for those made available to Purchaser.

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(9) Seller has received no written notice that the use, operation and occupancy of the Property violates any material zoning, building, administrative or other law, ordinance, order or regulation or any restrictive covenant applicable to the Property which is currently outstanding.

(10) There is no action or proceeding pending that is designed to levy any special assessments against the Property; and

(11) Neither Seller nor any beneficial owner of Seller is (i) listed on the Specially Designated Nationals and Blocked Persons List maintained by OFAC (as defined below) pursuant to the Order (as defined below) and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders (such lists are collectively referred to as the “Lists”); (ii) a person who has been determined by competent authority to be subject to the prohibitions contained in the Orders; or (iii) owned or controlled by, or acts for or on behalf of, any person on the Lists or any other person who has been determined by competent authority to be subject to the prohibitions contained in the Orders. The term “Order” shall mean the requirements of Executive Order No. 133224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and other similar requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (“OFAC”) and in any enabling legislation or other Executive Orders or regulations in respect thereof (the Order and such other rules, regulations, legislation, or orders are collectively called the “Orders”).

Seller shall advise Purchaser in writing if, subsequent to the date of this Agreement and prior to the Closing, any of the representations and warranties set forth in this subsection (iii) is no longer true or correct in any material respect, unless Purchaser already has that knowledge. These warranties and representations, as supplemented or amended by any such subsequent disclosure, shall be deemed restated at Closing and shall survive Closing for a period of one year. In addition, Purchaser shall not be entitled to terminate this Agreement because of (i) any default by landlord under any Lease which is cured or waived in writing by the tenant by Closing, which cure or waiver (or a condition to it) does not impose any post-Closing obligation on Purchaser, or (ii) if the default is a non-monetary, non-material default under a Lease. “Made available to Purchaser” as used in this Section includes those things made available to Purchaser for its review or furnished to Purchaser either prior to or after the date of this Agreement. Under no circumstances shall any of the Employees have any personal liability for any of the above representations and warranties.

The representations and warranties set forth in this subsection (iii) shall be subject to the limitations set forth in Section 8.24.

e. Remedy for Failure of a Condition . In the event that one or more of the conditions set forth in this Section 2.5 has not been satisfied or waived by Purchaser on or before the Closing Date, then unless otherwise agreed to by Seller and Purchaser, Purchaser’s exclusive remedy shall be to request the Escrow Agent to return the Deposit to Purchaser, whereupon this Agreement shall terminate and neither party shall have any further rights or obligations under this Agreement except as expressly provided in this Agreement, including without limitation the rights of Purchaser under Section 4.1 (including Purchaser’s remedies for breaches of Seller’s representations and warranties which are discovered by Purchaser after the Closing).

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ARTICLE 3

CLOSING AND POST-CLOSING ADJUSTMENTS

Section 3.1 Closing Adjustments . The following are to be apportioned at the Closing on a per diem basis through and including 12:01 a.m. of the Closing Date (provided that the Purchase Price is received by Seller no later than 2:00 p.m. Mountain Time on the Closing Date, otherwise the prorations shall be made as of 12:01 a.m. of the day on which the Closing actually occurs) with respect to the Property:

a. Taxes and Assessments . Real estate taxes, personal property taxes and all assessments (special and general) for the year of the Closing, provided that any special assessments that are due and payable at the time of the Closing shall be paid by Seller. If the rate or amount of these taxes has not been fixed prior to the Closing Date, the adjustment shall be upon the basis of the mill levy for the preceding year applied to the latest assessed valuation, which shall be considered a final settlement between the parties.

b. Utilities . Unless final meter readings are obtained up to the Closing Date (for which Seller shall be solely responsible), water and sewer service charges, and charges for all other public utilities, including, without limitation, electricity and gas. The right to the return of any deposits with utility companies shall be retained by Seller, and Seller shall not receive any credit at Closing for those deposits. Purchaser agrees to promptly make any replacement deposits which may be required by the utility companies in order for Seller to obtain a refund of those deposits.

c. Rents . Base rents, fixed rents, additional rents (including without limitation charges for increases in operating expenses), and any other rents paid or payable for the billing period in progress on the Closing Date; it being agreed that to the extent, on the Closing Date, any additional rents or other rents have not been determined for that billing period, then each such item shall be adjusted retroactively to the Closing Date (and the adjustment paid) no later than 30 days after those rents have been determined. Payments or reimbursements on account of operating expenses such as real estate taxes, utility charges and any other payments, reimbursements or contributions by tenants under the Leases shall be prorated as follows: the amount of any other rents, payments, reimbursements or contributions to be made by any tenant shall be made in accordance with the Leases as of Closing, and Purchaser shall promptly pay to Seller Seller’s pro rata portion of those rents, payments, reimbursements or contributions (based upon apportionment being made as of the Closing Date) promptly after the date when those rents, payments, reimbursements or contributions are received from the tenant. If Seller collected estimated amounts of prepayments in excess of any tenant’s pro rata share, Seller shall promptly remit the excess to Purchaser after notice from Purchaser and after the excess is verified by Seller. Seller shall not receive credit at the Closing for any delinquent rent; however, Purchaser shall promptly pay to Seller its pro-rata portions of those rents promptly after receipt by Purchaser in accordance with Section 3.2.

d. Permit and License Fees . Permit fees and license fees with respect to permits and licenses assigned to Purchaser.

e. Operating Accounts . All funds in any operating accounts, reserve accounts or any other accounts pertaining to the Property on the Closing Date shall be retained by Seller, and Purchaser shall not receive any credit for any of these funds.

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f. Contracts . Charges and payments then due or which have accrued on all Contracts (subject to Section 3.3).

g. Security Deposits . The security deposits and advance rents shall not be apportioned, but instead shall be retained by Seller and, to the extent not forfeited or applied to tenant’s obligations under the Leases prior to the Closing, credited against the Purchase Price.

h. Closing Costs: Attorneys’ Fees . All real estate recording and documentary fees payable in connection with the conveyance of the Property shall be paid by Purchaser. All costs and expenses incurred for closing services, such as closing fees and document preparation fees charged by the Escrow Agent (but not the premium for the Title Policy), shall be paid in equal shares by Seller and Purchaser. Except as otherwise expressly provided in this Agreement, each party shall pay its own attorney’s fees and other expenses incurred in the preparation of this Agreement and the sale of the Property.

i. Other Apportionments . Such other items as are customarily apportioned by the Escrow Agent at a closing of the sale of a commercial property in Denver, Colorado.

Section 3.2 Collection of Receivables . “Receivables” means all rental payments, expense reimbursements and other monetary obligations of any kind due and owing or to become due and owing by tenants to Seller for the period prior to the Closing Date under the Leases. Purchaser shall undertake reasonable efforts on behalf of Seller to collect all Receivables for a period of six months from the Closing Date (which shall include the submission of monthly invoices and follow-up invoices, and may (but need not) include the commencement or continuation of litigation or other proceedings), it being agreed that any monies received by Purchaser from and after the Closing Date from any person liable for any portion of the Receivables to be collected by Purchaser shall be applied (after payment of all reasonable costs of collection, including reimbursement to Seller or Purchaser of any legal fees or collection costs reasonably incurred by either of them) as follows, (unless the tenant properly identifies the payment as being for a specific item): first to the payment of monies owed to Seller and Purchaser for the billing period in progress on the Closing Date, second to any current sums and arrearages owed to Purchaser (relating to billing periods after the billing period in progress as of the Closing Date), and last to the balance of the Receivables. All monies received by Purchaser which are to be applied to Receivables owed to Seller shall be held in trust by Purchaser for the benefit of Seller and remitted to Seller promptly after receipt.

Notwithstanding the foregoing, Seller shall retain the right to collect (in such manner as it shall deem appropriate) (a) Receivables due from tenants who have vacated the Property prior to the Closing Date, and (b) subject to the limitations imposed in this Section 3.2, those Receivables listed on the Rent Roll; and Purchaser shall not be required to undertake any collection efforts with respect to those Receivables. With respect to any pending litigation or other proceedings to collect any Receivables from tenants in occupancy on the Closing Date, Purchaser shall have the option of either (i) continuing the litigation or proceedings (the costs of which shall be equitably apportioned between Seller and Purchaser, based upon the amounts ultimately paid to each, and reimbursed out of the first monies collected, if any) and Purchaser shall be substituted as the plaintiff, if necessary, or (ii) of not continuing the litigation, whereupon Seller may continue such litigation in its own name and at its sole cost and expense, provided that such litigation shall not result in the eviction of the tenant or the termination of its Lease without Purchaser’s consent, and all sums collected by Seller as a result of the litigation (after payment of all costs and expenses of Seller and Purchaser) shall be applied in full satisfaction of the applicable Receivables.

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If within 60 days following the Closing Date any of the Receivables to be collected by Purchaser and paid to Seller have not been collected and paid to Seller and Purchaser is not making reasonable efforts to collect those Receivables, then Seller may undertake its own efforts to collect those Receivables, including the commencement of litigation and other proceedings (but Seller shall not seek to evict any tenant or terminate any Lease), and in which event all sums collected by Seller as a result of such litigation (after payment of all costs and expenses of Seller and Purchaser) shall be applied in full satisfaction of the applicable Receivables. Purchaser and Seller shall reasonably cooperate with each other in the collection of Receivables and shall execute any documents reasonably requested by the other to collect those Receivables.

Section 3.3 Leasing Commissions . Seller shall be responsible for the payment of all leasing commissions and referral fees relating to the Leases entered into prior to the date of this Agreement, other than commissions or fees due or payable (a) as a result of the exercise of renewal options or other options or rights under Leases entered into prior to the date of this Agreement which are exercised on or after the date of this Agreement, or (b) as a result of any Leases executed on or after the date of this Agreement and any renewal, expansion or other modification of Leases executed on or after the date of this Agreement, or (c) as a result of the execution of the pending Lease Agreement with Denver Transit Contractors, LLC or its affiliates, a copy of which has been provided to Purchaser (the “Pending Warehouse Lease”), each of which shall be Purchaser’s responsibility. Purchaser shall reimburse Seller at the Closing to the extent Seller has paid any such leasing commissions or referral fees which are the responsibility of Purchaser. Each party agrees to indemnify, defend and hold the other harmless from and against any and all liability for leasing commissions, referral fees and other costs and expenses owed by it under this Section.

Section 3.4 Post-Closing Apportionments . Seller and Purchaser agree to use reasonable efforts to calculate all apportionments required under this Article 3 (and to make the applicable payments resulting from those calculations) with respect to those items of income and expense which are not known, have not been received or cannot be accurately or finally determined on the Closing Date by no later than 30 days after the Closing Date. Each other item of income and expense which is subject to apportionment under this Article 3 but which is not known, have not been received or cannot be accurately or finally determined on the Closing Date shall be apportioned retroactive to the Closing Date, and the payment made on such apportionment within 30 days after the date that the apportionment becomes ascertainable, i.e., the date by which each party, in its good faith business judgment, has sufficient information to make the apportionment. The parties agree that each party shall have the right following Closing, on reasonable written notice to the other, from time to time to review the books and records of such other party pertaining solely to the operations of the Property to the extent necessary to confirm the amounts of adjustments payable to Seller and/or Purchaser following the Closing.

Purchaser and Seller shall cooperate as necessary following the Closing in order to promptly and in good faith discharge their respective obligations under this Article 3. Notwithstanding the foregoing, any claim for an adjustment under Section 3.1 shall be valid only if made in writing with reasonable specificity within six months of the Closing Date, except in the case of items of

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adjustment which at the expiration of that period are subject to pending litigation or administrative proceedings. Claims with respect to items of adjustment which are subject to litigation or administrative proceedings will be valid if made on or before the later to occur of (i) the date that is 1 year after the Closing Date and (ii) the date that is 180 days after a final order is issued in such litigation or administrative hearing. Both parties shall use good faith efforts to resolve any disputed claims promptly. The provisions of this Article 3, including but not limited to Section 3.3, shall survive the Closing.

ARTICLE 4

DEFAULT

Section 4.1 Default and Termination .

a. Purchaser’s Default . If Purchaser defaults in its obligation to close, to timely make the Deposit, or otherwise commits a material default under this Agreement, Seller shall have the right (i) if the default occurs prior to or at Closing, as Seller’s exclusive remedy, except as expressly set forth elsewhere herein, to terminate this Agreement and to demand payment of, collect and retain the Deposit as liquidated damages; or (ii) if the default occurs after Closing, to obtain any equitable or legal remedy for that default including, but not limited to, specific performance and actual money damages (but not consequential or punitive damages), and to obtain from Purchaser reasonable attorneys’ fees incurred in connection with obtaining any such remedy.

b. Seller’s Default . If Seller defaults in its obligation to close or otherwise commits a material default under this Agreement, Purchaser shall have, as its exclusive remedies, the right (i) if the default occurs prior to or at Closing, (a) to terminate this Agreement and to obtain the return of the Deposit or (b) if Seller has failed to close as required under this Agreement, to obtain specific performance to require Seller to convey such title to the Property as it is required to convey under this Agreement, without any reduction in the Purchase Price, and (c) to obtain from Seller reasonable attorneys’ fees incurred in connection with obtaining any such remedy; or (ii) if the default occurs or a material breach of a representation or warranty made in Section 2.5d(iii) is discovered after Closing, to obtain any equitable or legal remedy for that default including, but not limited to, specific performance and actual money damages (but not consequential or punitive), and to obtain from Seller reasonable attorneys’ fees incurred in connection with obtaining any such remedy.

c. Termination of Agreement . Upon termination of this Agreement in the manner set forth in this Section and the receipt of the Deposit as provided above, neither party shall have any further obligations or liabilities hereunder except as otherwise provided in this Agreement.

ARTICLE 5

CASUALTY AND CONDEMNATION

Section 5.1 Casualty . In the event that after the date of this Agreement and prior to the Closing Date any of the improvements on the Property are damaged by fire or other casualty, Seller shall notify Purchaser and Purchaser shall have the option either (a) to terminate this Agreement by notice given to Seller within 10 days after Purchaser receives the notice of the casualty (but only if the right to terminate exists hereunder), or (b) to proceed to Closing, paying Seller the entire Purchase Price for the Property and (i) to the extent the

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damage has not been repaired prior to the Closing, receiving a credit on the Purchase Price equal to the amount of the deductible applicable to that casualty and receiving all of Seller’s rights with respect to recovery for such unrepaired damage caused by the fire or casualty under Seller’s existing insurance policies, without compromise, or (ii) if Seller and Purchaser agree at or prior to the Closing, receiving a credit on the Purchase Price of the amount they estimate will be required to repair the damage (which shall be a final settlement). In the event Purchaser elects to terminate this Agreement as provided above, the Deposit shall be returned to Purchaser by the Escrow Agent and neither party shall have any further liability or obligation to the other except as expressly provided in this Agreement. The right of termination due to any such fire or other casualty shall only exist if the damage caused by the casualty is material and either has not been completely repaired prior to the Closing, or an amount sufficient to complete the repairs has not been deposited (which Seller shall have no obligation to do) with the Escrow Agent in escrow to be used for the purpose of making the repairs, or the parties have not agreed upon a credit against the Purchase Price for the amount of the deductible and an assignment to Purchaser of all of Seller’s rights with respect to recovery for such unrepaired damage under Seller’s existing insurance policies. A material casualty is one that results in damage to the improvements on any of the Property, the cost to repair of which is in excess of $250,000.00. If the casualty is not material and has not been completely repaired prior to the Closing, then at the Closing Purchaser shall receive a credit on the Purchase Price equal to the amount of the deductible applicable to that casualty under Seller’s existing insurance policies, and to the extent the damage has not been repaired prior to the Closing Purchaser shall receive all of Seller’s rights with respect to recovery for such unrepaired damage under Seller’s existing insurance policies, or if the damage or other casualty is not covered under Seller’s existing insurance policies, or if Seller and Purchaser so agree under this Section 5.1b(ii), then Purchaser shall receive a credit on the Purchase Price equal to the amount Seller and Purchaser agree it will cost to repair the damage.

Section 5.2 Condemnation . If, between the date of this Agreement and Closing, any portion of the Property that is of such size and configuration or character to be, in Purchaser’s reasonable judgment, material to the operation of the Property is taken in condemnation (a “Material Taking”), Purchaser shall have the right by written notice given to Seller prior to or at Closing to terminate this Agreement. In the event of such a termination of this Agreement, Purchaser shall be entitled to the return of the Deposit, after which Purchaser and Seller shall have no further liability or obligation under this Agreement, except as otherwise provided in this Agreement. If, between the date of this Agreement and Closing, any portion of the Property is taken in condemnation that is not a Material Taking, Purchaser may not terminate this Agreement in whole or in part for that reason, and Seller and Purchaser shall perform their respective obligations under this Agreement, except with respect to the part of the Property so taken; and Seller shall be entitled to all the condemnation proceeds and the Purchase Price shall be decreased by the amount of those condemnation proceeds, or Purchaser at its option can elect to require Seller to assign those proceeds to Purchaser at the Closing, in which case the amount so assigned shall not be deducted from the Purchase Price.

ARTICLE 6

OPERATION OF THE PROPERTY; LEASING; TERMINATION OF CONTRACTS

Seller agrees that between the date of this Agreement and the Closing Date, (a) Seller shall, subject only to conditions beyond Seller’s reasonable control, continue to operate and maintain the Property in its present condition and consistent with its previous operations of the Property, ordinary

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wear and tear excepted, provided that Seller shall not enter into any new contracts (other than Leases) which cannot be terminated on 30 days’ notice without Purchaser’s prior written consent, which shall not be unreasonably withheld or delayed, (b) Seller shall not initiate or consent to any proposed changes in the zoning of all or any part of the Property, (c) Seller shall maintain in full force or effect its existing insurance coverage on the Property as disclosed to Purchaser pursuant to this Agreement, and (d) Seller shall not voluntarily create or consent to any liens or other encumbrances against the Property except as expressly permitted in this Agreement.

From the date of this Agreement until the end of the Inspection Period, before entering into any new Leases for space at the Property, Seller shall provide Purchaser with a term sheet for each new Lease and with respect to any new Leases, Seller shall not enter into the new Lease without Purchaser’s approval, which approval shall not be unreasonably withheld; provided, however, that Purchaser agrees that the Pending Warehouse Lease has been previously approved.

However, after the end of the Inspection Period until the Closing Date, Seller shall not without Purchaser’s prior written approval, which shall not be unreasonably withheld or delayed: (i) voluntarily terminate, modify, renew, or accept a surrender (in whole or in part) of any of the Leases, or (ii) enter into any new Leases. Purchaser shall notify Seller in writing within five days after its receipt of each proposed termination, modification or renewal of an existing Lease or proposed new Lease of either its approval or disapproval, including the cost of all tenant improvement work and leasing commissions to be incurred in connection with the Lease.

At least ten days before the end of the Inspection Period, Purchaser shall deliver a notice to Seller specifying which, if any, of the Contracts it intends to assume and which Purchaser requests that Seller terminate. Within three days after receipt of Purchaser’s notice, Seller (if it has not already done so) shall advise Purchaser whether any of the Contracts specified by Purchaser cannot be terminated or can be terminated only with the payment of a fee or penalty which Seller is unwilling to pay and:

a. With respect to those Contracts which cannot be terminated, Purchaser shall deliver notice to Seller, within two business days of receipt of Seller’s notice, that Purchaser has either agreed to assume those Contracts or has elected to terminate this Agreement, in which latter instance, the Deposit and any interest accrued on it shall be refunded to Purchaser and neither Seller nor Purchaser shall have any further liability to the other except as expressly provided in this Agreement; and

b. With respect to those Contracts which can be terminated, but only with the payment of a fee or penalty which Seller is unwilling to pay, Purchaser shall deliver notice of Seller within two business days of receipt of Seller’s notice, that Purchaser has either agreed to pay the termination fee or penalty or has elected to terminate this Agreement, in which latter instance, the Deposit and any interest accrued on it shall be refunded to Purchaser and neither Seller nor Purchaser shall have any further liability to the other except as expressly provided in this Agreement.

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ARTICLE 7

GENERAL DISCLAIMER; ENVIRONMENTAL RELEASE

Section 7.1 General Disclaimer . EXCEPT AS OTHERWISE EXPRESSLY STATED IN THIS AGREEMENT OR IN ANY AGREEMENT OR INSTRUMENT EXECUTED AND DELIVERED BY SELLER TO PURCHASER AT THE CLOSING, INCLUDING BUT NOT LIMITED TO REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 2.5 OF THIS AGREEMENT AND THE LIMITED WARRANTY OF TITLE EXPRESSLY SET FORTH IN THE DEED (COLLECTIVELY, THE “SURVIVING REPRESENTATIONS”), SELLER HEREBY EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, OR AS TO THE PHYSICAL, STRUCTURAL OR ENVIRONMENTAL CONDITION OF THE PROPERTY OR ITS COMPLIANCE WITH LAWS, AND PURCHASER AGREES TO ACCEPT THE PROPERTY, “ AS IS, WHERE IS, WITH ALL FAULTS ”. WITHOUT LIMITING THE GENERALITY OF THE PRECEDING SENTENCE OR ANY OTHER DISCLAIMER SET FORTH HEREIN, SELLER AND PURCHASER HEREBY AGREE THAT, EXCEPT FOR THE SURVIVING REPRESENTATIONS, SELLER HAS NOT MADE AND IS NOT MAKING ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WRITTEN OR ORAL, AS TO (A) THE NATURE OR CONDITION, PHYSICAL OR OTHERWISE, OF THE PROPERTY OR ANY ASPECT THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF HABITABILITY, SUITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE, OR THE ABSENCE OF REDHIBITORY OR LATENT VICES OR DEFECTS IN THE PROPERTY, (B) THE NATURE OR QUALITY OF CONSTRUCTION, STRUCTURAL DESIGN OR ENGINEERING OF THE IMPROVEMENTS OR THE STATE OF REPAIR OR LACK OR REPAIR OF ANY OF THE IMPROVEMENTS, (C) THE QUALITY OF THE LABOR OR MATERIALS INCLUDED IN THE IMPROVEMENTS, (D) THE SOIL CONDITIONS, DRAINAGE CONDITIONS, TOPOGRAPHICAL FEATURES, ACCESS TO PUBLIC RIGHTS-OF-WAY, AVAILABILITY OF UTILITIES OR OTHER CONDITIONS OR CIRCUMSTANCES WHICH AFFECT OR MAY AFFECT THE PROPERTY OR ANY USE TO WHICH THE PROPERTY MAY BE PUT, (E) ANY CONDITIONS AT OR WHICH AFFECT OR MAY AFFECT THE PROPERTY WITH RESPECT TO ANY PARTICULAR PURPOSE, USE, DEVELOPMENT POTENTIAL OR OTHERWISE, (F) THE AREA, SIZE, SHAPE, CONFIGURATION, LOCATION, CAPACITY, QUANTITY, QUALITY, CASH FLOW, EXPENSES OR VALUE OF THE PROPERTY OR ANY PART THEREOF, (G) THE NATURE OR EXTENT OF TITLE TO THE PROPERTY, OR ANY EASEMENT, SERVITUDE, RIGHT-OF-WAY, POSSESSION, LIEN, ENCUMBRANCE, LICENSE, RESERVATION, CONDITION OR OTHERWISE THAT MAY AFFECT TITLE TO THE PROPERTY, (H) ANY ENVIRONMENTAL, GEOLOGICAL, STRUCTURAL, OR OTHER CONDITION OR HAZARD OR THE ABSENCE THEREOF HERETOFORE, NOW OR HEREAFTER AFFECTING IN ANY MANNER THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PRESENCE OR ABSENCE OF ASBESTOS OR ANY ENVIRONMENTALLY HAZARDOUS SUBSTANCE ON, IN, UNDER OR ADJACENT TO THE PROPERTY, OR (I) THE COMPLIANCE OF THE PROPERTY OR THE OPERATION OR USE OF THE PROPERTY WITH ANY APPLICABLE RESTRICTIVE COVENANTS, OR WITH ANY LAWS, ORDINANCES OR REGULATIONS OF ANY GOVERNMENTAL BODY (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, ANY ZONING LAWS OR REGULATIONS, ANY BUILDING CODES, ANY ENVIRONMENTAL LAWS, AND THE AMERICANS WITH DISABILITIES ACT OF 1990, 42 U.S.C. 12101 ET SEQ .), AND PURCHASER SHALL DETERMINE ALL SUCH MATTERS ON ITS OWN BEHALF DURING THE INSPECTION PERIOD. THE PROVISIONS OF THIS ARTICLE 7 SHALL BE BINDING ON PURCHASER AND EACH OF ITS PERMITTED ASSIGNEES AND SHALL SURVIVE THE CLOSING.

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DURING THE INSPECTION PERIOD, PURCHASER WILL BE GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY AND PERSONAL PROPERTY, AND THE LEASES, CONTRACTS AND OTHER MATERIALS (INCLUDING, WITHOUT LIMITATION, TITLE MATERIALS) RELATING TO THE PROPERTY AND PERSONAL PROPERTY THAT PURCHASER DEEMS NECESSARY TO INSPECT AND REVIEW IN CONNECTION WITH THIS AGREEMENT, AND PURCHASER WILL RETAIN SUCH ENVIRONMENTAL CONSULTANTS, STRUCTURAL ENGINEERS AND OTHER EXPERTS AS IT DEEMS NECESSARY TO INSPECT THE PROPERTY AND REVIEW SUCH MATERIALS. PURCHASER IS RELYING ON ITS OWN INVESTIGATION AND THE ADVICE OF ITS EXPERTS REGARDING THE PROPERTY, AND UPON ITS REVIEW OF LEASES, CONTRACTS, AND OTHER MATERIALS, AND NOT ON ANY REPRESENTATIONS OR WARRANTIES OF SELLER, THE MANAGERS OF THE PROPERTY, OR ANY REAL ESTATE BROKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER (OTHER THAN THE SURVIVING REPRESENTATIONS). PURCHASER ACKNOWLEDGES THAT SELLER MAKES ABSOLUTELY NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF ANY INFORMATION, REPORTS (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL AND ENGINEERING REPORTS) OR OTHER MATERIALS DELIVERED TO PURCHASER, EXCEPT AS MAY BE EXPRESSLY SET FORTH IN THE SURVIVING REPRESENTATIONS, AND THAT THE PURCHASE PRICE REFLECTS THE FACT THAT THIS IS AN “ AS IS, WHERE IS ” TRANSACTION.

UPON CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER’S INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL BE DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED SELLER (AND SELLER’S OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN , WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER (AND SELLER’S OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) AT ANY TIME BY REASON OF OR ARISING OUT OF THE PHYSICAL AND ENVIRONMENTAL CONDITIONS OF THE LAND OR IMPROVEMENTS, ANY LATENT OR PATENT CONSTRUCTION DEFECTS, VIOLATIONS OF ANY APPLICABLE LAWS AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN ANY DOCUMENT EXECUTED BY SELLER AT CLOSING AND EXCEPT FOR TORT CLAIMS AGAINST THE OWNER OF THE PROPERTY DUE TO EVENTS WHICH OCCURRED DURING SELLER’S PERIOD OF OWNERSHIP OF THE PROPERTY, FOR WHICH CLAIMS SELLER SHALL REMAIN LIABLE.

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Section 7.2 Environmental Report; Environmental Release .

a. Environmental Report . Notwithstanding anything contained in this Agreement to the contrary, Purchaser may engage a consultant to perform a Phase I or similar environmental evaluation of the Property (the “Report”), and Purchaser shall provide Seller with a copy of any Report it obtains as soon as it is prepared but no later than 10 days prior to the Closing Date.

b. Environmental Release .

(1) Release . WITHOUT LIMITING THE PROVISIONS OF SUBPARAGRAPH 2.5D(II) ABOVE AND NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT EXCEPT AS PROVIDED IN SUBPARAGRAPH 2.5D(III) ABOVE, PURCHASER HERBY RELEASES SELLER AND SELLER’S PARTNERS’ OFFICERS, DIRECTORS, SHAREHOLDERS, TRUSTEES, PARTNERS, EMPLOYEES, MANAGERS AND AGENTS FROM ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTIONS, LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION ATTORNEYS’ FEES), WHETHER KNOWN OR UNKNOWN, LIQUIDATED OR CONTINGENT, ARISING FROM OR RELATING TO THE ENVIRONMENTAL CONDITIONS ON OR AFFECTING THE PROPERTY, WHETHER THE SAME ARE A RESULT OF NEGLIGENCE OR OTHERWISE, AND ALL CLAIMS UNDER ANY ENVIRONMENTAL LAWS OF THE UNITED STATES, THE STATE IN WHICH THE PROPERTY IS LOCATED OR ANY POLITICAL SUBDIVISION THEREOF, AS ANY OF THOSE ENVIRONMENTAL LAWS MAY BE AMENDED FROM TIME TO TIME AND ANY REGULATIONS, ORDERS, RULES OF PROCEDURES OR GUIDELINES PROMULGATED IN CONNECTION WITH SUCH ENVIRONMENTAL LAWS, REGARDLESS OF WHETHER THEY ARE IN EXISTENCE ON THE DATE OF THIS AGREEMENT. PURCHASER ACKNOWLEDGES THAT PURCHASER HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF PURCHASER’S SELECTION AND PURCHASER IS GRANTING THIS RELEASE OF ITS OWN VOLITION AND AFTER CONSULTATION WITH PURCHASER’S COUNSEL.

(2) Survival . Purchaser and Seller agree that the provisions of this Section 7.2b shall survive Closing.

ARTICLE 8

MISCELLANEOUS

Section 8.1 Special Districts . Purchaser hereby agrees and acknowledges that as of the date of this Agreement, the Property, or portions of it, is or may be included within certain districts and other quasi-municipal corporations organized and existing under the laws of the State of Colorado (collectively, the “Districts”), and that as a result of such inclusion the Property and the rights and interests of Purchaser in it are subject to (i) current and future taxation by the Districts for all purposes for which the Districts are authorized to tax, and (ii) any and all actions other than taxation, such as imposition of impact fees, that the Districts lawfully may take that may affect the Property and/or the rights and interests of Purchaser in it.

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Section 8.2 Confidentiality, Distribution of Information . Purchaser and Seller acknowledge the importance of confidentiality regarding this transaction. Without the prior written consent of the other, except as may be required in connection with required disclosures under securities or other laws applicable to one of the parties, neither party shall disclose to any person (other than their partners, members, the wholly owned affiliates of said partners or members, or the officers, boards, attorneys, lender, accountants, and employees of said party, said partner, said member, or said wholly owned affiliates, or any others who have a need to know in connection with the acquisition of the Property and who such party advises in writing of this confidentiality requirement or as otherwise required by law) any of the terms or provisions of this Agreement. This provision and restriction also applies to a disclosure of any information previously or hereafter received or learned by Purchaser or any of its partners, trustees, agents or representatives (including also the Brokers) about or concerning the Property or the operations of the Property, which is not available to the general public including without limitation any investigations or tests conducted by Purchaser and any leases, operating reports, rent rolls or other documents reviewed by Purchaser or any such persons. This provision shall terminate upon the completion of the Closing.

Section 8.3 Authority of Seller and Purchaser .

a. Purchaser . Purchaser represents and warrants that, as of the date of this Agreement and as of the date of Closing, Purchaser is and shall be a duly organized and validly existing limited liability company under the laws of the State of Colorado, is and shall be in good standing under the laws of that state, and has and shall have full and lawful right and authority to execute and deliver this Agreement and to consummate and perform the transactions contemplated in it. Furthermore, Purchaser represents and warrants that the person or persons executing this Agreement and any documents required under it on behalf of Purchaser have the authority to do so. Purchaser also represents and warrants that the consummation and performance of the transactions contemplated by this Agreement will not constitute a default or result in the breach of any term or provision of any contract or agreement to which Purchaser is a party so as to adversely affect the consummation of these transactions.

b. Seller . Seller represents and warrants that, as of the date of this Agreement and as of the date of Closing, Seller is and shall be a duly organized and validly existing corporation under the laws of the State of Colorado, is and shall be in good standing under the laws of that state, and has and shall have full and lawful right and authority to execute and deliver this Agreement and to consummate and perform the transactions contemplated in it. Furthermore, Seller represents and warrants that the person or persons executing this Agreement and any documents required under it on behalf of Seller have the authority to do so. Seller also represents and warrants that the consummation and performance of the transactions contemplated by this Agreement will not constitute a default or result in the breach of any term or provision of any contract or agreement to which Seller is a party so as to adversely affect the consummation of these transactions.

Section 8.4 Brokers . Seller represents and warrants to Purchaser that no broker or finder has been engaged in connection with the sale contemplated by this Agreement, other than Greg Knott of Unique Properties, LLC (“Seller’s Broker”), whose commission shall be paid by Seller pursuant to a separate agreement. Purchaser represents and warrants to Seller that no broker or finder has been engaged by Purchaser in connection with the sale

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contemplated by this Agreement, other than Sam Leger and Tim Finholm of Unique Properties, LLC (“Purchaser’s Broker,” and together with Seller’s Broker, the “Brokers”), whose commission shall be paid by Seller’s Broker. Each party further represents and warrants to the other that no other person or entity claims or will claim any commission, finder’s fee or other amounts by, through, under or as a result of any relationship with such party because of this transaction. Each party agrees to hold the other party harmless from and against any and all costs, expenses, claims, losses or damages, including also reasonable attorneys’ fees, resulting from any breach of the representations and warranties contained in this Section.

Section 8.5 Assignability .

a. Purchaser’s Assignability . Except as provided in Section 8.25 or to an Affiliate, as defined below, Purchaser shall not have the right to assign all or any part of its interest or rights under this Agreement without the prior written consent of Seller, which may be granted or withheld in Seller’s sole discretion. Any attempted assignment by Purchaser without such prior written consent, including assignments that would otherwise occur by operation of law, shall be without force or effect as against Seller. Notwithstanding the foregoing provisions, Purchaser shall have the right to assign this Agreement without the consent of Seller to any entity controlling, controlled by or under common control with Purchaser (each, an “Affiliate”), provided Purchaser delivers to Seller at least 5 days prior to the Closing a copy of the assignment under which the Affiliate assignee assumes all of the Purchaser’s obligations under this Agreement. Any assignment made in violation of the terms of this Section shall be void and of no force and effect. For purposes of this Section, an assignment by Purchaser shall include, but not be limited to, a transfer or transfers by any means of more than 55% in the aggregate of the voting stock or voting interest in Purchaser.

b. Seller’s Assignability . Seller may assign all or any part of its rights and obligations hereunder without the consent, written or otherwise, of Purchaser or any other person or entity, as long as the assignee assumes the obligations of Seller under this Agreement and has the capacity to perform Seller’s obligations under this Agreement.

Section 8.6 Notices . All notices required or permitted under this Agreement shall be given by registered or certified mail, postage prepaid, by recognized overnight courier, or by hand delivery, directed as follows:

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If intended for Seller, to:

SCOTT’S LIQUID GOLD-INC.

4880 Havana Street

Denver, Colorado 80239

Attn: Barry J. Levine

E-mail: blevine@slginc.com

with a copy to:

SCOTT’S LIQUID GOLD-INC.

4880 Havana Street

Denver, Colorado 80239

Attn: Mark E. Goldstein

E-mail: mgoldstein@slginc.com

and with a copy to:

Elizabeth A. Sharrer

Holland & Hart LLP

Suite 3200

555 Seventeenth Street

Denver, CO 80202

E-mail: lsharrer@hollandhart.com

If intended for Purchaser, to:

Havana Gold, LLC

3535 Larimer Street

Denver, CO 80205

Attn: Andrew Feinstein

E-mail: afeinstein@exdomanagement.com

and with a copy to:

Jeffrey H. Sachs

8301 E. Prentice Ave., #300

Greenwood Village, CO 80111

E-mail: jeffsax@aol.com

Any notice delivered by mail in accordance with this Section shall be deemed to have been delivered (i) upon being deposited in any post office or postal box regularly maintained by the United States postal service, but, in the case of intended recipients who have an e-mail address listed above, only if concurrently with that deposit a copy of the notice is sent by e-mail to that intended recipient, and if that copy is not sent by e-mail to any intended recipient who has an e-mail address listed above, the notice shall not be deemed to have been delivered until actually received by the intended recipient; or (ii) the next business day after being deposited with a recognized overnight courier service; or (iii) upon receipt or refusal to accept delivery if hand-delivered. Either party, by notice given as above, may change the address to which future notices or copies of notices may be sent.

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Section 8.7 Binding Effect . Subject to Section 8.5, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, personal representatives, successors and permitted assigns.

Section 8.8 Entire Agreement; Modification . This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and may not be modified in any manner except by an instrument in writing signed by both parties. This Agreement supersedes and replaces all earlier agreements or understandings of the parties, whether written or oral.

Section 8.9 Headings . The headings herein are inserted only for convenient reference and do not define, limit or prescribe the scope of this Agreement or any Section or subsection.

Section 8.10 No Merger . The representations, covenants and agreements contained herein shall not merge into the various documents executed and delivered at the Closing and shall survive Closing, except as limited in this Agreement.

Section 8.11 Counterparts . This Agreement may be executed in any number of counterparts which together shall constitute a final Agreement.

Section 8.12 Severability . If any provision of this Agreement or its application to any person or situation, to any extent, shall be held invalid or unenforceable, the remainder of this Agreement, and the application of that provision to persons or situations other than those to which it has been held invalid or unenforceable, shall not be affected, but shall continue valid and enforceable to the fullest extent permitted by law.

Section 8.13 No Waiver . No waiver by either party of any provision hereof shall be deemed a waiver of any other provision or of any subsequent breach by either party of the same or any other provision.

Section 8.14 U.S. Dollars . All dollar amounts stated in this Agreement are in United States dollars and all funds shall be delivered in United States currency.

Section 8.15 Construction of Agreement . Seller and Purchaser acknowledge each to the other that both they and their counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits to it.

Section 8.16 Governing Law; Attorneys’ Fees . This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado. In the event of any litigation between the parties with respect to the subject matter of this Agreement, the prevailing party shall be entitled to recover all of its reasonable attorneys’ fees from the other party.

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Section 8.17 Recordation . Except in the event of a default in the other party’s obligation to close under this Agreement, neither Seller nor Purchaser shall place this Agreement or any of its terms and provisions, or any notice, memorandum or other written evidence of it, of record without the prior written consent of the other. Any violation of this Section shall be a material breach of this Agreement.

Section 8.18 Relationship of Parties . Nothing in this Agreement shall be construed or deemed to make or constitute Seller and Purchaser as partners, joint venturers or any other form of joint participants in the acquisition and ownership of the Property.

Section 8.19 Exhibits; Section References . All exhibits to this Agreement are a part of this Agreement and are incorporated into it by reference. References to section numbers and exhibits, unless otherwise stated, are to sections in and exhibits to this Agreement.

Section 8.20 Date of This Agreement . References to the “date of this Agreement” mean the date on which both Seller and Purchaser have signed this Agreement (including counterparts).

Section 8.21 Intentionally Omitted .

Section 8.22 Time of Essence . Time is of the essence with respect to all time periods for performance of the obligations under this Agreement. In calculating any period of time provided for in this Agreement, unless business days are specifically referenced, the term “days” shall refer to calendar and not business days. If any day scheduled for performance of any obligation hereunder shall occur on a weekend or on a holiday recognized by federal banks in the area in which the Property is located, the time period allowed and day for performance shall be continued to the next business day.

Section 8.23 OFAC Representation of Purchaser . Purchaser warrants and represents to Seller that neither Purchaser nor any beneficial owner of Purchaser is (i) listed on the Lists; (ii) a person who has been determined by competent authority to be subject to the prohibitions contained in the Orders; or (iii) owned or controlled by, or acts for or on behalf of, any person on the Lists or any other person who has been determined by competent authority to be subject to the prohibitions contained in the Orders.

Section 8.24 Cap on Limited Representations of Seller . Seller shall have no liability to Purchaser for a breach of any representation or warranty set forth in Section 2.5d(iii) of this Agreement unless (a) the valid claims for all such breaches of Section 2.5d(iii) of this Agreement collectively aggregate more than $15,000.00, in which event the full amount of such valid claims over the amount of $15,000.00 shall be actionable, up to the Cap (as defined below), and (b) written notice containing a description of the specific nature of such breach shall have been given by Purchaser to Seller and an action shall have been commenced by Purchaser against Seller prior to the expiration of the one-year period provided in that Section for survival of the representations and warranties. Purchaser agrees to first seek recovery under any insurance policies, Contracts and Leases prior to seeking recovery from Seller,

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and Seller shall not be liable to Purchaser if Purchaser’s claim is satisfied from such insurance policies, Contracts or Leases. As used herein, the term “Cap” shall mean the total aggregate amount of $375,000.00. Notwithstanding anything to the contrary set forth herein, if any of the representations and warranties set forth in Section 2.5d(iii) is untrue or incorrect in any material respect and the Employees actually knew (without independent investigation) that such representation and warranty was untrue in any material respect, then Purchaser shall be entitled to pursue all remedies available to it at law or in equity, including without limitation recovery of its actual damages resulting from such fraudulent misrepresentation. This Section 8.24 shall survive Closing.

Section 8.25 Section 1031 Exchange . Notwithstanding anything to the contrary in this Agreement, each party agrees that the other party may assign this Agreement (or all or any portion thereof or rights therein) to one or more qualified intermediaries or exchange accommodation titleholders (collectively, “Intermediary”), as that term is defined in the deferred like/kind exchange regulations (the “Regulations”) promulgated under Section 1031 of the Internal Revenue Code of 1986, as amended, to act in place of the assigning party in effecting a deferred or simultaneous like-kind exchange of the Property under the Regulations. Upon assignment of either party’s rights under this Agreement to an Intermediary, the Intermediary shall be substituted for the assigning party in this Agreement as the seller or purchaser of the Property, as applicable; provided, however, that the assigning party shall not be released of any of its obligations hereunder as a result of such assignment. The non-assigning party agrees to accept the consideration and all other required performance under this Agreement and any written instructions from an Intermediary and to render its performance of its obligations to such Intermediary. The non-assigning party agrees that performance by an Intermediary will be treated as performance by the assigning party. The assigning party agrees that non-assigning party’s cooperation hereunder (including the execution of documents) shall not require the non-assigning party to incur any out-of-pocket expenses, and the assigning party agrees to indemnify and hold the non-assigning party harmless from and against any and all damages, losses, liabilities, costs and expenses incurred by the non-assigning party as a result of the assigning party’s assignment of this Agreement to an Intermediary.

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Signature Page to Purchase and Sale Agreement

Between

Scott’s Liquid Gold-Inc., As Seller

And

Havana Gold, LLC, As Purchaser

SELLER:

SCOTT’S LIQUID GOLD-INC. , a Colorado corporation

By: /s/ Mark Goldstein

Name: Mark Goldstein

Its: President/CEO

Dated: 11/21/12

PURCHASER:

HAVANA GOLD, LLC,

a Colorado limited liability company

By: /s/ Andrew Feinstein

Name: Andrew Feinstein

Its: Manager

Dated: 11/20/12

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EXHIBIT A

LEGAL DESCRIPTION

PARCEL A:

THE NORTH 816.59 FEET OF THE SOUTH 1,897.58 FEET OF LOT 3, BLOCK 3, MONTBELLO NO. 11, EXCEPT THE EASTERLY 8.5 FEET THEREOF, CITY AND COUNTY OF DENVER, STATE OF COLORADO

PARCEL B:

THE NORTH 799.9 FEET OF THE SOUTH 1,080.99 FEET OF LOT 3, BLOCK 3, EXCEPT THE EAST 8.5 FEET THEREOF, MONTBELLO NO. 11, CITY AND COUNTY OF DENVER, STATE OF COLORADO.

PARCEL C:

A PARCEL OF LAND SITUATED IN THE SOUTHWEST 1/4 OF SECTION 14, TOWNSHIP 3 SOUTH, RANGE 67 WEST OF THE 6TH PRINCIPAL MERIDIAN, CITY AND COUNTY OF DENVER, STATE OF COLORADO, BEING PART OF LOT 3, BLOCK 3, MONTBELLO NO. 11, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCING AT THE WEST 1/4 CORNER OF SAID SECTION 14; THENCE SOUTH 89°14’55” EAST, ALONG THE NORTH LINE OF SAID SOUTHWEST 1/4, A DISTANCE OF 60.00 FEET TO A POINT LYING ON THE EAST RIGHT OF WAY LINE OF HAVANA STREET; THENCE SOUTH 00°00’00” WEST, ALONG SAID EAST RIGHT OF WAY LINE AND PARALLEL WITH THE WEST LINE OF SAID SOUTHWEST 1/4, A DISTANCE OF 9258.89 FEET TO THE POINT OF BEGINNING ; THENCE SOUTH 89°35’01” EAST, A DISTANCE OF 345.01 FEET TO A POINT ON A CURVE; THENCE ALONG A CURVE TO THE RIGHT WHOSE CHORD BEARS SOUTH 10°59’06” EAST, A DISTANCE OF 140.09 FEET, SAID CURVE HAVING A CENTRAL ANGLE OF 22°48’11”, A RADIUS OF 354.32 FEET, AN ARC LENGTH OF 141.01 FEET TO A POINT OF TANGENT; THENCE SOUTH 00°24’59” WEST, ALONG SAID TANGENT, A DISTANCE OF 183.54 FEET; THENCE NORTH 89°35’01” WEST, A DISTANCE OF 370.37 FEET TO A POINT LYING ON SAID EAST RIGHT OF WAY LINE; THENCE NORTH 00°00’00” EAST, ALONG SAID RIGHT OF WAY LINE PARALLEL WITH AND 60.00 FEET EASTERLY OF THE WEST LINE OF SAID SOUTHWEST 1/4, A DISTANCE OF 320.87 FEET TO THE POINT OF BEGINNING , CITY AND COUNTY OF DENVER, STATE OF COLORADO.

A-1

EXHIBIT B-1

SPECIAL WARRANTY DEED

This SPECIAL WARRANTY DEED evidences a conveyance by SCOTT’S LIQUID GOLD-INC., a Colorado corporation, whose address is 4880 Havana Street, Denver, Colorado 80239 (“Grantor”), to HAVANA GOLD, LLC, a Colorado limited liability company, whose address is (“Grantee”).

Grantor, for and in consideration of the sum of $9,500,000.00, the receipt and sufficiency of which is hereby acknowledged, has granted, bargained, sold and conveyed, and by these presents does grant, bargain, sell, convey and confirm unto Grantee, its successors and assigns forever, all the real property in Denver, Colorado, described on Exhibit A attached hereto, and the buildings, fixtures and other improvements located on that land (together called the “Property”), together with all easements, servitudes and other rights now belonging or appertaining to such real property, and all right, title and interest of the Grantor, if any, in and to any land lying in the bed of any street, road, avenue or alley, open or closed, in front of or behind or otherwise adjoining such Property and to the center line thereof and together with all and singular the hereditaments and appurtenances thereto belonging, or in anywise appertaining, and the reversions, remainders, rents, issues and profits thereof; and all the estate, right, title, interest, claim and demand whatsoever of the Grantor, either in law or in equity, of, in and to the Property, with the hereditaments and appurtenances;

TO HAVE AND TO HOLD the Property above bargained and described, with the appurtenances unto Grantee, its successors and assigns, forever. And Grantor, for itself, its successors and assigns, does covenant and agree that Grantor shall and will WARRANT AND FOREVER DEFEND the Property in the quiet and peaceable possession of Grantee, its successors and assigns, against all and every person or persons lawfully claiming or to claim the whole or any part thereof, by, through, or under Grantor, except for the lien of general taxes and assessments for the current year and all subsequent years, and except for the matters shown on Exhibit B attached hereto.

All representations, warranties and covenants, if any, made in this Deed are made for the sole benefit of Grantee and its successors, assignees and grantees and shall not inure to the benefit of any third party, including any title insurer through subrogation or otherwise.

Dated: , 2012.

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B-1

Signature Page to Special Warranty Deed

From

Scott’s Liquid Gold-Inc., As Grantor

Havana Gold, LLC, As Grantee

SCOTT’S LIQUID GOLD-INC. , a Colorado corporation

By:

Name:

Its:

STATE OF )

) ss.

COUNTY OF )

The foregoing instrument was acknowledged before me this day of , 2012, by as of SCOTT’S LIQUID GOLD-INC., a Colorado corporation.

WITNESS my hand and official seal.

My commission expires:

Notary Public

B-2

EXHIBIT A

To Special Warranty Deed

LEGAL DESCRIPTION

PARCEL A:

THE NORTH 816.59 FEET OF THE SOUTH 1,897.58 FEET OF LOT 3, BLOCK 3,

MONTBELLO NO. 11, EXCEPT THE EASTERLY 8.5 FEET THEREOF,

CITY AND COUNTY OF DENVER, STATE OF COLORADO

PARCEL B:

THE NORTH 799.9 FEET OF THE SOUTH 1,080.99 FEET OF LOT 3, BLOCK 3, EXCEPT

THE EAST 8.5 FEET THEREOF, MONTBELLO NO. 11,

CITY AND COUNTY OF DENVER, STATE OF COLORADO.

PARCEL C:

B-3

EXHIBIT B

To Special Warranty Deed

PERMITTED EXCEPTIONS

B-4

EXHIBIT B-2

ASSIGNMENT AND ASSUMPTION OF LEASES

THIS ASSIGNMENT is made this day of , 2012, by and between SCOTT’S LIQUID GOLD-INC., a Colorado corporation (hereinafter referred to as the “Assignor”), having its office at 4880 Havana Street, Denver, Colorado 80239, and HAVANA GOLD, LLC, a Colorado limited liability company (hereinafter referred to as the “Assignee”), having its office at .

Assignor is the landlord under those leases and rental agreements listed on Schedule 1 to this Assignment (the “Leases,” which term shall include without limitation any guaranties of or similar agreements pertaining to the Leases), demising space in that certain property described on Exhibit A and known as the Scott’s Liquid Gold Campus located in Denver, Colorado (the “Property”).

Assignor is on this date conveying the Property to Assignee pursuant to the terms of a Purchase and Sale Agreement dated , 2012, between Assignor, as Seller, and Assignee, as Purchaser (the “Agreement”).

In consideration of $10.00 and other good and valuable consideration, receipt of which is hereby acknowledged, Assignor and Assignee hereby agree as follows:

1. Assignor hereby assigns to Assignee all of the landlord’s interest in, to and under the Leases, together with Assignor’s right, title and interest as landlord in and to all security deposits and advance rents (paid in lieu of security deposits) paid by the tenants under the Leases and which have not previously been forfeited or applied in accordance with the Leases, and guaranties and similar agreements given in connection with the Leases, and together with the rents and other charges due under the Leases for the period from and after the date of this Assignment, effective as of the date of this Assignment. This Assignment is subject to the provisions of Sections 3.2 and 3.3 of the Agreement.

2. In consideration of the foregoing, Assignee hereby assumes and agrees to perform any and all obligations of Assignor under the Leases which arise and are applicable to the period from and after the date of this Assignment, except as otherwise expressly provided in the Agreement.

3. Except as expressly provided in the Agreement, this Assignment is made without representation, warranty or recourse of any kind, express or implied.

4. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and their respective successors and assigns.

5. This Assignment may be executed by one or more of the parties to this Assignment on any number of separate counterparts, all of which taken together shall be deemed to constitute one and the same instrument.

DATED: , 2012.

B-5

Signature Page to Assignment and Assumption of Leases

From

Scott’s Liquid Gold-Inc., As Assignor

Havana Gold, LLC, As Assignee

ASSIGNOR:

SCOTT’S LIQUID GOLD-INC. , a Colorado corporation

By:

Name:

Its:

Dated:

ASSIGNEE:

HAVANA GOLD, LLC ,

a Colorado limited liability company

By:

Name:

Its:

Dated:

B-6

EXHIBIT A

To Assignment and Assumption of Leases

LEGAL DESCRIPTION OF REAL PROPERTY

PARCEL A:

THE NORTH 816.59 FEET OF THE SOUTH 1,897.58 FEET OF LOT 3, BLOCK 3, MONTBELLO NO. 11, EXCEPT THE EASTERLY 8.5 FEET THEREOF, CITY AND COUNTY OF DENVER, STATE OF COLORADO

PARCEL B:

THE NORTH 799.9 FEET OF THE SOUTH 1,080.99 FEET OF LOT 3, BLOCK 3, EXCEPT THE EAST 8.5 FEET THEREOF, MONTBELLO NO. 11, CITY AND COUNTY OF DENVER, STATE OF COLORADO.

PARCEL C:

B-7

SCHEDULE 1

To Assignment and Assumption of Leases

SCHEDULE OF LEASES

B-8

EXHIBIT B-3

ASSIGNMENT AND ASSUMPTION OF CONTRACTS

KNOW ALL MEN BY THESE PRESENTS, that in consideration of the sum of Ten Dollars ($10) and other good and valuable consideration SCOTT’S LIQUID GOLD-INC., a Colorado corporation, having its office at 4880 Havana Street, Denver, Colorado 80239 (“Assignor”), does hereby convey, sell, assign, transfer, set over and deliver to HAVANA GOLD, LLC, a Colorado limited liability company, having its office at (“Assignee”), all of Assignor’s interest in and to those certain contracts, agreements, equipment leases, and other items (collectively, the “Agreements”) listed on Schedule 1 attached hereto, with respect to the real property described on Exhibit A attached hereto, effective as of the date of this Assignment.

TO HAVE AND TO HOLD the Agreements unto Assignee forever.

In consideration of the foregoing, Assignee hereby assumes and agrees to perform any and all obligations of Assignor under the Agreements which arise and relate to the period from and after the date of this Assignment.

Except as expressly provided in the Purchase and Sale Agreement between Assignor and Assignee, dated , 2012, the foregoing assignment is made without representation, warranty or recourse of any kind.

This Assignment may be executed by one or more of the parties to this Assignment on any number of separate counterparts, all of which taken together shall be deemed to constitute one and the same instrument.

This Assignment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

Dated: , 2012.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

B-9

Signature Page to Assignment and Assumption of Contracts

From

Scott’s Liquid Gold-Inc., As Assignor

Havana Gold, LLC, As Assignee

ASSIGNOR:

SCOTT’S LIQUID GOLD-INC. , a Colorado corporation

By:

Name:

Its:

Dated:

ASSIGNEE:

HAVANA GOLD, LLC,

a Colorado limited liability company

By:

Name:

Its:

Dated:

B-10

EXHIBIT A

To Assignment and Assumption of Contracts

LEGAL DESCRIPTION OF REAL PROPERTY

PARCEL A:

THE NORTH 816.59 FEET OF THE SOUTH 1,897.58 FEET OF LOT 3, BLOCK 3, MONTBELLO NO. 11, EXCEPT THE EASTERLY 8.5 FEET THEREOF, CITY AND COUNTY OF DENVER, STATE OF COLORADO

PARCEL B:

THE NORTH 799.9 FEET OF THE SOUTH 1,080.99 FEET OF LOT 3, BLOCK 3, EXCEPT THE EAST 8.5 FEET THEREOF, MONTBELLO NO. 11, CITY AND COUNTY OF DENVER, STATE OF COLORADO.

PARCEL C:

B-11

SCHEDULE 1

To Assignment and Assumption of Contracts

SCHEDULE OF CONTRACTS

B-12

EXHIBIT B-4

BILL OF SALE

KNOW ALL MEN BY THESE PRESENTS, that SCOTT’S LIQUID GOLD-INC., a Colorado corporation (“Seller”), having its office at 4880 Havana Street, Denver, Colorado 80239, for and in consideration of the sum of $10.00 and other good and valuable consideration, the receipt and sufficiency of which is acknowledged, paid by HAVANA GOLD, LLC, a Colorado limited liability company (“Purchaser”), having its office at , has granted, bargained, sold, transferred and delivered, and does grant, bargain, sell, transfer and deliver unto Purchaser, its successors and assigns, the personal property described on Schedule 1 attached hereto and made a part hereof and all of Seller’s right, title and interest in and to all those items of personal property (collectively, the “Personal Property”) described as follows: (a) to the extent they may be transferred by Seller and are in existence and effect (i) all licenses, permits, approvals and authorizations required for the ownership, use and operation of the real property described on Exhibit A attached hereto and made a part hereof (the “Property”), and (ii) warranties covering any portion of the Property; (b) all existing surveys, blueprints, drawings, plans and specifications (including, without limitation, structural, HVAC, mechanical and plumbing plans and specifications) in Seller’s possession; (c) all tenant lists, lease files, lease booklets, manuals and promotional and advertising materials concerning the Property or used in connection with the operation of the Property, exclusive of any internal books and records of Seller maintained at any of Seller’s offices, internal appraisals and/or evaluations of the Property, budgets and any other privileged or proprietary information; (d) the furniture, fixtures, inventory, equipment, operating supplies, tools, machinery and other personal property which are now located on or attached to the Property; and (e) all other tangible and intangible personal property owned by the Seller and used in connection with the Property; but excluding: (x) any names or marks of Seller or any affiliates of Seller; (y) the accounts and other property reserved by Seller under Section 3.1.e. of the Purchase and Sale Agreement between Seller and Purchaser, dated , 2012; and (z) any personal property used in or related to the conduct of Seller’s business, including without the furniture, fixtures, inventory, equipment, operating supplies, tools, machinery and other personal property located in the computer room on the third floor or on the fourth or fifth floor of the office building commonly known as Building A, or in the warehouses commonly known as Buildings B, C and D.

This Bill of Sale is made without representation, warranty, or recourse, express or implied, except that Seller warrants ownership of the Personal Property described on Schedule 1.

ALL WARRANTIES OF QUALITY, FITNESS AND MERCHANTABILITY ARE HEREBY EXCLUDED.

Dated: , 2012.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

B-13

Signature Page to Bill of Sale

From

Scott’s Liquid Gold-Inc., As Seller

Havana Gold, LLC, As Purchaser

SELLER:

SCOTT’S LIQUID GOLD-INC. , a Colorado corporation

By:

Name:

Its:

Dated:

B-14

EXHIBIT A

To Bill of Sale

LEGAL DESCRIPTION OF REAL PROPERTY

PARCEL A:

THE NORTH 816.59 FEET OF THE SOUTH 1,897.58 FEET OF LOT 3, BLOCK 3, MONTBELLO NO. 11, EXCEPT THE EASTERLY 8.5 FEET THEREOF, CITY AND COUNTY OF DENVER, STATE OF COLORADO

PARCEL B:

THE NORTH 799.9 FEET OF THE SOUTH 1,080.99 FEET OF LOT 3, BLOCK 3, EXCEPT THE EAST 8.5 FEET THEREOF, MONTBELLO NO. 11, CITY AND COUNTY OF DENVER, STATE OF COLORADO.

PARCEL C:

B-15

SCHEDULE 1

To Bill of Sale

SCHEDULED PERSONAL PROPERTY

B-16

EXHIBIT B-5

NON-FOREIGN AFFIDAVIT

AFFIDAVIT PURSUANT TO I.R.C. SECTION 1445 (B) (2)

STATE OF )

) ss:

COUNTY OF )

, being duly sworn, deposes and says:

1. I am the of SCOTT’S LIQUID GOLD-INC., a Colorado corporation (“Owner”) having an office at 4880 Havana Street, Denver, Colorado 80239.

2. This Affidavit is made on behalf of Owner in connection with the sale of certain real property known as the Scott’s Liquid Gold Campus located in Denver, Colorado (the “Property”) from Owner to HAVANA GOLD, LLC, a Colorado limited liability company (“Purchaser”).

3. This Affidavit is made pursuant to Section 1445 (b) (2) of the Internal Revenue Code of 1986, as amended (the “Code”), for the purpose of evidencing an exemption from the requirement imposed by Code Section 1445(a) that the Purchaser deduct and withhold a tax on the disposition of the Property.

4. The Owner is not a “foreign person” or “foreign partnership” as defined in Code Section 1445 (f).

5. The Owner’s U.S. employer identification number is .

6. The Owner’s office address is 4880 Havana Street, Denver, Colorado 80239.

7. The Owner understands that the Purchaser may furnish a copy of this Affidavit to the Internal Revenue Service and that any false statement contained herein could be punished by fine, imprisonment or both.

B-17

Under penalties of perjury, I declare that the facts presented in this Affidavit are, to the best of my knowledge and belief, true, correct and complete and I further declare that I have the authority to sign this document on behalf of the Owner.

SCOTT’S LIQUID GOLD-INC. , a Colorado corporation

By:

Name:

Its:

Dated:

Sworn to before me this day of , 2012.

Notary Public

B-18

EXHIBIT C

TENANT ESTOPPEL LETTER

Ladies and Gentlemen:

You have informed us of a pending conveyance of the project commonly known as Scott’s Liquid Gold Campus, Denver, Colorado (the “Property”) from SCOTT’S LIQUID GOLD-INC., a Colorado corporation and the current owner of the Property (“SLG”) to HAVANA GOLD, LLC, a Colorado limited liability company (“Cherfein”).

For good and sufficient consideration, and for the purposes of providing information to SLG and to Cherfein, regarding the Property and the lease premises (the “Premises”) in which the undersigned is a tenant under that certain lease agreement dated between (“Tenant”) and (such lessor and its successors and assigns are hereinafter referred to as “Landlord”), the undersigned Tenant hereby certifies to both SLG and Cherfein, and to their respective successors and permitted assigns, and agrees that:

1. The Lease, a true and correct copy of which (including all amendments and extensions) is attached hereto as E xhibit “A” , is in full force and effect, is valid and enforceable according to its terms against Tenant and has not been modified, amended, supplemented or changed in any respect, either orally or in writing, except as indicated in this certificate. The Premises contains approximately rentable square feet.

2. a. Term of Lease :

Date of Commencement :

Date of Expiration *:

* (to include any presently exercised option or renewal term)

b. Renewal Options :

Exercised :

Not Exercised :

c. Security Deposit :

d. Guarantor/s (if any) :

3. Tenant has unconditionally accepted possession of the Premises, and all improvements, alterations and other work and parking facilities to be performed or constructed by Landlord under the Lease have been completed as of the date hereof and unconditionally accepted by Tenant.

C-1

4. All rent, charges or other payments due Landlord under the Lease have been paid as of the date of this certificate, and there have been no prepayments of rent or other obligations.

5. Neither Tenant nor, to the best of Tenant’s knowledge, Landlord is in default under any terms of this Lease nor has any event occurred, which with the passage of time (after notice, if any required by the Lease), would become an event of default under the Lease. No event or condition has occurred, which with the passage of time (after notice, if any, required by the Lease), would give rise to any right or option of Tenant to terminate the Lease or discontinue the operation of business from the Premises.

6. Tenant under the Lease has no claims, counterclaims, defenses or setoffs against Landlord arising from the Lease, nor is Tenant entitled to any concession, rebate, allowance or free rent for any period after this certification. As of the date hereof, Tenant is not entitled to any partial or total abatement of rent or other amounts due under the Lease.

7. As of the date hereof, there are no actions, whether voluntary or otherwise, which are pending or have been threatened against Tenant under any bankruptcy or insolvency laws of any State or the United States.

8. Tenant is the actual occupant in possession and has not assigned, transferred or sublet all or any part of the Premises, except as follows: .

9. Tenant has never permitted, and will not permit, the generation, treatment, storage or disposal of any hazardous substance as defined under federal, state or local law on the Premises or the Property except for such substances of a type and only in a quantity normally used in connection with the occupancy or operation of buildings (such as non-flammable cleaning fluids and supplies normally used in the day to day operation of first-class offices), which substances are being held, stored and used in strict compliance with federal, state and local laws.

10. Tenant’s current address for notice under the Lease is: .

11. This certification may not be changed, waived or discharged orally, but only by an agreement in writing.

12. This certificate shall be binding upon, and shall inure to the benefit of Cherfein, Landlord and Tenant, the respective successors and assigns of Cherfein, Landlord and Tenant, and all parties claiming through or under such persons or any such successor or assign.

C-2

IN WITNESS WHEREOF, the undersigned has caused this certificate to be executed as of the day of , 2012.



Tenant

By
Name:
Title:

C-3

EXHIBIT D

SELLER’S CERTIFICATE

Property Name: Scott’s Liquid Gold Campus,

Denver, Colorado

Tenant:

To:	HAVANA GOLD, LLC (“Purchaser”)

Re:

Lease Date:

Between (“Landlord”)

and (“Tenant”)

Square Footage Leased:

Suite No. , Building No.

Floor No.

SCOTT’S LIQUID GOLD-INC. (“Seller”) hereby certifies to Purchaser that to the current actual knowledge of (the employee or agent of Seller who is most knowledgeable about the Leases on the Property), the following with respect to the above-referenced lease (“Lease”):

The Lease has not been cancelled, modified, assigned, extended or amended except as follows:

Rent has been paid to . There is no prepaid rent, except . The amount of security deposit is $ .

The Tenant is currently in occupancy of the Property.

The Lease terminates on and the Tenant has the following renewal option(s):

D-1

All work to be performed for the Tenant under the Lease has been performed as required and has been accepted by Tenant, except .

The Lease is (a) in full force and effect, except ; (b) neither Landlord nor Tenant is in default under the Lease, except ; and (c) Seller has not received any notice that the Tenant has any claims, liens, charges or credits against Landlord or offsets against rent, except .

The Tenant has not assigned or sublet the Lease, except .

There are no other agreements written or oral between the Tenant and Seller with respect to the Lease and or the leased premises and building, except

The undersigned is duly authorized to execute this Certificate on behalf of the Seller.

EXECUTED this day of , 2012.




By:
Title:

D-2

EXHIBIT E

COPIES PROVIDED TO PURCHASER

Seller shall furnish the following to Purchaser, to the extent the same are in existence and are in Seller’s possession, subject to the provisions of Section 2.5d of the Agreement:

1.	Copies of all maintenance and service contracts (i.e., elevator, waste disposal, landscaping, etc.), leasing and sale brokerage agreements, and current Leases.

2.	Copies of all consultant agreements, warranties, guaranties, bonds, any correspondence to or from tenants, and any estoppels related to the current Leases.

Copies of all environmental studies, including Phase I or Phase II environmental studies, and of any engineering, building, architectural or other reports or studies which have been commissioned by Seller, Citywide Banks or any other institutional lender for the Property during the last ten years and which are in Seller’s possession.

Copies of any written claims, demands or notices from any third party which concern or otherwise affect the Property received by Seller during the last three years, including (without limitation), any existing internal list of potential litigation, written notices from any governmental or quasi-governmental body.

5.	A list of major repairs and casualties affecting the Property occurring during the last three years.

6.	Copies of any surveys of the Property.

7.	Copies of all plans and specifications for the buildings and improvements located upon the Property.

8.	Copies of all utility bills for the Property for the past two years.

8.	Copies of paid tax receipts for the Property for the past three years.

10.	Copies of current elevator inspections for any elevators located upon the Property.

11.	Copies of any reports issued by the Fire Marshal regarding inspection of the buildings upon the Property during the past three years.

12.	Copies of all current certificates of occupancy or other permits or licenses related to the ownership or operation of the Property (but not those related to the ongoing operation of Seller’s business therein).

13.	Copies of certificates of insurance currently affecting the Property.

E-1

EXHIBIT F-1

SELLER LEASES

BUILDING A LEASE

REAL PROPERTY LEASE

(BUILDING A)

BY AND BETWEEN

Havana Gold, LLC

LESSOR

AND

SCOTT’S LIQUID GOLD-INC.

LESSEE

4880 Havana Street, Building A , Denver CO 80239

PROPERTY ADDRESS

LEASE AGREEMENT

THIS LEASE AGREEMENT (the “Lease”) is entered into this day of , 201 , by and between Havana Gold, LLC, a Colorado limited liability company (hereinafter referred to as “Lessor”), and Scott’s Liquid Gold-Inc., a Colorado corporation (hereinafter referred to as “Lessee”).

W I T N E S S E T H:

1. PREMISES

Lessor leases to Lessee and Lessee leases from Lessor, upon the terms and conditions as hereinafter set forth, certain premises situated in the City and County of Denver, State of Colorado, consisting of a portion of the office building commonly known and described as Building A, located at 4880 Havana Street, Denver, CO, 80239 (the “Building”), which portion consists of the entirety of the fourth floor of the Building, containing a total of approximately 16,078 square feet of rentable area (hereinafter referred to as the “Premises”), together with (i) any rights of way, easements, and other rights, if any, appurtenant thereto, including without limitation a non-exclusive license to use any portions of the Building or the land on which it is situated that are designated by Lessor for the common use of tenants and others, (ii) the nonexclusive right to use the computer room located on the third floor of the Building for the placement, maintenance, repair, or replacement of its network servers and other computer and telephone equipment, and (iii) the parking rights described below. The Premises are depicted on Exhibit “A” attached hereto and incorporated herein by this reference. Lessee and its employees and invitees shall have the right to use, at no additional charge, a total of (a) eighteen (18) reserved parking spaces in the underground parking garage adjacent to the Building, (b) thirty (30) parking spaces in the surface parking lot located north of the building commonly referred to as Building D (the “North Lot”), and three (3) reserved visitor parking spaces to be designated for Lessee’s visitors, located immediately in front of the Building. The locations of the parking spaces in the North Lot shall be within the first five (5) rows at the south end of the North Lot.

Without limiting the generality of the foregoing, during the term Lessee and Lessee’s agents, officers and employees shall have the right to use the existing cafeteria space located within the Building, but such use shall be limited to the hours of operation and terms of service as are provided to all other users of the cafeteria by the operator of the cafeteria.

2. TERM OF LEASE

The term of this Lease (the “Term”) shall begin on [INSERT CLOSING DATE] , 201 (the “Commencement Date”), and shall expire at midnight on the day before the date that is three (3) years from the Commencement Date, or if the Commencement Date is not the first day of a month, then from the first day of the following month. Lessee shall have two (2) options to extend the Term of the Lease, for renewal terms of three (3) additional years each (each, a “Renewal Term”). Each of these options may be exercised by Lessee providing Lessor with written notice of such exercise no less than ninety (90) days prior to the expiration of the initial Term or the first Renewal Term, as applicable. Lessee’s failure to exercise its option to extend the Term for the first Renewal Term shall automatically cancel the option to extend for a second Renewal Term. The term “Lease Year” means each consecutive twelve-month period beginning with the

Commencement Date, except that if the Commencement Date is not the first day of a calendar month, then the first Lease Year shall be the period from the Commencement Date through the final day of the twelve months after the first day of the following month, and each subsequent Lease Year shall be the twelve months following the prior Lease Year.

3. RENT

Lessee hereby agrees to pay rent (“Base Rent”) to Lessor in the amounts specified below. The first monthly installment shall be payable on the Commencement Date (which shall be prorated for a partial month if the Commencement Date is not the first day of a month), and thereafter on or before the first day of each month of the Term in the following amounts:

For the first Lease Year, the amount of SEVENTEEN THOUSAND FOUR HUNDRED SEVENTEEN AND 83/100 DOLLARS ($17,417.83) per month.

For the second Lease Year, the amount of SEVENTEEN THOUSAND NINE HUNDRED FORTY AND 36/100 DOLLARS ($17,940.36) per month.

For the third Lease Year, the amount of EIGHTEEN THOUSAND FOUR HUNDRED SEVENTY EIGHT AND 58/100 DOLLARS ($18,478.58) per month.

If Lessee elects to extend this Lease for a Renewal Term, the Base Rent shall be as follows:

For the fourth Lease Year, the amount of NINETEEN THOUSAND THIRTY-TWO AND 94/100 DOLLARS ($19,032.94) per month.

For the fifth Lease Year, the amount of NINETEEN THOUSAND SIX HUNDRED THREE AND 93/100 DOLLARS ($19,603.93) per month.

For the sixth Lease Year, the amount of TWENTY THOUSAND ONE HUNDRED NINETY-TWO AND 05/100 DOLLARS ($20,192.05) per month.

For the seventh Lease Year, the amount of TWENTY THOUSAND SEVEN HUNDRED NINETY-SEVEN AND 81/100 DOLLARS ($20,797.81) per month.

For the eighth Lease Year, the amount of TWENTY-ONE THOUSAND FOUR HUNDRED TWENTY-ONE AND 74/100 DOLLARS ($21,421.74) per month.

For the ninth Lease Year, the amount of TWENTY-TWO THOUSAND SIXTY-FOUR AND 39/100 DOLLARS ($22,064.39) per month.

All such payments shall be made to Lessor at Lessor’s address as set forth in this Lease on or before the due date and without demand. Lessee agrees to pay Base Rent in the form of a personal check, cashier’s check, or money order made out to Lessor. All additional amounts other than Base Rent due from Lessee to Lessor shall be referred to herein as “Additional Rent,” and Base Rent and Additional Rent shall together be referred to as “Rent.”

3. LATE PAYMENTS : Base Rent is due on the first day of each month and shall be deemed late on the 6 ^th day of each month. If Base Rent is late more than one time in any calendar year during the Term, then a late fee of five percent (5%) of the delinquent payment shall become payable for any subsequent Base Rent payment during that calendar year that is not received on time. The addition of such late fee and the collection thereof shall not operate to waive any other rights of Lessor for nonpayment of Base Rent or for any other reason.

4. SECURITY DEPOSIT

On the Commencement Date, Lessee shall deposit with Lessor a security deposit in the amount of SEVENTEEN THOUSAND FOUR HUNDRED SEVENTEEN DOLLARS AND NO/100 DOLLARS ($17,417.00).

If, at any time during the Term of this Lease, Lessee shall be in default in the performance of any of the provisions of this Lease beyond any applicable period for notice and cure, Lessor shall have the right but not the obligation to use the security deposit, or as much thereof as Lessor may deem necessary, to cure, or correct or remedy any such default; and Lessee, upon notification thereof, shall forthwith pay to Lessor any and all such expenditure or expenditures so that Lessor will at all times have the full amount of the security deposit. This security deposit and application thereof shall not be considered as liquidated damages in the event of breach but only as application toward actual damages. Upon the termination of this Lease in any manner, if Lessee is not then in default hereunder, the security deposit or so much thereof as has not been lawfully expended by Lessor shall be returned to Lessee.

5. USE OF PREMISES

Lessee shall have the right to use and occupy the Premises for an office space or any such other similar use, provided this use conforms with applicable zoning regulations. Any other use shall be permitted only with the prior written consent of Lessor. Lessee covenants throughout the Term of this Lease, at Lessee’s sole cost and expense, to promptly comply with all laws and ordinances and the orders, rules, regulations and requirements of all federal, state and municipal governments and appropriate departments, commissions, boards and officers thereof (collectively, “Laws”), in each case to the extent applicable to its use of the Premises; provided, however, Lessee will only be required to make structural repairs and alterations which are required by Laws as a direct result of Lessee’s specific use of the Premises (but not if required for general office use).

6. INSURANCE

During the Term of the Lease, Lessee and Lessor shall carry and maintain the following policies of insurance:

a. Lessor’s Insurance . Lessor shall, at its sole cost and expense, obtain and maintain throughout the Term of this Lease cause of loss “special form” insurance (formerly known as “all risk”) on the Building, including the Premises, and any parking facilities, at a minimum full replacement cost of the Building, the Premises (other than Lessee’s Property as defined below), and the parking facilities. Such insurance shall not be required to cover any of Lessee’s inventory, furniture, furnishings, fixtures, or equipment within the Premises (collectively, “Lessee’s Property”), and Lessor shall not be obligated to repair any damage thereto or replace any of same, and Lessee shall have no interest in any proceeds of Lessor’s insurance.

b. Lessee’s Insurance . Lessee shall, at its sole cost and expense, obtain and maintain throughout the Term of this Lease, on a full replacement cost basis, “special form” insurance covering all of Lessee’s Property located on or within the Premises, and Lessor shall have no interest in any proceeds of such policy. In addition, Lessee shall obtain and maintain, at its sole cost and expense, commercial general public liability insurance providing coverage from and against any loss or damage occasioned by an accident or casualty on, about or adjacent to the Premises, including protection against death, personal injury and property damage. Such liability coverage shall be written on an “occurrence” basis, with limits of not less than $2,000,000.00 combined single limit coverage. All policies of liability insurance required to be carried by Lessee hereunder shall name Lessor and its property manager, if any, as additional insureds. To the extent such coverage is available, each such policy shall provide that same shall not be cancelled or materially modified without at least thirty (30) days’ prior written notice to Lessor and any mortgagee of Lessor. The limits of such insurance shall not, under any circumstances, limit the liability of Lessee under this Lease. In the event that Lessee fails to maintain any of the insurance required of it pursuant to this provision, Lessor shall have the right (but not the obligation) at Lessor’s election, after five (5) business days written notice to Lessee, to pay Lessee’s premiums or to arrange substitute insurance with an insurance company of Lessor’s choosing, in which event any premiums advanced by Lessor shall constitute Additional Rent payable under this Lease and shall be payable by Lessee to Lessor immediately upon demand for same.

(c) Mutual Subrogation Waiver . Lessor and Lessee hereby agree to obtain from any insurer providing property insurance coverage to either of them covering the Premises, the Building, the parking facilities or Lessee’s Property, a waiver of any right of subrogation any such insurer of one party may acquire against the other or as against the Lessor or Lessee by virtue of payments of any loss under such insurance, and to cause each such policy to be properly endorsed to reflect such waiver. As requested, the parties shall provide evidence to one another of their respective insurers’ waivers of subrogation hereunder. Notwithstanding anything to the contrary contained in this Lease, each party hereby waives any and all rights to recover from the other and its officers, agents, members, managers and employees for any loss or damage, including consequential loss or damage, caused by any peril or perils (including negligent acts) enumerated in each cause of loss-special risk form property insurance policy required to be maintained by either party hereunder.

d. Miscellaneous . All insurance required by virtue of this Section shall be written with an insurance company licensed to do business within the State of Colorado, with such policies to be non-assessable. Upon request, each party shall provide the other with a certificate of insurance (with proof of payment), evidencing the coverages required hereunder.

7. PAYMENT OF TAXES AND ASSESSMENTS

Lessor shall timely pay all real property taxes, assessments, and similar amounts on the land and Building, but not on Lessee’s Property contained in the Premises.

8. ASSIGNMENT AND SUBLETTING

purposes of this Section, an “affiliate” of Lessee shall mean any entity which, directly or indirectly, controls or is controlled by or is under common control with Lessee, or a successor entity to Lessee by virtue of merger, consolidation, or nonbankruptcy reorganization or the sale of all or substantially all of the assets of Lessee. For purpose of the definition of “affiliate,” the word “control” (including “controlled by” and “under common control with”), as used with respect to any corporation, partnership, or association, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policy of a particular corporation, partnership or association, whether through the ownership of voting securities or by contract or otherwise. Notwithstanding the foregoing, it is understood and agreed that following any assignment or sublease of all or any portion of the Premises, unless the parties shall agree otherwise in writing, Lessee shall remain fully liable for payment of Rent and performance of all of Lessee’s obligations under this Lease.

9. SERVICES AND UTILITIES

Lessor shall furnish services as follows:

a. Heating and Air Conditioning . Lessor shall furnish heating and air conditioning to provide a comfortable temperature for normal business operations (which the parties agree shall be 72°F +/- 2°F), except to the extent Lessee installs equipment which adversely affects the temperature in the Premises maintained by the HVAC system. If Lessee installs such equipment, then, upon ten (10) days written notice to Lessee containing information supporting Lessor’s claim that Lessee’s equipment is affecting the temperature in the Premises, Lessor may install supplementary air conditioning units in the Premises, and Lessee shall pay to Lessor within thirty (30) days following demand as Additional Rent the reasonable cost of installation, operation and maintenance thereof.

b. Elevators . Lessor shall provide passenger elevator service during normal business hours to Lessee in common with Lessor and all other tenants. Lessor shall provide limited passenger elevator service at other times, provided Lessee shall have at least one (1) passenger elevator available for service to the Premises 24 hours per day, seven (7) days per week, except in case of an event beyond Lessor’s reasonable control.

c. Electricity . Lessor shall provide sufficient electricity to operate normal office lighting and equipment 24 hours per day, seven (7) days per week, as well as lighting replacement for building standard lights. Lessee shall not install or operate in the Premises any electrically operated equipment or other machinery, other than business machines, computers, telephones, and equipment normally employed for general office use which do not require high electricity consumption for operation, without obtaining the prior written consent of Lessor, which shall not be unreasonably withheld, conditioned or delayed.

d. Water . Lessor shall furnish hot and cold tap water for drinking and toilet purposes.

e. Janitorial Service . Lessor shall furnish janitorial service not less than five (5) days per week (excluding holidays), as generally provided to other tenants in the Building, including without limitation office cleaning, restroom supplies, window washing, and trash pickup in a manner that such services are customarily furnished to comparable office buildings in the area.

f. Access . Lessor shall provide access to the Premises, the Building and the parking facilities, subject to such security card system as Lessor may establish from time to time, twenty-four (24) hours per day, seven (7) days per week.

g. Security . Lessor shall provide standard security services comparable to other office buildings in the area.

h. Interruption of Services . If any of the Building equipment or machinery ceases to function properly for any cause, Lessor shall use reasonable diligence to repair the same promptly. Lessor’s inability to furnish, to any extent, the Building services set forth in this Section, or any cessation thereof resulting from any causes, including without limitation any entry for repairs pursuant to this Lease, and any renovation, redecoration or rehabilitation of any area of the Building shall not render Lessor liable for damages to either person or property or for interruption or loss to Lessee’s business, nor be construed as an eviction of Lessee, nor work an abatement of any portion of Rent, nor relieve Lessee from fulfillment of any covenant or agreement hereof, unless caused by the negligence or misconduct of Lessor or its employees, agents or contractors. However, in the event that an interruption of the Building services set forth in this Section is within Lessor’s reasonable control and such interruption causes the Premises or some portion thereof to be unusable for the purpose of conducting Lessee’s business therein for a period of at least three (3) consecutive business days, monthly Rent shall be abated proportionately for the period beginning on the first day of the service interruption until such services are restored.

10. PROPERTY MAINTENANCE/ CONDITION OF PREMISES

Lessee has inspected and accepts the Premises in their present condition and acknowledges the Premises are tenantable and in good condition. Lessor shall, at its own cost and expense, maintain, repair and keep in good order Building, the common areas and the parking areas, including without limitation the interior and exterior of the Premises and each and every part thereof and all appurtenances thereof, including but not limited to glass, doors, sidewalks, yards areas, fences, curbs, paving, roof, wiring, plumbing, sewer systems, heating, air cooling installations, elevators, boilers, machinery, and other parts of the Building, except for the repair obligations of Lessee as set forth in Sections 10c(1) and 10c(2).

Lessee shall not permit, commit to suffer waste, impairment or deterioration of the Premises or improvements thereon or any part thereof beyond reasonable wear and tear expected.

a. Lessor’s Obligations .

In the event this Article 10 provides for Lessor’s responsibility for certain repairs and maintenance, Lessor shall be responsible for: (i) any repairs, replacements, restorations, or maintenance that have been necessitated by reason of ordinary wear and tear, (ii) any repairs, replacements, restorations, or maintenance that have been necessitated by the neglect, misuse, or abuse of Lessor, its agents, employees, customers, licensees, invitees, or contractors, and (iii) any repairs, replacements, restorations, or maintenance that have been necessitated by sudden natural forces, or acts of God, or by fire or other casualty not caused by Lessee. The cost of any maintenance, repairs, or replacements necessitated by the neglect, misuse, or abuse of Lessee, its agents, employees, customers, licensees, invitees, or contractors shall be paid by Lessee to Lessor promptly upon billing. Lessor shall use reasonable efforts to cause any necessary repairs to be made promptly; provided, however, that Lessor shall have no liability whatsoever for any delays beyond Lessor’s reasonable control in causing such repairs to be made, including, without limitation, any liability for injury to or loss of Lessee’s business, nor, except as provided above in Section 9.h, shall any delays entitle Lessee to any abatement of Base Rent or Additional Rent or damages, or be deemed an eviction of Lessee in whole or in part.

b. Lessee’s Allowed Responsibilities .

In the event this Article 10 provides for Lessor’s responsibility for certain repairs and maintenance, Lessee shall not perform or contract with third parties to perform any such repairs upon the Premises or Building. In the event any repair that is the responsibility of Lessor becomes necessary, Lessee shall notify Lessor as soon as possible, and allow reasonable time for the work to be completed. Any unauthorized work performed or contracted for by Lessee will be at the sole expense of Lessee, except for work that Lessee performs or contracts for in order to correct or mitigate an emergency situation, if Lessee has made reasonable efforts to contact Lessor regarding the emergency and has been unable to do so.

c. Lessee’s Obligations .

(1) Except for services or repairs and maintenance for which Lessor is obligated pursuant to Articles 9 and 10 hereof, Lessee, at Lessee’s sole expense, shall maintain in good order, condition and repair, ordinary wear and tear excepted, the following portions of the Premises: the interior surfaces of the ceilings and walls and the painting of such surfaces, the interior surfaces of the floors and all floor coverings (including carpet, pad, tile, vinyl and other floor coverings), all doors, all interior windows and interior window blinds, draperies and other window coverings, all plumbing, pipes and fixtures that solely serve the Premises, electrical wiring, switches and fixtures that solely serve the Premises, and special items and equipment installed by or at the expense of Lessee that solely serve the Premises.

(2) Lessee shall be responsible for all repairs and alterations in and to the Premises and Building and the facilities and systems thereof, the need for which arises out of (i) the installation, removal, use or operation of Lessee’s Property in the Premises, (ii) the moving of Lessee’s Property into or out of the Building, or (iv) the, neglect, misuse, or abuse of Lessee, its agents, contractors, employees or invitees.

(3) If Lessee fails to maintain those portions of the Premises which it is required to maintain hereunder in good order, condition and repair, ordinary wear and tear excepted Lessor shall give Lessee notice to do such acts as are reasonably required to so maintain the Premises. If Lessee fails to promptly commence such work and diligently prosecute it to completion, then Lessor shall have the right to do such acts and expend such funds at the expense of Lessee as are reasonably required to perform such work. Any amount so expended by Lessor shall be paid by Lessee promptly after demand with interest at the prime commercial rate as published in the W all Street Journal for the date such work was completed plus two percent (2%) per annum, from the date such work was completed until paid, but not to exceed the maximum rate then allowed by law. Lessor shall have no liability to Lessee for any damage, inconvenience, or interference with the use of the Premises by Lessee as a result of performing any such work, unless caused by the neglect, misuse, or abuse of Lessor, its agents, employees, or contractors,.

(4) Waste/ Rubbish Removal: Lessee shall not lay waste to the Premises. Lessee shall not perform any action or practice that may injure the Premises or Building. Subject to Lessor’s obligation to provide janitorial services including trash pickup to the Premises, Lessee shall keep the Premises, the Building and the real property surrounding the Building free and clear of all debris, garbage, and rubbish.

11. INDEMNITY PROVISIONS

Without limitation of any other provisions hereof and to the extent not prohibited by law, Lessee agrees to defend, protect, indemnify and save harmless Lessor and its partners, and its and their partners, venturers, managers, officers, agents, servants and employees, affiliated limited liability companies, and other affiliated entities from and against all claims, liabilities, losses, damages or expenses made against or incurred by Lessor attributable to the negligence, willful misconduct or breach of this Lease by Lessee or its partners, officers, servants, agents, employees, contractors, suppliers, licensees, visitors, workmen or invitees. Without limitation of any other provisions hereof and to the extent not prohibited by law, Lessor agrees to defend, protect, indemnify and save harmless Lessee and its members, partners, venturers, managers, officers, agents, shareholders, servants and employees from and against all claims, liabilities, losses, damages or expenses made against or incurred by Lessee attributable to the negligence, willful misconduct or breach of this Lease by Lessor or its partners, officers, servants, agents, employees, contractors, suppliers, licensees, visitors, workmen or invitees. The indemnifications set forth in this Section shall survive termination of this Lease.

12. OCCUPATIONAL SAFETY AND HEALTH ACT

Lessee shall fully comply with the Occupational Safety and Health Act of 1970 (as amended) (Chapter XVII, Title XIX of the United States Code) (OSHA) or applicable state statute adopted pursuant to OSHA. Lessee shall fully comply with the provisions and standards as contained in OSHA (as the same may be amended) and Lessee shall hold Lessor harmless from any obligations or responsibilities required under OSHA with respect to Lessee’s activities within or occupancy of the Premises.

13. ALTERATIONS TO PREMISES/ LESSEE IMPROVEMENTS

Unless otherwise provided in the Lease, Lessee shall be solely responsible for any and all improvements and alterations within the Premises necessary for Lessee’s intended use of the Premises, which are not otherwise the responsibility of Lessor as provided for elsewhere in the Lease. Lessee agrees to submit to Lessor complete plans and specifications, including engineering, mechanical, and electrical plans and specifications, covering any and all subsequent improvements or alterations of the Premises. The plans and specifications shall be in such detail as Lessor may reasonably require, and in compliance with all applicable Laws. As soon as reasonably feasible thereafter, Lessor shall notify Lessee of whether it approves the plans, and if not, of the specific reasons for such disapproval. Lessee shall use reasonable efforts to cause Lessee’s plans to be revised to the extent necessary to obtain Lessor’s approval. Except as set forth in the next sentence, Lessee shall not commence any improvements, or alterations of Premises until Lessor has approved Lessee’s plans, which approval shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, Lessee shall have the right to install new carpeting within the Premises, to paint the interior of the Premises, or to install phone and data cabling within or leading to the Premises without obtaining the prior written consent of Lessor, and shall also have the right to make other non-structural alterations within the Premises without obtaining the prior written consent of Lessor, but with prior notice to Lessor, so long as such alterations do not affect the structural integrity of the Building, or any part of the heating, ventilating, air conditioning, plumbing, mechanical, electrical, communication or other systems of the Building, and so long as such alterations are not visible from the exterior of the Premises and do not cost more than an aggregate amount per year of $10,000 (collectively, “Minor Alterations”).

14. LESSEE WORK / COMPLIANCE WITH CODES/ MECHANIC’S LIENS

Lessee shall procure all necessary permits before undertaking any alterations, improvements or repairs within the Premises (collectively, “Lessee Work”). Lessee shall perform all Lessee Work in a good and workmanlike manner. Lessee shall use materials of good quality and perform Lessee Work only with contractors previously approved of in writing by Lessor (other than Minor Alterations, for which Lessor’s prior approval of the contractor shall not be necessary). Lessee shall comply with all Laws applicable to the Lessee Work, including, but not limited to, building, health, fire, and safety codes. Lessee hereby agrees to hold Lessor and Lessor’s agents harmless and indemnified from all injury, loss, claims, or damage to any person or property (including the cost for defending against the foregoing) occasioned by, or growing out of Lessee Work. Lessee shall promptly pay when due the entire cost of any Lessee Work on the Premises undertaken by Lessee, so that the Premises shall at all times be free of liens for labor and materials. Lessee hereby agrees to indemnify, defend, and hold Lessor harmless of and from all liability, loss, damages, costs, or expenses, including reasonable attorneys’ fees, incurred in connection with any claims of any nature whatsoever for work performed for, or materials, or supplies furnished to Lessee, including lien claims of laborers, materialmen, or others. Should any such liens be filed or recorded against the Premises or the Building with respect to work done for, or materials supplied to, or on behalf of Lessee, or should any action affecting the title thereto be commenced, Lessee shall cause such liens to be released of record within ten (10) business days after notice thereof. If Lessee desires to contest any such claim of lien, Lessee shall nonetheless cause such lien to be released of record by the posting of adequate security with a court of competent jurisdiction as may be provided by Colorado’s mechanic’s lien statutes. If Lessee shall be in default in paying any charge for which such mechanic’s lien or suit to foreclose such lien has been recorded or filed and shall not have caused the lien to be released as aforesaid, Lessor may (but without being required to do so) pay such lien or claim and any associated costs, and the amount so paid, together with reasonable attorneys’ fees incurred in connection therewith, shall be immediately due from Lessee to Lessor as Additional Rent.

15. CONDEMNATION

a. Complete Taking . If during the Term of this Lease, or any extension hereof, the whole or substantially all of the Premises shall be taken as a result of the exercise of power of eminent domain, this Lease shall terminate as of the date of vesting of title to the Premises or delivery possession, whichever shall first occur, pursuant to such proceeding. For the purpose of this Article 15, “substantially all of the Premises” shall be deemed to have been taken under any such proceeding that involves such an area, whether the area be improved with a building or be utilized for a parking area or for other use, that Lessee cannot reasonably operate in the remainder of the Premises the business being conducted on the Premises at the time of such proceeding.

b. Partial Taking . If, during the Term of this Lease, or any extension hereof, less than the whole or less than substantially all of the Premises shall be taken in any proceeding, so that Lessee can continue to reasonably operate in the remainder of the Premises the business being conducted on the Premises at the time of such proceeding, this Lease shall terminate as to the portion so taken. The Rent thereafter due and payable by Lessee shall be reduced in such proportion as the nature, value and extent of the part so taken bears to the whole of the Premises. Lessor shall, from the proceeds of the condemnation, promptly restore the Premises for the use of Lessee.

c. Award . Any award granted for either partial or complete taking regarding the Premises shall be the property of Lessor; provided that the foregoing shall not in any way restrict Lessee from asserting a claim in a separate proceeding against the condemning authority for any compensation or damages resulting from the taking of Lessee’s Property or any leasehold improvements of Lessee or for moving expenses or business relocation expenses incurred as a result of such taking.

16. DESTRUCTION OF PREMISES

a. Termination Rights; Casualty Determination .

i. If the Premises are damaged by fire or other casualty which renders all or a Substantial Portion (as hereinafter defined) of the Premises unusable for Lessee’s normal business operations and the damage is so extensive that the Casualty Determination (as defined in Subparagraph iii below) determines that the Premises cannot, with the exercise of reasonable diligence, be made usable for Lessee’s normal operations within 180 days from the date of the Casualty Determination, then, at the option of Lessee exercised in writing to Lessor within 30 days of the Casualty Determination, this Lease shall terminate as of the occurrence of such damage; provided, however, Lessee may not terminate this Lease if the damage is caused by the intentional, criminal or otherwise uninsurable acts of Lessee or its agents, contractors or employees. For purposes of this Lease, “Substantial Portion” means twenty-five percent (25%) or more of the total area of the Premises.

ii. If the Premises are damaged by fire or other casualty and (A) the damage is so extensive that the Casualty Determination determines that rebuilding or repairs cannot be completed on or before the date which is 12 months prior to the expiration of the Term, or (B) the cost of rebuilding or repairs would exceed the insurance proceeds received or recoverable by Lessor and available for funding the cost of such rebuilding or repairs by more than ten percent (10%) of the replacement cost thereof, then, at the option of Lessor exercised in writing to Lessee within 30 days of the Casualty Determination or the date Lessor receives final confirmation of the determination of available insurance proceeds, as applicable, this Lease shall terminate as of the occurrence of such damage; provided, however, Lessor may not terminate this Lease if the damage is caused by the gross negligence or willful misconduct of Lessor or its agents, contractors or employees.

iii. The cost of rebuilding and repair and the number of days within which the Premises can be rebuilt or repaired (the “Estimated Repair Timeframe”) shall be determined by an independent contractor mutually acceptable to Lessor and Lessee (the “Casualty Determination”). The Casualty Determination shall be made within 60 days after the happening of the casualty.

iv. In the event this Lease is terminated pursuant to this Section 16a, Lessee shall pay Rent duly apportioned up to the time of such casualty and forthwith surrender the Premises and all interest therein to Lessor. Upon surrender of the Premises and all interest therein by Lessee, the parties shall be released from all obligations and liabilities arising thereafter, except for those obligations which expressly survive termination of this Lease.

b. Repair and Restoration .

i. If the Premises are damaged by fire or other casualty and this Lease cannot be or is not terminated pursuant to Section 16a above, then subject to the rights of any mortgagee, Lessor shall, at Lessor’s sole cost and expense, rebuild or repair the Premises (but excluding Lessee’s Property or any Lessee’s Work) in compliance with all applicable Laws and otherwise to substantially the condition that existed as of the Commencement Date; provided, however, Lessor shall not be required to expend more than the insurance proceeds received from such casualty plus ten percent (10%) of the replacement cost of the

Premises. Notwithstanding the foregoing, in the event Lessor has not received final confirmation of the determination of available insurance proceeds and provided written notice thereof to Lessee within 90 days after the Casualty Determination, Lessee shall have the right to terminate this Lease by delivery of written notice thereof to Lessor within 15 days after receipt of Lessor’s notice and, upon surrender of the Premises and all interest therein by Lessee, the parties shall be released from all obligations and liabilities arising thereafter, except for those obligations which expressly survive termination of this Lease.

ii. In the event Lessor is required to rebuild and repair the Premises pursuant to this Section 16b, Lessor shall: (A) commence such rebuilding and repair within 45 days after the date Lessor receives final confirmation of the determination of available insurance proceeds, and (B) pursue diligently such rebuilding and repair to completion. If Lessor fails to repair and restore the Premises within 60 days after the Estimated Repair Timeframe, then Lessee shall have the right to terminate this Lease by delivery of written notice thereof to Lessor and, upon surrender of the Premises and all interest therein by Lessee, the parties shall be released from all obligations and liabilities arising thereafter, except for those obligations which expressly survive termination of this Lease.

iii. Rent shall abate from the date of the casualty until the completion of the repair and restoration in the same proportion that the part of the Premises rendered unusable bears to the whole; provided, however, if the casualty is the result of the intentional, criminal or otherwise uninsurable acts of Lessee or its agents, contractors or employees, then the Rent will abate during any such period of repair and restoration but only to the extent of any recovery by Lessor under its rental insurance related to the Premises. During any period of repair and restoration, Lessor shall use reasonable efforts to minimize disruption of Lessee’s use of the Premises.

17. DEFAULT PROVISIONS

The occurrence of any one or more of the following events shall constitute a default and breach of this Lease by Lessee:

a. Failure to Pay Base Rent . Lessee failing to pay the Base Rent herein reserved when due; unless the failure is cured within five (5) business days after written notice by Lessor; however, Lessee is not entitled to more than two notices of delinquent payments of Base Rent during any Lease Year and, if thereafter during that Lease Year any Base Rent is not paid when due, a default shall automatically occur;.

b. Failure to Pay Additional Rent . Lessee failing to make when due any other payments constituting Additional Rent required to be made by Lessee, where such failure continues for a period of fourteen (14) days following written notice from Lessor to Lessee.

c. Failure to Keep Covenants . Lessee failing to perform or keep any of the other terms, covenants and conditions herein contained for which it is responsible, and such failure continuing and not being cured for a period of thirty (30) days after written notice from Lessor to Lessee, or if such default is a default which cannot be cured within a 30 day period, Lessee’s failing to commence to correct the same within said 30 day period and thereafter failing to prosecute the same to completion with reasonable diligence.

d. Abandonment . Lessee abandoning the Premises.

e. Assignment for Benefit of Creditors . Lessee making any general assignment or general arrangement of its property for the benefit of its creditors.

f. Bankruptcy . Lessee under this Lease shall file a petition under any section or chapter of the Bankruptcy Code, as amended, or under any similar law or statute of the United States or any state thereof, and the petition either remains undismissed for a period of sixty (60) days or results in the entry of an order for relief against Lessee which is not fully stayed within ten (10) days after entry, or Lessee shall be adjudged bankrupt or insolvent in proceedings filed against Lessee.

18. REMEDIES

In the event of an occurrence of default beyond applicable notice and cure periods as set forth herein, Lessor shall have the right to:

a. Terminate Lease . Terminate this Lease and end the Term hereof by giving Lessee notice of such termination, in which event Lessor shall be entitled to recover from Lessee at the time of such termination the present value of the excess, if any, of the amount of Base Rent reserved in this Lease for the then balance of the Term hereof over the then reasonable rental value of the Premises for the same period, both discounted to present value at the rate of five percent (5%) per annum. It is understood and agreed that the “reasonable rental value” shall be the amount of rental which Lessor may be expected to obtain as rent for the remaining balance of the initial Term or Renewal Term, whichever is applicable; or

b. Sue monthly . Without resuming possession of the Premises or terminating this Lease, to sue monthly for and recover all rents, other required payments due under this Lease, and other sums including damages and legal fees at any time and from time to time accruing hereunder; or

c. Repossess Premises . Reenter and take possession of the Premises or any part thereof and repossess the same as of Lessor’s former estate, and expel Lessee and those claiming through or under Lessee and remove the effects of both through process of law, without being deemed guilty in any manner of trespass and without prejudice to any remedies for Rent delinquencies or preceding Lease defaults. Under such circumstances, Lessor may bar entry to Lessee, and may, from time to time, without terminating this Lease, relet the Premises or any part thereof for such term or terms and at such rental or rentals and upon such other terms and conditions as Lessor may deem advisable, with the right to make alterations and repairs to the Premises, and such re-entry or taking of possession of the Premises by Lessor shall not be construed as an election on Lessor’s part to terminate this Lease unless a written notice of termination be given to Lessee or unless the termination thereof be decreed by a court of competent jurisdiction. In the event of Lessor’s election to proceed under this Subparagraph c, then such repossession shall not relieve Lessee of its obligation and liability under this Lease, all of which shall survive such repossession, and Lessee shall pay to Lessor as current liquidated damages the Base Rent and Additional Rent and other sums hereinabove provided which would be payable hereunder if such repossession had not occurred, less the net proceeds (if any) of any reletting of the Premises after deducting all of Lessor’s expenses in connection with such reletting, including but without limitation all repossession costs, brokerage commissions, legal expenses, attorney’s fees, expense of employees, alteration costs (including but not limited to any and all costs associated with Lessee’s failure to properly maintain the property as described in Section 10) and expenses of preparation for such reletting. Lessee shall pay such current damages to Lessor on the days on which the Base Rent would have been payable hereunder if possession had not been retaken, and Lessor shall be entitled to receive the same from Lessee on each such day. Notwithstanding anything to the contrary in this Section 18, Lessor shall use reasonable efforts to attempt to mitigate its damages and to attempt to promptly relet the Premises at a fair market rental.

19. HOLD OVER

Any rule or law to the contrary notwithstanding, in the event Lessee remains in possession of the Premises or any part thereof subsequent to the expiration of the Term hereof and such holding over shall be with the consent of Lessor, it shall be conclusively deemed that such possession and occupancy shall be a tenancy from month-to-month only, at a monthly rent equal to 125% of the monthly rate for Base Rent and Additional Rent which was existing at the end of the Term hereof and, further, such possession shall be subject to all of the other terms and conditions (except any option to renew or option to purchase) contained in this Lease.

20. SUBORDINATION AND ESTOPPEL LETTER

This Lease is subject and subordinate to all mortgages and deeds of trust which now or hereafter may affect the Premises, and Lessee shall, within ten (10) business days after receipt thereof, execute and deliver upon demand of Lessor any and all instruments desired by Lessor subordinating this Lease in the manner requested by Lessor to any new or existing mortgage or deed of trust. Any holder of a mortgage or deed of trust may rely upon the terms and conditions of this paragraph. Lessor agrees it shall cause any present or future mortgagee or holder of a deed of trust to deliver to Lessee a non-disturbance agreement, in a form then in use by such present or future mortgagees or holders and which shall be reasonably acceptable to Lessee, providing that as long as Lessee is current and not in default, the mortgagee or holder shall not disturb the tenancy of Lessee. Further, Lessee shall at any time and from time to time, upon not less than ten (10) business days prior written notice from Lessor, execute, acknowledge and deliver to Lessor a statement in writing certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified is in full force and effect) and the dates to which rental and other charges are paid in advance, if any, and acknowledging that there are not, to the then current actual knowledge of the employee of Lessee executing the certificate, any uncured defaults on the part of Lessor hereunder, or specifying such defaults, if any are claimed. Lessee shall attorn to any purchaser at any foreclosure sale or to any grantee or transferee designated in any deed given in lieu of foreclosure.

21. SURRENDER OF PREMISES

Upon the expiration or termination of the Term of this Lease, Lessee shall peaceably and quietly leave and surrender the Premises in as good condition as they are upon execution hereof, ordinary wear and tear and damage by fire or other casualty excepted. Lessee shall surrender and deliver the Premises broom clean and free of Lessee’s Property. Provided Lessee is not in default beyond any applicable period for notice and cure, it shall have the right to remove all of Lessee’s Property, and Lessee shall repair any damage to the Premises caused by such removal. Further, in the event Lessee does not remove any of Lessee’s Property, or any additions or alterations made to the Premises during the Term of this Lease that Lessor indicated would need to be removed at the time it approved the plans therefor, then Lessor may, at its option, either (a) require Lessee to remove any such Lessee’s Property or alterations or additions and restore the Premises to the condition as existed at the commencement of the Lease, ordinary wear and tear and damage by fire or other casualty excepted, or (b) retain the same. If, following request for removal of Lessee’s Property, Lessee fails to do so, then the costs incurred by Lessor to remove such property and repair the Premises shall be recoverable by Lessor as Additional Rent due under this Lease. Lessee shall not be otherwise required to remove any improvements, alterations or additions, or to restore the Premises to the condition they were in prior to installation of the same.

22. NOTICES

All notices required or permitted under this Agreement shall be given by registered or certified mail, postage prepaid, by recognized overnight courier, or by hand delivery, directed as follows:

If intended for Lessee, to:

SCOTT’S LIQUID GOLD-INC.

4880 Havana Street

Denver, Colorado 80239

Attn: Barry J. Levine

E-mail: blevine@slginc.com

with a copy to:

SCOTT’S LIQUID GOLD-INC.

4880 Havana Street

Denver, Colorado 80239

Attn: Mark E. Goldstein

E-mail: mgoldstein@slginc.com

If intended for Lessor, to:

Havana Gold, LLC

3535 Larimer Street

Denver, CO 80205

Attn: Andrew Feinstein

E-mail: afeinstein@exdomanagement.com

23. TIME OF THE ESSENCE

Time is of the essence hereof.

24. QUIET ENJOYMENT

Lessor represents and warrants that:

a. Authority . Lessor has the right to enter into and make this Lease.

b. Peaceful Possession . Lessee, upon paying the Rent herein reserved and upon performing all of the terms and conditions of this Lease on its part to be performed, shall at all times during the Term herein demised peacefully and quietly have, hold and enjoy the Premises.

Lessee accepts the Premises subject to all zoning ordinances and regulations pertaining to the Premises, without responsibility or warranty by Lessor, and further Lessee accepts the Premises subject to easements, rights-of-way, restrictive covenants and reservations of record.

25. RIGHT TO INSPECT OR SHOW PREMISES

Lessor, or Lessor’s agent and representative, shall have the right to enter into and upon the Premises or any part thereof at all reasonable hours for the purpose of examining the same, upon reasonable prior telephonic notice to Lessee and accompanied by a representative of Lessee (except in cases of actual or suspected emergency, in which case no prior notice and no accompaniment by a Lessee representative shall be required).

Lessor, or Lessor’s agent and representative, shall have the right to show the Premise to prospective purchasers, or during the last six (6) months of the Term to prospective tenants, upon reasonable prior notice to Lessee and during business hours. During the 90-day period prior to the expiration of this Lease, Lessor, or Lessor’s agent and representative, shall have the right to place the usual “for rent” or “for sale” notices on the Premise, and Lessee agrees to permit the same to remain thereon without hindrance or molestation.

26. LIMITATIONS ON LESSOR’S LIABILITY

Notwithstanding anything to the contrary contained in this Lease, in the event of any default or breach by Lessor with respect to any of the terms, covenants and conditions of this Lease to be observed, honored or performed by Lessor, Lessee shall look solely to the estate and property of Lessor in the land and Building owned by Lessor, including proceeds of sale, insurance, condemnation and rental income from the Building, for the collection of any judgment (or any other judicial procedures requiring the payment of money by Lessor) and no other property or assets of Lessor shall be subject to levy, execution, or other procedures for satisfaction of Lessee’s remedies.

27. SIGNS

a. Exterior Signs . Lessee shall not place or suffer to be placed on the exterior walls of the Premises or upon the roof or any exterior door or wall or on the exterior or interior of any window thereof any sign, awning, canopy, marquee, advertising matter, decoration, letter or other thing of any kind without the prior written consent of Lessor. Lessor acknowledges and agrees that Lessee may, subject to the approval of the appropriate governmental authorities and Lessor (with respect to size, color, type, format, design and location), install a sign with Lessee’s logo on the Building; provided, however, the foregoing shall not be in place of or in derogation of any of Lessor’s Building signage and the failure or refusal of any governmental entity to approve Lessee’s logo sign shall not constitute an event of default, a claim for damages or a ground for Lessee to

terminate this Lease. In addition, if Lessor installs a monument sign outside of the Building, Lessee shall be permitted to install a sign with Lessee’s logo on such monument sign, which shall be at least as prominent as the sign of any other tenant. Permits for Lessee’s signs and their installation shall be obtained by Lessee at its expense. All signs shall be constructed and installed at Lessee’s expense. Signs shall be permitted only within the areas designated by Lessor. All penetrations of the Building structure required for sign installation shall be neatly sealed in watertight condition and properly maintained. Lessee shall cause to be repaired any damage caused by its sign contractor or sign installation. Other than the exterior Building sign permitted above, Lessor hereby reserves the exclusive right to the use for any purpose whatsoever of the roof and exterior of the walls of the Premises or the Building. In the event Lessee shall install any sign which has not been approved by Lessor, Lessor shall have the right and authority without liability to Lessee to enter upon the Premises, remove and store the subject sign and repair all damage caused by the removal of the sign. All costs and expenses incurred by Lessor in effecting such removal and storage shall be paid by Lessee as Additional Rent within thirty (30) days after presentation of an invoice therefor. Lessor reserves the right to temporarily remove Lessee’s sign if necessary during any period when Lessor repairs, restores, constructs or renovates the Premises or the Building.

b. Interior Signs . Except as otherwise herein provided, Lessee shall have the right, at its sole cost and expense, to erect and maintain within the interior of the Premises all signs and advertising matter customary or appropriate in the conduct of Lessee’s business; provided that no advertising placards, banners, pennants, names, insignia, trademarks, or other descriptive material shall be affixed or maintained upon the glass panes and supports of the windows and doors, or upon the exterior walls of the Building. Lessee shall upon demand of Lessor immediately remove any sign, advertisement, decoration, lettering or notice which Lessee has placed or permitted to be placed in, upon or about the Premises which is visible from the exterior thereof and which Lessor reasonably deems objectionable or offensive, and if Lessee fails or refuses so to do, Lessor may enter upon the Premises and remove the same at Lessee’s cost and expense. In this connection, Lessee acknowledges that the Premises is a part of the integrated office areas of the Building and agrees that control of all signs by Lessor is essential to the maintenance of uniformity, propriety and the aesthetic values in or pertaining to the Building. Lessor shall install a directory in the lobby of the Building that displays Lessee’s name and location within the Building, as well as the names and locations of other office tenants.

28. MISCELLANEOUS

a. Choice of Law . This Lease has been executed and delivered in the State of Colorado and shall be construed in accordance with the laws of the State of Colorado.

b. Headings and Captions . The parties mutually agree that the heading and captions contained in this Lease are inserted for convenience of reference only and are not to be deemed part of or to be used in construing this Lease.

c. Binding Effect . The covenants and agreements herein contained shall be binding upon and inure to the benefit of both Lessor and Lessee and their respective successors and assigns.

d. Construction of terms . Words of any gender used in this Lease shall be held to include any other gender, and words in the singular shall be held to include the plural, as the identity of Lessor or Lessee requires.

e. Amendments. This Lease may be modified or amended only by written instrument executed by all of the parties hereto.

29. NO WAIVER

No waiver by either party of any provision hereof shall be deemed a waiver of any other provisions hereof or of any subsequent breach by the other party of the same or any other provision. Lessor’s consent to or approval of any act shall not be deemed to render unnecessary the obtaining of Lessor’s consent to or approval of any subsequent act by Lessee. The acceptance of Rent hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of any provisions hereof, other than the failure of Lessee to pay the particular Rent so accepted, regardless of Lessor’s knowledge of such preceding breach at the time of acceptance of such Rent.

30. VENUE AND ATTORNEY’S FEES

The parties hereto agree that (i) the venue and jurisdiction of any litigation pertaining to the enforcement or interpretation of this Lease shall be vested exclusively in the District Court for the City and County of Denver, Colorado, and (ii) the prevailing party in such litigation shall be entitled to recover its reasonable attorney fees and costs in an amount to be determined by the court. Each of the parties hereto does hereby WAIVE TRIAL BY JURY in any action or proceeding of any kind or nature pertaining to the enforcement or interpretation of this Lease in which action either of the parties (or their respective assignees or successors in interest) are joined as litigants.

31. INTEREST ON PAST DUE OBLIGATIONS

Any amount due to Lessor not paid when due shall bear interest at the rate of eight percent (8%) per annum from the date due; provided, however, that any such payment of interest shall not excuse or correct any default by Lessee under this Lease.

32. MEMORANDUM OF LEASE

Either party, upon request from the other party, shall execute in recordable form a short form Memorandum of Lease, which Memorandum of Lease shall only contain the names of the parties and the Commencement Date and date of expiration of the Term of this Lease (or any options which may be granted hereunder), and the legal description of the Premises.

33. SEVERABILITY

If any sentence, paragraph or article of this Lease is held to be illegal or invalid, this shall not affect in any manner those other portions of the Lease not illegal or invalid and this Lease shall continue in full force and effect as to those provisions.

34. CONFIDENTIALITY

consent, and the consent by such party to any disclosures shall not be deemed to be a waiver on the part of such party of any prohibition against any future disclosure. However, Lessor or Lessee may disclose copies of the Lease to prospective lenders or purchasers of all or any portion of the Premises or Common Areas or to potential lenders to or investors in Lessor’s or Lessee’s businesses and to any governmental authorities as required by applicable Laws without prior consent, and both may provide copies to their respective accountants, attorneys and managing employees, as reasonably necessary for each party’s business purposes or in connection with the enforcement of this Lease, without such prior consent, provided that, upon such disclosure, such party’s accountants, attorneys and managing employees will be bound by the terms of this Section. Lessor and Lessee shall indemnify, defend upon request, and hold the other party harmless from and against all costs, damages, claims, liabilities, expenses, losses, court costs, and reasonable attorneys’ fees suffered or claimed against the non-breaching party, its agents, servants, and employees, based in whole or in part upon the breach of this Section by a party, its agents, servants, and employees. For purposes hereof, the term “Proprietary Information” means all information provided by the disclosing party to the receiving party in accordance with this Lease and during the Term, notwithstanding the form of the information, and includes by way of example, but without limitation, corporate and financial information, data, know-how, formulae, processes, designs, sketches, photographs, plans, drawings, specifications, reports, customer lists, studies, findings, inventions and ideas. Information which is not labeled as proprietary, whether presented in writing, media or orally, shall nonetheless be considered Proprietary Information if a reasonable person in a position of the receiving party would presume confidentiality of such information even without such a label, identification or confirmation, but the burden of proof shall be on the disclosing party to demonstrate the confidential nature and extent of the disclosure of the information.

Notwithstanding the foregoing, Proprietary Information shall not include any information to the extent that the information: (a) is in or enters the public domain through no fault of the receiving party; (b) is known to the receiving party as of the date of this Lease, as evidenced by the written records of the receiving party; (c) becomes known to the receiving party, subsequent to such disclosure, without similar restrictions from an independent source having the right to convey it; or (d) is developed by the receiving party independent of any disclosure under this Lease.

In the event of any breach of this Section, the disclosing party may be irreparably and immediately harmed and may not be made whole by monetary damages. As a result, in addition to any other remedy to which the disclosing party may be entitled under this Lease, the disclosing party shall be entitled to an injunction or injunctions to prevent breaches of this Section and to compel specific performance of this Section, without the need for proof of actual damages.

The obligations of Lessee under this Section will survive for a period of two years after the expiration or earlier termination of this Lease; the obligations of Lessor under this Section will survive for a period of two years after the earlier to occur of Lessor’s transfer of the Premises and Common Areas and its interest in this Lease or the expiration or earlier termination of this Lease.

IN WITNESS WHEREOF the parties have set their hands and seals the date and year first written above.

Lessor: Havana Gold, LLC, a Colorado limited liability company

Signature: .

Its:

Printed Name:

LESSEE: Scott’s Liquid Gold-Inc., a Colorado corporation

Signature: .

Its:

Printed Name:

Exhibit A

Premises

LOGO

EXHIBIT F-2

SELLER LEASES

BUILDINGS C & D LEASE

REAL PROPERTY LEASE

(BUILDINGS C & D)

BY AND BETWEEN

Havana Gold, LLC

LESSOR

AND

SCOTT’S LIQUID GOLD-INC.

LESSEE

4880 Havana Street, Buildings C&D , Denver CO 80239

PROPERTY ADDRESS

NET LEASE AGREEMENT

THIS LEASE AGREEMENT (the “Lease”) is entered into this day of , 201_, by and between Havana Gold, LLC, a Colorado limited liability company (hereinafter referred to as “Lessor”), and Scott’s Liquid Gold-Inc., a Colorado corporation (hereinafter referred to as “Lessee”).

W I T N E S S E T H:

1. PREMISES

Lessor leases to Lessee and Lessee leases from Lessor, upon the terms and conditions as hereinafter set forth, certain premises situated in the City and County of Denver, State of Colorado, consisting of: (i) the warehouse and industrial buildings commonly known and described as Building C and D, located at 4880 Havana Street, Denver, CO, 80239 (the “Buildings”), containing approximately 61,400 square feet (Building C) and approximately 52,220 square feet (Building D), for a total of approximately 113,620 rentable square feet, and (ii) the storage tank farm located to the north of the Buildings and the CO2 tank located along the south side of Building D (the “Tank Farm”, and together with the Buildings, the “Premises”), together with a nonexclusive right to use (a) any rights of way, easements, and other rights, if any, appurtenant thereto, and any areas in the vicinity of the Premises or the land on which it is situated that are designated by Lessor for the common use of tenants and others, including without limitation all access roads and areas that are necessary or desirable for access to the Premises, and (b) the Parking Areas described below (collectively, the “Common Areas”). Lessee and its employees and invitees shall have the right to use, at no additional charge, (x) five (5) reserved parking spaces adjacent to the south side of Building D and four (4) reserved parking spaces adjacent to the north side of Building D, and (y) forty (40) parking spaces in the surface parking lot located north of Building D (the “North Lot”, and together with the parking locations referenced in (x) above, the “Parking Areas”). The locations of the parking spaces in the North Lot shall be within the first five (5) rows at the south end of the North Lot. The Buildings, the Tank Farm, and the Parking Areas are all shown on Exhibit “A” attached hereto and incorporated herein by this reference.

Without limiting the generality of the foregoing, during the term Lessee and Lessee’s agents, officers and employees shall have the right to use the existing cafeteria space located within the building commonly known as Building A, but such use shall be limited to the hours of operation and terms of service as are provided to all other users of the cafeteria by the operator of the cafeteria.

2. TERM OF LEASE

3. RENT

3a. Base Rent:

For the first Lease Year, the amount of THIRTY THOUSAND SEVEN HUNDRED SEVENTY TWO AND 08/100 DOLLARS ($30,772.08) per month.

For the second Lease Year, the amount of THIRTY ONE THOUSAND SIX HUNDRED NINETY FIVE AND 25/100 DOLLARS ($31,695.25) per month.

For the third Lease Year, the amount of THIRTY TWO THOUSAND SIX HUNDRED FORTY SIX AND 10/100 DOLLARS ($32,646.10) per month.

If Lessee elects to extend this Lease for a Renewal Term, the Base Rent shall be as follows:

For the fourth Lease Year, the amount of THIRTY-THREE THOUSAND SIX HUNDRED TWENTY-FIVE AND 49/100 DOLLARS ($33,625.49) per month.

For the fifth Lease Year, the amount of THIRTY-FOUR THOUSAND SIX HUNDRED THIRTY-FOUR AND 25/100 DOLLARS ($34,634.25) per month.

For the sixth Lease Year, the amount of THIRTY-FIVE THOUSAND SIX HUNDRED SEVENTY-THREE AND 28/100 DOLLARS ($35,673.28) per month.

For the seventh Lease Year, the amount of THIRTY-SIX THOUSAND SEVEN HUNDRED FORTY-THREE AND 48/100 DOLLARS ($36,743.48) per month.

For the eighth Lease Year, the amount of THIRTY-SEVEN THOUSAND EIGHT HUNDRED FORTY-FIVE AND 78/100 DOLLARS ($37,845.78) per month.

For the ninth Lease Year, the amount of THIRTY-EIGHT THOUSAND NINE HUNDRED EIGHTY-ONE AND 15/100 DOLLARS ($38,981.15) per month.

All such payments shall be made to Lessor at Lessor’s address as set forth in this Lease on or before the due date and without demand. Lessee agrees to pay Base Rent in the form of a personal check, cashier’s check, or money order made out to Lessor. All additional amounts other than Base Rent due from Lessee to Lessor, including Operating Expense Rent, shall be referred to herein as “Additional Rent,” and Base Rent and Additional Rent shall together be referred to as “Rent.”

3b. Operating Expense Rent :

For purposes of this Lease:

“Operating Expenses” means any reasonable expenses, costs and disbursements of any kind, paid or incurred by Lessor in connection with the management, maintenance, operation, insurance, repair and other similar activities related solely to (a) the Premises (b) the Common Areas, and (c) the personal property, fixtures, machinery, equipment, systems and apparatus used by Lessor in connection therewith, including the cost of providing those services required to be furnished by Lessor under this Lease, if any. Operating Expenses shall exclude any expenses relating to the Premises and the Common Areas to be borne by Lessee under this Lease, but shall include (i) Taxes, (ii) property insurance on the Premises and any other improvements and facilities within the Premises and the Common Areas which Lessor is required to carry hereunder, and (iii) the costs of any capital improvements made in or to the Premises and the Common Areas (to the extent required to be made by Lessor), in order to conform to changes in applicable Laws (as hereinafter defined) enacted after the date of this Lease (“Required Capital Improvements”); provided, that the costs of any Required Capital Improvements shall be amortized, together with interest on such costs at a rate of six percent (6%) per annum, over the useful life of such Required Capital Improvements as determined in accordance with generally accepted accounting principles consistently applied.

“Taxes” means all ad valorem real and personal property taxes and assessments, special or otherwise, levied upon or with respect to the Premises and Common Areas, the personal property, fixtures, machinery, equipment, systems and apparatus used by Lessor in operating the Premises and Common Areas, and the rents and additional charges payable by Lessee according to this Lease, and imposed by any taxing authority having jurisdiction; and all taxes, levies and charges which may be assessed, levied or imposed in replacement of, or in addition to, all or any part of ad valorem real or personal property taxes or assessments as revenue sources, and which in whole or in part are measured or calculated by or based upon the assessed valuation of the Premises and Common Areas, the leasehold estate of Lessor or Lessee in and to the Premises and Common Areas, or the rents and other charges payable by Lessee according to this Lease. Taxes will not include any net income, franchise, business and occupation, gift or inheritance taxes of Lessor.

“Uncontrollable Operating Expenses” means, collectively, (1) Taxes, (2) premiums for property insurance carried by Lessor with respect to the Premises and Common Areas, as applicable, (3) snow removal expenses related to the Premises and Common Areas, and (4) Required Capital Improvements; provided that any of the foregoing items that relate to any Common Area may only be included to the extent of the proportionate share of the rentable square footage of the Buildings compared to the rentable square footage contained in all of the improvements that are entitled to use such Common Area.

Lessee and Lessor have agreed that Lessee’s share of Operating Expenses shall be equal to an additional amount of $1.25 per rentable square foot within the Buildings per annum. Lessee shall pay to Lessor during the Term, at the same time and in the same manner that Base Rent payments are due hereunder, the additional monthly amount of ELEVEN THOUSAND EIGHT HUNDRED THIRTY FIVE AND 42/100 ($11,835.42) per month, as Lessee’s share of Operating Expenses (“Operating Expense Rent”).

The foregoing notwithstanding, beginning in the second calendar year of the Term, in the event that any Uncontrollable Operating Expenses incurred by Lessor with respect to the Premises or the Common Areas in a calendar year should increase by more than five percent over the amount paid by Lessor in the prior calendar year, Lessor shall have the right to increase the amount of Operating Expense Rent payable by Lessee to account for such increase in Uncontrollable Operating Expenses. In such event, Lessor shall provide Lessee with such information as reasonably required by Lessee to verify the amount of such Uncontrollable Operating Expenses.

4. SECURITY DEPOSIT

On the Commencement Date, Lessee shall deposit with Lessor a security deposit in the amount of THIRTY ONE THOUSAND SIX HUNDRED NINETY FIVE AND 25/100 DOLLARS ($31,695.25).

5. USE OF PREMISES

5.a Permitted Use . Lessee shall have the right to use and occupy the Premises for manufacturing, a warehouse, office space, or any such other similar use (the “Permitted Use”). Any other use shall be permitted only with the prior written consent of Lessor.

5.b Compliance . Lessee covenants throughout the Term of this Lease, at Lessee’s sole cost and expense, to promptly comply with all laws and ordinances and the orders, rules, regulations and requirements of all federal, state and municipal governments and appropriate departments, commissions, boards and officers thereof (collectively, “Laws”), in each case to the extent applicable to its use of the Premises; provided, however, Lessee will only be required to make structural repairs and alterations which are required by Laws as a direct result of Lessee’s specific use of the Premises (but not if required generally for all warehouse, manufacturing, or office buildings).

Lessee will not use the Premises for any purposes prohibited by Laws. Lessee will not keep anything on or about the Premises which would invalidate any insurance policy required to be carried on the Premises by Lessee or Lessor pursuant to this Lease (and Lessor agrees that none of the activities or materials kept on the Premises in connection with Lessee’s operations thereon as of the Commencement Date would have that effect). Lessee will not cause or permit to exist any public or private nuisance on or about the Premises.

Lessee will have the right, to contest or challenge by appropriate proceedings the enforceability of any Law or its applicability to the Premises or the use or occupancy thereof by Lessee or a subtenant so long as Lessee diligently prosecutes the contest or challenge to completion and, in the event Lessee loses the contest or challenge, thereafter abides by and conforms to such Law. In the event of Lessee’s challenge or contest of such Law, Lessee may elect not to comply with such Law during such challenge or contest; provided, however, that such election not to comply will not result in any material risk of forfeiture of Lessor’s interest in the Premises. Lessee will indemnify and hold Lessor harmless from and against all claims, damages or judgments resulting from any such election not to comply.

5c. Hazardous Substances.

(i) Environmental Covenants.

Lessee . Lessee covenants and agrees that Lessee and its employees, agents and contractors: (A) shall keep or cause the Premises to be kept free from Hazardous Substances (as hereinafter defined) (except those substances used by Lessee in the Ordinary Course of Business, as hereinafter defined); (B) shall not install or use any underground storage tanks in or on the Premises, shall not itself engage in and shall expressly prohibit all occupants of space in the Premises from engaging in the use, generation, handling, storage, production, processing or management of Hazardous Substances in or on the Premises, except in the Ordinary Course of Business and in compliance with all Environmental Laws (as hereinafter defined); (C) shall not itself cause or allow and shall expressly prohibit the Release (as hereinafter defined) of Hazardous Substances at, on, under or from the Premises; shall itself comply and shall expressly require all other persons who may come upon the Premises to comply with all Environmental Laws; (D) shall keep the Premises clear of all liens and other encumbrances imposed pursuant to any Environmental Law (“Environmental Liens”) due to any act or omission of Lessee or any of its employees, agents or contractors; and, (E) without limiting the generality of the foregoing, shall not use any construction materials which contain asbestos nor install in the Premises, or permit to be installed in Lessee’s Work (as hereinafter defined), any materials which contain asbestos. Lessee and its employees, agents and contractors will at all times cause all Hazardous Substances in their control to be properly contained while on the Premises and properly disposed of, in all cases using commercially prudent and reasonable procedures and properly maintained equipment that meets or exceeds the then-current industry standard and in a manner that does not negatively affect or otherwise compromise the environmental condition of the Premises or any surrounding areas.

Lessor . Lessor covenants and agrees that Lessor and its employees, agents and contractors: (A) shall not install or use any underground storage tanks in or on the Premises or Common Areas, shall not itself engage in the use, generation, handling, storage, production, processing or management of Hazardous Substances in or on the Premises or Common Areas, except in the Ordinary Course of Business and in compliance with all Environmental Laws; (C) shall not cause or allow the Release of Hazardous Substances at, on, under or from the Premises or Common Areas; shall comply with all Environmental Laws in connection with its activities relating to the Premises or Common Areas; and (D) shall keep the Premises and Common Areas free and clear of all Environmental Liens due to any at or omission of Lessor or any of its employees, agents or contractors. Lessor and its employees, agents and contractors will at all times cause all Hazardous Substances to be properly contained while on the Premises and Common Areas and properly disposed of, in all cases using commercially prudent and reasonable procedures and properly maintained equipment that meets or exceeds the then-current industry standard and in a manner that does not negatively affect or otherwise compromise the environmental condition of the Premises or Common Areas or any surrounding areas.

(ii) Notice and Access.

Lessee . Lessee shall promptly notify Lessor in writing if Lessee knows, suspects or believes there is or are (A) any Hazardous Substances, other than those used by Lessee or Lessor at the Premises in the Ordinary Course of Business and in compliance with all Environmental Laws, present on the Premises; (B) any Release of Hazardous Substances in, on, under, from or migrating towards the Premises; (C) any non-compliance with Environmental Laws related in any way to the Premises; (D) any actual or potential Environmental Liens on or relating to the Premises; (E) any investigation or action or claim, whether threatened or pending, by any governmental agency or third party pertaining to the Release of Hazardous Substances in, on, under, from or migrating towards the Premises; and/or (F) any installation of wells, piping or other equipment at the Premises to investigate, remediate or otherwise address any Release of Hazardous Substances at, on, in or in the vicinity of the Premises.

Lessor . Lessor shall promptly notify Lessee in writing if Lessor knows, suspects or believes there is or are (A) any Hazardous Substances, other than those used by Lessor or Lessee at the Premises in the Ordinary Course of Business and in compliance with all Environmental Laws, present on the Premises or Common Areas; (B) any Release of Hazardous Substances in, on, under, from or migrating towards the Premises or Common Areas; (C) any non-compliance with Environmental Laws related in any way to the Premises or Common Areas; (D) any actual or potential Environmental Liens on or relating to the Premises or Common Areas; (E) any investigation or action or claim, whether threatened or pending, by any governmental agency or third party pertaining to the Release of Hazardous Substances in, on, under, from or migrating towards the Premises or Common Areas; and/or (F) any installation of wells, piping or other equipment at the Premises or Common Areas to investigate, remediate or otherwise address any Release of Hazardous Substances at, on, in or in the vicinity of the Premises or Common Areas.

(iii) Clean Up . Lessee shall promptly, at Lessee’s sole cost and expense, take all legally required actions with respect to any Release or threat of Release of any Hazardous Substances on, in, under or affecting all or any portion of the Premises or any surrounding areas caused by Lessee and its employees, agents or contractors, including all investigative, monitoring, removal, containment and remedial actions in accordance with all applicable Environmental Laws, including the payment, at no expense to the Lessor Indemnified Parties (as hereinafter defined), of all clean-up, administrative and enforcement costs of applicable governmental agencies which are legally required to (A) comply with all applicable Environmental Laws; (B) protect human health or the environment; (C) allow continued use, occupation or operation of the Premises, Common Areas and surrounding areas; and/or (D) maintain fair market value of the Premises, Common Areas and surrounding areas (collectively, the “Completion of the Clean-up”). In the event Lessee fails to do so, Lessor may, but shall not be obligated or have any duty to, cause the Completion of the Clean-up of the Premises, Common Areas and surrounding areas. Lessee hereby grants to the Lessor Indemnified Parties and their agents and employees access to the Premises as provided in this Section 5c and a license to remove any items deemed by the Lessor Indemnified Parties to be necessary to cause the Completion of the Clean-up of the Premises.

(iv) Indemnification.

Lessee . Lessee covenants and agrees, at Lessee’s sole cost and expense, to indemnify, defend and hold the Lessor Indemnified Parties harmless from and against any and all liens, damages (excluding consequential damages), losses, liabilities, obligations, settlement payments, penalties, claims, judgments, suits, proceedings, costs, disbursements or expenses of any kind or of any nature whatsoever (including reasonable attorneys’, consultants’ and experts’ fees and disbursements actually incurred in investigating, defending, settling or prosecuting any claim, litigation or proceeding) which may at any time be imposed upon, incurred by or asserted against the Lessor Indemnified Parties or the Premises, and arising directly or indirectly from or out of: (A) the present or future presence, Release or threat of Release of any Hazardous Substances on, in, under or affecting all or any portion of the Premises or any surrounding areas caused by Lessee or its employees, agents or contractors; (B) the present or future violation of any Environmental Laws, relating to or affecting the Premises or the operation thereof caused by Lessee or its employees, agents or contractors; (C) the failure by Lessee to comply fully with the terms and conditions of this Section 5c; or (D) the enforcement of this Section 5c, including any liabilities that arise as a result of the actions taken or caused to be taken by Lessor Indemnified Parties, all legally required actions with respect to any Release or threat of Release of any Hazardous Substances on, in, under or affecting all or any portion of the Premises or any surrounding areas caused by Lessee or its Affiliates (as hereinafter defined), employees, agents or contractors, including all investigative, monitoring, removal, containment and remedial actions in accordance with all applicable Environmental Laws, including the payment, at no expense to the Lessor Indemnified Parties, of all clean-up, administrative and enforcement costs of applicable governmental agencies which are legally required to (x) comply with all applicable Environmental Laws; (y) protect human health or the environment; and/or (z) allow continued use, occupation or operation of the Premises.

Lessor . Lessor covenants and agrees, at Lessor’s sole cost and expense, to indemnify, defend and hold the Lessee Indemnified Parties (as hereinafter defined) harmless from and against any and all liens, damages (excluding consequential damages), losses, liabilities, obligations, settlement payments, penalties, claims, judgments, suits, proceedings, costs, disbursements or expenses of any kind or of any nature whatsoever (including reasonable attorneys’, consultants’ and experts’ fees and disbursements actually incurred in investigating, defending, settling or prosecuting any claim, litigation or proceeding) which may at any time be imposed upon, incurred by or asserted against the Lessee Indemnified Parties or the Premises , and arising directly or indirectly from or out of: (A) the past, present or future presence, Release or threat of Release of any Hazardous Substances on, in, under or affecting all or any portion of the Premises or any surrounding areas caused by Lessor or its Affiliates, employees, agents or contractors; (B) the past, present or future violation of any Environmental Laws, relating to or affecting the Premises caused by Lessor or its Affiliates, employees, agents or contractors; (C) the failure by Lessor to comply fully with the terms and conditions of this Section 5c; or (D) the enforcement of this Section 5c, including any liabilities that arise as a result of the actions taken or caused to be taken by the Lessee Indemnified Parties, all legally required actions with respect to any Release or threat of Release of any Hazardous Substances on, in, under or affecting all or any portion of the Premises or any surrounding areas caused by Lessor or its Affiliates, employees, agents or contractors, including all investigative, monitoring, removal, containment and remedial actions in accordance with all applicable Environmental Laws, including the payment, at no expense to Lessee Indemnified Parties, of all clean-up, administrative and enforcement costs of applicable governmental agencies which are legally required to (x) comply with all applicable Environmental Laws; (y) protect human health or the environment; and/or (z) allow continued use, occupation or operation of the Premises.

(v) Lessor Site Visits, Observation and Testing. Lessor and its agents and representatives shall have the right at any reasonable time to enter and visit the Premises for the purposes of observing the Premises, confirming that Lessee is meeting the requirements set forth in the definition of Ordinary Course of Business, taking and removing soil or groundwater samples, and conducting tests on any part of the Premises, all at Lessor’s sole cost and expense, subject to the confidentiality requirements of Section 33. Lessor has no duty, however, to visit or observe the Premises or to conduct tests, and no site visit, observation or testing by Lessor shall impose any liability on any Lessor Indemnified Party. In no event shall any site visit, observation or testing by Lessor be a representation that Hazardous Substances are or are not present in, on or under the Premises, or that there has been or shall be compliance with the requirements set forth in this Section, with any Environmental Laws or with any other applicable Laws. Neither Lessee nor any other party is entitled to rely on any site visit, observation or testing by any Lessor Indemnified Party. Lessor shall give Lessee reasonable notice before entering the Premises, shall permit a representative of Lessee to be present during such entry by Lessor, and shall make reasonable efforts to avoid interfering with Lessee’s use of the Premises in exercising any rights provided in this Section.

(vi) Definitions. For purposes of this Lease:

“Hazardous Substance” means, but is not limited to, any substance, chemical, material or waste (i) the presence of which causes a nuisance, trespass or any other common law, statutory or regulatory liability of any kind; (ii) which is regulated by any federal, state or local governmental authority because of its toxic, flammable, corrosive, reactive, carcinogenic, mutagenic, infectious, radioactive or other hazardous property or because of its effect on the environment, natural resources or human health and safety, including, but not limited to, petroleum and petroleum products, asbestos-containing materials, polychlorinated biphenyls, lead and lead-based paint, radon, radioactive materials, flammables and explosives; or (iii) which is designated, classified, or regulated as being a hazardous or toxic substance, material, pollutant, waste (or a similar such designation) under any federal, state or local law, regulation or ordinance, including under any Environmental Law.

“Ordinary Course of Business” means, (a) with respect to Lessee, that the applicable activity is conducted by Lessee on the Premises and Common Areas in connection with the permitted uses hereunder and all related activities, and (b) with respect to Lessor, that the applicable activity is conducted by Lessor in its role as Lessor hereunder, and with respect to both Lessee and Lessor, in compliance with applicable Laws.

“Environmental Laws” shall mean any and all federal, state and local laws (whether under common law, statute, rule, regulation or otherwise), requirements under permits or other authorizations issued with respect thereto, and other orders, decrees, judgments, directives or other requirements of any governmental authority relating to or imposing liability or standards of conduct (including disclosure or notification) concerning protection of human health or the environment, including, without limitation, the Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Emergency Planning and Community Right-to-Know Act (42 U.S.C. § 11001 et seq.), the Hazardous Substances Transportation Act (49 U.S.C. § 1801 et seq.), and the Clean Air Act (42 U.S.C. § 7401 et seq.), all as previously and in the future to be amended.

“Release” shall mean any release, deposit, discharge, emission, leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of any Hazardous Substance.

“Lessor Indemnified Parties” shall mean and include Lessor, its Affiliates and their respective officers, directors, managers, members, partners, employees and agents.

“Lessee Indemnified Parties” shall mean and include Lessee, its Affiliates and their respective officers, directors, managers, members, partners, employees and agents.

“Affiliates” means, with respect to any party, the entities or individuals that control, are controlled by or are under common control with such party, and for purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policy of a particular corporation, partnership or association, whether through the ownership of voting securities or by contract or otherwise.

(vii) Survival. The parties’ obligations under this Section 5c will survive the expiration of the Term or other termination of this Lease.

6. INSURANCE

During the Term of the Lease, Lessee and Lessor shall carry and maintain the following policies of insurance:

a. Lessor’s Insurance . Lessor shall, at its cost and expense (but to be included in Operating Expenses), obtain and maintain throughout the Term of this Lease cause of loss “special form” insurance (formerly known as “all risk”) on the Buildings, including the Premises and the Common Areas, at a minimum full replacement cost of the Buildings, the Premises (other than Lessee’s Property as defined below), and the Common Areas. Such insurance shall not be required to cover any of Lessee’s inventory, furniture, furnishings, fixtures, or equipment within the Premises (collectively, “Lessee’s Property”), and Lessor shall not be obligated to repair any damage thereto or replace any of same, and Lessee shall have no interest in any proceeds of Lessor’s insurance.

that Lessee fails to maintain any of the insurance required of it pursuant to this provision, Lessor shall have the right (but not the obligation) at Lessor’s election, after five (5) business days written notice to Lessee, to pay Lessee’s premiums or to arrange substitute insurance with an insurance company of Lessor’s choosing, in which event any premiums advanced by Lessor shall constitute Additional Rent payable under this Lease and shall be payable by Lessee to Lessor immediately upon demand for same.

c. Mutual Subrogation Waiver . Lessor and Lessee hereby agree to obtain from any insurer providing property insurance coverage to either of them covering the Premises, the Buildings, the Common Areas or Lessee’s Property, a waiver of any right of subrogation any such insurer of one party may acquire against the other or as against the Lessor or Lessee by virtue of payments of any loss under such insurance, and to cause each such policy to be properly endorsed to reflect such waiver. As requested, the parties shall provide evidence to one another of their respective insurers’ waivers of subrogation hereunder. Notwithstanding anything to the contrary contained in this Lease, each party hereby waives any and all rights to recover from the other and its officers, agents, members, managers and employees for any loss or damage, including consequential loss or damage, caused by any peril or perils (including negligent acts) enumerated in each cause of loss-special risk form property insurance policy required to be maintained by either party hereunder.

7. PAYMENT OF TAXES AND ASSESSMENTS

Lessor shall timely pay all Taxes on the Premises, the Common Areas, and the land on which they are located, but not on Lessee’s Property contained in the Premises; provided, however, that this Article 7 shall not negate Lessee’s obligation to reimburse Lessor for its share of such Taxes through the payment of Operating Expense Rent pursuant to Article 3b.

8. ASSIGNMENT AND SUBLETTING

This Lease or any interest herein may be assigned by Lessee, voluntarily or involuntarily, by operation of law or otherwise, and either all or any part of the Premises may be subleased by Lessee with the prior written consent of Lessor, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding anything to the contrary contained in this Lease, Lessee shall have the right, without obtaining Lessor’s prior written consent, to assign or sublease all or any portion of the Premises to any Affiliate of Lessee, or to a successor entity to Lessee by virtue of merger, consolidation, or nonbankruptcy reorganization or the sale of all or substantially all of the assets of Lessee. Notwithstanding the foregoing, it is understood and agreed that following any assignment or sublease of all or any portion of the Premises, unless the parties shall agree otherwise in writing, Lessee shall remain fully liable for payment of Rent and performance of all of Lessee’s obligations under this Lease.

9. UTILITIES

10. NET LEASE; COMMON AREA AND PROPERTY MAINTENANCE

Lessee has inspected and accepts the Premises in their present condition (AS IS) and acknowledges the Premises are tenantable and in good condition. Except as specifically provided in this Lease, this Lease is intended to be a net lease and Lessor shall have no obligation of any kind to make expenditures of any nature upon the Premises.

Lessor shall maintain, repair and keep in good order all of the Common Areas, including without limitation landscape maintenance and replacement, mowing, snow removal, trash removal, and repair, resurfacing and restriping as necessary of the Parking Areas, and the costs thereof shall be included within Operating Expenses, and Lessee’s share thereof shall be reimbursed to Lessor by payment of the Operating Expense Rent due from Lessee hereunder. In addition, Lessor, at Lessor’s sole cost and expense, shall maintain, repair and replace, if necessary, the foundation, the structural portions of the roof and the exterior walls of the Buildings. For purposes of this paragraph, the term “exterior walls” shall not include windows, plate glass, office doors, dock doors, dock bumpers or office entries.

Except for the obligations of Lessor set forth in the preceding paragraph, Lessee shall maintain, repair and keep in good order the Premises, as further detailed in Sections 10a and 10b below. Notwithstanding the foregoing, if Lessee so elects, Lessee may give notice to Lessor (a “Maintenance Notice”) that it elects to have Lessor perform all or part of the maintenance and repair obligations of Lessee hereunder, in which event Lessor shall perform such maintenance and repair, and the costs thereof shall be reimbursed to Lessor by Lessee within thirty (30) days after presentation of an invoice or invoices therefor. Lessee shall not permit or suffer waste, impairment or deterioration of the Premises or improvements thereon or any part thereof, ordinary wear and tear and damage from fire or other casualty excepted.

a. Lessee’s Obligations.

Lessee will, at its expense, and subject to Lessee’s right to elect to have Lessor perform such obligations at Lessee’s expense pursuant to a Maintenance Notice:

(i)

maintain, repair and replace as necessary all of the non-structural elements of the Premises (i.e., elements other than the foundation, the structural portions of the roof

and the exterior walls of the Buildings) including, without limitation, all walls, floors, ceilings and fixtures, the interior surfaces of the ceilings and walls and the painting of such surfaces, the interior surfaces of the floors and all floor coverings (including carpet, pad, tile, vinyl and other floor coverings), all windows and plate glass, window fittings and sashes, all interior and exterior doors in the Buildings, all plumbing, pipes and fixtures that solely serve the Buildings, electrical wiring, switches and fixtures that solely serve the Buildings, dock doors and dock bumpers, and special items and equipment installed by or at the expense of Lessee that solely serve the Buildings, and the storage tanks in the Tank Farm, ordinary wear and tear and damage from fire or other casualty excepted;

(ii)

keep the Premises free of insects, rodents, vermin and other pests;

(iii)

repair, maintain and replace all HVAC systems, ducts, controls and appurtenances within the interior of the Buildings, ordinary wear and tear and damage from fire or other casualty excepted;

(iv)

repair, maintain and replace all utility systems, lines, conduits and appurtenances thereto that serve the Premises exclusively, ordinary wear and tear and damage from fire or other casualty excepted;

(v)

keep any garbage, trash, rubbish or refuse removed on a regular basis and temporarily stored on the Premises or the Common Areas in designated trash receptacles; and

(vi)

provide such janitorial services to the Premises as may be necessary for the operation of Lessee’s business, in Lessee’s reasonable discretion.

Without limiting the foregoing, as between Lessor and Lessee, except to the extent expressly set forth to the contrary in this Lease, Lessee will be responsible for all ordinary, non-structural, foreseen and unforeseen maintenance, repairs and replacements to the Premises during the Term.

b. Maintenance Procedures .

The following maintenance procedures shall be followed by Lessee, provided that if Lessee has given Lessor a Maintenance Notice, Lessor shall be responsible for complying with the same:

accurate and reasonably complete records of such maintenance, repair and replacement. Nothing will prohibit Lessee from performing such maintenance, repair and/or replacement using Lessee’s employees as long as such employees are reasonably qualified to perform the applicable tasks and Lessee otherwise complies with applicable Laws and warranties.

(ii) Lessor’s Inspection Rights . Lessor, or its designated representative, may enter the Premises during reasonable times and upon reasonable prior notice to Lessee, to inspect the Premises and to confirm Lessee’s compliance with its obligations under this Section, as to the actual maintenance, repair and replacement and also as to Lessee’s records relating thereto, provided that Lessor will take reasonable steps in connection with such entry to minimize any disruption to Lessee’s business or its use of the Premises . Subject to reasonable scheduling, Lessee will make available to Lessor Lessee’s representative who is primarily responsible for such maintenance, repair and replacement in connection with such inspections.

(iii) Lessee’s Failure . Except in the event of an emergency, in which case Lessor shall have the right to take immediate corrective action, if Lessor determines, in its reasonable discretion, that Lessee has failed to perform such maintenance, repair and replacement practices, Lessor, at its option, may notify Lessee of such failure, which notice will expressly set forth the basis for Lessor’s determination and the actions that Lessor will require to be taken to rectify such failure. If Lessee fails to rectify such failure within 30 days from receipt by Lessee of Lessor’s notice, and gives Lessor written notice within such 30-day period that it disagrees with Lessor’s determination, the parties will have 15 days to attempt to resolve the issue. In the event the parties fail to resolve the issues within such 15-day period, then Lessor may arrange for a third party to perform such maintenance, repair and/or replacement practices on any portion of the Premises, in which event Lessee will permit the applicable party to enter upon the Premises to perform such practices, and the reasonable cost of such maintenance, repair and/or replacement will be billed directly to Lessee and will be Additional Rent, paid within thirty (30) days of receipt of invoice therefor.

11. INDEMNITY PROVISIONS

12. OCCUPATIONAL SAFETY AND HEALTH ACT

13. ALTERATIONS TO PREMISES

a. Plans and Specifications; Lessor’s Approval Rights .

Unless otherwise provided in the Lease, Lessee shall be solely responsible for any and all improvements and alterations within the Premises necessary for Lessee’s intended use of the Premises, which are not otherwise the responsibility of Lessor as provided for elsewhere in the Lease. Lessee agrees to submit to Lessor complete plans and specifications, including engineering, mechanical, and electrical plans and specifications, covering any and all subsequent improvements or alterations of the Premises. The plans and specifications shall be in such detail as Lessor may reasonably require, and in compliance with all applicable Laws. As soon as reasonably feasible thereafter, Lessor shall notify Lessee of whether it approves the plans, and if not, of the specific reasons for such disapproval. Lessee shall use reasonable efforts to cause Lessee’s plans to be revised to the extent necessary to obtain Lessor’s approval. Except as set forth in the next sentence, Lessee shall not commence any improvements, or alterations of Premises until Lessor has approved Lessee’s plans, which approval shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, Lessee shall have the right: (i) to install an upgraded sprinkler system in a portion of Building C as may be required by Laws to allow for the storage of aerosol products therein without obtaining the prior written consent of Lessor, but with prior notice to Lessor; and (ii) to install new equipment in the Premises, to paint any portion of the interior of the Premises, or to install phone and data cabling within or leading to the Premises without obtaining the prior written consent of Lessor, and shall also have the right to make other non-structural alterations within the Premises without obtaining the prior written consent of Lessor, but with prior notice to Lessor, so long as such alterations do not affect the structural integrity of the Buildings, or any part of the heating, ventilating, air conditioning, plumbing, mechanical, electrical, communication or other systems of the Buildings, and so long as such alterations are not visible from the exterior of the Premises and do not cost more than an aggregate amount per year of $10,000 (collectively, “Minor Alterations”).

b. Lessee’s Work; Compliance With Codes; Mechanic’s Liens .

reasonable attorneys’ fees, incurred in connection with any claims of any nature whatsoever for work performed for, or materials, or supplies furnished to Lessee, including lien claims of laborers, materialmen, or others. Should any such liens be filed or recorded against the Premises or the Buildings with respect to work done for, or materials supplied to, or on behalf of Lessee, or should any action affecting the title thereto be commenced, Lessee shall cause such liens to be released of record within ten (10) business days after notice thereof. If Lessee desires to contest any such claim of lien, Lessee shall nonetheless cause such lien to be released of record by the posting of adequate security with a court of competent jurisdiction as may be provided by Colorado’s mechanic’s lien statutes. If Lessee shall be in default in paying any charge for which such mechanic’s lien or suit to foreclose such lien has been recorded or filed and shall not have caused the lien to be released as aforesaid, Lessor may (but without being required to do so) pay such lien or claim and any associated costs, and the amount so paid, together with reasonable attorneys’ fees incurred in connection therewith, shall be immediately due from Lessee to Lessor as Additional Rent.

14. CONDEMNATION

a. Complete Taking . If during the Term of this Lease, or any extension hereof, the whole or substantially all of the Premises shall be taken as a result of the exercise of power of eminent domain, this Lease shall terminate as of the date of vesting of title to the Premises or delivery possession, whichever shall first occur, pursuant to such proceeding. For the purpose of this Article 14, “substantially all of the Premises” shall be deemed to have been taken under any such proceeding that involves such an area, whether the area be improved with a building or be utilized for a parking area or for other use, that Lessee cannot reasonably operate in the remainder of the Premises the business being conducted on the Premises at the time of such proceeding.

15. DESTRUCTION OF PREMISES

a. Termination Rights; Casualty Determination.

to Lessor within 30 days of the Casualty Determination, this Lease shall terminate as of the occurrence of such damage; provided, however, Lessee may not terminate this Lease if the damage is caused by the intentional, criminal or otherwise uninsurable acts of Lessee or its agents, contractors or employees. For purposes of this Lease, “Substantial Portion” means twenty-five percent (25%) or more of the total area of either Building.

iv. In the event this Lease is terminated pursuant to this Section 15a, Lessee shall pay Rent duly apportioned up to the time of such casualty and forthwith surrender the Premises and all interest therein to Lessor. Upon surrender of the Premises and all interest therein by Lessee, the parties shall be released from all obligations and liabilities arising thereafter, except for those obligations which expressly survive termination of this Lease.

b. Repair and Restoration .

i. If the Premises are damaged by fire or other casualty and this Lease cannot be or is not terminated pursuant to Section 15a above, then subject to the rights of any mortgagee, Lessor shall, at Lessor’s sole cost and expense, rebuild or repair the Premises (but excluding Lessee’s Property or any Lessee’s Work) in compliance with all applicable Laws and otherwise to substantially the condition that existed as of the Commencement Date; provided, however, Lessor shall not be required to expend more than the insurance proceeds received from such casualty plus ten percent (10%) of the replacement cost of the Premises. Notwithstanding the foregoing, in the event Lessor has not received final confirmation of the determination of available insurance proceeds and provided written notice thereof to Lessee within 90 days after the Casualty Determination, Lessee shall have the right to terminate this Lease by delivery of written notice thereof to Lessor within 15 days after receipt of Lessor’s notice and, upon surrender of the Premises and all interest therein by Lessee, the parties shall be released from all obligations and liabilities arising thereafter, except for those obligations which expressly survive termination of this Lease.

ii. In the event Lessor is required to rebuild and repair the Premises pursuant to this Section 15b, Lessor shall: (A) commence such rebuilding and repair within 45 days after the date Lessor receives final confirmation of the determination of available insurance proceeds, and (B) pursue diligently such rebuilding and repair to completion. If Lessor fails to repair and restore the Premises within 60 days after the Estimated Repair Timeframe, then Lessee shall have the right to terminate this Lease by delivery of written notice thereof to Lessor and, upon surrender of the Premises and all interest therein by Lessee, the parties shall be released from all obligations and liabilities arising thereafter, except for those obligations which expressly survive termination of this Lease.

16. DEFAULT PROVISIONS

The occurrence of any one or more of the following events shall constitute a default and breach of this Lease by Lessee:

d. Abandonment . Lessee abandoning the Premises.

e. Assignment for Benefit of Creditors . Lessee making any general assignment or general arrangement of its property for the benefit of its creditors.

17. REMEDIES

In the event of an occurrence of default beyond applicable notice and cure periods as set forth herein, Lessor shall have the right to:

c. Repossess Premises . Reenter and take possession of the Premises or any part thereof and repossess the same as of Lessor’s former estate, and expel Lessee and those claiming through or under Lessee and remove the effects of both through process of law, without being deemed guilty in any manner of trespass and without prejudice to any remedies for Rent delinquencies or preceding Lease defaults. Under such circumstances, Lessor may bar entry to Lessee, and may, from time to time, without terminating this Lease, relet the Premises or any part thereof for such term or terms and at such rental or rentals and upon such other terms and conditions as Lessor may deem advisable, with the right to make alterations and repairs to the Premises, and such re-entry or taking of possession of the Premises by Lessor shall not be construed as an election on Lessor’s part to terminate this Lease unless a written notice of termination be given to Lessee or unless the termination thereof be decreed by a court of competent jurisdiction. In the event of Lessor’s election to proceed under this Subparagraph c, then such repossession shall not relieve Lessee of its obligation and liability under this Lease, all of which shall survive such repossession, and Lessee shall pay to Lessor as current liquidated damages the Base Rent and Additional Rent and other sums hereinabove provided which would be payable hereunder if such repossession had not occurred, less the net proceeds (if any) of any reletting of the Premises after deducting all of Lessor’s expenses in connection with such reletting, including but without limitation all repossession costs, brokerage commissions, legal expenses, attorney’s fees, expense of employees, alteration costs (including but not limited to any and all costs associated with Lessee’s failure to properly maintain the property as described in Section 10) and expenses of preparation for such reletting. Lessee shall pay such current damages to Lessor on the days on which the Base Rent would have been payable hereunder if possession had not been retaken, and Lessor shall be entitled to receive the same from Lessee on each such day. Notwithstanding anything to the contrary in this Section 17, Lessor shall use reasonable efforts to attempt to mitigate its damages and promptly relet the Premises at a fair market rental.

18. INTENTIONALLY DELETED

19. HOLD OVER

20. SUBORDINATION AND ESTOPPEL LETTER

21. SURRENDER OF PREMISES

22. NOTICES

All notices required or permitted under this Agreement shall be given by registered or certified mail, postage prepaid, by recognized overnight courier, or by hand delivery, directed as follows:

If intended for Lessee, to:

SCOTT’S LIQUID GOLD-INC.

4880 Havana Street

Denver, Colorado 80239

Attn: Barry J. Levine

E-mail: blevine@slginc.com

with a copy to:

SCOTT’S LIQUID GOLD-INC.

4880 Havana Street

Denver, Colorado 80239

Attn: Mark E. Goldstein

E-mail: mgoldstein@slginc.com

If intended for Lessor, to:

Havana Gold, LLC

3535 Larimer Street

Denver, CO 80205

Attn: Andrew Feinstein

E-mail: afeinstein@exdomanagement.com

23. TIME OF THE ESSENCE

Time is of the essence hereof.

24. QUIET ENJOYMENT

Lessor represents and warrants that:

a. Authority . Lessor has the right to enter into and make this Lease.

25. RIGHT TO INSPECT OR SHOW PREMISES

26. LIMITATIONS ON LESSOR’S LIABILITY

Notwithstanding anything to the contrary contained in this Lease, in the event of any default or breach by Lessor with respect to any of the terms, covenants and conditions of this Lease to be observed, honored or performed by Lessor, Lessee shall look solely to the estate and property of Lessor in the land and Buildings owned by Lessor, including proceeds of sale, insurance, condemnation and rental income from the Buildings, for the collection of any judgment (or any other judicial procedures requiring the payment of money by Lessor) and no other property or assets of Lessor shall be subject to levy, execution, or other procedures for satisfaction of Lessee’s remedies.

27. SIGNS

a. Exterior Signs . Other than Lessee’s sign containing its name and logo which is currently located on the exterior of Building D, Lessee shall not place or suffer to be placed on the exterior walls of the Premises or upon the roof or any exterior door or wall or on the exterior or interior of any window thereof any sign, awning, canopy, marquee, advertising matter, decoration, letter or other thing of any kind without the prior written consent of Lessor. Lessor acknowledges and agrees that Lessee may, subject to the approval of the appropriate governmental authorities and Lessor (with respect to size, color, type, format, design and location), install a sign with Lessee’s logo on the Buildings; provided, however, the foregoing shall not be in place of or in derogation of any of Lessor’s Buildings signage and the failure or refusal of any governmental entity to approve Lessee’s logo sign shall not constitute an event of default, a claim for damages or a ground for Lessee to terminate this Lease. In addition, if Lessor installs a monument sign outside of the Buildings, Lessee shall be permitted to install a sign with Lessee’s logo on such monument sign, which shall be at least as prominent as the sign of any other tenant. Permits for Lessee’s signs and their installation shall be obtained by Lessee at its expense. All signs shall be constructed and installed at Lessee’s expense. Signs shall be permitted only within the areas designated by Lessor. All penetrations of the Buildings’ structure required for sign installation shall be neatly sealed in watertight condition and properly maintained. Lessee shall cause to be repaired any damage caused by its sign contractor or sign installation. Other than the exterior Building sign permitted above, Lessor hereby reserves the exclusive right to the use for any purpose whatsoever of the roof and exterior of the walls of the Premises or the Buildings. In the event Lessee shall install any sign which has not been approved by Lessor, Lessor shall have the right and authority without liability to Lessee to enter upon the Premises, remove and store the subject sign and repair all damage caused by the removal of the sign. All costs and expenses incurred by Lessor in effecting such removal and storage shall be paid by Lessee as Additional Rent within thirty (30) days after presentation of an invoice therefor. Lessor reserves the right to temporarily remove Lessee’s sign if necessary during any period when Lessor repairs, restores, constructs or renovates the Premises or the Buildings.

28. MISCELLANEOUS

a. Choice of Law . This Lease has been executed and delivered in the State of Colorado and shall be construed in accordance with the laws of the State of Colorado.

c. Binding Effect . The covenants and agreements herein contained shall be binding upon and inure to the benefit of both Lessor and Lessee and their respective successors and assigns.

e. Amendments. This Lease may be modified or amended only by written instrument executed by all of the parties hereto.

29. NO WAIVER

30. VENUE AND ATTORNEY’S FEES

31. INTEREST ON PAST DUE OBLIGATIONS

32. MEMORANDUM OF LEASE

33. SEVERABILITY

34. ADA COMPLIANCE

ADA Compliance: Lessee shall not cause or permit any violation of the Americans with Disabilities Act (the “ADA”) to occur on, or about the Premises by Lessee, its agents, employees, contractors or invitees.

35. CONFIDENTIALITY

the breach of this Section by a party, its agents, servants, and employees. For purposes hereof, the term “Proprietary Information” means all information provided by the disclosing party to the receiving party in accordance with this Lease and during the Term, notwithstanding the form of the information, and includes by way of example, but without limitation, corporate and financial information, data, know-how, formulae, processes, designs, sketches, photographs, plans, drawings, specifications, reports, customer lists, studies, findings, inventions and ideas. Information which is not labeled as proprietary, whether presented in writing, media or orally, shall nonetheless be considered Proprietary Information if a reasonable person in a position of the receiving party would presume confidentiality of such information even without such a label, identification or confirmation, but the burden of proof shall be on the disclosing party to demonstrate the confidential nature and extent of the disclosure of the information.

36. BUILDING B LEASE [USE THIS SECTION IF DENVER TRANSIT LEASE IS EXECUTED]

IN WITNESS WHEREOF the parties have set their hands and seals the date and year first written above.

Lessor: Havana Gold, LLC, a Colorado limited liability company

Signature: .

Its:

Printed Name:

LESSEE: Scott’s Liquid Gold-Inc., a Colorado corporation

Signature: .

Its:

Printed Name:

Exhibit A, Premises and Parking Areas

LOGO

Exhibit 10.25

REAL PROPERTY LEASE

(BUILDINGS C & D)

BY AND BETWEEN

Havana Gold, LLC

LESSOR

AND

Scott’s Liquid Gold-Inc.

LESSEE

4880 Havana Street, Buildings C&D , Denver CO 80239

PROPERTY ADDRESS

NET LEASE AGREEMENT

THIS LEASE AGREEMENT (the “Lease”) is entered into as of February 1, 2013, by and between Havana Gold, LLC, a Colorado limited liability company (hereinafter referred to as “Lessor”), and Scott’s Liquid Gold-Inc., a Colorado corporation (hereinafter referred to as “Lessee”).

W I T N E S S E T H:

1. PREMISES

Lessor leases to Lessee and Lessee leases from Lessor, upon the terms and conditions as hereinafter set forth, certain premises situated in the City and County of Denver, State of Colorado, consisting of: (i) the warehouse and industrial buildings commonly known and described as Building C and D, located at 4880 Havana Street, Denver, CO, 80239 (the “Buildings”), containing approximately 61,400 square feet (Building C) and approximately 52,220 square feet (Building D), for a total of approximately 113,620 rentable square feet, and (ii) the storage tank farm located to the north of the Buildings and the CO2 tank located along the south side of Building D (the “Tank Farm”, and together with the Buildings, the “Premises”), together with a nonexclusive right to use (a) any rights of way, easements, and other rights, if any, appurtenant thereto, and any areas in the vicinity of the Premises or the land on which it is situated that are designated by Lessor for the common use of tenants and others, including without limitation all access roads and areas that are necessary or desirable for access to the Premises, and (b) the Parking Areas described below (collectively, the “Common Areas”). Lessee and its employees and invitees shall have the right to use, at no additional charge, (x) five (5) reserved parking spaces adjacent to the south side of Building D and four (4) reserved parking spaces adjacent to the north side of Building D, and (y) forty (40) parking spaces in the surface parking lot located north of Building D (the “North Lot”, and together with the parking locations referenced in (x) above, the “Parking Areas”). The locations of the parking spaces in the North Lot shall be within the first five (5) rows at the south end of the North Lot. The Buildings, the Tank Farm, and the Parking Areas are all shown on Exhibit “A” attached hereto and incorporated herein by this reference.

Without limiting the generality of the foregoing, during the term Lessee and Lessee’s agents, officers and employees shall have the right to use the existing cafeteria space located within the building commonly known as Building A, but such use shall be limited to the hours of operation and terms of service as are provided to all other users of the cafeteria by the operator of the cafeteria.

2. TERM OF LEASE

The term of this Lease (the “Term”) shall begin on shall begin on February 1, 2013 (the “Commencement Date”), and shall expire at midnight on January 31, 2016. Lessee shall have two (2) options to extend the Term of the Lease, for renewal terms of three (3) additional years each (each, a “Renewal Term”). Each of these options may be exercised by Lessee providing Lessor with written notice of such exercise no less than ninety (90) days prior to the expiration of the initial Term or the first Renewal Term, as applicable. Lessee’s failure to exercise its option to extend the Term for the first Renewal Term shall automatically cancel the option to extend for a second Renewal Term. The term “Lease Year” means each consecutive twelve-month period beginning with the Commencement Date, except that if the Commencement Date is not the first day of a calendar month, then the first Lease Year shall be the period from the Commencement Date through the final day of the twelve months after the first day of the following month, and each subsequent Lease Year shall be the twelve months following the prior Lease Year.