SCOTTS LIQUID GOLD INC (Form: 10-K, Received: 03/28/2014 09:47:33)

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, 2013

¨	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 $3,270,618 on June 28, 2013.

As of March 26, 2014, there were 11,446,831 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, 2013.

CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of U.S. federal securities laws. All statements, other than statements of historical facts, included in this Report that address activities, events, or developments with respect to our financial condition, results of operations, or economic performance that we expect, believe, or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements. You can typically identify forward-looking statements by the use of words, such as “may,” “could,” “should,” “assume,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “plan,” and other similar words. 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:

·	changing consumer preferences and the 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; including 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 and limited resources available for such advertising;

·	new competitive products and/or technological changes;

·	dependence upon third party vendors and upon sales to major customers;

·	the availability of necessary raw materials and potential increases in the prices of these raw materials;

·	changes in the regulation of our products, including applicable environmental and U.S. Food And Drug Administration (“FDA”) regulations;

·	the continuing availability of financing on terms and conditions that are acceptable to us;

·	future losses which could affect our liquidity;

·	the loss of any executive officer; and

·	other matters discussed in this Report, including the risks described in the Risk Factors section of this Report.

We caution you that forward-looking statements are not guarantees of future performance and that actual results or performance may be materially different from those expressed or implied in the forward-looking statements. The forward-looking statements in this Report speak as of the filing date of this Report. Although we may from time to time voluntarily update our prior forward-looking statements, 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	6
Item 1B.	Unresolved Staff Comments	8
Item 2.	Properties	8
Item 3.	Legal Proceedings	9
Item 4.	Mine Safety Disclosures	9
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
Item 6.	Selected Financial Data	11
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 8.	Financial Statements and Supplementary Data	16
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	32
Item 9A.	Controls and Procedures	32
Item 9B.	Other Information	32
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	33
Item 11.	Executive Compensation	33
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	33
Item 13.	Certain Relationships and Related Transactions, and Director Independence	33
Item 14.	Principal Accounting Fees and Services	33
PART IV
Item 15.	Exhibits and Financial Statement Schedules	33

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. These products include:

·	Scott’s Liquid Gold ^® , our wood cleaner and preservative that has been sold in the United States for over 60 years;

·	Alpha Hydrox ^® , our skin care brand, which was one of the first to use alpha hydroxy acids (“AHAs”);

·	Our Neoteric Diabetic ^® products which were specially developed to address the skin conditions of persons living with diabetes; and

·	Montagne Jeunesse face masque sachets and Batiste Dry Shampoos, which are manufactured by other companies and distributed exclusively by us in the United States under distribution agreements with the respective manufacturers.

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 Segment		Key Products
Household		Scott’s Liquid Gold ^® Wood Cleaner and Preservative
		Scott’s Liquid Gold ^® Floor Restore
		Scott’s Liquid Gold ^® Wood Wash
		Scott’s Liquid Gold ^® Dust ’N Go Wipes
		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 to our Consolidated Financial Statements in Item 8.

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 2014, 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 by returning to profitability and increasing the value of our common stock during 2013. In addition, one of our primary goals from 2012 was to reduce the costs and expenses associated with our owned real estate assets located at 4880 Havana Street, Denver, Colorado, which consisted 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 on February 1, 2013 and entered into a lease with the new owner with respect to a portion of the

Property. Please see Note 12 to our Consolidated Financial Statements in Item 8 for information on the sale of the Property and our leasing back certain of the office, warehouse and manufacturing space.

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. Late in the fourth quarter of 2013, we introduced our Scott’s Liquid Gold ^® Floor Restore product. This product is a quick and easy way to renew and protect hardwood floors.

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 miner al deposits and other impurities. In 2010, we introduced Clean Screen in a wipe form and marketed the product as “Little Clean Screen”. Due to declining sales and distribution, Little Clean Screen is being discontinued during 2014. We attribute this decline primarily to generally lower actual consumer demand than anticipated for this type of product.

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 concentrated fragrances, which are quick, easy to use and effective.

Household products accounted for 27.7 % of our consolidated net sales in 2013 and 30.5% in 2012. 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 skin 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. Our healing cream is a therapeutic moisturizer that provides a clinically proven and patented treatment for dry skin by helping to increase 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 attract ive 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. We have already begun transition discussions with Church & Dwight in anticipation of the end of the agreement’s term. We are discussing with Church & Dwight the possibility of entering into a new distribution agreement for certain segments of the marketplace in the United States; however, there can be no assurance that we

will be able to consummate such an agreement. 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 72.3 % of our consolidated net sales in 2013 and 69.5% in 2012. 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, both 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 2013 and 2012, Wal-Mart Stores, Inc. (“Wal-Mart”) accounted for approximately 36% and 32% of our sales of household products, respectively. With regard to our skin and hair care products, Wal-Mart accounted for approximately 16% and 18% of our sales in 2013 and 2012, respectively. Wal-Mart accounted for approximately 21% and 22% of our aggregate net sales on a consolidated basis in 2013 and 2012, respectively.

In 2013 and 2012, Ulta Salon, Cosmetics & Fragrance, Inc. (“Ulta”) accounted for approximately 23 % and 16%, respectively, of our skin and hair care products and approximately 17% and 11% of our aggregate net sales on a consolidated basis in 2013 and 2012, respectively. In 2013 and 2012, Walgreens Co. (“Walgreens”) accounted for approximately 9% and 14%, respectively, of our sales of skin and hair care products and approximately 7% of our aggregate net sales on a consolidated basis in both 2013 and 2012.

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 7% and 9% of total sales in 2013 and 2012, respectively.

Our household and skin and hair care products are available in limited distribution in Canada and other foreign countries. Please see Note 8 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 pai d for these products in U.S. dollars.

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 e nforceable 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 , when we sold the facilities and entered into a lease with the new owner for a portion of the facilities. Please see Note 12 to our Consolidated Financial Statements in Item 8 for information on the sale of our Property 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 su ppliers 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. In addition, we have sole suppliers for two of the polymers in our Scott’s Liquid Gold ® Floor Restore product. 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 larger 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 providing written notice of termination no less than three or six months’ in advance, depending on the reason for termination. To date, neither party has provided such notice. In addition, 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. 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.

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 o bjectives. 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 cas e of an uncured breach, upon a change in control, or upon our violation of export control laws, the initial term of the agreement runs through December 31, 2014 and will automatically renew for successive one year terms until it is terminated by either party upon 90 days’ prior written notice. We have already begun transition discussions with Church & Dwight in anticipation of the end of the agreement’s initial three year term. We are discussing with Church & Dwight the possibility of entering into a new distribution agreement for certain segments of the marketplace in the United States; however, there can be no assurance that we will be able to consummate such an agreement.

Competition

Both the household and skin and hair care products markets are highly competitive. We compete in both markets against a range of competitors, most of which are significantly larger and have great financial resources, name recognition and product and market diversification than us. 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 that are 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 Alp ha Hydrox ^® products must compete. Because of the large number of varied products produced by our competitors, some of which are not direct competitors to our specialized products, 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 types 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 Packagin g and Labeling Act. The relevant laws and regulations are enforced by 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 p art 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, the FDA published a set of Q&A’s that dealt with both long term exposure and drug/cosmetic issues.

In the 2008 Q&A’s, the FDA restated its traditional position that certain AHA products intended for therapeutic use, such as acne treatments or skin lighteners, are considered drugs. However, the FDA also confirmed that other AHA products, including those marketed by us, are considered cosmetics and therefore are not subject to more stringent regulations applicable to drugs. 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 believe we are appropriately marketing 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 false and misleading claims in advertising. We believe that all of our labeling and promotional materials comply with these regulations.

Employees

We employ 60 persons of which 26 work in plant and production related functions and 34 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 subject to annual review by the Compensation Committee of our Board of Directors. Additional benefits that we provide 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 for our Neoteric Diabetic ^® Healing Cream. 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 protect 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 our website ( www.scottsliquidgold.com ), 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”). 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 continue to increase our revenues and/or further reduce our costs in order to remain profitable.

Prior to 2013, we experienced significant losses over an extended number of years. These losses result ed primarily from declining sales of our skin care products and our primary household products as well as the costs and expenses associated with our ownership of the Property. 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 Financial Resources, L.P. (“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, 2015, 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, 2015 and thereafter on the anniversary date of each 12 month period. On March 16, 2011, with the consent of 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 continue to increase our revenues and/or further reduce our costs.

Unfavorable economic conditions could adversely affect demand for our products.

Unfavorable and uncertain economic conditions in recent years have adversely affected, and in the future may adversely affect, consumer demand for some of our products, resulting in reduced sales volume. Factors that can affect consumer demand include rates of unemployment, consumer confidence, health care costs, fuel and other energy costs and other economic factors affecting consumer spending behavior.

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, our competitors include some of the largest consumer products companies in the United States.

The markets in which our products compete are intensely competitive, and many of the other competitors in these markets are multi-national consumer products companies that are significantly larger than us. These large competitors have financial, technical, and other resources exceeding those available to us, and as a result, are able to regularly introduce new products and spend considerably more than we can on advertising. The distribution and sales of our products can be adversely impacted by the actions of our competitors, and we may have little or no ability to take action to prevent or mitigate these adverse impacts.

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 adve rtising 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 a small number of major retail 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 these 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 factors, 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 and a corresponding decrease 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 fewer 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, both of which depend upon the continuation of our distributorship agreements 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 the Batiste Dry Shampoo products, has an initial term that runs through December 31, 2014 and, following this term, may be automatically renewed. We have already begun transition discussions with Church & Dwight in anticipation of the end of the agreement’s term. We are discussing with Church & Dwight the possibility of us entering into a new distribution agreement with them for certain segments of the marketplace in the United States. 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, three of which are sole source suppliers. 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, “Managem ent’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 produ ction and sale of certain Alpha Hydrox ^® products more expensive or prohibitive. Also, in the past, we have been required to change the formulation of our household products to comply with environmental regulations and may be required to do so again in the future if the applicable regulations are further amended.

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 trades in our stock varies from day to day 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.

Until February 1, 2013, we owned real property, buildings and related improvements located in Denver, Colorado consisting 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). We sold the Property on February 1, 2013 and leased the portion of the Property used by 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 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 Property, 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.

2013 Three Months Ended					2012 Three Months Ended
	High		Low			High		Low
March 31	$	0.38	$	0.26	March 31	$	0.28	$	0.17
June 30	$	0.46	$	0.24	June 30	$	0.21	$	0.20
September 30	$	0.50	$	0.38	September 30	$	0.32	$	0.13
December 31	$	0.65	$	0.41	December 31	$	0.39	$	0.14

Shareholders

As of March 26 , 2014, based on inquiry, we had approximately 746 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. Please see Note 4 to our Consolidated Financial Statements in Item 8 for information concerning restrictions on our ability to pay dividends that were in force up until February 1, 2013.

Equity Plans

The following table provides, as of December 31, 2013, information regarding our 2005 Stock Option Plan. 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		694,500	$	0.35		2,305,800
Equity compensation plans not approved by security holders		0		0		0
Total		694,500	$	0.35		2,305,800

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 accounting policies summarized 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 factor s 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 perio ds may be impacted.

Income Taxes

As of December 31, 2013, we have net deferred income tax assets of approximately $4,615,60 0 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 a ctual 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 for details regarding our determination that there has been no impairment in the carrying values of our long-lived assets at December 31, 2013. However, please refer to the same note as to our determination in 2012 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 2013 were $ 19,292,200 versus $16,041,400 for 2012, an increase of $3,250,800 or 20.3%. We saw a 48.2% increase in net sales of the skin and hair care products that we distribute for other companies and an 8.8% decrease in net sales of our own line of skin care products. We saw a 9.0% increase in net sales of our household products. The reasons for the foregoing changes in net sales of our products are described below.

Our net income for 2013 was $643,90 0 versus a net loss $1,371,800 for 2012. The net income for 2013 compared to the net loss for 2012 resulted primarily from: (1) increased sales; (2) changes in our trade promotions to our customers; (3) changes in costs of sales; and (4) changes in operating expenses.

Summary of Results as a Percentage of Net Sales

	Year Ended December 31,
	2013			2012
Net sales
Household products		27.7	%		30.5	%
Skin and hair care products		72.3	%		69.5	%
Total net sales		100.0	%		100.0	%
Cost of sales		54.3	%		56.6	%
Gross profit		45.7	%		43.4	%
Other revenue		0.2	%		1.5	%
		45.9	%		44.9	%
Operating expenses		41.7	%		46.2	%
Loss on impairment of long-lived assets		0	%		1.8	%
Loss on impairment of assets held for sale		0	%		3.6	%
Interest expense		0.4	%		1.8	%
		42.1	%		53.4	%
Income (loss) before taxes		3.8	%		(8.6	%)

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) to our Consolidated Financial Statements in Item 8.

Comparative Net Sales

	Year Ended December 31,				Percentage Increase
	2013		2012		(Decrease)
Scott’s Liquid Gold ^® and other household products	$	5,335,500	$	4,895,600		9.0	%
Total household products		5,335,500		4,895,600		9.0	%
Alpha Hydrox ^® , Diabetic cream and shampoo and other skin care products		4,105,000		4,499,800		(8.8	%)
Montagne Jeunesse and Batiste Dry Shampoo		9,851,700		6,646,000		48.2	%
Total skin and hair care products		13,956,700		11,145,800		25.2	%
Total net sales	$	19,292,200	$	16,041,400		20.3	%

During 2013, net sales of skin and hair care products accounted for 72.3 % of consolidated net sales compared to 69.5% in 2012. The net sales of these products were $13,956,700 in 2013 compared to $11,145,800 in 2012, an increase of $2,810,900 or 25.2%.

The net sales of our Alpha Hydrox ^® , Neoteric Diabetic ^® and other manufactured skin care products were $4,105,000 in 2013 versus $4,499,800 in 2012, a decrease of $394,800 or 8.8%. This decrease is primarily attributable to: (1) a decrease in the net sales of our Neoteric Diabetic ^® shampoo due to one of our customers returning the shampoo from certain of their stores and no longer carrying the shampoo in those stores; (2) a decrease in net sales of our Neoteric Diabetic ^® skin cream due to one of our customers no longer carrying the cream in their stores; and (3) increased competition for diabetic skin cream products.

The net sales of Montagne Jeunesse sachet pr oducts and Batiste Dry Shampoo were $9,851,700 in 2013 versus $6,646,000 in 2012, an increase of $3,205,700 or 48.2%. This increase is primarily attributable to increased distribution of both Montagne Jeunesse products and Batiste Dry Shampoo among new and existing customers and the improved placement of our products at existing customers. This increase would have been higher, but one of our customers for the Montagne Jeunesse face masque sachets replaced these products with their own private label brand of sachets and another customer stopped carrying the sachets in their stores.

Sales of household products for 2013 accounted for 27.7 % of consolidated net sales compared to 30.5% for the same period in 2012. During 2013, the sales of our household products were $5,335,500 as compared to $4,895,600 for the same period in 2012, an increase of $439,900 or 9.0%. This increase is attributable primarily to increased sales on certain of our wood care products, which we believe is due to increased use of television advertising and a coupon program during 2013. Due to the decline in sales and distribution of Mold Control 500, this product was discontinued at the end of 2012.

We paid our customers a total of $2,036,80 0 in 2013 for trade promotions to support price features, displays and other merchandising of our products, versus total spending of $1,735,700 in 2012, an increase of $301,100 or 17.3%. This increase is primarily attributable to higher spending on promotion of Montagne Jeunesse sachet products and Batiste Dry Shampoo, which we believe was the primary reason we were able to generate an increase of $3,205,700 or 48.2% in net sales of these products in 2013 compared to 2012.

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 r equests 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. Our product returns (as a percentage of net sales) were 0.79% in 2013 compared to 0.60% in 2012. This increase is primarily attributable to one of our customers returning our Diabetic shampoo from certain of their stores that will no longer carry our Diabetic shampoo.

On a consolidated basis, cost of sales was $1 0,469,800 for 2013 compared to $9,074,700 for 2012, an increase of $1,395,100 or 15.4%, on a net sales increase of 20.3%. As a percentage of consolidated net sales, cost of sales was 54.3% in 2013 versus 56.6% in 2012.

The cost of sales for our skin and hair care products was 54.5% in 2013 versus 53.7% in 2012. The increase reflects primarily a higher percentage of net sales of the skin and hair care products that we distribute for other companies which have a higher cost than the skin care products that we manufacture.

The costs of sales for our household products decreased to 53.7% of net sales in 2013 as compared to 63.1% in 2012. This decrease is primarily attributable to reducing the fill amount and reducing the number of colors in the graphics on our cans of Scott’s Liquid Gold ^® Wood Cleaner and Preservative as well as a decrease in the cost of certain of our raw materials.

Operating Expenses, Interest Expense and Other Income

	Year Ended December 31,				Percentage Increase
	2013		2012		(Decrease)
Operating Expenses
Advertising	$	657,500	$	320,200		105.3	%
Selling		4,598,600		4,305,200		6.8	%
General and administrative		2,782,200		2,792,200		(0.4	%)
Impairment of long-lived assets		0		286,900		(100.0	%)
Impairment on assets held for sale		0		579,800		(100.0	%)
Total operating expenses	$	8,038,300	$	8,284,300		(3.0	%)
Rental and Other Income	$	34,000	$	240,400		(85.9	%)
Interest Expense	$	80,000	$	294,600		(72.8	%)

Our operating expenses for 2013 were $8,038,300 compared to $8,284,300 for 2012, a decrease of $246,000 or 3.0%. 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 2013 were $657,50 0 compared to $320,200 for 2012, an increase of $337,300 or 105.3%. The increase relates primarily to the cost of a national television campaign for Scott’s Liquid Gold ^® Wood Cleaner and Preservative in the first and fourth quarters of 2013 as well as a national coupon program that was part of the marketing program in the first quarter of 2013. We did not do a similar national television campaign in 2012 although we did do a similar coupon program in 2012.

Selling expenses for 2013 were $4,598,60 0 compared to $4,305,200 for 2012, an increase of $293,400 or 6.8%. The increase was primarily attributable to changes in personnel within our sales organization starting in the first quarter of 2013.

General and administrative expenses for 2013 were $2,782,200 compared to $2,792,200 for 2012, a decrease of $10,000 or 0.4%. Although our general and administrative expenses remained relatively unchanged, we did have the following two material changes that in large part offset each other: (1) a decrease in 2013 due to a reduction in our operating and maintenance costs of our Property which was sold in the first quarter of 2013 and (2) an increase in 2013 due to the need as a result of the sale of our Property to incur a non-cash expense for brokerage commissions relating to the leasing of office space in our Property that were previously capitalized on our balance sheet.

The impairment of our long-lived assets for 2013 was $0 compared to $286,900 for 2012. The decrease is due to an impairment in 2012 to the carrying value of our Property as discussed in Note 1(i) of our Consolidated Financial Statements in Item 8.

The impairment of our assets held for sale for 2013 was $0 compared to $579,800 for 2012. The decrease is due to a reclassification in 2012 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 2013 of $34,00 0 included $11,000 of net rental receipts, $14,800 in interest earned on our cash reserves and other income of $8,200. This compares to total rental and other income for 2012 of $240,400 which included $152,100 of net rental receipts, $2,500 in interest earned on our cash reserves and other income of $85,800. The decrease in rental income is a result of the sale of our Property on February 1, 2013, part of which was being leased to unaffiliated tenants.

Interest expense for 2013 was $80,000 and included $33,600 in administrative fees incurred relative to the sale of accounts receivable invoices to Summit and a one-time non-cash charge of $31,700 to expense capitalized loan fees in connection with the sale of the Property. Interest expense for 2012 was $294,600 and included $98,000 in administrative fees paid to Summit. The decrease in interest expense is due to us paying off our mortgage as a result of the sale of our Property on February 1, 2013 and maintaining since that time a zero balance on our line of credit with Summit.

During 2013 and 2012, our expenditures for research and development were insignificant.

Liquidity and Capital Resources

Citywide Loan

On June 28, 2006, we entered into a loan with a fifteen year amortization with Citywide Banks for $5,156,600 secured by the land, building and fixtures at our Denver, Colorado facilities. All outstanding principal and accrued interest on the loan was repaid in full on February 1, 2013 at the closing of the sale of our Property and all liens securing this loan were released. Please see Note 12 to our Consolidated Financial Statements in Item 8 for additional 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, 2013, we had $3.1 million in cash on hand and the full $1.5 million of capacity under our credit line with Summit was available for future borrowing. Our net cash used by operating activities in 2013 was $2,587,600 as compared to net cash provided by operating activities of $17,900 in 2012. For 2013, the primary components of working capital (exclusive of cash that was $2,872,300 more at December 31, 2013 compared to December 31, 2012) that significantly affected operating cash flows are the following: (1) net trade receivables were $213,100 more at December 31, 2013 than at December 31, 2012 due primarily to increased gross sales activity and the timing of receiving payment; (2) obligations collateralized by those receivables and inventory were $1,201,400 less at December 31, 2013 than at December 31, 2012 due to repaying the outstanding balance on our line of credit with Summit on February 4, 2013 following the sale of our Property; (3) inventory at December 31, 2013 was $1,235,400 more than at December 31, 2012 due primarily to increased current and anticipated future gross sales activity; and (4) accounts payable and other accrued expenses at December 31, 2013 were $680,800 less than at December 31, 2012 due primarily to paying real estate property taxes for 2012 at the closing for the sale of our Property and paying certain other financial obligations to suppliers and vendors in February 2013.

We anticipate that our existing cash, especially given the cash proceeds from the sale of our Property , 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 do not expect to make any significant capital expenditures during 2014. Please see Note 12 to our Consolidated Financial Statements in Item 8 for information on the sale of our Property.

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, 2013 and 2012, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2013. 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, 2013 and 2012, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

/s/ EKS&H LLLP

March 28, 2014

Denver, Colorado

Consolidated Statements of Operations

	Year Ended December 31,
	2013			2012
Net sales	$	19,292,200		$	16,041,400
Operating costs and expenses:
Cost of sales		10,469,800			9,074,700
Advertising		657,500			320,200
Selling		4,598,600			4,305,200
General and administrative		2,782,200			2,792,200
Loss on impairment of long-lived assets		0			286,900
Loss on impairment of assets held for sale		0			579,800
Total operating costs and expenses		18,508,100			17,359,000
Income (loss) from operations		784,100			(1,317,600	)
Rental and other income		34,000			240,400
Interest expense		(80,000	)		(294,600	)
Income (loss) before income taxes		738,100			(1,371,800	)
Income tax expense		94,200			0
Net income (loss)	$	643,900		$	(1,371,800	)
Net income (loss) per common share :
Basic	$	0.06		$	(0.13	)
Diluted	$	0.06		$	(0.13	)
Weighted average shares outstanding:
Basic		11,251,637			10,934,945
Diluted		11,347,418			10,934,945

See accompanying notes to these Consolidated Financial Statements.

Consolidated Balance Sheets

	December 31,
	2013		2012
Assets
Current assets:
Cash and cash equivalents	$	3,126,200	$	253,900
Trade receivables, net		1,182,300		969,200
Inventories, net		3,211,200		1,975,800
Prepaid expenses		269,200		139,100
Total current assets		7,788,900		3,338,000
Property, plant and equipment, net		518,200		467,400
Assets held for sale		0		8,907,600
Other assets		51,000		82,800
Total assets	$	8,358,100	$	12,795,800
Liabilities and Shareholders’ Equity
Current liabilities:
Obligations collateralized by receivables and inventory	$	0	$	1,201,400
Accounts payable		860,900		1,371,600
Accrued payroll and benefits		553,300		509,200
Accrued property taxes		33,400		227,900
Other accrued expenses		0		19,700
Current maturities of long-term debt		0		352,600
Total current liabilities		1,447,600		3,682,400
Long-term debt, net of current maturities		0		3,010,700
Total liabilities		1,447,600		6,693,100
Commitments and contingencies
Shareholders’ equity:
Common stock; $0.10 par value, authorized 50,000,000 shares; issued and outstanding 11,446,800 shares (2013) and 10,937,000 shares (2012)		1,144,700		1,093,700
Capital in excess of par		5,615,500		5,502,600
Retained earnings (accumulated deficit)		150,300		(493,600	)
Total shareholders’ equity		6,910,500		6,102,700
Total liabilities and shareholders’ equity	$	8,358,100	$	12,795,800

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
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		0			53,600
Stock options exercised		30,000		3,000		2,100		0			5,100
Net loss		0		0		0		(1,371,800	)		(1,371,800	)
Balance, December 31, 2012		10,937,000	$	1,093,700	$	5,502,600	$	(493,600	)	$	6,102,700
Stock-based compensation		0		0		55,300		0			55,300
Stock options exercised		509,800		51,000		57,600		0			108,600
Net income		0		0		0		643,900			643,900
Balance, December 31, 2013		11,446,800	$	1,144,700	$	5,615,500	$	150,300		$	6,910,500

See accompanying notes to these Consolidated Financial Statements.

Consolidated Statements of Cash Flows

	Year Ended December 31,
	2013		2012
Cash flows from operating activities:
Net income (loss)	$	643,900	$	(1,371,800	)
Adjustment to reconcile net income (loss) to net cash (used) provided by operating activities:
Depreciation and amortization		135,000		420,300
Impairment of long-lived assets		0		286,900
Impairment on assets held for sale		0		579,800
Stock-based compensation		55,300		53,600
Loss (gain) on disposal of assets		7,200		(25,800	)
Change in operating assets and liabilities:
Trade receivables		(213,100)		(521,300	)
Inventories		(1,235,400)		43,400
Prepaid expenses and other assets		(98,300)		(20,100	)
Net (payments) proceeds on obligations collateralized by receivables and inventory		(1,201,400)		924,300
Accounts payable and accrued expenses		(680,800)		(351,400	)
Total adjustments to net income (loss)		(3,231,500)		1,389,700
Net Cash (Used) Provided by Operating Activities		(2,587,600)		17,900
Cash flow from investing activities:
Net proceeds from sale of assets held for sale		8,922,600		0
Proceeds from sale of property, plant and equipment		0		26,600
Purchase of property, plant and equipment		(208,000)		(30,700	)
Net Cash Provided (Used) by Investing Activities		8,714,600		(4,100	)
Cash flow from financing activities:
Principal payments on long-term debt		(3,363,300)		(340,900	)
Proceeds from exercise of stock options		108,600		5,100
Net Cash Used by Financing Activities		(3,254,700)		(335,800	)
Net Increase (Decrease) in Cash and Cash Equivalents		2,872,300		(322,000	)
Cash and Cash Equivalents, beginning of year		253,900		575,900
Cash and Cash Equivalents, end of year	$	3,126,200	$	253,900
Supplemental disclosures:
Cash paid during the period for interest	$	48,400	$	294,800

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 se gments, household products and skin and hair care products.

Prior to 2013, we experienced significant losses over an extended number of years primarily attributable to sales declines as well as the costs and expenses associated with the ownership of our real estate assets. We used a significant amount of our cash reserves during this time to fund operations and for debt service. Going forward, 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. We also plan to 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.

We anticipate that our existing cash, especially given the cash proceeds from the sale of our real estate assets on February 1, 2013, and our anticipated 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 do not expect to make any significant capital expenditures during 2014. 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 d ate 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 on June 29, 2012 (effective July 1, 2012). The agreement has a term that expires on January 1, 201 5, 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, 2015 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 agains t 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 amendment to the agreement 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 amendment on June 29, 2012 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, 2013, the prime rate was 3.25%.

In addition, prior to the amendment to the agreement 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 amendment on June 29, 2012 reduced these administrative fees to 0.85% per month on the average monthly outstanding loan on the receivable portion of any advanc e 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 2013, we sold approximately $8 24,200 of our accounts receivables to Summit for approximately $700,600. As the advance rate on these accounts receivables was 85%, we retained an interest equal to 15% of those accounts receivables. 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. At December 31, 2013, the entire credit line of $1.5 million was available for future factoring of accounts receivable invoices.

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 the “Current Assets” section within our Consolidated Balance Sheets as “Trade receivables, net.” Similarly, the net liability owing to Summit appears as “Obligations collateralized by receivab les and inventory” within the “Current Liabilities” section of our Consolidated Balance Sheets. Net proceeds received on obligations collateralized by receivables and inventory appear as “net cash (used) provided by operating activities” within the “Adjustment to reconcile net income (loss) to net cash used by operating activities” section of our Consolidated Statements of Cash Flow.

On March 16, 2011, with the consent of 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, 2013, Wells Fargo used the 104-day LIBOR rate of 0.28%.

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 2013, we sold approximately $ 4,098,000 of our relevant accounts receivable to Wells Fargo for approximately $4,080,600. 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, respe ctively. 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. As of the consolidated balance sheet date, and 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. As of December 31, 2013, we had no long-term debt. Prior to February 1, 2013, our long-term debt bore interest at a fixe d rate that adjusted annually to the then prime rate. The carrying value of our long-term debt approximated 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 carryin g 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 September 30, 2012, due to changes in the real estate market in Denver, Colorado, we conducted an evaluation into the fair value of our property, plant and equipment with particular attention to our land and office, warehouse and manufacturing buildin gs (collectively, the “Property”). 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 net book value of the Property at September 30, 2012 was approximately $9,786,900.

On November 5, 2012, pursuant to FASB authoritative guidance, we classified the Property as an asset “held for sale.” Upon classification as “held for sale”, the long-lived asset was measured at the lower of its carrying value or fair value less cost to sell, depreciation was ceased and the asset was separately presented on our Consolidated Balance Sheets.

On February 1, 2013, we sold our Property for $9.5 million and received net proceeds of $8.9 million after deducting the expenses for selling the Property. Please see Note 12 for information on the sale of our Property.

(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 interest and pe nalties 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 arran gement 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.

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 resu lts 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 rec ognized or the date at which the sale incentive is offered.

At December 31, 2013 and December 31, 2012 approximately $ 821,700 and $468,400, respectively, had been reserved for as a reduction of accounts receivable. Trade promotions to our customers and incentives such as coupons and rebates to the consumer are deducted from gross sales and totaled $2,036,800 and $1,735,700 for the years ended December 31, 2013 and 2012, respectively.

(l)	Advertising Costs

Advertising costs are expensed as incurred.

(m)	Stock-based Compensation

During 2013, we granted: (i) options to acquire 85,000 shares of our common stock to two executive officers at a price of $0.41 per share; (ii) an option to acquire 30,000 shares of our common stock to a board member at a price of $0.55 per share; (iii) an option to acquire 15,000 shares of our common stock to a regional sales manager at a price of $0.55 per share; (iv) an option to acquire 15,000 shares of our common stock to a regional sales manager at a price of $0.49 per share; and (v) options to acquire 50,000 shares of our common stock to an executive officer at a price of $0.78 per share. These options which vest ratably over 48 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. In addition, during 2013, we granted options to acquire 90,000 shares of our common stock to three of our board members. These options which vested upon the date of grant, and which expire after five years, were granted at 120% of the market value as of the date of grant. During 2012, we granted an option to acquire 100,000 shares of our common stock to an executive officer at a price of $0.24 per share. Please see Note 6 for information regarding the 692,830 fewer stock options outstanding at December 31, 2013 than at December 31, 2012.

The weighted average fair market value of the options granted in the years ended December 31, 2013 and 2012 were estimated on the date of grant, using a Black-Scholes option pricing model with the following assumptions:


	2013		2012
Expected life of options (using the “simplified method”)		4.5 years		4.5 years
Average risk-free interest rate		0.8%-1.5		0.8	%
Average expected volatility of stock		137%-141%		143	%
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 $ 55,300 and $53,600 in the twelve months ended December 31, 2013 and 2012, respectively. Approximately $128,500 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 sale s and sales support personnel, travel, brokerage commissions and promotional costs, as well as certain other indirect costs. Shipping and handling costs totaled $1,461,700 and $1,487,300, for the years ended December 31, 2013 and 2012, 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 rent and 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:

	2013			2012
Finished goods	$	1,636,500		$	959,100
Raw materials		1,621,000			1,079,600
Inventory reserve for obsolescence		(46,300	)		(62,900	)
	$	3,211,200		$	1,975,800

Note 3: Property, Plant and Equipment

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

	2013			2012
Production equipment	$	4,989,900		$	5,004,900
Office furniture and equipment		794,000			1,211,800
Other		188,200			34,200
		5,972,100			6,250,900
Less accumulated depreciation		(5,453,900	)		(5,783,500	)
	$	518,200		$	467,400

Depreciation expense for the years ended December 31, 2013 and 2012 was $ 135,000 and $420,300, respectively. Please see Note 12 for information on the sale of our Property.

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 and repaid the loan in full at the closing on the sale of our real estate assets on February 1, 2013. Interest on the bank loan was at the prime rate as published in The Wall Street Journal, adjusted annually each June. The loan required 180 monthly payments of approximately $38,200 each. The loan agreement contained a number of covenants, including the requirement for us to maintain a current ratio of 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 were to be calculated in accordance with generally accepted accounting principles in the United States. We could 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 paid 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 could 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:

	2013		2012
Bank loan	$	0	$	3,363,300
Less current maturities		0		352,600
Long-term debt	$	0	$	3,010,700

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:

	2013			2012
Current provision (benefit):
Federal	$	32,800		$	0
State		61,400			0
Total current provision (benefit)		94,200			0
Deferred provision (benefit):
Federal		42,600			(407,800	)
State		3,800			(36,600	)
Valuation allowance		(46,400	)		444,400
Total deferred provision (benefit)		0			0
Provision (benefit):
Federal		32,800			0
State		61,400			0
Total provision (benefit)	$	94,200		$	0

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

	2013			2012
Federal income tax at statutory rates	$	251,000		$	(466,400	)
State income taxes, net of federal tax effect		22,500			(41,900	)
Change in unrecognized benefit		(6,300	)		24,900
Trade Promotions…………………………………………………………...		(152,700	)		0
Other		26,100			39,000
Total		140,600			(444,400	)
Change in valuation allowance		(46,400	)		444,400
Provision for income taxes	$	94,200		$	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, 2013 and 2012 are comprised of the following:

	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	3,647,400		$	4,531,300
Tax credit and other carryforwards		302,500			255,200
Trade receivables		160,200			20,900
Inventories		26,900			16,600
Accrued vacation		87,800			157,100
Other		46,100			44,300
Total deferred taxes		4,270,900			5,025,400
Deferred tax liability:
Accumulated depreciation for tax purposes		(105,300	)		(813,400	)
Total deferred tax liabilities		(105,300	)		(813,400	)
Net deferred tax asset, before allowance		4,165,600			4,212,000
Valuation allowance		(4,165,600	)		(4,212,000	)
Net deferred tax asset	$	0		$	0

At December 31, 2013, we had federal net operating loss carryforwards of approximately $9,230,600 and federal tax credit carryforwards related to research and development efforts of approximately $269,800, both of which expire over a period ending in 2033. At December 31, 2013, there was approximately $32,800 of alternative minimum tax credits which have no expiration period. State tax loss carryforwards at December 31, 2013 are approximately $16,655,100 expiring over a period ending in 2033.

A valuation allowance was established due mainly to the uncertainty relating to the future utilization of net operating loss carryforwards. The valuation allowance was decreased by $46,400 for 2013 and increased by $444,400 for 2012, primarily related to uncertainty as to the realization of net 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 uncertain tax positions that need to be adjusted. As of December 31, 2013 and December 31, 2012, we identified approximately $395,100 and $412,100 of related tax positions, respectively.

	2013			2012
Balance at January 1,	$	412,100		$	345,000
Additions based on tax positions related to current year		320,000			67,100
Reductions for tax positions of prior years or change in valuation		(337,000	)		0
Balance at December 31,	$	395,100		$	412,100

Due to our net operating loss carryforward 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, 2013 or December 31, 2012.

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 2010 and years thereafter. 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 2009 and years thereafter.

Note 6: Shareholders’ Equity

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 the 1998 plan and no options were outstanding under that plan at December 31, 2013.

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. Except for the grant of 90,000 options to three of our directors that vested upon the date of grant, the options granted in 2013 and 2012 are vested each month over a four-year period or upon a change in control.

	1998 Plan					2005 Plan
	Number of Shares			Average Option Price Per Share		Number of Shares			Average Option Price Per Share
Maximum number of shares under the plans		1,100,000					3,000,000
Outstanding, December 31, 2011		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		(172,900	)		0		(249,300	)		0.42
Outstanding, December 31, 2012		124,000		$	0.71		1,263,350		$	0.22
Granted in 2013		0			0		285,000			0.52
Exercised		0			0		(509,830	)		0.21
Cancelled/Expired		(124,000	)	$	0.56		(344,000	)		0.21
Outstanding, December 31, 2013		0					694,520		$	0.35
Available for issuance, December 31, 2013		None					2,305,480

A summary of additional information related to the options outstanding as of December 31, 2013 is as follows:

	Options Outstanding and Exercisable
	Weighted Average
Range of Exercise Prices	Number Outstanding		Remaining Contractual Life		Exercise Price
$0.17—$0.78		694,520		3.1 years	$	0.35
Total		694,520		3.1 years	$	0.35

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 2013 or 2012. At December 31, 2013 and 2012, a total of 860,053 and 1,169,540 shares of our common stock, respectively, have been allocated and earned by our employees.

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, determine d 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 to acquire 694,5 20 and 1,387,350 of our shares at December 31, 2013 and 2012, respectively, a decrease of 692,830 or 49.9%. This decrease is due primarily to stock options being exercised as well as stock options expiring. At December 31, 2013 options to acquire 106,778 of our shares had exercise prices that were lower than the average market price of our shares for the year ended December 31, 2013. At December 3, 2012, potentially dilutive securities were excluded from the computation of weighted average shares outstanding due to their anti-dilutive effect.

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

	2013		2012
Common shares outstanding, beginning of the year		10,937,000		10,907,000
Weighted average common shares issued		314,637		27,945
Weighted average number of common shares outstanding		11,251,637		10,934,945
Dilutive effect of common share equivalents		95,781		0
Diluted weighted average number of common shares outstanding		11,347,418		10,934,945

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, 2013.

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:

	2013					2012
	Household Products			Skin and Hair Care Products		Household Products			Skin and Hair Care Products
Net sales to external customers	$	5,335,500		$	13,956,700	$	4,895,600		$	11,145,800
(Loss) income before income taxes	$	(990,900	)	$	1,729,000	$	(1,985,600	)	$	613,800
Identifiable assets	$	3,514,000		$	3,733,800	$	2,388,200		$	3,905,600

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

	2013		2012
Net sales to external customers	$	19,292,200	$	16,041,400
Income (loss) before income taxes	$	738,100	$	(1,371,800	)
Consolidated income (loss) before income taxes	$	738,100	$	(1,371,800	)
Identifiable assets	$	7,247,800	$	6,508,800
Corporate assets		1,110,300		6,287,000
Consolidated total assets	$	8,358,100	$	12,795,800

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:

	2013		2012
United States	$	19,190,300	$	15,975,800
Foreign countries		101,900		65,600
Total net sales	$	19,292,200	$	16,041,400

In 2013 and 2012, Wal-Mart accounted for approximately $4,130,30 0 and $3,577,800, respectively, of our consolidated net sales, Ulta Salon, Cosmetics & Fragrance, Inc. (“Ulta”) accounted for approximately $3,253,400 and $1,742,000, of our consolidated net sales, respectively and Walgreens Co. (“Walgreens”) accounted for approximately $1,319,800 and $1,110,500 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 13 .7% and 8.7% of our total trade receivables at December 31, 2013 and 2012, respectively. The outstanding trade receivables from Ulta accounted for 20.9% and 19.4% of our total trade receivables at December 31, 2013 and 2012, respectively. The outstanding trade receivables from Walgreens accounted for 15.5% and 15.0% of our total trade receivables at December 31, 2013 and 2012, 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. Addition ally, 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 $3,500 and $2,500, in 2013 and 2012, respectively. We have made no discretionary profit sharing contributions in 2013 and 2012.

Note 10. Commitments and Contingencies

Leases

In connection with the sale of our real estate assets on February 1, 2013, we entered into a lease with the purchaser for 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”). Annual rental expense under the Office Lease and Warehouse Lease for 2013 was $191,600 and $338,500, respectively. These leases did not exist in 2012. Minimum annual rental payments under the Office Lease are approximately $214,800, $221,200 and $18,500 for the years ending December 31, 2014, 2015 and 2016 respectively. Minimum annual rental payments under the Warehouse Lease are approximately $379,400, $390,800 and $32,600 for the years ending December 31, 2014, 2015 and 2016 respectively. See Note 12 for information on the terms of the Office Lease and the Warehouse Lease.

We have entered into various operating lease agreements, primarily for office equipment. Annual rental expense under these leases totaled $ 78,500 and $77,400, in 2013 and 2012, respectively. Minimum annual rental payments under noncancellable operating leases are approximately $61,500, $23,700 and $7,000 for the years ending December 31, 2014, 2015 and 2016, respectively. Presently we have no lease commitments beyond 2016.

In connection with the sale of our real estate assets on February 1, 2013, we assigned the following leases to the purchaser. In Octo ber 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 would have continued through October 2014. These rent payments included annual rental escalations of between 3.7% and 4.2%. 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 were to start in May 2013.

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, 2012
Returns and allowances and doubtful accounts reserve	$	636,500	$	1,978,800	$	2,146,900	$	468,400
Year ended December 31, 2013
Returns and allowances and doubtful accounts reserve	$	468,400	$	2,039,300	$	1,686,000	$	821,700

Note 12. Sale of Property

On February 1, 2013, we consummated the sale of our Property 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. 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 entered into the Office Lease with purchaser to lease approximately 16,078 square feet of office space and entered into the Warehouse Lease to lease approximately 113,620 square feet of manufacturing and warehouse space 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 Febr uary 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.

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, 2013, 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, 2013.

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, 2013, 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 (1992). Based on its assessment, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2013.

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 a nd 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, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION.

On March 26, 2014, we entered into employment agreements with Mr. Goldstein, who serves as our Chief Executive Officer and President, and Chairman of our Board of Directors (the “Board”), and Mr. Levine, who serves as our Chief Operating Officer, Chief Financ ial Officer and a member of the Board. The agreements are for a three-year term, but either we or the executive may terminate the agreement before that time, with or without cause. The agreements also include terms and provisions to protect our business and confidential information, including standard non-compete, non-solicitation of clients and employees, and no-hire obligations during the term of employment. Upon either Mr. Goldstein’s or Mr. Levine’s termination of employment by us not for “cause,” or by Mr. Goldstein or Mr. Levine for “good reason” (as each term is defined in the employment agreement), in addition to already earned salary and any earned but unpaid bonus for the prior year, Mr. Goldstein and Mr. Levine are entitled to receive certain payments and benefits, including: (1) a severance payment equal to 18 months of their then current base salary in effect on the day of termination payable over a 18 month period; and (2) reimbursement for the costs of continuing health benefits for a period of 18 months following termination. All severance payments and benefits are subject to compliance with the restrictive covenants in the employment

agreement (such as the nondisclosure, non-solicitation, and non-competition provisions) for the 18 months after termination of employment, as well as the receipt of a release from the executive officer.

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, 2013, 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 35 of this Report

Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Operations for the years ended December 31, 2013 and 2012

Consolidated Balance Sheets as of December 31, 2013 and 2012

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2013 and 2012

Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012

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, Chief Operating Officer and Corporate Secretary
		(Principal Financial and Chief Accounting Officer)
Date:		March 28, 2014

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 28, 2014	Mark E. Goldstein,
	Director, President and Chief Executive Officer
March 28, 2014	Sharon D. Garrett, Director
March 28, 2014	Mark D. Goodman, Director		/s/ Mark E. Goldstein
March 28, 2014	Gerald J. Laber, Director		Mark E. Goldstein, for himself and as
March 28, 2014	Philip A. Neri, Director		Attorney-in-Fact for the named directors
			who constitute all of the members of the
			the Board of Directors and for the named officers

March 28, 2014	Barry J. Levine, Director, Treasurer, Chief Financial Officer, Chief Operating Officer and Corporate Secretary

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 incorporated by reference to Exhibit 10.3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

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*

Employment Agreement dated as of March 26, 2014 between Scott’s Liquid Gold-Inc. and Mark Goldstein.

10.6*

Employment Agreement dated as of March 26, 2014 between Scott’s Liquid Gold-Inc. and Barry Levine.

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.

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.

Exhibit

Number

Document

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. incorporated by reference to Exhibit 10.22 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

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.

10.24

Purchase and Sale Agreement, dated November 21, 2012, between the Company and Havana Gold, LLC. incorporated by reference to Exhibit 10.24 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

10.25

Real Property Lease (Warehouse Lease), dated February 1, 2013, between the Company and Havana Gold, LLC. incorporated by reference to Exhibit 10.25 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

10.26

Real Property Lease (Office Lease), dated February 1, 2013, between the Company and Havana Gold, LLC. incorporated by reference to Exhibit 10.26 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

10.27*

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan and Trust Agreement, Amended and Restated effective January 1, 2012.

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.

Consent of EKS&H LLLP.

Powers of Attorney.

31.1

Rule 13a-14(a) Certification of the Chief Executive Officer.

Exhibit Number		Document
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.

Exhibit 10.5

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made by and between Scott’s Liquid Gold- Inc. (“Company”), and Mark Goldstein (“Executive”) (individually, a “Party” and together, the “Parties”), as of the date on which the Agreement is executed by the Parties (“Effective Date”).

W I T N E S S E T H:

WHEREAS, Company desires to continue to employ the Executive in a capacity and on the terms and conditions, and for the consideration, hereinafter set forth and the Executive desires to be employed by Company on such terms and conditions and for such consideration;

NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, Company and Executive agree as follows:

ARTICLE 1
EMPLOYMENT AND DUTIES

1.1. Employment; Effective Date . As of the Effective Date, and continuing for the period of time set forth in Article 2 of this Agreement, Executive’s employment by Company shall be subject to the terms and conditions of this Agreement.

1.2. Positions . Company shall continue to employ Executive in the positions of Chief Executive Officer and President reporting to the Board of Directors (the “Board”). Executive agrees to serve as Chairman of the Board of Company until his resignation or removal.

1.3. Duties and Services . Executive agrees to serve in the positions referred to in paragraph 1.2 and to perform diligently and to the best of his abilities the duties and services pertaining to such offices, as well as such additional duties and services appropriate to such office which the Parties mutually may agree upon from time to time. Executive’s employment shall also be subject to the policies maintained and established by Company that are of general applicability to Company’s executive employees, as such policies may be amended from time to time, to the extent they do not otherwise conflict with the express terms of this Agreement.

1.4. Other Interests . Executive agrees, during the period of his employment by Company, to devote all of his primary business time, energy and best efforts to the business and affairs of Company and its affiliates and not to engage, directly or indirectly, for any pay or remuneration as an employee, consultant, or director in any other business or businesses, whether or not similar to that of Company, or to invest in any private companies that compete with Company, except with the advance written consent of the Board. The foregoing notwithstanding, the Parties recognize and agree that Executive may engage in charitable and civic pursuits without the consent of the Board, as long as such pursuits do not, in the sole and good faith determination of the Board, conflict with the business and affairs of Company or its affiliates or interfere with Executive’s performance of his duties hereunder.

1.5. Duty of Loyalty . Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty to act at all times in the best interests of Company. In keeping with such duty, Executive shall make full disclosure to Company of all business opportunities pertaining to Company’s business and shall not appropriate for Executive’s own benefit or the benefit of another business opportunities concerning Company’s business.

ARTICLE 2
TERM AND TERMINATION OF EMPLOYMENT

2.1. Term . Unless sooner terminated pursuant to paragraph 2.2 or 2.3 below, Company agrees to continue to employ Executive through the third anniversary of the Effective Date (the “Initial Expiration Date”); provided, however, that beginning on the Initial Expiration Date, and on each anniversary of the Initial Expiration Date thereafter, if this Agreement has not been terminated pursuant to paragraph 2.2 or 2.3, then said term of employment will automatically be extended for an additional one-year period, unless on or before the date that is 90 days prior to the first day of any such extension period either Party gives written notice to the other that no such automatic extension shall occur.

2.2. Company’s Right to Terminate . Company has the right to terminate Executive’s employment under this Agreement for any of the following reasons:

(i)	upon Executive’s death or presumed death;

(ii)

upon Executive’s disability, which shall mean Executive’s becoming incapacitated by accident, sickness, or other circumstances which renders him mentally or physically incapable of performing the duties and services required of him hereunder for 90 or more days (whether or not consecutive) out of any consecutive 180-day period;

(iii)

for “Cause,” which shall mean Executive has (A) engaged in gross negligence, gross incompetence or willful misconduct in the performance of the duties required of him hereunder; (B) refused without proper reason to perform the material duties and responsibilities required of him hereunder; (C) willfully engaged in conduct that is materially injurious to Company or its affiliates (monetarily or otherwise); (D) committed an act of fraud, embezzlement or breach of fiduciary duty to Company or an affiliate (including the unauthorized disclosure of confidential or proprietary material information of Company or an affiliate); (E) been charged, through indictment or criminal complaint, entry of pretrial diversion or sentencing agreement, or has been convicted of (or pleaded no contest to) a crime involving fraud, dishonesty or moral turpitude or any felony; or (F) engaged in dishonesty that is materially injurious to Company; or

(iv)	at any time for any other reason, or for no reason whatsoever, in the sole discretion of the Board.

2.3. Executive’s Right to Terminate . Executive shall have the right to terminate his employment under this Agreement for any of the following reasons:

(i)

for “Good Reason,” which shall mean a voluntary separation from service following the initial existence of one or more of the following conditions (which arises without the consent of Executive): (A) a material diminution in Executive’s responsibilities, duties or authority, including but not limited to being involuntarily removed from the position of Chairman of Board; (B) a material diminution in Executive’s base compensation; (C) a material breach by Company of any material provision of this Agreement, or (D) a change in the geographic location of Executive’s principal place of employment by Company of more than 50 miles from the location where he is principally employed as of the Effective Date; or

(ii)	at any time for any other reason, or for no reason whatsoever, in the sole discretion of Executive.

2.4. Notice of Termination .

(i)

If Company desires to terminate Executive’s employment hereunder at any time prior to expiration of the term of employment as provided in paragraph 2.1 for any reason other than for Cause as defined in paragraph 2.2(iii), it will do so by giving a 30-day written notice to Executive that it has elected to terminate Executive’s employment hereunder and stating the effective date and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising hereunder.

(ii)

In the case of any notice by Company of its intent to terminate this Agreement for Cause, Company shall provide Executive with notice of the existence of the condition(s) constituting the Cause and the effective date of the termination, provided that in the instance that Cause has arisen under paragraph 2.2(iii)(B) exclusively, provide Executive with 30 days to cure such condition, provided, however, that in the event Executive engages in the same or similar conduct after curing such condition the first time, then the Board has the unconditional right to terminate for Cause without further advance notice or opportunity to cure.

(iii)

If Executive desires to terminate his employment hereunder at any time prior to expiration of the term of employment as provided in paragraph 2.1, he shall do so by giving a 30-day written notice to Company that he has elected to terminate his employment hereunder and stating the effective date and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising hereunder and Company may, in its sole discretion, decide to pay Executive for the 30-day notice period (or any portion thereof) in lieu of Executive continuing to work during the notice period. In the case of any notice by Executive of his intent to terminate his employment hereunder for Good Reason, Executive shall provide Company with notice of the existence of the condition(s) constituting the Good Reason within 30 days after

the initial existence of such condition(s) and Company shall have 30 days following Executive’s provision of such notice to remedy such condition(s). If Company remedies the condition(s) constituting the Good Reason within such 30 day period, then Executive’s employment hereunder shall continue and his notice of termination shall become void and of no further effect. If Company does not remedy the condition(s) constituting the Good Reason within such 30 day period, Executive’s employment with Company shall terminate on the date that is 31 days following the date of Executive’s notice of termination and Executive shall be deemed to have separated from service for Good Reason.

2.5. Deemed Resignations . Any termination of Executive’s employment (regardless of which Party initiated the termination, or whether it occurred due to an expiration of the term of employment) shall constitute an automatic resignation of Executive as an officer of Company and each affiliate of Company, if any, an automatic resignation as trustee of the Company’s Employee Stock Ownership Plan and 401(k) plan, an automatic resignation of Executive from the Board and from the board of directors or similar governing body of any affiliate of Company, if any, and from the board of directors or similar governing body of any corporation, limited liability company or other entity in which Company or any affiliate, if any, holds an equity interest and with respect to which board or similar governing body Executive serves as Company’s or such affiliate’s designee or other representative.

ARTICLE 3
COMPENSATION AND BENEFITS

3.1. Base Salary . During the period of this Agreement, Executive shall receive an annual base salary of $351,727.40, less usual and customary withholdings, for the period of this Agreement. Executive’s annual base salary shall be reviewed by the Board (or a committee thereof) on an annual basis, and, in the sole discretion of the Board (or such committee), such annual base salary may be increased, but not decreased (except for a decrease that is consistent with reductions taken generally by other executives of Company), effective as of any date determined by the Board. Executive’s annual base salary shall be paid in equal installments in accordance with Company’s standard policy regarding payment of compensation to executives, but no less frequently than monthly.

3.2. Equity Compensation . The Board (or a committee thereof) may, in its sole discretion, offer or award Executive any form of equity or phantom equity as is permitted by any written plan or policy adopted by the Company, effective as of any date determined by the Board, in accordance with the terms of a separate agreement to be executed by Company and Executive concerning such award.

3.3. Bonus . Executive is eligible to receive an annual bonus of between 25-50% of Executive’s base salary during the applicable bonus period, provided Executive remains employed the entire calendar year, and the Board, in its sole discretion, determines that Executive and/or the Company, as applicable, met or exceeded all of the goals and objectives of the written annual bonus plan approved by the Board or a committee thereof. A bonus will not be earned or vested until such time as the Board or a committee thereof determines that the

goals and objectives have been achieved, and a bonus, if any, shall be paid to Executive on or before March 14 of the year following the year in which the bonus was earned.

3.4. Other Perquisites . During his employment hereunder, Executive shall be afforded the following benefits as incidences of his employment:

(i)

Business and Entertainment Expenses . Subject to Company’s standard policies and procedures with respect to expense reimbursement as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable and appropriate expenses incurred by Executive for business related purposes, including dues and fees to industry and professional organizations and costs of entertainment and business development.

(ii)

Vacation . During his employment hereunder, Executive shall be entitled to vacation pay in accordance with the terms and conditions of Company policies applied to its executive employees generally, provided Executive shall receive a minimum of three weeks of paid vacation each calendar year, which shall accrue per pay period, and shall similarly be entitled to all holidays provided to executives of Company generally.

(iii)

Automobile . Company will provide Executive with a minimum monthly automobile allowance in the same amount as he is currently receiving, subject to applicable taxes, withholdings and deductions. To the extent that Executive incurs taxable income relating to the automobile allowance, Company will pay Executive such additional amount as is necessary to “gross up” such benefits and cover the anticipated income tax liability resulting from such taxable income. Executive acknowledges and agrees that certain fringe benefits may be subject to income tax withholding and reporting to the extent required by the Internal Revenue Code of 1986, as amended (the “Code”).

(iv)

Other Company Benefits . With the exception of severance, which is governed by this Agreement, Executive will be eligible for all customary and usual fringe benefits generally available to similarly situated executive employees of Company and such other benefits as he is currently receiving (including Company payment of a long-term disability policy for Executive, a life insurance policy, and a supplemental medical insurance program, and payment of Executive’s reasonable annual tax preparation expenses upon receipt of appropriate documentation thereof), subject to the terms and conditions of Company’s benefit plan documents, as such documents may be amended or modified from time to time. In addition, Company reserves the right to change or eliminate the fringe benefits (with the exception of Company’s payment of Executive’s annual tax preparation expenses, payment of 100% of Executive’s premiums for Executive’s long-term disability policy and life insurance policy, and full payment for Executive’s participation in a supplemental medical insurance program) on a prospective basis, at any time, effective upon notice to Executive, and any such change or elimination shall not constitute “Good Reason” hereunder or under paragraph 2.3 hereof.

ARTICLE 4
EFFECT OF TERMINATION ON COMPENSATION

4.1. Termination By Expiration . If Executive’s employment hereunder is terminated upon expiration of the term provided in paragraph 2.1 hereof because either party has provided the notice contemplated in such paragraph, then all compensation and all benefits to Executive hereunder shall continue to be provided until the expiration of such term and such compensation and benefits shall terminate contemporaneously with termination of his employment (except as otherwise provided under any other agreement or plan of Company that provides post-termination benefits).

4.2. Termination Benefits .

(i)

In General. If Executive’s employment hereunder is terminated by Company or Executive prior to expiration of the term provided in paragraph 2.1, then, upon such termination, except as hereinafter provided, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment (except as otherwise provided under any other written agreement or plan of Company that provides post-termination benefits).

(ii)

Severance Pay. Subject to paragraph 4.3 below, if Executive’s termination of employment is for Good Reason, or by Company for any reason other than the expiration of the term as described in paragraph 4.1 or for any reason other than a reason encompassed by paragraph 2.2(i) (Executive’s death or presumed death), 2.2(ii) (Executive’s disability), or 2.2(iii) (for Cause), then Company shall provide Executive with 18 months of his then current base salary (which excludes bonus pay and the value of any fringe or other benefits) (“Severance Pay”), payable in accordance with paragraph 4.2(vi).

(iii)

Reimbursement for COBRA Premiums . Subject to paragraph 4.3 below, if Executive’s termination of employment is for Good Reason, or by Company for any reason other than the expiration of the term as described in paragraph 4.1 or for any reason other than a reason encompassed by paragraph 2.2(i) (Executive’s death or presumed death), 2.2(ii) (Executive’s disability), or 2.2(iii) (for Cause), and Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) in accordance with the COBRA materials that will be provided to Executive by the Company or the Company’s third party COBRA administrator, the Company shall reimburse Executive the full COBRA premium and applicable administrative fee (if any) for the same medical, dental and vision benefit plan coverage (“Group Health Plan Coverage”) Executive and Executive’s dependents had as of the termination of employment (“Termination Date”) for a period of 18 months, or until Executive elects to receive group medical, dental and vision insurance from another source, whichever occurs first (such payments referred to herein as “COBRA Reimbursements”). COBRA Reimbursements will be made by the Company promptly upon proof of payment of Executive’s COBRA coverage and will be subject to usual and customary withholdings. Company will pay Executive such

additional amount as is necessary to “gross up” the anticipated income tax liability resulting from such taxable income. Executive will be mailed a COBRA packet at his last known address. Such packet will contain additional information about Executive’s COBRA rights and responsibilities.

(iv)

Bonus Payment . If Executive has earned a bonus pursuant to paragraph 3.3, but between January 1 of the year following the year in which the bonus was earned and the time in which the bonus is paid the Company terminates Executive’s employment without Cause or Executive terminates his employment for Good Reason, Executive will be entitled to receive the bonus payment that was otherwise earned in the timeframe contemplated by paragraph 3.3, notwithstanding any language to the contrary in any applicable bonus plan.

(v)

Compliance with Code Section 409A . Company and Executive intend that payments pursuant to paragraph 4.2(ii) constitute payments on account of an involuntary separation from service or a separation from service for good reason within the meaning of Treasury Regulation section 1.409A-1(n)(1) and (2), and amounts paid pursuant to paragraph 4.2(ii) constitute separation pay exempt from Code Section 409A under Treasury Regulation section 1.409A-1(b)(9)(iii), up until the lesser of: (a) two times (2x) the Executive’s annualized compensation based upon the annual rate of pay in effect for the taxable year preceding the Termination Date (including any additional compensation paid, including bonuses), adjusted for any increase for the year of termination if such increase was expected to continue indefinitely; and (b) the maximum amount that may be taken into account under a qualified plan pursuant to Code section 401(a)(17) for the year of Executive’s Termination Date (the lesser of (a) and (b) referred to herein as the “Limit”). In the event the payments exceed the Limit, the remaining payments shall constitute deferred compensation subject to Code Section 409A and shall be subject to paragraph 4.5. Company and Executive intend that payments pursuant to paragraph 4.2(iii) will be exempt from Code Section 409A as a reimbursement or in-kind benefit plan. The coincident gross-up payments are intended to be exempt under Treasury Regulation section 1.409A-3(i)(1)(v). In any event, neither Party shall be liable to the other if any such payment receives different tax treatment.

(vi)

Time and Form of Payment . Payments under paragraph 4.2(ii) will be made in accordance with Company’s standard payroll procedures and will be paid in equal installments over an 18-month period with the first payment to be paid as promptly as reasonably possible after the timely execution and expiration of any revocation periods of the release described in paragraph 4.3, provided Executive is not permitted, directly or indirectly, to designate the taxable year of payment. Interest shall not be credited on remaining installment payments. All payments will be subject to deductions for taxes and other applicable withholdings. In the event of Executive’s death prior to receipt of all installments, payment shall be made at the same time and in the same matter as described herein to Executive’s estate.

(vii)

Accelerated Vesting . The Company may provide for accelerated vesting of equity awards in the documents governing such equity awards or by separate Board action.

4.3. Release and Full Settlement . Anything to the contrary herein notwithstanding, as a condition to the receipt of the termination payments and benefits under paragraph 4.2 hereof, as applicable, Executive shall (i) execute a release, in the form established by the Board and similar to the release attached hereto as Exhibit A, releasing the Board, Company, and Company’s parent corporation, subsidiaries, affiliates, and their respective shareholders, partners, officers, directors, employees, attorneys and agents from any and all claims and from any and all causes of action of any kind or character including, but not limited to, all claims or causes of action arising out of Executive’s employment with Company or its affiliates or the separation of such employment, but excluding all claims to vested benefits and payments Executive may have under any compensation or benefit plan, program or arrangement, including this Agreement, and (ii) provide such release to Company no later than 60 days after the date of his termination of employment with Company. The performance of Company’s obligations hereunder and the receipt of any benefits provided under paragraph 4.2 shall constitute full settlement of all such claims and causes of action.

4.4. No Duty to Mitigate Losses . Executive shall have no duty to find new employment following the termination of his employment under circumstances which require Company to pay any amount to Executive pursuant to this Article 4. Any salary or remuneration received by Executive from a third party for the providing of personal services (whether by employment or by functioning as an independent contractor) following the termination of his employment under circumstances pursuant to which this Article 4 apply shall not reduce Company’s obligation to make a payment to Executive (or the amount of such payment) pursuant to the terms of this Article 4.

4.5. Deferred Compensation Subject to Code Section 409A . Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Agreement that constitute “deferred compensation” within the meaning of Code Section 409A shall not commence in connection with Executive’s termination of employment unless and until Executive has also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless the Company reasonably determines that such amounts may be provided to Executive without causing Executive to incur additional tax under Code Section 409A. It is intended that each installment of Severance Pay provided for in this Agreement is a “separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i). For the avoidance of doubt, it is intended that Severance Pay set forth in this Agreement satisfy, to the greatest extent possible, the exceptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5), and 1.409A-1(b)(9). If the Company (or, if applicable, the successor entity thereto) determines that any payments or benefits constitute “deferred compensation” under Code Section 409A and Executive is, on the termination of service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Code Section 409A(a)(2)(B)(i), then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences to Executive under Section 409A, the timing of the payments and benefits shall be delayed until the earlier to occur of: (a) the date that is 6 months

and one day after Executive’s Separation From Service, or (b) the date of Executive’s death (such applicable date, the “Specified Executive Initial Payment Date”). On the Specified Executive Initial Payment Date, the Company (or the successor entity thereto, as applicable) shall (i) pay to Executive a lump sum amount equal to the sum of the payments and benefits that Executive would otherwise have received through the Specified Executive Initial Payment Date if the commencement of the payment of such amounts had not been so delayed pursuant to this Paragraph 4.5, and (ii) commence paying the balance of the payments and benefits in accordance with the applicable payment schedules set forth in this Agreement.

4.6. Application of Section 280G . In the event that it is determined that the Severance Pay payable to Executive pursuant to paragraph 4.2 of this Agreement, when added to any other payment or benefit to Executive from the Company, would be considered a “parachute payment” (a “Parachute Payment”), within the meaning of section 280G of the Code, would cause Executive to be considered to receive an “excess parachute payment” within the meaning of section 280G of the Code (an “Excess Parachute Payment”), the amount payable to Executive pursuant to paragraph 4.2 of this Agreement will be reduced to the maximum amount that, when added to any other Parachute Payments made to Executive, could be paid to Executive without causing Executive to receive an Excess Parachute Payment. Notwithstanding the foregoing, the Severance Pay payable to Executive pursuant to paragraph 4.2 of this Agreement will not be reduced if (i) the net amount payable to Executive without the reduction described in the preceding sentence, but reduced by all Federal, state and local income and employment taxes payable by Executive on the Severance Pay payable pursuant to this Agreement and all other Parachute Payments plus the excise tax payable on the Excess Parachute Payment pursuant to Section 4999 of the Code, is greater than (ii) the net amount that would be payable to Executive with the reduction described in the preceding sentence and reduced by all Federal, state and local income and employment taxes payable by Executive on the Severance Pay payable pursuant to this Agreement and all other Parachute Payments. For purposes of this paragraph 4.6, Executive will be deemed to pay Federal income tax and employment taxes at the highest marginal rate of Federal income and employment taxation in the calendar year in which the Excess Parachute Payment would occur and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive’s residence in the calendar year in which the Excess Parachute Payment would be made, net of the reduction in Federal income taxes that Executive may obtain from the deduction of such state and local income taxes. In addition, all determinations to be made under this paragraph 4.6 will be made by the Company’s independent public accountant (the “Accounting Firm”) immediately before the date the Severance Pay under paragraph 4.2 is to be paid. The Accounting Firm will provide its determinations and any supporting calculations and work papers both to the Company and to Executive within 10 days of such date, and any such determination by the Accounting Firm shall be binding upon the Company and Executive.

4.7. Other Benefits . This Agreement governs the rights and obligations of Executive and Company with respect to Executive’s base salary and certain perquisites of employment. Except as expressly provided herein, Executive’s rights and obligations both during the term of his employment and thereafter with respect to his ownership rights in Company, and other benefits under the plans and programs maintained by Company shall be governed by the terms (which are not, and are not required to be, affected, altered or amended) of the separate agreements, plans and the other documents and instruments governing such matters.

ARTICLE 5
PROTECTION OF CONFIDENTIAL INFORMATION

5.1. Disclosure to and Property of Company . All information, designs, ideas, concepts, improvements, product developments, discoveries and inventions, whether patentable or not, that are conceived, made, developed or acquired by Executive, individually or in conjunction with others, during the period of Executive’s employment (including the period of employment preceding this Agreement) by Company (whether during business hours or otherwise and whether on Company’s premises or otherwise) that relate to Company’s (or any of its affiliates’) business, trade secrets, products or services (including, without limitation, all such information relating to corporate opportunities, product specification, compositions, manufacturing and distribution methods and processes, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisitions prospects, the identity of customers or their requirements, the identity of key contacts within the customer’s organizations or within the organization of acquisition prospects, marketing and merchandising techniques, business plans, computer software or programs, computer software and database technologies, prospective names and marks) (collectively, “Confidential Information”) shall be disclosed to Company and are and shall be the sole and exclusive property of Company (or its affiliates). Moreover, all documents, videotapes, written presentations, brochures, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, drawings, architectural renditions, models and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, “Work Product”) are and shall be the sole and exclusive property of Company (or its affiliates). Upon Executive’s termination of employment with Company, for any reason, or earlier upon request of Company, Executive promptly shall deliver such Confidential Information and Work Product, and all copies thereof, to Company. Confidential Information does not include information which (i) is generally known to the public, or which may later become generally known to the public, except where such knowledge is the result of an unauthorized disclosure by Executive or another person or entity, provided Executive has knowledge, after reasonable inquiry, that the other person’s or entity’s disclosure was unauthorized; (ii) is lawfully and in good faith made available to Executive by a third party who, to Executive’s knowledge after inquiry, did not derive it from the Company and who imposed no obligation of confidence on Executive; (iii) is developed by Executive independent of any Confidential Information owned by the Company, as verified and evidenced by the prior written records of Executive; or (iv) is required to be disclosed in a judicial or administrative proceeding, or is otherwise required to be disclosed by law, in any such case after all reasonable legal remedies for maintaining such information in confidence have been exhausted, including, but not limited to, giving the Company as much advance notice of the possibility of such disclosure as practical so that the Company may attempt to stop such disclosure or obtain a protective order concerning such disclosure. Executive shall provide the Company with written notice no less than ten (10) business days prior to the disclosure of any Confidential Information that may be required by law.

5.2. Disclosure to Executive . Company has disclosed and will disclose to Executive, or placed Executive in a position to have access to or develop, Confidential Information and Work Product of Company (or its affiliates); and/or has entrusted and will entrust Executive with business opportunities of Company (or its affiliates); and/or has placed and will place Executive in a position to develop business good will on behalf of Company (or its affiliates). Executive agrees to preserve and protect the confidentiality of all Confidential Information or Work Product of Company (or its affiliates).

5.3. No Unauthorized Use or Disclosure . Executive agrees that he will not, at any time during or after Executive’s employment by Company, make any unauthorized disclosure of, and will prevent the removal from Company premises of, Confidential Information or Work Product of Company (or its affiliates), or make any use thereof, except in the carrying out of Executive’s responsibilities during the course of Executive’s employment with Company. Executive shall use commercially reasonable efforts to cause all persons or entities to whom any Confidential Information shall be disclosed by him hereunder to observe the terms and conditions set forth herein as though each such person or entity was bound hereby. At the request of Company at any time, Executive agrees to deliver to Company all Confidential Information that he may possess or control. Executive agrees that all Confidential Information of Company (whether now or hereafter existing) conceived, discovered or made by him during the period of Executive’s employment by Company exclusively belongs to Company (and not to Executive), and Executive will promptly disclose such Confidential Information to Company and perform all actions reasonably requested by Company to establish and confirm such exclusive ownership. Affiliates of Company shall be third party beneficiaries of Executive’s obligations under this Article 5. As a result of Executive’s employment by Company, Executive may also from time to time have access to, or knowledge of, Confidential Information or Work Product of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Company and its affiliates. Executive also agrees to preserve and protect the confidentiality of such third party Confidential Information and Work Product to the same extent, and on the same basis, as Company’s Confidential Information and Work Product.

5.4. Ownership by Company . If, during Executive’s employment by Company, Executive creates any work of authorship fixed in any tangible medium of expression that is the subject matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Company’s business, products, or services, whether such work is created solely by Executive or jointly with others (whether during business hours or otherwise and whether on Company’s premises or otherwise), including any Work Product, Company shall be deemed the author of such work if the work is prepared by Executive in the scope of Executive’s employment; or, if the work is not prepared by Executive within the scope of Executive’s employment but is specially ordered by Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Company shall be the author of the work.

5.5. Assistance by Executive . During the period of Executive’s employment by Company and thereafter, Executive shall assist Company and its nominee, at any time, in the protection of Company’s (or its affiliates’) worldwide right, title and interest in and to Work Product and the execution of all formal assignment documents requested by Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries.

ARTICLE 6
NON-COMPETITION AND NON-SOLICITATION OBLIGATIONS

6.1. Non-competition Obligations . As part of the consideration for the compensation and benefits to be paid to Executive hereunder; in light of Executive’s position as executive personnel to Company; to protect the trade secrets and confidential information of Company and its affiliates that have been or will in the future be disclosed or entrusted to Executive, the business goodwill of Company and its affiliates that has been and will in the future be developed in Executive, or the business opportunities that have been and will in the future be disclosed or entrusted to Executive by Company and its affiliates; and as an additional incentive for Company to enter into this Agreement, Company and Executive agree to the provisions of this Article 6. Executive agrees that during the period of Executive’s non-competition obligations hereunder, Executive shall not, directly or indirectly for Executive or for others, in the United States (regardless of the reason, if any, for the cessation of employment):

(i)	engage in any business that is competitive with the business conducted by Company;

(ii)	render any advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, with any business that is competitive with the business conducted by Company;

(iii)

induce any employee of Company or its affiliates to terminate his or her employment with Company or its affiliates, or hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with Company; or

(iv)	request, solicit, induce, or cause any customer of Company or its affiliates to terminate, reduce, or limit any business relationship with Company or its affiliates.

The non-competition obligations under this Agreement shall apply during the period that Executive is employed by Company and shall continue for 18 months after the date Executive’s employment with Company ends if Executive’s termination of employment is for Good Reason, or by Company for any reason other than the expiration of the term as described in paragraph 4.1 or for any reason other than a reason encompassed by paragraph 2.2(i) (Executive’s death or presumed death), 2.2(ii) (Executive’s disability), or 2.2(iii) (for Cause) . Executive understands that the foregoing restrictions may limit Executive’s ability to engage in certain businesses during the period provided for above, but acknowledges that the restrictions

are reasonable and necessary, and Executive acknowledges that Executive will receive sufficiently high remuneration and other benefits under this Agreement to justify such restriction.

6.2. Enforcement and Remedies . Executive acknowledges that money damages alone would not be sufficient remedy for any breach of Article 5 or 6 by Executive, that any material breach or threatened material breach of Article 5 or 6 based on a good faith determination by the Board will result in irreparable harm to Company, and Company shall be entitled to enforce the provisions of Article 5 or 6 by terminating any payments then owing to Executive under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach without posting any bond or other security, barring Executive from violating any such provision. Such remedies shall not be deemed the exclusive remedies for a breach of Article 5 or 6, but shall be in addition to all remedies available at law or in equity to Company, including, without limitation, the recovery of damages from Executive and Executive’s agents involved in such breach and remedies available to Company pursuant to other agreements with Executive.

6.3. Reformation . It is expressly understood and agreed that Company and Executive consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the proprietary information of Company and its affiliates. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced.

ARTICLE 7
NONDISPARAGEMENT

Executive shall refrain, both during the employment relationship and after the employment relationship ends, from publishing any oral or written statements about Company, its affiliates, or any of such entities’ directors, officers, employees, agents or representatives that (i) are slanderous, libelous, or defamatory; (ii) place Company, its affiliates, or any of such entities’ directors, officers, employees, agents, or representatives in a false light before the public; or (iii) constitute a misappropriation of the name or likeness of Company, its affiliates, or any of such entities’ directors, officers, employees, agents, or representatives. A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded Company and its affiliates under this provision are in addition to any and all rights and remedies otherwise afforded by law.

Company agrees that, both during Executive’s employment relationship and after the employment relationship terminates, Company’s directors, officers, employees, agents and representatives shall, during their employment or affiliation with Company, refrain from publishing any oral or written statements about Executive that (i) are slanderous, libelous, or defamatory; (ii) place Executive in a false light before the public; or (iii) constitute a misappropriation of the name or likeness of Executive. A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded Executive under this provision are in addition to any and all rights and remedies otherwise afforded by law.

The nondisparagement obligations of this Article 7 shall not apply to communications with law enforcement or required testimony under law or court process.

ARTICLE 8
MISCELLANEOUS

8.1. Notices . For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered, e-mailed, or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, to Company at its regular business address, and to the Executive at Executive’s address on file with Company, or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt.

8.2. Applicable Law and Waiver of Jury Trial . This Agreement has been negotiated within the State of Colorado and the rights and obligations of the Parties to this Agreement shall be construed and enforced in accordance with, and governed by, the laws of the State of Colorado without regard to any jurisdiction’s principles of conflict of laws. Any action brought to enforce this Agreement shall be brought in Colorado in a court of competent jurisdiction. In any action brought to enforce this Agreement, the action shall be tried to a court without a jury.

8.3. No Waiver . No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

8.4. Severability . Subject to paragraph 6.3, if a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.

8.5. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

8.6. Withholding of Taxes and Other Employee Deductions . Company may withhold from any benefits and payments made pursuant to this Agreement or otherwise all federal, state, city and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other normal employee deductions made with respect to Company’s employees generally.

8.7. Headings . The paragraph headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.

8.8. Gender and Plurals . Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.

8.9. Affiliate . As used in this Agreement, the term “affiliate” shall mean any entity which owns or controls, is owned or controlled by, or is under common ownership or control with, Company.

8.10. Assignment and Assumption . This Agreement shall be binding upon and inure to the benefit of Company and any successor of Company, by merger or otherwise. Executive shall not have the right to assign his rights or obligations under this Agreement.

8.11. Term . This Agreement has a term co-extensive with the term of employment provided in paragraph 2.1. Termination of the employment relationship shall not affect any right or obligation of any party which is accrued or vested prior to such termination, nor shall termination of the employment relationship impact any post-employment obligations under this Agreement.

8.12. Entire Agreement . Except as provided in (i) the written benefit plans and programs referenced in paragraph 3.4(iv) (and any agreements between Company and Executive that have been executed under such plans and programs) and (ii) any signed written agreement contemporaneously or hereafter executed by Company and Executive, this Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Executive by Company. Any modification of this Agreement will be effective only if it is in writing and signed by the party to be charged.

8.13. Legal Expenses . In the event of a dispute under this Agreement, the prevailing party shall be entitled to its or his legal costs and expenses (including reasonable attorneys’ fees) incurred in connection with such dispute.

8.14. Liability Insurance . Company shall maintain a directors’ and officers’ insurance liability policy throughout the term of this Agreement and shall provide Executive with coverage under such policy on terms not less favorable than provided to other Company directors and officers.

8.15 No Conflicting Agreements or Use of Third Party Information . During his employment with Company, Executive shall not improperly use or disclose any proprietary information or trade secrets of any former employer or other person or entity, and Executive shall not bring on to the premises of Company or any affiliate any unpublished document or proprietary information belonging to any such former employer, person or entity, unless consented to in writing by the former employer, person or entity. Executive represents that he has not improperly used or disclosed any proprietary information or trade secrets of any other person or entity during the application process or while employed or affiliated with Company. Executive also acknowledges and agrees that he is not subject to any contract, agreement, or understanding that would prevent him from performing his duties for Company or otherwise complying with this Agreement. To the extent Executive violates this provision, or his employment with Company constitutes a breach or threatened breach of any contract, agreement, or obligation to any third party, Executive shall indemnify and hold Company harmless from all damages, expenses, costs (including reasonable attorneys’ fees) and

liabilities incurred in connection with, or resulting from, any such violation or threatened violation.

8.16. Construction . The language used in this Agreement will be deemed to be language chosen by the Executive and Company to express their mutual intent, and no rules of strict construction will be applied against either party.

IN WITNESS WHEREOF , the parties hereto have executed this Agreement on the 26 ^th day of March, 2014.

SCOTT’S LIQUID GOLD-INC.

By: /s/ Barry J. Levine

Name: Barry J. Levine

Title: Chief Operating Officer and Chief Financial Officer

MARK GOLDSTEIN

/s/ Mark E. Goldstein

Signature

Exhibit A

SEPARATION AGREEMENT, WAIVER AND RELEASE

YOU ARE ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING THIS AGREEMENT

This Separation Agreement, Waiver and Release (the “Agreement”) is a contract between Mark Goldstein (“Executive”) and Scott’s Liquid Gold-Inc. (the “Company” and together with the Executive, the “Parties”). Executive and the Company wish to separate on an amicable basis. Executive’s last day of employment will be _________________, 20__ (“Termination Date”). Executive has been presented this Agreement on ________________, 20__ (“Presentation Date”).

THEREFORE, in consideration of the foregoing and this Agreement’s mutual promises, the sufficiency of which is acknowledged, the Parties agree as follows:

I.	TERMINATION FROM EMPLOYMENT AND PAYMENT OF WAGES THROUGH THE TERMINATION DATE.

A. Pay at Termination . On the Termination Date, the Company paid Executive’s wages and compensation earned through the Termination Date, and any accrued and unused vacation or paid time off (“PTO”) accrued through the Termination Date.

B. No Other Consideration Due . Executive acknowledges and agrees that except as expressly set forth in this Agreement, Executive is entitled to no other wages, commissions, PTO, vacation pay, sick pay, bonuses, incentive pay, benefits or other compensation. Executive also acknowledges and agrees that but for signing this Agreement, Executive would not be entitled to the consideration from the Company as set forth below.

II.	CONSIDERATION FROM THE COMPANY.

The Company will pay Executive severance pay and provide those other benefits on the terms and conditions expressly set forth in the Employment Agreement d ated March 26, 2014, as such agreement may have been amended (attached as Exhibit 1) (the “Employment Agreement”), provided Executive has signed this Agreement prior to expiration of the Consideration Period (defined below), Executive has not revoked this Agreement before expiration of the Revocation Date (as defined in Section V.C. below), Executive has returned all Company property and information as required by Section III.E. below, and Executive complies with all confidentiality requirements in this Agreement (“Payment Conditions”).

III.	EXECUTIVE’S AGREEMENTS.

A. Release of All Claims . The term “Releasee” or “Releasees” shall be construed as broadly as possible and includes: the Company, parent companies, subsidiaries, divisions, successors, and affiliates, and as to each of them, their former or current agents, joint venture members, stockholders, directors, officers, employees, and all other persons acting by, through, under or in concert with any of them. In exchange for the Company’s consideration, Executive

fully releases and discharges the Releasees from all claims, actions and causes of action of any kind, known or unknown, which Executive may presently have or claim to have against any Releasee based on acts or omissions occurring on or before the date on which Executive signs this Agreement including, but not limited to, all contract claims; all wrongful discharge or employment claims; all tort claims; all claims arising under the United States or any state’s constitution; all claims under Title VII of the Civil Rights Act of 1964, Equal Pay Act, Age Discrimination in Employment Act, Older Workers Benefit Protection Act, Rehabilitation Act, Americans with Disabilities Act, Family and Medical Leave Act, Fair Labor Standards Act, Fair Credit Reporting Act, Worker Adjustment Retraining and Notification Act, Sarbanes-Oxley Act, Immigration Reform and Control Act, Occupational Safety and Health Act, National Labor Relations Act, Colorado Wage Payment Act, and Colorado Anti-Discrimination Act; all claims arising under any other civil rights or employment laws or regulations (whether federal, state or local); any federal or state whistleblower laws or statutes; any claims based on Company policies or agreements, including severance policies or agreements to provide notice; any claims for short-term or long-term incentive compensation or other benefits; and all claims to attorneys’ fees or costs.

B. Filed and Non-Assignment of Claims . Executive has not filed any charge or claim or any part or portion thereof (“Filed Claim”). Executive has not assigned or transferred any claim or any part or portion thereof (“Assigned Claim”). Executive shall defend and indemnify the Releasees and hold the Releasees harmless from and against any Filed or Assigned Claim (including attorneys’ fees and costs).

C. Representations . Executive represents and warrants that Executive was permitted by the Company to take all leave to which Executive was entitled, Executive was properly classified as exempt from overtime (if Executive was so classified), Executive has been properly paid for all time worked while employed by the Company and Executive has received all benefits to which Executive was or is entitled, except as expressly set forth in this Agreement. Executive represents and warrants that Executive knows of no facts and has no reason to believe that Executive’s rights under the Fair Labor Standards Act, the Family and Medical Leave Act, or Colorado Wage Payment Act (or any other state wage payment law) have been violated.

D. Confidentiality, Noncompetition & Developments . Executive agrees as a condition of the Company’s obligations under this Agreement, including but not limited to the Company’s obligations under Section II, to comply at all times with the continuing obligations in Executive’s Employment Agreement, including but not limited to obligations of confidentiality, noncompetition, nonsolicitation, and nondisparagement. Nothing in this Agreement shall be construed to narrow, supersede, modify or affect in any way the obligations of Executive imposed by the Employment Agreement.

E. Return of Company Property . As of the Termination Date, Executive has returned (and has not retained any copies in any form) all Company documents and information (including all Confidential Information, as that term is defined in Executive’s Employment Agreement, and any other information stored on personally owned computer hard drives, flash drives or other format), and any vehicles, badges, pagers, cell phones, computers, software, equipment or other property belonging to the Company. Executive certifies, by signing this Agreement, that Executive has returned to the Company all versions of Company property,

including Confidential Information, in Executive’s possession and that Executive has destroyed and not retained any source codes or other Company intellectual property on Executive’s home computer or in any other form.

F. Report of Misconduct. Executive has had the opportunity to notify appropriate personnel within the Company of any violation or potential violation of any laws or regulations or any other misconduct by the Company or any of its management personnel or other representatives in the course of their duties on behalf of the Company. To the extent Executive is aware of any such misconduct, Executive has reported it to appropriate Company personnel. If Executive subsequently becomes aware of any such misconduct, Executive will notify appropriate personnel within the Company. Appropriate personnel to whom such misconduct should be reported include the Company’s Chief Executive Officer or Chief Financial Officer.

G. Cooperation with Litigation or Other Matters. Executive acknowledges that Executive may have factual information or knowledge that may be useful to the Company in connection with current or future legal, regulatory or administrative proceedings. Executive will reasonably cooperate with the Company in the defense or prosecution of any such claims. Executive’s cooperation shall include being reasonably available to meet with counsel to prepare for discovery or trial, and to testify truthfully as a witness. The Company will not compensate Executive for testifying as a fact witness, but may reimburse Executive for reasonable expenses associated with travel, meals, lodging or other out of pocket expenses. In all litigation or legal matters, Executive shall testify truthfully.

H. Injunctive and Other Relief. Executive agrees and acknowledges that the Company may exercise any or all of its rights as set forth in Executive’s Employment Agreement with respect to any violation or threatened violation of any provision of this Section III. Any suspension of separation payments or other consideration to be paid, or any recovery of paid separation payments or other paid consideration, shall not void Executive’s release of claims under this Agreement, which shall remain in full force and effect.

IV.	DENIAL OF ANY LIABILITY.

The Company denies any liability to Executive. The Parties agree that this Agreement may not be used as evidence; does not constitute an adjudication or finding on the merits; and is not, and shall not be construed as, an admission by the Company of a breach of any contract or agreement, a violation of the Company’s policies and procedures, or a violation of any state or federal laws or regulations. After execution (including signatures by both Executive and the Company), this Agreement may be introduced in evidence to enforce its terms.

V.	OPPORTUNITY TO CONFER AND OBTAIN ADVICE FROM OTHERS, INCLUDING ATTORNEYS.

A. Opportunity to Confer . The Company advises Executive to confer with an attorney of Executive’s own choosing before entering into this Agreement. Executive represents that Executive has had a full opportunity to confer with an attorney before signing this Agreement. If Executive signs this Agreement without conferring with an attorney, Executive knowingly and voluntarily waives the opportunity to confer with an attorney before signing this Agreement.

B. Opportunity to Consider . Executive may take up to a maximum of twenty-one (21) days after the Presentation Date (the “Consideration Period”) to decide whether to enter into this Agreement, after which the Company’s offer to enter into this Agreement shall automatically expire. If Executive signs this Agreement before the Consideration Period expires, Executive represents and agrees that Executive fully understands that Executive has been given the opportunity to take a period, starting with the Presentation Date, of up to twenty-one (21) days within which to decide whether to enter into this Agreement and has voluntarily waived that opportunity.

C. Opportunity to Revoke . Executive has the opportunity to revoke this Agreement within seven (7) days after signing it (such seventh day after signing being the “Revocation Date”). If this Agreement is revoked by Executive, it will be revoked in its entirety. Revocation will be effective only upon delivering a written revocation to Chief Executive Officer or Chief Financial Officer, Scott’s Liquid Gold-Inc., 4880 Havana Street, Suite 400, Denver, Colorado 80239. This Agreement shall become effective on the eighth day after Executive timely signs the Agreement, provided Executive does not timely exercise Executive’s right to revoke the Agreement (the “Effective Date”).

D. No Waiver of Future Claims . Notwithstanding anything to the contrary, by entering into this Agreement, Executive is not waiving any rights or claims that may arise after the date on which Executive signs this Agreement.

VI.	COMPLETE AGREEMENT.

This Agreement, including Exhibit(s), is an integrated document. It constitutes and contains the entire agreement and understanding between the Parties, and supersedes and replaces all prior negotiations and all agreements concerning the subject matters hereof. In the event of a conflict between this Agreement and the E mployment Agreement, the Employment Agreement controls.

VII.	SEVERABILITY OF INVALID PROVISIONS.

The provisions of this Agreement are severable. If any provision of this Agreement or its application is held invalid, the invalidity shall not affect other provisions or applications of this Agreement that can be given effect without the invalid provisions or application.

VIII.

VENUE/CHOICE OF LAW/ATTORNEYS’ FEES/ WAIVER OF RIGHT TO TRIAL BY JURY.

With the exception of any claim for unemployment benefits, workers compensation benefits, or for injunctive relief, any dispute arising under or related to this Agreement shall be tried to a court without a jury. This Agreement has been negotiated within the State of Colorado and the rights and obligations of the Parties to this Agreement shall be construed and enforced in accordance with, and governed by, the laws of the State of Colorado without regard to any jurisdiction’s principles of conflict of laws. Any action brought to enforce this Agreement shall be brought in Colorado in a court of competent jurisdiction.

IX.	NO WAIVER OF BREACH.

No waiver of any breach of any term or provision of this Agreement shall be binding unless in writing and signed by the party waiving the breach. No waiver of any breach of any term or provision of this Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Agreement.

X.	KNOWING AND VOLUNTARY WAIVER.

Executive has carefully read and fully understands all of the provisions of this Agreement. Executive knowingly and voluntarily enters into this Agreement.

XI.	FURTHER ASSURANCES.

The Parties agree to cooperate fully and to execute any and all supplementary documents and to take all additional actions that may be necessary or appropriate to give full force to the terms of this Agreement.

XII.	HEADINGS NOT BINDING/COUNTERPARTS/ORIGINALS AND COPIES.

The use of headings in this Agreement is only for ease of reference and the headings have no effect and are not to be considered part of or terms of this Agreement. This Agreement may be executed in counterparts. A photocopy or facsimile copy of this Agreement shall be as effective as an original.

EXECUTIVE HAS CAREFULLY READ AND FULLY UNDERSTANDS ALL THE PROVISIONS OF THIS AGREEMENT. EXECUTIVE REPRESENTS THAT EXECUTIVE IS ENTERING INTO THIS AGREEMENT VOLUNTARILY AND THAT THE CONSIDERATION EXECUTIVE RECEIVES IN EXCHANGE FOR EXECUTING THIS AGREEMENT IS GREATER THAN THAT TO WHICH EXECUTIVE WOULD BE ENTITLED IN THE ABSENCE OF THIS AGREEMENT. EXECUTIVE REPRESENTS THAT EXECUTIVE IS NOT RELYING ON ANY REPRESENTATION OR UNDERSTANDING NOT STATED IN THIS AGREEMENT .

Executed this ____ day of ____, 201_.

Mark Goldstein

Executed this ____ day of _____, 201_.

Scott’s Liquid Gold-Inc.

Its: Authorized Officer

Exhibit 1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made by and between Scott’s Liquid Gold-Inc. (“Company”), and Mark Goldstein (“Executive”) (individually, a “Party” and together, the “Parties”), as of the date on which the Agreement is executed by the Parties (“Effective Date”).

W I T N E S S E T H:

NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, Company and Executive agree as follows:

ARTICLE 1
EMPLOYMENT AND DUTIES

ARTICLE 2
TERM AND TERMINATION OF EMPLOYMENT

2.2. Company’s Right to Terminate . Company has the right to terminate Executive’s employment under this Agreement for any of the following reasons:

(i)	upon Executive’s death or presumed death;

(ii)

(iii)

(iv)	at any time for any other reason, or for no reason whatsoever, in the sole discretion of the Board.

2.3. Executive’s Right to Terminate . Executive shall have the right to terminate his employment under this Agreement for any of the following reasons:

(i)

(ii)	at any time for any other reason, or for no reason whatsoever, in the sole discretion of Executive.

2.4. Notice of Termination .

(i)

(ii)

(iii)

ARTICLE 3
COMPENSATION AND BENEFITS

goals and objectives have been achieved, and a bonus, if any, shall be paid to Executive on or before March 14 of the year following the year in which the bonus was earned.

3.4. Other Perquisites . During his employment hereunder, Executive shall be afforded the following benefits as incidences of his employment:

(i)

(ii)

(iii)

(iv)

ARTICLE 4
EFFECT OF TERMINATION ON COMPENSATION

4.2. Termination Benefits .

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

Accelerated Vesting . The Company may provide for accelerated vesting of equity awards in the documents governing such equity awards or by separate Board action.

ARTICLE 5
PROTECTION OF CONFIDENTIAL INFORMATION

ARTICLE 6
NON-COMPETITION AND NON-SOLICITATION OBLIGATIONS

(i)	engage in any business that is competitive with the business conducted by Company;

(ii)	render any advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, with any business that is competitive with the business conducted by Company;

(iii)

(iv)	request, solicit, induce, or cause any customer of Company or its affiliates to terminate, reduce, or limit any business relationship with Company or its affiliates.

The non-competition obligations under this Agreement shall apply during the period that Executive is employed by Company and shall continue for 18 months after the date Executive’s employment with Company ends if Executive’s termination of employment is for Good Reason, or by Company for any reason other than the expiration of the term as described in paragraph 4.1 or for any reason other than a reason encompassed by paragraph 2.2(i) (Executive’s death or presumed death), 2.2(ii) (Executive’s disability), or 2.2(iii) (for Cause). Executive understands that the foregoing restrictions may limit Executive’s ability to engage in certain businesses during the period provided for above, but acknowledges that the restrictions

are reasonable and necessary, and Executive acknowledges that Executive will receive sufficiently high remuneration and other benefits under this Agreement to justify such restriction.

ARTICLE 7
NONDISPARAGEMENT

The nondisparagement obligations of this Article 7 shall not apply to communications with law enforcement or required testimony under law or court process.

ARTICLE 8
MISCELLANEOUS

8.5. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

8.7. Headings . The paragraph headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.

8.8. Gender and Plurals . Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.

8.9. Affiliate . As used in this Agreement, the term “affiliate” shall mean any entity which owns or controls, is owned or controlled by, or is under common ownership or control with, Company.

liabilities incurred in connection with, or resulting from, any such violation or threatened violation.

IN WITNESS WHEREOF , the parties hereto have executed this Agreement on the 26 ^th day of March, 2014.

SCOTT’S LIQUID GOLD-INC.

By: /s/ Barry J. Levine

Name: Barry J. Levine

Title: Chief Operating Officer and Chief Financial Officer

MARK GOLDSTEIN

/s/ Mark E. Goldstein

Signature

Exhibit 10.6

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made by and between Scott’s Liquid Gold- Inc. (“Company”), and Barry Levine (“Executive”) (individually, a “Party” and together, the “Parties”), as of the date on which the Agreement is executed by the Parties (“Effective Date”).

W I T N E S S E T H:

NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, Company and Executive agree as follows:

ARTICLE 1
EMPLOYMENT AND DUTIES

1.2. Positions . Company shall continue to employ Executive in the positions of Chief Operating Officer and Chief Financial Officer reporting to the Chief Executive Officer. Executive agrees to serve as a member of the Board of Directors (“Board”) of Company until his resignation or removal.

good faith determination of the Board, conflict with the business and affairs of Company or its affiliates or interfere with Executive’s performance of his duties hereunder.

ARTICLE 2
TERM AND TERMINATION OF EMPLOYMENT

2.2. Company’s Right to Terminate . Company has the right to terminate Executive’s employment under this Agreement for any of the following reasons:

(i)	upon Executive’s death or presumed death;

(ii)

(iii)

(iv)	at any time for any other reason, or for no reason whatsoever, in the sole discretion of the Board.

2.3. Executive’s Right to Terminate . Executive shall have the right to terminate his employment under this Agreement for any of the following reasons:

(i)

for “Good Reason,” which shall mean a voluntary separation from service following the initial existence of one or more of the following conditions (which arises without the consent of Executive): (A) a material diminution in Executive’s responsibilities, duties or authority, including but not limited to being involuntarily removed from the Board; (B) a material diminution in Executive’s base compensation; (C) a material breach by Company of any material provision of this Agreement, or (D) a change in the geographic location of Executive’s principal place of employment by Company of more than 50 miles from the location where he is principally employed as of the Effective Date; or

(ii)	at any time for any other reason, or for no reason whatsoever, in the sole discretion of Executive.

2.4. Notice of Termination .

(i)

(ii)

(iii)

following Executive’s provision of such notice to remedy such condition(s). If Company remedies the condition(s) constituting the Good Reason within such 30 day period, then Executive’s employment hereunder shall continue and his notice of termination shall become void and of no further effect. If Company does not remedy the condition(s) constituting the Good Reason within such 30 day period, Executive’s employment with Company shall terminate on the date that is 31 days following the date of Executive’s notice of termination and Executive shall be deemed to have separated from service for Good Reason.

ARTICLE 3
COMPENSATION AND BENEFITS

3.1. Base Salary . During the period of this Agreement, Executive shall receive an annual base salary of $234,727.40, less usual and customary withholdings, for the period of this Agreement. Executive’s annual base salary shall be reviewed by the Board (or a committee thereof) on an annual basis, and, in the sole discretion of the Board (or such committee), such annual base salary may be increased, but not decreased (except for a decrease that is consistent with reductions taken generally by other executives of Company), effective as of any date determined by the Board. Executive’s annual base salary shall be paid in equal installments in accordance with Company’s standard policy regarding payment of compensation to executives, but no less frequently than monthly.

3.4. Other Perquisites . During his employment hereunder, Executive shall be afforded the following benefits as incidences of his employment:

(i)

(ii)

(iii)

(iv)

Other Company Benefits . With the exception of severance, which is governed by this Agreement, Executive will be eligible for all customary and usual fringe benefits generally available to similarly situated executive employees of Company and such other benefits as he is currently receiving (including Company payment of a supplemental medical insurance program), subject to the terms and conditions of Company’s benefit plan documents, as such documents may be amended or modified from time to time. In addition, Company reserves the right to change or eliminate the fringe benefits (with the exception of Company’s full payment for Executive’s participation in a supplemental medical insurance program) on a prospective basis, at any time, effective upon notice to Executive, and any such change or elimination shall not constitute “Good Reason” hereunder or under paragraph 2.3 hereof.

ARTICLE 4
EFFECT OF TERMINATION ON COMPENSATION

compensation and benefits shall terminate contemporaneously with termination of his employment (except as otherwise provided under any other agreement or plan of Company that provides post-termination benefits).

4.2. Termination Benefits .

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

Accelerated Vesting . The Company may provide for accelerated vesting of equity awards in the documents governing such equity awards or by separate Board action.

that Executive would otherwise have received through the Specified Executive Initial Payment Date if the commencement of the payment of such amounts had not been so delayed pursuant to this Paragraph 4.5, and (ii) commence paying the balance of the payments and benefits in accordance with the applicable payment schedules set forth in this Agreement.

ARTICLE 5
PROTECTION OF CONFIDENTIAL INFORMATION

ARTICLE 6
NON-COMPETITION AND NON-SOLICITATION OBLIGATIONS

(i)	engage in any business that is competitive with the business conducted by Company;

(ii)	render any advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, with any business that is competitive with the business conducted by Company;

(iii)

(iv)	request, solicit, induce, or cause any customer of Company or its affiliates to terminate, reduce, or limit any business relationship with Company or its affiliates.

certain businesses during the period provided for above, but acknowledges that the restrictions are reasonable and necessary, and Executive acknowledges that Executive will receive sufficiently high remuneration and other benefits under this Agreement to justify such restriction.

ARTICLE 7
NONDISPARAGEMENT

this prohibition may be enjoined by the courts. The rights afforded Executive under this provision are in addition to any and all rights and remedies otherwise afforded by law.

The nondisparagement obligations of this Article 7 shall not apply to communications with law enforcement or required testimony under law or court process.

ARTICLE 8
MISCELLANEOUS

8.5. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

8.7. Headings . The paragraph headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.

8.8. Gender and Plurals . Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.

8.9. Affiliate . As used in this Agreement, the term “affiliate” shall mean any entity which owns or controls, is owned or controlled by, or is under common ownership or control with, Company.

agreement, or obligation to any third party, Executive shall indemnify and hold Company harmless from all damages, expenses, costs (including reasonable attorneys’ fees) and liabilities incurred in connection with, or resulting from, any such violation or threatened violation.

IN WITNESS WHEREOF , the parties hereto have executed this Agreement on the 26 ^th day of March, 2014.

SCOTT’S LIQUID GOLD-INC.

By: /s/ Mark E. Goldstein

Name: Mark E. Goldstein
Title: President and Chief Executive Officer

BARRY LEVINE

/s/ Barry J. Levine

Signature

Exhibit A

SEPARATION AGREEMENT, WAIVER AND RELEASE

YOU ARE ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING THIS AGREEMENT

This Separation Agreement, Waiver and Release (the “Agreement”) is a contract between Barry Levine (“Executive”) and Scott’s Liquid Gold-Inc. (the “Company” and together with the Executive, the “Parties”). Executive and the Company wish to separate on an amicable basis. Executive’s last day of employment will be _________________, 20__ (“Termination Date”). Executive has been presented this Agreement on ________________, 20__ (“Presentation Date”).

THEREFORE, in consideration of the foregoing and this Agreement’s mutual promises, the sufficiency of which is acknowledged, the Parties agree as follows:

I.	TERMINATION FROM EMPLOYMENT AND PAYMENT OF WAGES THROUGH THE TERMINATION DATE.

II.	CONSIDERATION FROM THE COMPANY.

III.	EXECUTIVE’S AGREEMENTS.

IV.	DENIAL OF ANY LIABILITY.

V.	OPPORTUNITY TO CONFER AND OBTAIN ADVICE FROM OTHERS, INCLUDING ATTORNEYS.

VI.	COMPLETE AGREEMENT.

VII.	SEVERABILITY OF INVALID PROVISIONS.

VIII.

VENUE/CHOICE OF LAW/ATTORNEYS’ FEES/ WAIVER OF RIGHT TO TRIAL BY JURY.

IX.	NO WAIVER OF BREACH.

X.	KNOWING AND VOLUNTARY WAIVER.

Executive has carefully read and fully understands all of the provisions of this Agreement. Executive knowingly and voluntarily enters into this Agreement.

XI.	FURTHER ASSURANCES.

XII.	HEADINGS NOT BINDING/COUNTERPARTS/ORIGINALS AND COPIES.

Executed this ____ day of ____, 201_.

Barry Levine

Executed this ____ day of _____, 201_.

Scott’s Liquid Gold-Inc.

Its: Authorized Officer

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made by and between Scott’s Liquid Gold-Inc. (“Company”), and Barry Levine (“Executive”) (individually, a “Party” and together, the “Parties”), as of the date on which the Agreement is executed by the Parties (“Effective Date”).

W I T N E S S E T H:

NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, Company and Executive agree as follows:

ARTICLE 1
EMPLOYMENT AND DUTIES

good faith determination of the Board, conflict with the business and affairs of Company or its affiliates or interfere with Executive’s performance of his duties hereunder.

ARTICLE 2
TERM AND TERMINATION OF EMPLOYMENT

2.2. Company’s Right to Terminate . Company has the right to terminate Executive’s employment under this Agreement for any of the following reasons:

(i)	upon Executive’s death or presumed death;

(ii)

(iii)

(iv)	at any time for any other reason, or for no reason whatsoever, in the sole discretion of the Board.

2.3. Executive’s Right to Terminate . Executive shall have the right to terminate his employment under this Agreement for any of the following reasons:

(i)

for “Good Reason,” which shall mean a voluntary separation from service following the initial existence of one or more of the following conditions (which arises without the consent of Executive): (A) a material diminution in Executive’s responsibilities, duties or authority, including but not limited to being involuntarily removed from the Board; (B) a material diminution in Executive’s base compensation; (C) a material breach by Company of any material provision of this Agreement, or (D) a change in the geographic location of Executive’s principal place of employment by Company of more than 50 miles from the location where he is principally employed as of the Effective Date; or

(ii)	at any time for any other reason, or for no reason whatsoever, in the sole discretion of Executive.

2.4. Notice of Termination .

(i)

(ii)

(iii)

ARTICLE 3
COMPENSATION AND BENEFITS

3.4. Other Perquisites . During his employment hereunder, Executive shall be afforded the following benefits as incidences of his employment:

(i)

(ii)

(iii)

(iv)

Other Company Benefits . With the exception of severance, which is governed by this Agreement, Executive will be eligible for all customary and usual fringe benefits generally available to similarly situated executive employees of Company and such other benefits as he is currently receiving (including Company payment of a supplemental medical insurance program), subject to the terms and conditions of Company’s benefit plan documents, as such documents may be amended or modified from time to time. In addition, Company reserves the right to change or eliminate the fringe benefits (with the exception of Company’s full payment for Executive’s participation in a supplemental medical insurance program) on a prospective basis, at any time, effective upon notice to Executive, and any such change or elimination shall not constitute “Good Reason” hereunder or under paragraph 2.3 hereof.

ARTICLE 4
EFFECT OF TERMINATION ON COMPENSATION

4.2. Termination Benefits .

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

Accelerated Vesting . The Company may provide for accelerated vesting of equity awards in the documents governing such equity awards or by separate Board action.

ARTICLE 5
PROTECTION OF CONFIDENTIAL INFORMATION

ARTICLE 6
NON-COMPETITION AND NON-SOLICITATION OBLIGATIONS

(i)	engage in any business that is competitive with the business conducted by Company;

(ii)	render any advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, with any business that is competitive with the business conducted by Company;

(iii)

(iv)	request, solicit, induce, or cause any customer of Company or its affiliates to terminate, reduce, or limit any business relationship with Company or its affiliates.

The non-competition obligations under this Agreement shall apply during the period that Executive is employed by Company and shall continue for 18 months after the date Executive’s employment with Company ends if Executive’s termination of employment is for Good Reason, or by Company for any reason other than the expiration of the term as described in paragraph 4.1 or for any reason other than a reason encompassed by paragraph 2.2(i) (Executive’s death or presumed death), 2.2(ii) (Executive’s disability), or 2.2(iii) (for Cause). Executive understands that the foregoing restrictions may limit Executive’s ability to engage in

ARTICLE 7
NONDISPARAGEMENT

this prohibition may be enjoined by the courts. The rights afforded Executive under this provision are in addition to any and all rights and remedies otherwise afforded by law.

The nondisparagement obligations of this Article 7 shall not apply to communications with law enforcement or required testimony under law or court process.

ARTICLE 8
MISCELLANEOUS

8.5. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

8.7. Headings . The paragraph headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.

8.8. Gender and Plurals . Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.

8.9. Affiliate . As used in this Agreement, the term “affiliate” shall mean any entity which owns or controls, is owned or controlled by, or is under common ownership or control with, Company.

IN WITNESS WHEREOF , the parties hereto have executed this Agreement on the __ day of March, 2014.

SCOTT’S LIQUID GOLD-INC.

By: /s/ Mark E. Goldstein

Name: Mark E. Goldstein
Title: President and Chief Executive Officer

BARRY LEVINE

/s/ Barry J. Levine

Signature

Exhibit 10.27

Scott’s Liquid Gold-Inc.

Employee Stock Ownership Plan

and Trust Agreement

(Amended and Restated Effective January 1, 2012)

Any statements regarding tax matters made herein, including any attachments, cannot be relied upon by any person to avoid tax penalties and are not intended to be used or referred to in any marketing or promotional materials. To the extent this communication contains a tax statement or tax advice, Holland & Hart LLP does not and will not impose any limitation on disclosure of the tax treatment or tax structure of any transactions to which such tax statement or tax advice relates.

Scott’s Liquid Gold-Inc.
Employee Stock Ownership Plan and Trust Agreement

TABLE OF CONTENTS

TABLE OF CONTENTS		i
ARTICLE 1. DEFINITIONS		6
1.1	Account	6
1.2	Annual Addition	6
1.3	Beneficiary	6
1.4	Break in Service	6
1.5	Code	6
1.6	Committee	6
1.7	Compensation	6
1.8	Computation Period	8
1.9	Date of Employment	8
1.10	Date of Reemployment	8
1.11	Death	8
1.12	Disability	8
1.13	Effective Date	8
1.14	Employee	8
1.15	Employer	9
1.16	Employer Contributions	9
1.17	ERISA	9
1.18	Highly Compensated Employee	9
1.19	Hours of Service	9
1.20	Leave of Absence	10
1.21	Normal Retirement Date	10
1.22	Participant	10
1.23	Participating Employer	10
1.24	Plan	10
1.25	Plan Entry Date	10
1.26	Plan Sponsor	10
1.27	Plan Year	10
1.28	Regulation	11
1.29	Related Group	11
1.30	Spouse	11
1.31	Stock	11
1.32	Trust	11
1.33	Trustee	11
1.34	Valuation Date	11
1.35	Vested	11
1.36	Year of Service	11

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 i
Prepared by Holland & Hart LLP

ARTICLE 2. EMPLOYEES ENTITLED TO PARTICIPATE		12
2.1	Eligibility to Enter Plan	12
2.2	Participation after Reemployment	12
2.3	Change in Employee Status	12
2.4	Qualified Military Service	12
2.5	Notification of Eligibility	12
ARTICLE 3. SERVICE; VESTING; FORFEITURES		13
3.1	Service Crediting Method	13
3.2	Vested Percentage	13
3.3	Related Employers	13
3.4	Reinstatement of Service Upon Reemployment	13
3.5	Forfeiture of Non-Vested Amounts	14
3.6	Restoration of Forfeited Amounts	14
3.7	Application of Forfeitures	14
ARTICLE 4. CONTRIBUTIONS TO THE TRUST		15
4.1	Employer Contributions	15
4.2	Make-Up Contributions	15
4.3	Participant Contributions	15
ARTICLE 5. ALLOCATIONS TO ACCOUNTS		16
5.1	Participant Accounts	16
5.2	Allocation of Contributions	16
5.3	Suspension of Allocation Requirements	16
5.4	Allocation of Stock Dividends, Splits, Rights	17
5.5	Allocation of Gains and Losses	17
5.6	Valuation of Trust	17
5.7	Annual Additions Limit	18
ARTICLE 6. DISTRIBUTION OF BENEFITS		19
6.1	Amount of Distribution	19
6.2	Form of Distribution	19
6.3	Timing of Distribution	19
6.4	In-Service Distributions	20
6.5	Diversification Distribution	20
6.6	Minimum Distributions to Participants	21
6.7	Special Rules for Distributions Upon Death of Participant	23
6.8	Qualified Domestic Relations Orders	26
6.9	Direct Rollovers	26
ARTICLE 7. EMPLOYER STOCK		28
7.1	Investment of Accounts	28
7.2	Securities Transactions	28
7.3	Reserve Fund; Segregated Accounts	28
7.4	Rights, Options, and Restrictions on Stock …………………………………………………………	29
7.5	Voting and Other Rights ……………………………………………………………………………..	30

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 ii
Prepared by Holland & Hart LLP

ARTICLE 8. COMMITTEE		31
8.1	Appointment, Vacancies and Removal	31
8.2	Action of the Committee	31
8.3	Information Provided to Committee	31
8.4	Powers and Duties	31
8.5	Compensation and Expenses	33
8.6	Employment of Agents	34
8.7	Bonding	34
8.8	Reliance on Information Provided	34
8.9	Claims Procedure	34
8.10	Exhaustion of Remedies; Limitation of Actions	35
8.11	Liability and Indemnification	35
8.12	Investment Managers	35
8.13	Abstention on Matters Affecting Individual Member	36
ARTICLE 9. TRUST AGREEMENT		37
9.1	Establishment and Acceptance of Trust	37
9.2	Bond	37
9.3	Investment of Trust	37
Any cash received by the Trustee may be applied to purchase Stock		37
9.4	Receipt of Contribution	37
9.5	Payments from the Trust	37
9.6	Exclusive Benefit	38
9.7	Trustee Investment Powers	38
9.8	Trustee Powers, Rights and Duties	39
9.9	Records and Accounts	40
9.10	Fees and Expenses	41
9.11	Change of Trustee	41
ARTICLE 10. TOP-HEAVY PROVISIONS		43
10.1	Definitions	43
10.2	Determination of Top-Heavy Status	43
10.3	Change in Vesting Schedule	44
10.4	Minimum Contribution	44
ARTICLE 11. AMENDMENT, TERMINATION, AND MERGER		46
11.1	Right to Amend Plan	46
11.2	Termination: Suspension of Contributions	46
11.3	Termination: Unallocated Funds	46
11.4	Termination: Accounts Held by Trustee	47
11.5	Amendment to Vesting Schedule	47
11.6	Merger: Continuance of Plan	47
11.7	Merger: Termination of Plan	47

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 iii
Prepared by Holland & Hart LLP

ARTICLE 12. PARTICIPATING EMPLOYERS		48
12.1	Adoption by Other Employers	48
12.2	Participating Employer Required To Use Same Trust Agreements	48
12.3	Forfeitures	48
12.4	Employee Transfers	48
12.5	Participating Employer’s Contribution	48
12.6	Designation of Agent	49
12.7	Committee’s Authority	49
12.8	Discontinuance of Participation	49
ARTICLE 13. GENERAL PROVISIONS		50
13.1	Employer-Employee Relationship	50
13.2	Exclusive Benefit of Participants	50
13.3	Inalienability	50
13.4	Incapacity of Participant or Beneficiary	50
13.5	Expenses	51
13.6	Severability	51
13.7	Applicable Law	51
13.8	Word Usage	51

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 iv
Prepared by Holland & Hart LLP

Scott’s Liquid Gold-Inc.
Employee Stock Ownership Plan and Trust Agreement

(Amended and Restated Effective January 1, 2012)

Introduction

Scott’s Liquid Gold-Inc. , a Colorado corporation (the “Plan Sponsor”), originally adopted the Scott’s Liquid Gold‑Inc. Employee Stock Ownership Plan (the “Plan”), effective October 3, 1978, for the exclusive benefit of its employees and their beneficiaries. The Plan Sponsor hereby amends and restates the Plan, effective January 1, 2012, as required to submit the Plan to the Internal Revenue Service for a favorable determination letter under Cycle A.

The Plan is intended to qualify as an employee stock ownership plan under Code Section 4975. The Plan shall be a stock bonus plan that is designed to invest primarily in qualifying employer securities. The primary purpose of the Plan is to enable employees to obtain a proprietary interest in the Employer by the acquisition of Employer stock.

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 5
Prepared by Holland & Hart LLP

ARTICLE 1 .
DEFINITIONS

1.1	Account shall mean the separate account or one or more separate accounts which the Trustee shall maintain for a Participant under the Plan.

1.2	Annual Addition shall mean the sum, as allocated on behalf of a Participant for a limitation year under any qualified plan sponsored by the Employer, of (a) Employer Contributions, (b) forfeitures and (c) Employee contributions.

1.3

Beneficiary shall mean any individual, trust, estate or other recipient properly designated by the Participant pursuant to the procedures required by the Committee to receive Death benefits payable under the Plan, on either a primary or contingent basis. A Beneficiary who becomes entitled to a benefit under the Plan shall remain a Beneficiary under the Plan until the Trustee has fully distributed such benefit to such Beneficiary. For purposes of the required minimum distribution rules, Beneficiary means the individual who is designated as the Beneficiary under Section 6.7 and is the designated beneficiary under Code Section 401(a)(9) and Regulation Section 1.401(a)(9)‑1, Q&A-4.

1.4

Break in Service shall mean a Plan Year in which an employee has not completed more than 500 Hours of Service and during which the employee was not on a Leave of Absence. Solely for purposes of determining whether, for vesting purposes, a Break in Service has occurred, an employee who is absent from work because for a maternity or paternity leave shall receive credit for the Hours of Service that would otherwise have been credited to such employee but for such absence, or if such hours cannot be determined, eight Hours of Service per day for such absence. Hours of Service credited under this paragraph will be credited in the Computation Period in which such absence commences or, if not necessary to prevent a Break in Service in such period, in the immediately following Computation Period. Hours of Service credited to the employee under this subsection shall only be credited upon receipt by the Committee of such timely information as may be reasonably required to establish the existence and duration of such absence.

For purposes of this definition, “employee” shall mean all employees of the Employer and the Related Group, regardless of whether such person is eligible to participate in the Plan and regardless of whether the employer is participating in the Plan, to the extent required by Code Section 411(a)(6).

1.5	Code shall mean the Internal Revenue Code of 1986, as amended.

1.6	Committee shall mean the committee appointed by the Plan Sponsor to administer this Plan pursuant to Article 9 .

1.7

Compensation shall mean the Employee’s earned income and wages within the meaning of Code Section 3401(a) and all other payments of remuneration to the Employee by the Employer in the course of the Employer’s trade or business, for which the Employer is required to furnish the Employee a Form W-2 or such other similar written statement pursuant to Code Sections 6041(d), 6051(a)(3) and 6052, determined without regard to any rules under Code Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed. For purposes of allocation of Employer Contributions under Section 5.2 , Compensation shall be limited to

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 6
Prepared by Holland & Hart LLP

Compensation earned during the portion of the Plan Year in which the Employee was a Participant. For purposes of calculating Compensation under the Plan (except as specifically provided herein), “Employer” shall mean the Plan Sponsor and all members of the Related Group (as modified by Code Section 415(h)), regardless of whether they are Participating Employers.

(a)

Inclusions. Compensation shall include, to the extent and for the purposes required to comply with the definition of “compensation” under Code Section 415(c)(3), Employer contributions which are not includible in the gross income of the Employee under Code Section 125 (salary deferrals under a cafeteria plan), 132(f) (qualified transportation expenses) or 402(a)(8) (salary deferrals under a Code Section 401(k) plan). Compensation shall also include, effective for limitation years beginning on or after June 30, 2007:

(1)	back pay, within the meaning of Regulation Section 1.415(c)-2(g)(8), which shall be treated as Compensation for the year to which the back pay relates, to the extent the back pay represents wages and compensation that would otherwise be included in this definition of Compensation; and

(2)	amounts paid by the later of 2½ months after a severance from service or the end of the Plan Year that includes the severance from service date, if the payment is:

(A)	regular compensation for services performed during regular working hours, or compensation for services performed outside the regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and

(B)	absent a severance from service, the payments would have been paid while the Participant continued in employment with Employer; and

(3)

amounts paid by the later of 2½ months after a severance from service or the end of the Plan Year that includes the severance from service date, if the payment is for unused accrued bona fide sick, vacation or other leave, but only if the employee would have been able to use the leave if employment had continued.

(4)	Effective January 1, 2009, amounts that represent “differential wage payments” within the meaning of Code Section 414(u)(12) shall be included in Compensation.

(b)	Exclusions. Compensation shall not include amounts paid by the Employer to an Employee who is Disabled.

(c)

Annual Compensation Limit. Compensation shall not exceed the limitation under Code Section 401(a)(17), which is $200,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Code Section 401(a)(17). The cost of living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 7
Prepared by Holland & Hart LLP

Code Section 401(a)(17) limitation will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12.

1.8

Computation Period shall mean, for purposes of determining eligibility, a 12‑consecutive-month period, beginning on an Employee’s Date of Employment, or any succeeding 12‑consecutive-month period, beginning with the Plan Year which includes the first anniversary of the Employee’s Date of Employment. For purposes of determining vesting, Computation Period shall mean the Plan Year.

1.9	Date of Employment shall mean the date on which an Employee first completes an Hour of Service with the Employer.

1.10	Date of Reemployment shall mean the date on which an Employee first completes an Hour of Service with the Employer after a Break in Service.

1.11	Death shall mean the death or disappearance of a Participant resulting in the issuance of a death certificate or declaration of death, as applicable.

1.12

Disability or Disabled shall refer to a disability which permanently renders a Participant unable to perform satisfactorily the usual duties of his or her employment with the Employer, as determined by the Committee in a uniform and nondiscriminatory manner, and which results in his or her termination of employment with the Employer. The Committee may make such determination after consideration of a report by a physician selected by the Committee.

1.13

Effective Date of this restatement shall mean January 1, 2012. The Plan Sponsor is adopting this Plan in substitution for and as amendment and restatement of an existing plan, the original plan being adopted as of October 3, 1978. The provisions of this restatement shall apply solely to an Employee who performs an Hour of Service for the Employer on or after January 1, 2012. If an earlier effective date for a provision in this restated Plan applies, the provision is effective as of the earlier date notwithstanding the general January 1, 2012 effective date.

1.14

Employee shall mean any individual who is employed by the Employer and, effective January 1, 2009, any individual receiving “differential wage payments” within the meaning of Code Section 414(u)(12), but excluding (a) any individual who is classified as an agent, consultant, independent contractor or self-employed individual who has entered into an agency, consulting, independent contractor or other similar agreement with the Employer, regardless of whether such person has or is later determined to have an employer-employee relationship with the Employer and regardless of any classification as a common law employee by the Internal Revenue Service or any other governmental agency or any court of competent jurisdiction; and (b) any individual who provides services to the Employer under a contract between the Employer and a temporary help firm, employee leasing company, technical services firm, outsourcing company, professional employer organization or similar entity.

1.15	Employer shall mean the Plan Sponsor. Employer shall also include any Participating Employer, except as otherwise indicated or interpreted by the Committee in its sole discretion.

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 8
Prepared by Holland & Hart LLP

1.16	Employer Contributions shall mean contributions made to the Trust by the Employer according to Section 4.1 .

1.17	ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended.

1.18	Highly Compensated Employee shall mean:

(a)	Any Employee who (1) was a 5% owner (as defined in Code Section 416(i)(1)) of the Employer at any time during the current or preceding year, or (2) for the preceding year, had Compensation from the Employer in excess of $80,000 (as adjusted pursuant to Code Section 414(q)).

(b)	A former Employee shall be treated as a Highly Compensated Employee if: (1) such Employee was a Highly Compensated Employee when such Employee severed employment, or (2) such Employee was a Highly Compensated Employee at any time after attaining age 55.

(c)	For purposes of this section, compensation shall mean compensation within the meaning of Code Section 415(c)(3). The determination shall be made without regard to the Code Section 401(a)(17) limitation.

(d)	The determination of who is a Highly Compensated Employee shall be made in accordance with Code Section 414(q) and applicable Regulations.

1.19	Hours of Service shall mean hours computed according to the following rules:

(a)	Hours of Service.

(1)

Paid Duty. Each Employee shall be credited with one Hour of Service for each hour for which the Employee is directly or indirectly paid, or entitled to payment, by the Employer for the performance of duties. Such Hours of Service shall be credited to the Employee for the Computation Period during which the duties are performed, irrespective of when payment is made.

(2)

Paid Non-Duty. Each Employee shall be credited with one Hour of Service for each hour for which the Employee is directly or indirectly paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence; provided, however, that Hours of Service shall not be credited by reason of payment of unemployment or worker’s compensation or by reason of reimbursement for medical expenses; and provided further that no more than 501 Hours of Service shall be credited under this section with respect to any single continuous period when the Employee performs no services.

(3)	Back Pay. Each Employee shall be credited with one Hour of Service for each hour for which back pay is awarded or agreed to, irrespective of mitigation of damages.

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 9
Prepared by Holland & Hart LLP

The Committee shall not credit an Hour of Service under more than one of the above classifications described in subsections (1) , (2) and (3) .

(b)

Method of Counting. The number of Hours of Service to be credited to an Employee shall be determined solely by reference to the Employer’s internal records and shall be calculated on the basis of actual hours for which the Employee is paid or entitled to payment. If such actual hours cannot be determined, the number of Hours of Service will be calculated using 45 Hours of Service for each week during which the Employee would be required to be credited with at least one Hour of Service under Regulation Section 2530.200b-2.

(c)

Special Rules. The number of Hours of Service credited to an Employee for a period of time during which no duties are performed, and the Computation Periods to which such Hours of Service are credited, shall be determined in accordance with Regulation Sections 2530.200b-2(b) and (c), which Regulations are incorporated in this section by this reference. To the extent required by law, the Committee shall credit Hours of Service the Employee completes for members of the Related Group and shall credit Hours of Service the Employee completed as a leased employee within the meaning of Code Section 414(n).

1.20

Leave of Absence shall mean any absence of not over 12 months approved by the Employer in accordance with reasonable nondiscriminatory standards and policies consistently applied by the Employer, including any absence from work for service in the U.S. armed forces (other than career military service). Any Leave of Absence must be given in advance and may be canceled at any time in the discretion of the Employer.

1.21	Normal Retirement Date shall mean the later of (a) the date on which the Participant attains age 65, or (b) the 5 ^th anniversary of the last day of the first Plan Year in which the Participant entered the Plan.

1.22	Participant shall mean any Employee who has entered the Plan in accordance with the provisions of Article 2 . An Employee who becomes a Participant shall remain a Participant under the Plan until the Trustee has fully distributed the Participant’s Account.

1.23	Participating Employer shall mean any member of the Related Group which has adopted this Plan.

1.24	Plan shall mean the Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan and Trust Agreement.

1.25	Plan Entry Date shall mean January 1 and July 1 of each Plan Year.

1.26	Plan Sponsor shall mean Scott’s Liquid Gold-Inc. and its successors.

1.27

Plan Year shall mean the calendar year. The Plan Year shall be the limitation year. If the Plan is terminated effective as of a date other than the last day of the Plan Year, the Plan shall be treated as if the Plan was amended to change its Plan Year. As a result of this deemed amendment, the Code Section 415(c)(1)(A) dollar limit shall be prorated under the short limitation year rules.

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 10
Prepared by Holland & Hart LLP

1.28	Regulation shall mean any rule or regulation promulgated by the Secretary of the Department of the Treasury, Department of Labor or their delegates.

1.29

Related Group shall mean a controlled group of corporations, trades or businesses (whether or not incorporated) which are under common control, an affiliated service group, and any other entity required to be aggregated with the Employer pursuant to Code Section 414(o) and applicable Regulations. If the Employer is a member of a Related Group, the Plan shall treat all Employees of the members of such Related Group as if employed by a single employer. Solely for purposes of applying the Code Section 415 limitations of Article 5 , the Plan Administrator shall determine any Related Group by modifying Code Sections 414(b) and (c) in accordance with Code Section 415(h). For purposes of Article 5 , the Related Group will be determined by substituting the phrase “more than 50%” for the phrase “at least 80%” each place it appears in the above-referenced Code Sections.

1.30	Spouse shall mean the legal spouse of the Participant, provided that a former spouse will be treated as the Spouse and a current spouse will not be treated as the Spouse to the extent provided under a qualified domestic relations order as described in Code Section 414(p).

1.31	Stock shall mean the common stock of the Plan Sponsor.

1.32	Trust shall mean the legal entity created by the Plan Sponsor under this Plan that holds the funds and property of every kind held or acquired by the Trustee under the Plan.

1.33	Trustee shall mean the person or persons named herein or any person who accepts the position of Trustee in writing pursuant to Article 9 .

1.34	Valuation Date shall mean December 31 of each Plan Year and each additional date on which the Trustee values the Trust.

1.35	Vested shall mean nonforfeitable, such that a claim obtained by a Participant or Beneficiary to that part of an immediate or deferred benefit hereunder arises from the Participant’s service with the Employer, that is unconditional and that is legally enforceable against the Plan.

1.36	Year of Service shall mean any Computation Period during which the Employee completes 1,000 Hours of Service.

* * * * End of Article 1 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 11
Prepared by Holland & Hart LLP

Article 2.
EMPLOYEES ENTITLED TO PARTICIPATE

2.1	Eligibility to Enter Plan.

(a)	Each Employee who was a Participant immediately prior to the Effective Date shall continue to be a Participant in the Plan as of the Effective Date.

(b)	Each Employee shall become a Participant as of the Plan Entry Date following the later of the date:

(1)	on which the Employee completes one Year of Service, or

(2)	the Employee attains age 21;

unless the Employee has a severance from employment with the Employer and has not returned to service prior to such Plan Entry Date.

2.2

Participation after Reemployment. A Participant who has a severance from service with the Employer shall again become a Participant on his or her Date of Reemployment. An Employee who satisfies the eligibility requirements of Section 2.1 , but who has a severance from employment with the Employer prior to becoming a Participant, shall become a Participant as of the later of the Plan Entry Date on which the Employee would have entered the Plan had he or she not severed employment or his or her Date of Reemployment. An Employee who has a severance from employment with the Employer prior to satisfying the eligibility requirements of Section 2.1 shall become a Participant in accordance with Section 2.1 .

2.3

Change in Employee Status. If a Participant does not have a severance from employment, but is not an Employee or ceases to be an Employee by reason of an employment classification, then during the period such Participant is not an Employee, the Committee shall not allocate Employer Contributions or forfeitures to the Participant’s Account except to the extent the Participant rendered services for the Employer as an Employee. A Participant who is no longer an Employee shall participate immediately upon again becoming an Employee. An Employee who satisfied the eligibility requirements of Section 2.1 , but who ceased to be an Employee prior to becoming a Participant, shall become a Participant on the later of the Plan Entry Date on which the Employee would have entered the Plan had he or she not ceased to be an Employee or the Plan Entry Date following the date on which he or she again becomes an Employee.

2.4	Qualified Military Service. Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code Section 414(u).

2.5	Notification of Eligibility. The Committee shall notify each Employee when he or she becomes a Participant. Participation shall give an Employee only such rights as are set forth in the Plan, as amended from time to time, and shall in no way prejudice the Employer’s right to discharge any Employee.

* * * * End of Article 2 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 12
Prepared by Holland & Hart LLP

Article 3.
SERVICE; VESTING; FORFEITURES

3.1	Service Crediting Method. All Employees shall be credited with service pursuant to the Hours of Service method.

3.2	Vested Percentage. A Participant’s Account shall become Vested as follows:

(a)	Each Participant shall fully vest in Employer Contributions made to his or her Account prior to January 1, 2007 upon completion of five Years of Service.

(b)	Each Participant shall fully vest in Employer Contributions made to his or her Account on or after January 1, 2007 upon completion of three Years of Service.

(c)	Notwithstanding the foregoing, a Participant’s Vested percentage will be 100% upon the occurrence of any one of the following events:

(1)	attainment of Normal Retirement Date while employed by the Employer;

(2)	severance from service due to Death (including the Participant’s death while performing qualified military service) or Disability;

(3)	termination or partial termination of the Plan affecting the Participant; or

(4)	complete discontinuance of Employer Contributions.

3.3

Related Employers. For purposes of determining whether an Employee has completed a Year of Service, incurred a Break in Service, had a severance from employment, or met the participation requirements, service with the Plan Sponsor shall be deemed to include service with the Related Group only with respect to the Employee’s service during the time that the other trades or businesses are or were actually under common control with the Plan Sponsor within the meaning of Code Section 414.

3.4	Reinstatement of Service Upon Reemployment. If a Participant is reemployed following a severance from service with the Employer, the following rules shall apply:

(a)

Benefits Accrued After Reemployment. If a Participant incurs a number of consecutive Breaks in Service that equals or exceeds the greater of five or the aggregate number of the Years of Service prior to the Break in Service, the Participant’s Years of Service credited prior to the Break in Service shall be excluded in determining the Participant’s Vested percentage in benefits accrued after the Date of Reemployment, provided that the Participant’s Vested percentage in his or her Account is zero at the time the Participant incurs the Break in Service. The aggregate number of the Years of Service prior to a Break in Service does not include any Years of Service not required to be taken into account under this exception by reason of any prior Break in Service.

(b)	Benefits Accrued Before Reemployment. If a Participant incurs five consecutive Breaks in Service, Years of Service after the five consecutive Breaks in Service shall

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 13
Prepared by Holland & Hart LLP

not be counted in order to increase the Participant’s Vested percentage with respect to Employer Contributions earned prior to the five consecutive Breaks in Service.

An Employee shall not have fewer Years of Service credited to him or her for vesting purposes than he or she would have had under the prior plan document as of the date this restatement is executed.

3.5

Forfeiture of Non-Vested Amounts. If a Participant has a severance from service before becoming fully vested for reasons other than Death, Disability, or reaching Normal Retirement Date, and subsequently receives a distribution of his or her Vested Account or incurs five consecutive Breaks in Service, the amount of the Participant’s Account that is not Vested shall be forfeited and applied in accordance with Section 3.7 . A Participant who is 0% Vested upon a severance from employment shall be deemed to have received a distribution of his or her Vested Account in the Plan Year that includes the severance from employment date. The forfeiture shall take place on the earlier of:

(a)	the last day of the Plan Year in which the Participant receives a distribution of his or her Vested Account, or

(b)	the last day of the Plan Year in which the Participant first incurs five consecutive Breaks in Service.

3.6

Restoration of Forfeited Amounts. If a Participant who has received a deemed distribution of zero shares of Stock on account of severance from service with the Employer before becoming Vested again becomes an eligible Employee prior to a period of five consecutive Breaks in Service, the forfeited number of shares of Stock shall be restored, without interest, to such Participant’s Account.

3.7

Application of Forfeitures. Forfeitures arising during a Plan Year that are not used to restore a Participant’s Account as of the last day of such Plan Year shall be used, upon the election of the Employer, for any of the following purposes: (a) to reduce the Employer Contributions on behalf of Participants for the Plan Year or the following Plan Year in which occurs the event causing the forfeitures, (b) to pay the reasonable expenses of administering the Plan, and (c) to be allocated to Participants as of the last day of the Plan Year as Employer Contributions pursuant to Section 5.2 . Forfeitures under this Plan shall be available as provided under this subsection without regard to which Employer contributed such assets.

* * * * End of Article 3 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 14
Prepared by Holland & Hart LLP

Article 4.
CONTRIBUTIONS TO THE TRUST

4.1	Employer Contributions.

(a)	Form and Amount of Contribution. The Employer shall be entitled to contribute to the Trust a sum in cash or in Stock, in such amount as determined in the sole discretion of the Employer.

(b)

Deduction Limit . In no event shall the amount of Employer Contributions exceed the maximum deductible contribution pursuant to Code Section 404 for the Plan Year for which the contribution is being made. If Employer Contributions exceed the deductible contribution limit in any Plan Year, the Employer may instruct the Trustee to return the excess, non-deductible contribution in accordance with Section 13.2 .

(c)

Timing . Employer Contributions shall be paid by the Employer to the Trust not later than the due date of the Employer’s federal income tax return for the year (including extensions), or within such other maximum period as may be designated from time to time by the Code as the period within which Employer Contributions may be deducted from income tax for the year.

4.2

Make-Up Contributions. The Employer may make special make-up contributions to the Plan, if necessary, if there are insufficient forfeitures under the Plan to restore Participant Accounts according to Section 3.5 , or if a mistake or omission in the allocation of Employer Contributions is discovered and is not be corrected by revising prior allocations.

4.3	Participant Contributions. Participants shall not be required, nor shall they be permitted, to make any contributions to the Trust, nor shall the Trustee accept any rollover contributions from any Participant.

* * * * End of Article 4 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 15
Prepared by Holland & Hart LLP

Article 5.
ALLOCATIONS TO ACCOUNTS

5.1

Participant Accounts. On the date an Employee first commences participation in the Plan, the Committee shall open a separate bookkeeping account for such Employee. The Account for each Participant shall indicate the dollar value of, and shares allocated to, the Account as of the last previous Valuation Date. At least annually, the Committee shall provide to each Participant a written statement setting forth the current value of the Participant’s Account. Stock will be allocated to Participant Accounts in shares and fractions of shares.

5.2

Allocation of Contributions. The Committee, as of each Valuation Date, shall allocate Employer Contributions to the Account of each Participant who is employed by the Employer on the last day of the Plan Year and had completed a Year of Service during such Plan Year; provided, however, that if the Participant has a severance from service prior to the last day of the Plan Year, he or she shall receive an allocation of Employer Contributions if such Participant completed 1,000 Hours of Service prior to termination of employment and such termination of employment was on account of Death or Disability or occurred on or after the Participant’s Normal Retirement Date. Employer Contributions shall be allocated to eligible Participants in the same proportion that each such Participant’s Compensation for the Plan Year bears to the Compensation of all Participants for the Plan Year. A Participant’s Compensation shall include Compensation from all Participating Employers, irrespective of which Employers are contributing to the Plan.

5.3

Suspension of Allocation Requirements. If the Plan fails to satisfy the coverage test of Code Section 410(b) for any Plan Year, the Plan shall suspend the requirements of Section 5.2 (“allocation requirements”) for Includible Employees who are Participants in the following order, until the Plan satisfies the coverage test for such Plan Year:

(a)	The Includible Employees employed with the Employer on the last day of the Plan Year, beginning with the Includible Employees with the greatest number of Hours of Service for the Plan Year, followed by Includible Employees in descending order based on Hours of Service for the Plan Year; and

(b)	the Includible Employees who have the latest severance from service date during the Plan Year, continuing in descending order for each Includible Employee who incurred an earlier severance from service date, from the latest to the earliest date during the Plan Year.

If two or more Includible Employees have the same number of Hours of Service or have the same severance from service date, the Plan will suspend the allocation requirements for all such Includible Employees, irrespective of whether the Plan can satisfy the coverage test by allocating benefits for fewer than all such Includible Employees.

For purposes of this Section 5.3 , “Includible Employees” shall mean all Employees other than: (1) those Employees excluded from participating in the Plan for the entire Plan Year by reason of the collective bargaining unit exclusion or the nonresident alien exclusion described in Code Section 410(b)(3) or by reason of the age and service requirements of Section 2.1 ;

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 16
Prepared by Holland & Hart LLP

and (2) any Employee who has a severance from employment during the Plan Year and fails to complete at least 501 Hours of Service for the Plan Year.

5.4	Allocation of Stock Dividends, Splits, Rights.

(a)

Stock Dividends and Splits. If the Trust receives Stock as a result of a Stock split or Stock dividend on Stock held in a Participant’s Account, such Stock shall be allocated as of the Valuation Date coincident with or following the date of such split or dividend. The amount of Stock received will be allocated to Participant Accounts in the same ratio as the number of shares held in each Participant’s Account bears to the total number of shares held in the Accounts of all Participants.

(b)

Non-Stock Dividends. As provided by Code Section 404(k)(2), cash or property (other than Stock) received by the Trust as a result of a dividend on Stock held in a Participant’s Account may be: (1) used to purchase Stock to be allocated to such Participant’s Account; (2) paid in cash to such Participants (or their Beneficiaries); or (3) paid in cash to the Plan and distributed by the Plan to such Participants (or their Beneficiaries) no later than 90 days after the end of the Plan Year in which paid. If the dividends are paid to Participants and Beneficiaries, such payments may be taxable distributions, as provided in the Code and applicable Regulations. (See Code Sections 404(k), 72(t), 3405(e) and 411(a)(11)(C).)

(c)

Rights, Warrants and Options. To the extent the holding of rights, warrants and options would be consistent with the requirements of the Code and ERISA, and subject to the provisions applicable to voting rights in Section 7.5 , and unless otherwise directed by the Committee, if any rights, warrants, or options are issued on Stock held in the Trust, the Trustee may in its sole discretion exercise them for the acquisition of additional Stock to the extent that cash is then available. Unless otherwise directed by the Committee, any rights, warrants or options on Stock that cannot be exercised for lack of cash may be sold by the Trustee and the proceeds invested as provided in Section 9.3 .

5.5

Allocation of Gains and Losses. Promptly after each Valuation Date, the Trustee shall cause a valuation to be made of the Trust as of such date (except that in the case of investment in common trust fund units which are not normally valued as of such date, the valuation may be made as of the immediately preceding date of valuation for such units). Such valuation shall represent the fair market value of the Trust and shall give effect to the income, expenses, gains, and losses of the Trust since the last preceding Valuation Date. The Trustee shall compare such valuation with the valuation as of the last preceding Valuation Date and shall report the net increase or decrease in the value of the Trust to the Committee. The Committee shall cause such increase or decrease to be allocated among Participant Accounts as of such Valuation Date proportionately to the respective Account balances as of the last preceding Valuation Date, reduced by any forfeitures or any amounts withdrawn or distributed since the last Valuation Date. For purposes of this section, “Trust” shall not include Stock and “Participant Accounts” shall not include the portion of the Accounts invested in Stock.

5.6	Valuation of Trust. The Trust shall be valued at fair market value, which in no event shall be less than the market price for such assets as established by the average current bid

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 17
Prepared by Holland & Hart LLP

and asked closing prices quoted on the OTC Bulletin Board, or in the alternative, the closing sales price for such Stock as quoted on the OTC Bulletin Board or such other established public market, or absent a quotation on such system or any national or regional stock exchange, then as determined by an independent appraisal by a person who customarily makes such appraisals. In the case of a transaction between the Plan and an Employer or another party in interest, the fair market value of the Stock must be determined as of the date of the transaction rather than as of some other date occurring before or after the transaction. In other cases, the fair market value of the Stock will be determined as of the most recent Valuation Date.

5.7

Annual Additions Limit. The Plan shall comply with the requirements of Code Section 415 and applicable Regulations, which are incorporated herein by this reference. In the event a provision of this Plan is inconsistent with Code Section 415 and applicable Regulations, the requirements of Code Section 415 and the Regulations shall take precedence.

(a)	Annual Additions Limit. In no event shall the sum of the Annual Additions to any Participant’s Account exceed the lesser of—

(1)	$40,000, as adjusted from time to time under Code Section 415(c) or such other maximum amount permitted under Code Section 415(c), or

(2)	100% of the Participant’s Compensation during any Plan Year.

(b)	Correction of Excess Amounts. Any excess Annual Additions allocated to a Participant shall be corrected through the Employee Plans Compliance Resolution System or such other correction method allowed by statute, Regulations or regulatory authorities.

* * * * End of Article 5 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 18
Prepared by Holland & Hart LLP

Article 6.
DISTRIBUTION OF BENEFITS

6.1	Amount of Distribution. The amount of a Participant’s distribution shall be based on the value of his or her Vested Account as of the Valuation Date immediately preceding the date of the distribution.

6.2	Form of Distribution.

(a)	Any distribution of a Participant’s Vested Account shall be in Stock, with fractional shares paid in cash. Distribution shall be in one of the following alternative forms of distribution selected by the Committee:

(b)	Lump Sum Payment. A single lump sum payment.

(c)	Installments. Substantially equal periodic payments, as least annually, over a period not longer than the greater of the following:

(1)	5 years, or

(2)	in the case of a Participant’s Vested Account that has a value as of the Valuation Date immediately preceding or coinciding with his or her benefit starting date in excess of $800,000:

(A)	5 years, plus

(B)	one additional year for each additional $160,000, but not more than 5 additional years.

The $160,000 and $800,000 amounts shall be adjusted to reflect cost of living increases under Code Section 409(o)(2).

6.3	Timing of Distribution.

(a)	Distribution Date. The total amount that a Participant is entitled to receive under this Article shall be distributed as follows:

(1)	All distributions shall require Participant consent and shall be subject to subsection (2) below.

(2)	The Participant may elect to have his or her Vested Account paid as soon as administratively feasible following the date elected by the Participant. Unless the Participant elects otherwise, the distribution of his or her Vested Account shall commence no later than the following:

(A)	one year after the close of the Plan Year in which the Participant’s employment terminates by reason of attainment of Normal Retirement Age, Disability or Death;

(B)	one year after the close of the Plan Year in which occurs the 5 ^th anniversary following the close of the Plan Year in which the

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 19
Prepared by Holland & Hart LLP

Participant’s employment otherwise terminates, unless the Participant is reemployed by the Employer before such date; or

(C)	the 60 ^th day after the close of the Plan Year in which the Participant attains Normal Retirement Age, reaches the 10 ^th anniversary of the year in which he or she began participation in the Plan or terminates service with the Employer, whichever is later.

Notwithstanding any provision to the contrary, in no event shall payment of the Participant’s Vested Account be distributed later than the Participant’s Required Beginning Date (as defined in Section 6.6(a) ).

(b)

Benefit Notice. Not earlier than 90 days before the Participant’s Benefit Starting Date, the Committee shall provide a benefit notice to a Participant who is eligible to make an election or required to consent under this Article. The benefit notice shall explain the optional methods of distribution from the Plan, including the material features and relative values of those methods, the Participant’s right to defer distribution until the Participant attains his or her Required Beginning Date and the Participant’s right to consider whether to elect a distribution for a period of at least 30 days. Such distribution may commence fewer than 30 days after the benefit notice is given, provided that the Participant, after receiving the notice, affirmatively elects a distribution.

6.4

In-Service Distributions. Prior to a severance from service with the Employer, a Participant who has reached his or her Normal Retirement Date may receive, not more than once per Plan Year, a distribution of all or any portion of the Participant’s Vested Account ; provided, however, that such distribution is valued at no less than $100 at the time of the request (determined as of the applicable Valuation Date) . The Participant may elect a lump sum or partial distribution in Stock, commencing as soon as administratively feasible following the Committee’s receipt of the Participant’s request for a distribution under this section.

6.5	Diversification Distribution.

(a)

In General. Each Qualified Participant may elect within 90 days after the close of each Plan Year during the Qualified Election Period to receive a distribution of up to 25% of the total number of shares of Stock acquired by or contributed to the Plan that have ever been allocated to such Qualified Participant’s Account (reduced by the number of shares of Stock previously diversified pursuant to a prior election) after December 31, 1986 and prior to July 1, 1994. In the case of the election year in which the Participant can make his last election, the preceding sentence shall be applied by substituting “50%” for “25%.” Any Stock so distributed shall be subject to the put option.

(b)

De Minimis Exception. Notwithstanding the above, if the fair market value (determined as the Plan Valuation Date immediately preceding the first day on which a Qualified Participant is eligible to make an election) of Stock acquired by or contributed to the Plan and allocated to a Qualified Participant’s Account is $500 or less, then such Stock shall not be subject to this section.

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 20
Prepared by Holland & Hart LLP

(c)	Restriction to Stock Acquired After 1986. This section shall apply only to Stock acquired by the Plan on or after December 31, 1986 and prior to July 1, 1994.

(d)	Definitions. For purposes of this section, the specified terms shall have the following meanings:

(1)	Qualified Participant shall mean a Participant who has attained age 55 and who has at least 10 years of participation in the Plan.

(2)	Qualified Election Period shall mean the period consisting of the six consecutive Plan Years beginning with the Plan Year in which the Participant first becomes a Qualified Participant.

6.6	Minimum Distributions to Participants. The Employer shall direct the Trustee to commence distributions not later than the Participant’s Required Beginning Date.

(a)	Required Beginning Date.

(1)	If the Participant attained age 70½ on or after January 1, 2001, Required Beginning Date shall mean―

(A)	if the Participant is not a 5% owner (as defined in Code Section 416) of the Employer, the April 1 of the calendar year following the later of (i) the calendar year in which the Participant attains age 70½, or (ii) the calendar year in which the Participant has a severance from service;

(B)	if the Participant is a 5% owner, the April 1 of the calendar year following the calendar year in which the Participant attains age 70½.

(2)

If the Participant attained age 70½ on or after January 1, 1994 and prior to January 1, 2001, Required Beginning Date shall mean the April 1 following the close of the calendar year in which the Participant attains age 70½; provided, however, that a Participant who attains age 70½ on or after January 1, 2000 and prior to January 1, 2001, and who is a not a 5% owner, may elect whether such Participant’s Required Beginning Date shall be the April 1 of the calendar year following the calendar year in which (A) the Participant attains age 70½; or (B) the Participant retires.

(3)

If the Participant, prior to a severance from service, attained age 70½ before January 1, 1988, and, for the five Plan Year period ending in the calendar year in which the Participant attained age 70½ and for all subsequent years, the Participant did not own more than 5% of the Employer, Required Beginning Date shall mean the April 1 following the close of the calendar year in which the Participant has a severance from service or, if earlier, the April 1 following the close of the calendar year in which the Participant owns more than 5% of the Employer. Furthermore, if a Participant who did not own more than 5% of the Employer attained age 70½ during 1988 and did not have a severance from service prior to January 1, 1989, the Participant’s Required Beginning Date shall be April 1, 1990.

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 21
Prepared by Holland & Hart LLP

(b)

Timing of Distribution. The first minimum distribution is due by the Participant’s Required Beginning Date. The minimum distribution for each subsequent Distribution Calendar Year (as defined in subsection (d)(1) ) , including the calendar year in which the Participant’s Required Beginning Date falls, is due by December 31 of that year.

(c)

Calculation of Distribution. For purposes of determining required minimum distributions, all distributions required under this Article will be determined and made in accordance with the Regulations under Code Section 401(a)(9), including the minimum incidental death benefit requirement of Code Section 401(a)(9)(G) and Regulation Section 1.401(a)(9)-2. Notwithstanding the other provisions of this Article, distributions may be made under a designation made before January 1, 1984, in accordance with section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to TEFRA Section 242(b)(2). The requirements of this section shall take precedence over any provisions of the Plan inconsistent with Code Section 401(a)(9) and applicable Regulations.

(1)	Amount of Distributions During Participant’s Lifetime. During the Participant’s lifetime, the minimum amount that will be distributed for each Distribution Calendar Year is the lesser of:

(A)	the quotient obtained by dividing the Participant’s Vested Account by the distribution period in the Uniform Lifetime Table set forth in Regulations Section 1.401(a)(9)-9, using the Participant’s age as of the Participant’s birthday in the Distribution Calendar Year; or

(B)

if the Participant’s sole Beneficiary for the Distribution Calendar Year is the Participant’s Spouse, the quotient obtained by dividing the Participant’s Vested Account by the number in the Joint and Last Survivor Table set forth in Regulations Section 1.401(a)(9)-9, using the Participant’s and Spouse’s attained ages as of the Participant’s and Spouse’s birthdays in the Distribution Calendar Year.

(2)

Amount of Distributions After Participant’s Death. Required minimum distributions will be determined under subsection 6.6(c)(2) beginning with the first Distribution Calendar Year and up to and including the Distribution Calendar Year that includes the Participant’s date of death. Subsequent distributions shall be determined under Section 6.7 .

(d)	Definitions. For purposes of this section and Section 6.7 , the following capitalized terms shall have the specified meanings:

(1)

Distribution Calendar Year: a calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year that contains the Participant’s Required Beginning Date. For distributions beginning after the Participant’s death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin under Section 6.7(c) . The required minimum distribution for

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 22
Prepared by Holland & Hart LLP

the Participant’s first Distribution Calendar Year will be made on or before the Participant’s Required Beginning Date. The required minimum distribution for other Distribution Calendar Years, including the required minimum distribution for the Distribution Calendar Year in which the Participant’s Required Beginning Date occurs, will be made on or before December 31 of that Distribution Calendar Year.

(2)	Life Expectancy: life expectancy as computed by use of the Single Life Table in Regulations Section 1.401(a)(9)‑9.

6.7	Special Rules for Distributions Upon Death of Participant. Upon the occurrence of an event that entitles a Participant’s Beneficiary to a distribution, the Employer shall determine the manner and time of payment of benefits by application of the rules set forth in this section.

(a)	Beneficiary Designation. Each Participant shall have the right to designate a Beneficiary on the forms prescribed for such designation by the Committee and in accordance with the following rules:

(1)

Spouse as Beneficiary; Consent. In all cases, the Participant’s Beneficiary shall be the Participant’s Spouse, unless (A) the Beneficiary is otherwise determined pursuant to subsection (4) , or (B) the Participant elects to name a different Beneficiary and the election is consented to by the Participant’s Spouse. The Spouse’s consent must be in writing, must acknowledge the effect of the election, must be witnessed by a Plan representative or a notary public, and must meet one of the following three requirements:

(A)	the consent must name a specific Beneficiary that cannot be changed without the additional consent of the Spouse in a form meeting the requirements of this subsection;

(B)	the consent must specifically provide that the Participant may change the designation of a Beneficiary without any further consent by the Spouse, and the Spouse must acknowledge in the consent that she or he is giving up the right to limit his or her consent to a specific Beneficiary; or

(C)

the consent must specifically provide that the Participant may change the designation of a Beneficiary, with such change being limited to a change among certain Beneficiaries, without any further consent by the Spouse, and the Spouse must acknowledge in the consent that she or he is giving up the right to limit his or her consent to a specific Beneficiary.

(2)

Exceptions. A Spouse’s consent shall not be required if it is established to the satisfaction of the Committee that the required consent cannot be obtained because there is no Spouse, because the Spouse cannot be located, or because of other circumstances that may be prescribed in Regulations. A valid election made by the Participant may be revoked by the Participant in writing without the consent of the Spouse at any time. Any new election must

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 23
Prepared by Holland & Hart LLP

comply with the requirements of this subsection. A former Spouse’s consent shall not be applicable to a new Spouse.

(3)

Presumed Designation of Beneficiary. If the Participant fails to designate a Benefit or there is no living Beneficiary at the time of the Participant’s Death, the Committee shall designate the Spouse as the Beneficiary. If there is no Spouse, or if the Spouse consents in accordance with the requirements of subsection (1) 6.7(a)(1), the Employer shall designate as the Beneficiary, in order of priority, (A) the Participant’s children, by representation, and if a child is deceased then to such child’s living children, by representation; (B) the Participant’s surviving parents, in equal shares; (C) the Participant’s surviving brothers and sisters, in equal shares, and (D) the Participant’s estate or a trustee of a trust named as the beneficiary of the residue of the Participant’s estate as Beneficiary. Persons who are legally adopted shall be treated for all purposes as the children of their adoptive parents. The Committee’s determination of the persons who qualify as Beneficiaries under this Plan shall be binding on all interested parties.

(4)	Effect of Dissolution of Marriage. Dissolution of marriage shall terminate the Participant’s Beneficiary designation, or presumed designation, of the Participant’s former Spouse as the Participant’s Beneficiary.

(A)

If, prior to payment of benefits upon the Participant’s Death, documentation of the Participant’s dissolution of marriage, as issued by a court of competent jurisdiction, is received and accepted by the Committee, the Committee shall deem the Participant’s former Spouse to have predeceased the Participant, and no heirs or other beneficiaries of the Participant’s former Spouse shall receive benefits as a Beneficiary, unless such heirs are specifically designated in the Participant’s Beneficiary designation under the Plan.

(B)	Subsection (A) shall not apply if, prior to distribution of the Participant’s Account, either of the following occurs:

(i)	the Participant delivers to the Committee a properly completed Beneficiary designation dated after the date of the dissolution of marriage that designates the Participant’s former Spouse as a Beneficiary; or

(ii)	the Plan receives a qualified domestic relations order, as defined in Section 6.8 , directing that the Participant’s former Spouse shall be treated as the Participant’s Beneficiary.

Any such payment shall be a distribution for the account of such Participant and his or her Beneficiary(ies) and shall, to the extent thereof, be a complete discharge of any liability under the Plan to the Participant’s estate or any Beneficiary. In the event of a dispute with respect to the determination of Beneficiaries as a result of the operation of this subsection, the Committee may solicit a court of competent jurisdiction for a determination of a rightful

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 24
Prepared by Holland & Hart LLP

Beneficiary. If such request is made to a court, the Trustee shall retain within the Plan or transfer to the court any Account in dispute until the rendering of a final determination by the court. The decision of the Committee shall be final and binding on all interested parties, and the Committee shall be under no duty to investigate further the intent of the Participant with respect to the designation of any Beneficiary.

(5)

Disclaimer by Beneficiary. A Beneficiary entitled to a distribution of all or any portion of the Participant’s Account may disclaim his or her interest upon delivery to the Committee of an executed disclaimer of the benefit, and the Beneficiary (A) is a natural person, (B) has not yet received a distribution of all or any portion of the Participant’s Account at the time the disclaimer is executed and delivered, and (C) must have attained at least age 21 years as of the date of the Participant’s Death. A disclaimer shall be irrevocable when delivered to the Committee and shall not be effective to disclaim any interest in an Account that has been distributed prior to the date the disclaimer is received by the Committee. The Committee shall be the sole judge of the content, interpretation and validity of a purported disclaimer. The effect of a valid disclaimer shall be that the Committee shall deem the Beneficiary to have predeceased the Participant with respect to the interest disclaimed, and no heirs or other beneficiaries of the Beneficiary shall receive benefits as a beneficiary, unless such heirs are specifically designated in the Participant’s Beneficiary designation under the Plan.

(b)	Distributions Beginning Before Death . If the Participant dies on or after the date distribution begin, the Participant’s Account shall be distributed at least as rapidly as under the method in use on the date of the Participant’s Death.

(1)

Participant Survived by Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s Death is the quotient obtained by dividing the Participant’s Vested Account by the longer of the remaining Life Expectancy of the Participant or the remaining Life Expectancy of the Participant’s Beneficiary, determined as follows:

(A)	The Participant’s remaining Life Expectancy is calculated using the age of the Participant in the year of Death, reduced by one for each subsequent year.

(B)

If the Participant’s Spouse is the Participant’s sole Beneficiary, the remaining Life Expectancy of the Spouse is calculated for each Distribution Calendar Year after the year of the Participant’s Death using the Spouse’s age as of the Spouse’s birthday in that year. For Distribution Calendar Years after the year of the Spouse’s Death, the remaining Life Expectancy of the Spouse is calculated using the age of the Spouse as of the Spouse’s birthday in the calendar year of the Spouse’s Death, reduced by one for each subsequent calendar year.

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 25
Prepared by Holland & Hart LLP

(C)	If the Participant’s Spouse is not the Participant’s sole Beneficiary, the Beneficiary’s remaining Life Expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s Death, reduced by one for each subsequent year.

(2)

No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no designated Beneficiary as of September 30 of the year after the year of the Participant’s Death, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Vested Account by the Participant’s remaining Life Expectancy calculated using the age of the Participant in the year of Death, reduced by one for each subsequent year.

(c)

Distributions Beginning After Death. If the Participant dies before distributions begin, the Participant’s Vested Account will be distributed (1) by December 31 of the calendar year containing the 5 ^th anniversary of the Participant’s Death or the Participant’s Required Beginning Date, if later, if the Participant’s Spouse is the Participant’s sole Beneficiary, or (2) by December 31 of the calendar year containing the 5 ^th anniversary of the Participant’s Death in all other cases . For purposes of this subsection, distributions are considered to begin on the Participant’s Required Beginning Date. If the Participant’s Spouse is the Participant’s sole Beneficiary, and the Spouse dies before distributions are required to begin to the Spouse, this subsection will apply as if the Spouse were the Participant.

6.8

Qualified Domestic Relations Orders. All rights and benefits, including elections, provided to a Participant in this Plan shall be subject to the rights afforded to any “alternate payee” under a “qualified domestic relations order” as those terms are defined in Code Section 414(p). Notwithstanding any other provision in this Article, the distribution of all or the portion of a Participant’s Vested Account that is assigned to an alternate payee under a qualified domestic relations order shall commence as soon as reasonably practicable after the later of the following dates: (a) the date on which the Employer determines that the domestic relations order pertaining to the alternate payee is a qualified domestic relations order, or (b) the date specified in the qualified domestic relations order; provided, however, that the Committee shall not, without the prior written consent of the alternate payee, commence the distribution of the amount to be distributed to the alternate payee prior to the Participant’s “earliest retirement age” as that term is defined in Code Section 414(p)(4). Distributions made pursuant to this section shall completely discharge the Plan of its obligations with respect to the Participant and each alternate payee to the extent of any such distributions.

6.9

Direct Rollovers. Notwithstanding any provision of the Plan to the contrary that would limit a Distributee’s election under this Article 6 , a Distributee may elect to have all or any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee. The election regarding a direct rollover shall be made at the time and in the manner prescribed by the Committee. For purposes of this section only:

(a)	Distributee shall mean a Participant, former Participant, a Beneficiary who is the Spouse of a Participant or former Participant, or an “alternate payee” as defined under

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 26
Prepared by Holland & Hart LLP

Code Section 414(p), and effective for distributions made on or after January 1, 2007, a non-Spouse Beneficiary of a Participant or former Participant.

(b)

Eligible Rollover Distribution shall mean any distribution of all or any portion of the balance to the credit of the Distributee. However, an Eligible Rollover Distribution shall not include: (1) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s Beneficiary; (2) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for a specified period of 10 years or more; (3) any distribution to the extent the distribution is required under Code Section 401(a)(9); (4) any portion of any distribution that is not includible in gross income, as determined without regard to the exclusion for net unrealized appreciation of employer securities; or (5) any distribution on account of hardship.

(c)

Eligible Retirement Plan shall mean: (1) an individual retirement account described in Code Section 408(a); (2) an individual retirement annuity described in Code Section 408(b); (3) a Roth IRA described in Code Section 408A; (4) an annuity plan described in Code Section 403(a); (5) a qualified trust described in Code Section 401(a); (6) an annuity contract described in Code Section 403(b) and (7) an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from the Plan. For Distributees who are non-Spouse Beneficiaries, an Eligible Retirement Plan means only an arrangement described in subsections (1) , (2) and (3) that is treated as an inherited IRA pursuant to Code Section 402(c)(11).

* * * * End of Article 6 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 27
Prepared by Holland & Hart LLP

Article 7.
EMPLOYER STOCK

7.1	Investment of Accounts.

(a)	Stock Investments. Except as otherwise provided in this Section 7.1 and in Section 7.3 , each Participant’s Account shall be invested primarily (or exclusively) in Stock.

(b)	Diversified Accounts. A Participant’s Account shall not be invested in Stock to the extent required by Section 6.5 .

(c)	Discretionary Non-Stock Accounts. The Employer in its fiduciary discretion may direct the Trustee to exchange any or all of the Stock in a Participant’s Account for assets in the Reserve Fund. Such exchange may be prudent, for example, to prepare for distribution of the Account.

(d)

Investment. To the extent an Account has been divested of Stock in accordance with subsection (b) or (c) : (1) it shall not be re-invested in Stock unless the Employer directs the Trustee otherwise, and (2) it shall be invested as part of the Reserve Fund unless the Employer directs the Trustee to maintain it as a segregated account.

7.2

Securities Transactions. The Trustee may acquire Stock in the open market or from the Plan Sponsor or any other person, including a party in interest as defined under ERISA Section 3(14). In the case of a transaction between the Plan and the Plan Sponsor or another party in interest, the fair market value of Stock must be determined as of the date of the transaction rather than as of some other Valuation Date occurring before or after the transaction. In other cases, the fair market value of Stock will be determined as of the most recent Valuation Date.

No commission will be paid in connection with the Trustee’s acquisition of Stock from a party in interest. None of the Employer, Committee, or Trustee will have any responsibility or duty to time any transaction involving Stock in order to anticipate market conditions or changes in Stock value. None of the Employer, Committee or Trustee will have any responsibility or duty to sell Stock held in the Trust in order to maximize return or minimize loss.

7.3	Reserve Fund; Segregated Accounts.

(a)	Segregated Accounts. Any Account established as a segregated Account shall remain a part of the Trust but shall be invested in assets other than Stock, and shall alone share in any income it earns and alone bear any expense or loss it incurs.

(b)

Reserve Fund In General. The portion of the Trust not invested in Stock (other than segregated Accounts described in subsection (a) ) is referred to as the Reserve Fund. The Reserve Fund will be invested by the Trustee in its discretion. The Reserve Fund may be used to convert Stock to cash in the Account of a Participant who is receiving cash distributions, to repurchase Stock following exercise of a Participant’s put option, to pay Plan expenses, to exercise rights, warrants or options and for other purposes as directed by the Employer.

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 28
Prepared by Holland & Hart LLP

(c)

Allocation of Reserve Fund Gain or Loss. As of each Valuation Date, the Employer will determine the net gain or loss, after adjustment for applicable expenses, if any, in the Reserve Fund since the immediately preceding Valuation Date. The net gain or loss of the Reserve Fund will be apportioned to each Participant’s Account in the same proportion that the balance of the Participant’s Account attributable to the Reserve Fund on the preceding Valuation Date (less any distributions from the Participant’s Account that were made after the preceding Valuation Date) bears to the total of the Reserve Fund on the preceding Valuation Date.

The result of this allocation of net gain or loss of the Reserve Fund may be expressed in dollars and cents, or shares and fractional shares of Stock having the same value as such dollars and cents on the date as of which the allocation is made. However, conversion to full and fractional shares of Stock will be made only to the extent necessary to reflect actual purchases from the Reserve Fund of Stock allocated to the Accounts of Participants who are receiving cash distributions.

7.4

Rights, Options, and Restrictions on Stock. If Stock is distributed to a Participant, Beneficiary or alternate payee (a “distributee” for purposes of this Section 7.4 ) at a time when it is not readily tradable on an established securities market within the meaning of Code Section 409(l), then the provisions of this section shall apply.

(a)

Right of First Refusal. Any shares of Stock distributed to a distributee shall be subject to a “right of first refusal.” The right of first refusal must provide that, before any subsequent transfer, the shares must first be offered for purchase in writing to the Employer, and then to the Trust, at the then fair market value. A bona fide written offer from an independent prospective buyer is deemed to be the fair market value of the Stock for this purpose. The Employer (on behalf of the Trust) has a total of 14 days to exercise the right of first refusal on the same terms offered by a prospective buyer. The Employer may require that a distributee entitled to a distribution of Stock execute an appropriate stock restriction agreement (evidencing the right of first refusal) before receiving a certificate for Stock.

(b)

Put Option. The Employer will issue a “put option” to any distributee who receives a distribution of Stock. The put option must permit the distributee to sell the distributed Stock to the Employer at any time during two option periods, at the fair market value of the shares. The first put option period is for at least 60 days beginning on the date the Stock is distributed to the distributee. The second put option period is for at least 60 days following the new determination of the fair market value of the Stock by the Committee (and notice to the distributee) in the following Plan Year. The put option must provide that if the distributee exercises the put option, the Employer, or the Plan if the Plan so elects, will repurchase the Stock as follows:

(1)

If the distribution is a total distribution, payment of the fair market value of a distributee’s distributed Stock will be made either in a single sum or substantially equal annual installments over a period of time not longer than five years at the discretion of the Committee. The first installment will be paid not later than 30 days after the distributee exercises the put option. The

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 29
Prepared by Holland & Hart LLP

Plan will pay a reasonable rate of interest and provide adequate security on amounts not paid after 30 days.

(2)	If the distribution is not a total distribution, the Plan will pay the distributee an amount equal to the fair market value of the Stock repurchased no later than 30 days after the distributee exercises the put option.

7.5

Voting and Other Rights. Effective January 1, 2012, because the Stock is readily tradable on an established market within the meaning of Code Section 401(a)(22), voting rights with respect to Stock held in each Participant’s or Beneficiary’s Account shall be provided in accordance with Code Section 409(e). In accordance with Code Section 409(e), because the Stock is a registration-type class of securities, each Participant or Beneficiary shall be entitled to direct the Trustee as to the manner in which Stock held in such Participant’s or Beneficiary’s Account shall be voted. The Trustee will not vote shares of Stock allocated to Accounts for which instructions are not received from Participants or Beneficiaries. Stock contributed to or acquired by the Plan that is not yet allocated will be voted by the Trustee according to the Committee’s instructions. Shareholder rights, other than voting rights, which can be exercised by Participants may be passed through to Participants and exercised in a similar manner to voting rights or will be exercised in such other manner as is permitted by applicable law.

* * * * End of Article 7 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 30
Prepared by Holland & Hart LLP

Article 8.
COMMITTEE

8.1

Appointment, Vacancies and Removal. The Plan Sponsor shall appoint the Committee, which shall have at least two members. A member’s appointment to the Committee shall terminate upon such member’s termination of employment or other service relationship with the Employer. Vacancies due to resignation, death, removal, or other causes shall be filled by the Plan Sponsor. The Plan Sponsor’s Board of Directors shall be entitled to remove the Committee or any member thereof at any time, with or without cause. Each member of the Committee may resign at any time upon written notice to the Plan Sponsor. The Committee shall be a “named fiduciary” as that term is defined in ERISA. The Committee may appoint any person or entity to serve in more than one fiduciary capacity.

8.2

Action of the Committee. The rights, duties, and functions of the Committee with respect to the operation, administration, and management of the Plan shall be those defined in this Plan. The Committee may adopt such procedures it deems desirable for the conduct of its affairs and may act by majority agreement of its members, taken either at a meeting or in writing without a meeting. The Committee shall have the right to authorize any individual to execute any document, documents, or class of documents or to take other action or types of action on behalf of the Committee. If the Committee so authorizes any individual, the Committee shall notify the Trustee in writing of such authorization and the name or names of the individuals so designated. The Trustee shall be entitled to rely on such authorization until it is revoked in writing by the Committee.

8.3

Information Provided to Committee. The Committee shall determine the status of Employees for the purposes of the Plan on the basis of information furnished it by the Employer. The Employer shall provide information sufficient for the Committee to properly perform its duties. The information to be provided shall include, without limitation, an Employee’s name, address, age, birth date, Social Security number, Dates of Employment and Reemployment, Compensation, Hours of Service earned each Plan Year, completion of one Year of Eligibility Service, Years of Vesting Service and Employer contributions.

8.4

Powers and Duties. The Committee shall administer the Plan in accordance with its terms, and shall have all powers necessary to carry out the provisions of the Plan not otherwise reserved to the Plan Sponsor, the Board of Directors or the Trustee. Not in limitation, but in amplification of the powers and duties specified in this Plan, the Committee shall:

(a)	Administration. Have all powers to administer the Plan, within its discretion, other than the power to invest or reinvest the assets of the Plan; such powers having been delegated to the Trustee.

(b)

Interpretation. Have total and complete discretion to interpret the Plan and to determine all questions arising in the administration, interpretation and application of the Plan, including the power to construe and interpret the Plan; to decide all questions relating to an individual’s eligibility to participate in the Plan and/or eligibility for benefits and the amounts thereof; to make such adjustments which it deems necessary or desirable to correct any arithmetical or accounting errors; to determine the amount, form and timing of any distribution to be made hereunder, all of which shall be final and binding decisions. Benefits under this Plan will be paid

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 31
Prepared by Holland & Hart LLP

only if the Committee decides in its sole discretion that the Participant or Beneficiary is entitled to such benefits.

(c)	Reconciliation. Correct any defect, supply any omission or reconcile any inconsistency in such manner and to such extent as the Committee shall deem necessary to carry out the purposes of this Plan.

(d)

Factual Determinations. Have fact finder discretionary authority to decide all facts relevant to the determination of eligibility for benefits or participation; have the discretion to make factual determinations as well as decisions and determinations relating to the amount and manner of allocations and distribution of benefits; and in making such decisions, be entitled to, but need not rely upon, information supplied by a Participant, Beneficiary, or representative thereof.

(e)	Rules and Procedures. Have total and complete discretion to adopt, publish, and enforce such rules and regulations as the Committee shall deem necessary and proper for the efficient administration of the Plan.

(f)	Funding Policy.

(1)	Determine whether the Plan has a short-term need for liquidity or whether liquidity is a long-term goal and investment goal is a more current need.

(2)	Determine the Plan’s short-term and long-term financial and investment needs and regularly communicate these requirements to the Employer, the Trustee and any other appropriate entities or persons so that funding and investment policies can be coordinated with the Plan’s needs.

(g)

Qualified Domestic Relations Orders. Have full and complete discretion to determine whether a domestic relations order constitutes a qualified domestic relations order and whether the putative alternate payee otherwise qualifies for benefits hereunder (as such terms are defined by Code Section 414(p)).

(h)

Appointment of Trustee. Have the authority to appoint and remove the Trustee; to direct the Trustee with respect to the investment, sale, reinvestment, and management of Plan assets including, without limitation, to appoint an investment manager or managers and to communicate to the Trustee any elections made by a Participant as to the investment and management of such Participant’s Account; to direct the Trustee to make payment of any benefits as they become payable under the Plan; to decide all questions submitted by the Trustee on all matters necessary for it to properly discharge its powers, duties and obligations; and to enter into a Trust agreement with the Trustee setting forth the powers, duties and obligations of the Trustee.

(i)	Direction of Trustee. Have the authority to direct the Trustee to make payment of any benefits as they become payable under the Plan.

(j)	Stock. Direct the Trustee in all actions or decisions with respect to Stock. Without limiting the foregoing, the Committee shall have the power to direct the Trustee to sell, purchase or hold Stock, and to direct the Trustee’s voting of Stock (except to the

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 32
Prepared by Holland & Hart LLP

extent Participants and Beneficiaries have properly exercised any pass-through voting rights); provided, however, that the Trustee shall exercise its independent judgment as a fiduciary consistent with the requirements of ERISA in following any such Committee direction.

(k)

Review Agents, Fiduciaries. Establish and maintain procedures for review of the performance of persons to whom functions are delegated under any provision of this Plan. This review may consist of day to day supervision, periodic formal review, a combination of the two, or such other procedures as the Committee shall deem prudent and appropriate under the circumstances.

(l)	Reporting and Disclosure.

(1)

Cause to be prepared and filed with the appropriate governmental authorities such reports, documents, registration statements, and income tax returns as may from time to time be required under applicable federal or state law, including, but not limited to, annual reports; terminal and supplementary reports; annual registration statements and notifications of changes in status; and annual information returns.

(2)

Furnish to each Participant or, in the case of a Beneficiary, after such Beneficiary begins to receive benefits, a summary plan description, and, at appropriate times, such summary descriptions of modifications or changes and updated summary plan descriptions as are required by law; summary annual reports and Account statements indicating the total Account balance of such Participant or Beneficiary and the portion of such benefits that has become Vested; and such other reports and information as may from time to time be required by applicable law.

(3)	Make available at reasonable hours to each Participant and Beneficiary a copy of the Plan, a summary plan description, the latest annual report, and such of its records as may pertain to the assets held by the Trustee for the benefit of such Participant or Beneficiary.

(4)	Maintain records sufficient to enable the Committee to adequately fulfill its duties under this Plan and applicable law, and preserve such records for a period of not less than six years after the filing date of the documents based on information that such records contain.

(5)	Nothing in this Plan shall be interpreted to require reporting or disclosure from which the Plan, the Employer, the Committee, or the Trustee is exempt under any applicable federal or state law, Regulation, or administrative ruling.

The Committee’s decision in such matters shall be binding and conclusive as to all parties.

8.5	Compensation and Expenses. The Committee shall serve without compensation, but all expenses of or relating to the administration of the Plan shall be paid by the Employer if not paid by the Plan.

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 33
Prepared by Holland & Hart LLP

8.6

Employment of Agents. The Committee shall have the right to employ such agents, clerical and other services, and such lawyers and accountants as may be necessary for the purpose of administering the Plan. The Committee shall have the right to employ the Trustee to perform clerical and other services. Such costs may be paid for out of the assets of the Plan and shall in such case constitute an operating expense of the Plan.

8.7	Bonding. The Committee shall cause to be secured bonding in such amounts as may be required by ERISA and applicable Regulations. Such bonding shall be paid for by the Employer.

8.8

Reliance on Information Provided. The Committee shall be entitled to rely upon any information furnished by the Employer. If any Employee or Beneficiary believes that an error has been made in the information relating to the Employee or in any determination made by the Committee on the basis of such information, the Employee or Beneficiary shall have the right to file a claim for review under the provisions of Section 8.9 .

8.9	Claims Procedure. If a claim is filed by a Participant, a Beneficiary or a duly authorized representative of either (the “claimant”), the following provisions shall apply:

(a)	Submission of Claim. A claim shall mean a request for the grant or enforcement of rights under this Plan to which a claimant is entitled. A claim is deemed filed when a written communication is made by a claimant to the Committee or to the Committee’s designated representative.

(b)

Disability Claim. To the extent required by law and to the extent the Committee is ruling on a claim for benefits on account of a Disability, the Plan will follow, with respect to that claim, claims procedures required by law for plans providing disability benefits rather than the claims procedures in this Section 8.9 .

(c)

Denial of Claim. If the claim is denied in whole or in part, the Committee shall provide the claimant with a written notice of denial no later than 60 days after receive of the claim (or within 120 days if special circumstances require an extension and if written, including electronic, notice of such extension and circumstances is given to the claimant within the initial 60-day period). The notice of denial shall be written (including electronic media) in a manner calculated to be understood by the claimant and shall include the following:

(1)	the specific reason or reasons for the adverse determination;

(2)	specific references to pertinent Plan provisions on which the adverse determination was based;

(3)	a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

(4)	an explanation of the Plan’s claim review procedures and applicable time limits, including a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following and adverse determination on review.

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 34
Prepared by Holland & Hart LLP

(d)

Appeal of Adverse Determination. The claimant shall have up to 90 days after receipt of the notice of denial to file with the Committee a request for review of a denied claim. In connection with the review of the denied claim, the claimant shall be entitled to inspect pertinent documents and submit issues and comments in writing. The review of the decision shall be a full and fair review by the Committee and shall be made promptly and not later than 60 days after receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered as soon as possible but not later than 120 days after receipt of a request for review. The decision on review shall be made in writing, shall include specific reasons for the decision written in a manner calculated to be understood by the claimant, and shall set forth specific references to the pertinent Plan provisions on which the decision is based.

8.10

Exhaustion of Remedies; Limitation of Actions. In the event of any dispute over benefits under this Plan, all remedies available to the disputing individual under Section 8.9 must be exhausted before legal recourse of any type is sought. No legal action at law or in equity may be filed against the Plan, the Plan Sponsor, any Employer, the Committee or its delegate relating to any dispute over benefits under this Plan more than one year after a final decision under the claims review process described in Section 8.9 .

8.11

Liability and Indemnification. Subject to the provisions of Section 8.9 , the decisions of the Committee made in good faith on any matter within the scope of the Committee’s authority shall be final and, to the extent permitted by law, shall not give rise to any liability to any person. The Committee at all times shall act in a uniform and nondiscriminatory manner and according to uniform principles of interpretation and administration.

The Employer shall assume no obligation or responsibility to any of its Employees, Participants, or B eneficiaries for any act of, or failure to act, on the part of the Trustee or the Committee. The Employer shall indemnify and hold harmless every person acting in the capacity of the Committee from and against any and all loss resulting from liability to which the Committee may be subjected by reason of any act or conduct (except willful misconduct) in its official capacities in the administration of this Trust and Plan, including all expenses reasonably incurred in its defense, in case the Employer fails to provide such defense. Furthermore, the Committee and the Employer may execute an agreement further delineating the indemnification agreement of this section if the agreement is consistent with and does not violate ERISA. Nothing in this instrument shall be construed to prohibit the Plan, the Employer, or the Committee from insuring against liability.

8.12

Investment Managers. The Committee shall have the right to appoint an investment manager or managers and to enter into and execute investment management agreements to provide for the investment or reinvestment of the Trust or of designated parts of the Trust with such other provisions incorporated in the investment management agreements as may be deemed desirable by the Committee for the proper management of the Trust. Any such investment manager shall be qualified to act as such under the provisions of ERISA Section 3(38). Each investment manager shall confirm to the Committee and the Trustee in writing that such investment manager is a fiduciary with respect to the Plan. The action of the Committee in making any appointment of an investment manager and in entering into any investment management agreement shall constitute the carrying out of a procedure for allocation of fiduciary responsibility for investments to the investment manager appointed by

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 35
Prepared by Holland & Hart LLP

the Committee in accordance with ERISA Section 405(c) with respect to all trust assets that are made subject to the investment management agreement.

8.13	Abstention on Matters Affecting Individual Member. A member of the Committee who is also a Participant shall not vote or act on any matter relating solely to such member.

* * * * End of Article 8 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 36
Prepared by Holland & Hart LLP

Article 9.
TRUST AGREEMENT

9.1

Establishment and Acceptance of Trust. This Trust agreement is made by and between the Plan Sponsor and the Trustee. The Trustee accepts the Trust created under the Plan and agrees to perform the obligations imposed by the Trust. All right, title, and interest in and to the Trust shall at all times be vested exclusively in the Trustee. The Trustee shall accept its appointment by executing the Plan, or by executing a written acceptance of the office of Trustee. If more than two Trustees are appointed by the Employer, the decision of a majority of the Trustees shall control with respect to any decision regarding the administration or investment of the Trust.

9.2	Bond. The Trustee shall provide bond for the faithful performance of its duties under the Trust to the extent required by ERISA.

9.3

Investment of Trust. Any cash received by the Trustee for the Account of any Participant or credited to the Account of any Participant shall be invested primarily in Stock. Subject to the direction of the Committee, the Trustee is authorized to invest and hold up to 100% of the Trust assets in Stock. The Trustee may purchase Stock from the Employer or from any other source, and such Stock may be outstanding, newly issued or treasury securities. All such purchases shall be made at no more than fair market value. The determination of fair market value shall be in accordance with Section 5.6 , unless Regulations subsequently promulgated under ERISA Section 3(18) provide otherwise, in which case a determination of fair market value shall be made in accordance with such Regulations.

Any cash received by the Trustee may be applied to purchase Stock. If the Committee fails to instruct the Trustee as to the manner in which the funds held in the Trust should be invested, then the Trustee may invest the entire Trust in a savings account, certificates of deposit, money market funds or any other similar investment, including depositing such cash with the Trustee bank if a bank serves as Trustee hereunder, or any other permitted investment, other than Stock, provided such investment or the retention of such investment, is prudent under all the facts and circumstances then prevailing.

The application of this section shall be subject to Participants’ diversification elections pursuant to Section 6.5

9.4

Receipt of Contribution. The Trustee shall hold in the Trust all amounts received by the Trustee and designated in writing as contributions to the Trust. All contributions so received together with any income or other increment realized by the Trust shall be invested and administered by the Trustee in accordance with the terms of this Article. The Trustee shall have no responsibility or power with respect to the calculation or collection of any contributions to the Plan for the Employer.

9.5

Payments from the Trust. Payments from the Trust shall be made by the Trustee to such persons, in such manner, at such times, and in such amounts as the Committee shall specify in written instructions to the Trustee. The Committee shall have the sole authority to direct the Trustee to make payments from the Trust. The Committee shall act in its good faith discretion pursuant to its powers and duties set forth in the Plan. The Trustee shall have no

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 37
Prepared by Holland & Hart LLP

obligation to inquire whether any payee or distributee is entitled to any payment, whether the distribution is proper or within the terms of the Plan, or as to the manner of making any payment or distribution.

Subject to Section 6.2 , the Trustee may make distributions under the Plan in cash or Stock, or partly in each, at its fair market value as determined by the Trustee. If any check in payment of a benefit under the Plan which had been mailed by regular U.S. mail to the last address of the payee as furnished to the Trustee by the Committee is returned unclaimed, the Trustee shall so notify the Committee and shall discontinue further payments to such payee until it receives further instructions from the Committee.

9.6

Exclusive Benefit. Except as the Plan permits the return of Employer Contributions, it shall be impossible at any time prior to the satisfaction of all liabilities with respect to Participants and their Beneficiaries, for any part of the Trust to be used for, or diverted to, purposes other than the exclusive benefit of Participants and their Beneficiaries, except that payment of taxes and administrative expenses may be made from the Trust. The Trustee shall discharge its duties under this Article solely in the interest of the Participants of the Plan and their Beneficiaries and for the exclusive purpose of providing benefits to Participants and their Beneficiaries and defraying reasonable expenses of administering the Plan, with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, all in accordance with the provisions of this Article insofar as they are consistent with the provisions of ERISA.

9.7

Trustee Investment Powers. Subject to Section 9.3 , the Trustee shall have full discretion and authority with regard to the investment and management of the Trust, except with respect to a Plan asset under the control or direction of an investment manager or with respect to a Plan asset subject to Employer direction, or with respect to a Plan asset subject to Committee direction. The Trustee shall coordinate its investment policy with the Plan’s financial needs as communicated to it by the Committee. The Trustee is authorized and empowered, to do the following without previous application to or subsequent ratification of any court, tribunal, or commission, or any federal or state governmental agency, but not by way of limitation:

(a)

Types of Investments. To invest any part or all of the Trust in any common or preferred stocks or other securities, open-end or closed-end mutual funds (including the investment of up to 100% of the Trust in Stock), United States retirement plan bonds, corporate bonds, notes, debentures, convertible debentures, commercial paper, U.S. Treasury bills, U.S. Treasury notes, other direct or indirect obligations of the United States government or its agencies, certificates of deposits or savings accounts in a bank or other savings institution supervised by the United States or a state, improved or unimproved real estate or interests in real estate situated in the United States, limited partnerships, insurance contracts of any type, annuities, endowment contracts, mortgages, notes, or other property of any kind, real or personal, including shares or certificates of participation issued by regulated investment companies or regulated investment trusts, shares or units of participation in qualified common trust funds, in qualified pooled funds, or in pooled investment funds of an insurance company qualified to do business in the state, and to buy or sell options on common stock on a nationally recognized exchange with or without holding the underlying

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 38
Prepared by Holland & Hart LLP

common stock, as a prudent man would do under like circumstances with due regard for the purposes of this Plan and any investment made or retained by the Trustee in good faith shall be proper but shall be of a kind constituting a diversification considered by law suitable for trust investments.

(b)

Cash. To retain in cash so much of the Trust as it may deem advisable to satisfy liquidity needs of the Plan and to deposit any cash held in the Trust in a bank account at reasonable interest, including, if a bank is acting as Trustee, specific authority to invest in any type of deposit of the Trustee at a reasonable rate of interest or in a common trust fund (the provisions of which govern the investment of such assets and which the Plan incorporates by this reference) as described in Code Section 584 which the Trustee (or an affiliate of the Trustee, as defined in Code Section 1504) maintains exclusively for the collective investment of money contributed by the bank (or the affiliate) in its capacity as Trustee and which conforms to the rules of the Comptroller of the Currency.

9.8

Trustee Powers, Rights and Duties. Except as otherwise required by law, no party dealing with the Trustee shall have any obligation to inquire into the authority of the Trustee or into the application by the Trustee of any funds or other property transferred to the Trustee. The decisions of the Trustee in the exercise of any of its powers or the carrying out of any of its responsibilities shall be final and conclusive as to all persons for all purposes, to the extent permitted by law. Subject to the powers of the Committee as set forth in Article 8 , the Trustee shall have all the powers necessary or advisable to carry out the provisions of the Trust and all inherent, implied, and statutory powers now or subsequently provided by law, including, but not by way of limitation, but in amplification of the powers and duties specified in the provisions of the Trust, the Trustee shall:

(a)	Title. Have the authority to cause any securities or other property to be registered and held in its name as Trustee, or in the name of one or more of its nominees, without disclosing the fiduciary capacity, or to keep the same in unregistered form payable to bearer.

(b)

Investment. Have the authority to manage, sell, contract to sell, grant options to purchase, convey, exchange, pledge, transfer, abandon, improve, repair, insure, lease for any term even though commencing in the future or extending beyond the term of the Trust, encumber, mortgage, deed in trust, or use any other form of hypothecation, or otherwise deal with the whole or any part of the Trust on such terms and for such property or cash, or part cash and credit, as it may deem best; to retain, hold, maintain, or continue any securities or investments that it may hold as part of the Trust for such length of time as it may deem advisable; and generally, in all respects, to do all things and exercise each and every right, power, and privilege in connection with and in relation to the Trust as could be done, exercised, or executed by an individual holding and owning such property in absolute and unconditional ownership.

(c)	Legal Matters. Have full and complete discretion to abandon, compromise, contest, and arbitrate claims and demands; to institute, compromise, and defend actions at law (but without obligation to do so unless indemnified to the Trustee’s satisfaction).

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 39
Prepared by Holland & Hart LLP

(d)

Equity Rights. Have the authority to vote in person or by proxy any shares of stock held in the Trust in the manner directed by the Committee (or the Participants at a time when the Stock is not readily tradable on an established public market); to participate in any voting trusts; to participate in and to exchange securities or other property in reorganization, liquidation, or dissolution of any corporation, the securities of which are held in the Trust in the manner directed by the Committee and to exercise the sale of stock subscriptions or conversion rights in the manner directed by the Committee.

(e)

Insurance Contracts. Have the authority to execute the application for any insurance contract to be applied for under the Plan; to pay from the Trust premiums, assessments, dues, charges, and interest to acquire or maintain any insurance contracts held in the Trust; to collect and receive all dividends or payments of any kind payable under any insurance contracts held in the Trust or to leave the same with the issuing insurance company; and to exercise any other power or take any other action permitted under any insurance contract held in the Trust.

(f)	Reporting. File all tax returns required of the Trustee.

(g)	Disputed Property. Retain any funds or property subject to any dispute without liability for the payment of interest, and to decline to make payment or delivery of the funds or property until final adjudication is made by a court of competent jurisdiction.

(h)

Coordination with Investment Manager. Comply as promptly as possible with any investment direction given by an investment manager. The Trustee shall not be liable for the acts or omissions of any investment manager appointed by the Committee, nor have any obligation to invest or otherwise manage any asset of the Plan which is subject to the management of a properly appointed investment manager or to question any written investment direction by a properly appointed investment manager.

(i)	Other Tasks. Perform any and all other acts in its judgment or in the judgment of the Committee to be necessary or appropriate for the proper and advantageous investment, management, administration, and distribution of the Trust.

(j)

Fiduciary Standards. Discharge its duties under the Plan and this Trust solely in the interest of Participants of the Plan and their Beneficiaries and for the exclusive purpose of providing benefits to Participants and their Beneficiaries and defraying reasonable expenses of administering the Plan, with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims all in accordance with the provisions of this article insofar as they are consistent with the provisions of ERISA.

9.9

Records and Accounts. The Trustee shall keep all such records and accounts which may be necessary in the administration and conduct of this Trust. Upon written request from the Trustee, the Employer or Committee shall furnish the Trustee in writing with information specified in any such request and necessary or appropriate in connection with any of the Trustee’s responsibilities or powers (including, without limitation, the names, addresses, and

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 40
Prepared by Holland & Hart LLP

specimen signatures of all parties authorized to furnish instructions or notices to the Trustee). The Trustee’s records and accounts shall be open to inspection by the Employer and the Committee at all reasonable times during business hours, and may be audited from time to time by any person or persons as the Employer or Committee may specify in writing. After the close of each Plan Year, the Trustee shall provide the Committee a statement of assets and liabilities of the Trust for such year. The Trustee shall furnish the Committee any additional information relating to the Trust that the Committee requests.

All income, profits, recoveries, contributions, forfeitures, and any and all moneys, securities, and properties of any kind at any time received or held by the Trustee shall be held for investment purposes as a commingled Trust. Separate accounts or records may be maintained for operational or accounting purposes, but no such account or record shall be considered as segregating any funds or property from any other funds or property contained in the commingled fund, unless specifically designated as a segregated investment Account.

9.10

Fees and Expenses. A Trustee shall be entitled to receive reasonable compensation for services rendered or for the reimbursement of expenses properly and actually incurred in the performance of its duties under the Trust. However, no Trustee who already receives full-time pay from any Employer shall receive compensation from the Plan, except for reimbursement of expenses properly and actually incurred. All compensation and expenses shall be paid by the Plan, unless any Employer, in its discretion, elects to pay all or any part of Trustee compensation or recurring administrative or overhead expenses. The Committee shall not treat any fee or expense properly paid, directly or indirectly, by the Employer as a Employer Contribution.

9.11

Change of Trustee. A Trustee may be removed by the Plan Sponsor at any time upon 30 days’ written notice to the Trustee, or on such shorter notice as may be agreed to by the Plan Sponsor and the Trustee. A Trustee may resign at any time upon 30 days’ written notice to the Plan Sponsor, or on such shorter notice as may be agreed to by the Plan Sponsor and the Trustee. A Trustee who is an employee of an Employer will be deemed to have resigned as Trustee upon termination of his or her employment with such Employer.

Upon such removal or resignation, the Plan Sponsor shall appoint a successor Trustee and the successor Trustee shall have the same powers and duties as those conferred upon the predecessor Trustee. If the Plan Sponsor fails to appoint a successor Trustee within 60 days of removal or resignation of the Trustee, the Plan Sponsor shall be treated as having appointed itself as Trustee and as having executed its acceptance of appointment. Each successor Trustee shall succeed to the title of the Trust vested in its predecessor upon the successor Trustee’s written acceptance of the office of Trustee. The resigning or removed Trustee, upon receipt of acceptance in writing by the successor Trustee, shall execute all documents and do all acts necessary to vest the title of record in the successor Trustee. No successor Trustee shall be liable for the acts or omissions of any prior Trustee which occurred prior to the successor Trustee’s acceptance of office, or be obliged to examine the accounts, records, or acts of any prior Trustee.

In the event that any corporate Trustee shall be converted into, shall merge or consolidate with, or shall sell or transfer substantially all of its assets and business to another corporation, state or federal, the corporation resulting from such conversion, merger, or consolidation, or

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 41
Prepared by Holland & Hart LLP

the corporation to which such sale or transfer shall be made, shall thereupon become and be the Trustee under this Article with the same effect as though originally so named.

* * * * End of Article 9 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 42
Prepared by Holland & Hart LLP

Article 10.
TOP-HEAVY PROVISIONS

10.1	Definitions. For purposes of this Article 10 , the following terms shall have the following meanings.

(a)	Determination Date shall mean the last day of the preceding Plan Year or, in the case of the first Plan Year, the last day of such Plan Year.

(b)

Key Employee shall mean any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the Determination Date was (1) an officer of the Employer having annual compensation greater than $130,000 (as adjusted under Code Section 416(i)(1)), (2) a 5% owner of the Employer, or (3) a 1% owner of the Employer having annual compensation of more than $150,000.

The determination of who is a Key Employee shall be made in accordance with Code Section 416(i)(1) and the Regulations and other guidance of general applicability issued thereunder. For this purpose, annual compensation means compensation within the meaning of Code Section 415(c)(3) without application of the Code Section 401(a)(17) limit and includes amounts that are not includible in the gross income of the Employee under Code Section 125, 132(f), 402(a)(8), 402(h) or 403(b).

(c)	Non-Key Employee shall mean any Participant who is an Employee on the last day of the Plan Year and who is not a Key Employee, without regard to the Hours of Service or Compensation earned by such Employee during the Plan Year.

(d)

Permissive Aggregation Group shall mean the Required Aggregation Group combined with any other plan maintained by the Employer, provided that the resulting combination group would continue to satisfy the requirements of Code Sections 401(a)(4) and 410 once such other plan is taken into account. The Committee shall determine which plan or plans maintained by the Employer shall be taken into account in determining the Permissive Aggregation Group.

(e)	Required Aggregation Group shall mean each plan of the Employer in which a Key Employee is a participant, and each other plan of the Employer that enables any plan described in which a Key Employee is a participant to meet the requirements of Code Section 401(a)(4) or 410.

10.2

Determination of Top-Heavy Status. This Plan shall be deemed to be a “Top-Heavy Plan” within the meaning of Code Section 416(g) if, as of the Determination Date, either the aggregate of the Accounts of Key Employees under the Plan exceeds 60% of the aggregate of the Accounts of all Employees under the Plan, or the Plan is part of a Required or Permissive Aggregation Group and the Required or Permissive Aggregation Group is determined to be a Top-Heavy Plan after application of the same test. This Plan shall not be considered a Top-Heavy Plan for any Plan Year in which the Plan is a part of a Required or Permissive Aggregation Group that is not a Top-Heavy Plan.

(a)	Determination Percentage. The top-heavy determination percentage shall be derived by the Committee as of the Determination Date by dividing (1) the sum of the

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 43
Prepared by Holland & Hart LLP

Accounts of Key Employees under this Plan (plus the aggregate present value of cumulative accrued benefits for Key Employees under a defined contribution or defined benefit plan that is part of a Required or Permissive Aggregation Group) by (2) a similar sum determined for all Employees.

For purposes of determining the Account of any Employee (or the present value of the cumulative accrued benefit for any Employee in a defined contribution or defined benefit plan), such Account or present value shall be increased by the aggregate distributions from such plans made with respect to such Employee during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Code Section 416(g)(2)(A)(i). In the case of a distribution made for a reason other than severance from service, Death, or Disability, this provision shall be applied by substituting “5-year period” for “1-year period.”

Look-Back Period. If any Employee is a Non-Key Employee for any Plan Year, but was a Key Employee for any prior Plan Year, such Employee’s Account (and the present value of the cumulative accrued benefit for any such Employee in a defined contribution or defined benefit plan) shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy Plan. If an Employee has not performed any services for the Employer at any time during the 1-year period ending on the Determination Date, such Employee’s Account (and the present value of the cumulative accrued benefit for any such Employee in a defined contribution or defined benefit plan) shall not be taken into account for the purposes of determining whether the Plan is a Top-Heavy Plan.

10.3

Change in Vesting Schedule. To the extent the vesting provisions of Article 3 are not more generous, if this Plan is deemed a Top-Heavy Plan for a Plan Year, then the vesting rules in Article 3 shall be replaced for such Plan Year and all subsequent Plan Years with a vesting schedule in which a Participant’s Vested percentage in allocations made to his or her Account will be 100% upon completion of three Years of Vesting Service.

A shift to a new vesting schedule under this section is an amendment to the vesting schedule and is subject to Section 11.5 .

10.4

Minimum Contribution. For any Plan Year in which the Plan is a Top-Heavy Plan, the Employer shall contribute to the Account of each Non-Key Employee an amount equal to (a) the lesser of (1) 3% of the Non-Key Employee’s Compensation or (2) the largest percentage of Compensation contributed on behalf of any Key Employee for such Plan Year (determining such largest percentage by taking into account all Employer Contributions minus (b) any Employer Contribution for such Plan Year for such Non-Key Employee that may have been made as of the Determination Date.

The minimum contribution shall be made on behalf of each Participant who is a Non-Key Employee regardless of whether the Non-Key Employee has attained any minimum level of s ervice for accrual purposes or Compensation for the Plan Year.

If any Participant in this Plan is also covered by another defined contribution plan or defined benefit plan sponsored by the Employer, then for each year this Plan is a Top-Heavy Plan, the

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 44
Prepared by Holland & Hart LLP

Participant’s receipt of a minimum guaranteed benefit under this Plan shall satisfy the minimum contribution requirement.

* * * * End of Article 10 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 45
Prepared by Holland & Hart LLP

Article 11.
AMENDMENT, TERMINATION, AND MERGER

11.1

Right to Amend Plan. The Plan Sponsor, by resolution of the Board of Directors, reserves the right at any time and from time to time to modify, suspend, amend, terminate, or merge the Plan in whole or in part (including the provisions relating to contributions) by means of a writing executed by its President or by the Chair of its Board of Directors, a copy of which modification, suspension, amendment, termination, or merger shall be delivered to the Trustee and the Committee.

The Committee shall have the right to amend this Plan at any time and from time to time if such amendment is necessary to retain the Plan’s qualified status under Code Sections 401(a) and 409 or to comply with ERISA or if such amendment will not result in any material increase in the benefits provided under or the cost of maintaining the Plan.

Any such amendment by the Plan Sponsor or the Committee may be made retroactively effective to the extent permitted by applicable law.

Neither the Plan Sponsor nor the Committee shall have the power to modify, suspend, amend, terminate, or merge the Plan (a) to cause or permit any part of the Trust to be diverted to purposes other than the exclusive benefit of Participants, or their Beneficiaries; (b) to cause or permit any portion of the Trust to revert to or become the property of any Employer; or (c) to have the effect of rendering the nonforfeitable percentage of a Participant’s Account, determined as of the later of the date such amendment is adopted or the date such amendment becomes effective, less than such nonforfeitable percentage computed without regard to such amendment. Each amendment or action to terminate all or any portion of the Plan shall be made in writing and shall state the date to which it is either retroactively or prospectively effective.

11.2

Termination: Suspension of Contributions. If the Plan Sponsor decides, in its sole discretion, that it is impossible or inadvisable to continue to make Employer Contributions, it shall have the power by appropriate resolution or decision to suspend such contributions to the Plan. Suspension shall be a temporary cessation of Employer Contributions, which shall not constitute or require a formal termination of the Plan and shall not preclude Employer Contributions. After the date of the suspension of Employer Contributions, the Plan and Trust shall remain in force. The Committee shall deliver to the Trustee a copy of the Plan Sponsor’s resolution to suspend contributions. Notwithstanding anything herein to the contrary, the Plan Sponsor, by resolution of the Board of Directors, upon any termination of the Plan, shall have no obligation or liability whatsoever to make any further Employer Contributions (including all or any part of any contribution payable prior to the termination of the Plan) to the Trustee, and neither the Trustee, the Committee, nor any Participant, Employee, or other person shall have any right to compel any Employer to make any such payments after the termination of the Plan.

11.3

Termination: Unallocated Funds. In the event the Plan is terminated for any reason, or in the event of complete discontinuance of Employer Contributions, any previously unallocated funds shall first be used to pay Plan expenses incurred in connection with the termination of the Plan, and then shall be allocated to the Participants as provided in Section 5.2 .

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 46
Prepared by Holland & Hart LLP

11.4

Termination: Accounts Held by Trustee. In the event the Plan is terminated for any reason, or in the event of complete discontinuance of Employer Contributions, the Trustee shall hold the entire Account of each Participant for distribution as soon as administratively practicable to the Participant, the Participant’s estate, or the Participant’s Beneficiaries, in accordance with the provisions of Article 6 . If a Participant (or a Participant’s Beneficiary) cannot be found after all reasonable measures have been taken, the Trustee or Committee may make the distribution to an account (including an interest-bearing savings account) established in the Participant’s or Beneficiary’s name, as applicable.

11.5

Amendment to Vesting Schedule. If any amendment is adopted to provide a vesting schedule that is less generous than the vesting schedule in effect prior to such amendment, any Participant having at least three Years of Service as of the last day of the election period shall have the right, at any time during the election period beginning on the date such amendment is adopted and ending 60 days following the latest of (a) the date the amendment is adopted, (b) the date the amendment becomes effective, or (c) the date the Participant receives notice of such amendment, to elect in writing to have his or her nonforfeitable percentage computed without regard to such amendment. Such election shall be irrevocable. In the event the amended vesting schedule is more generous than the vesting schedule in effect prior to such amendment, any such Participant described in this section shall be deemed to have elected application of the amended vesting schedule. Effective for amendments adopted after August 9, 2006, with respect to benefits accrued as of the later of the adoption or effective date of the amendment, the Vested percentage of each Participant shall be the greater of the Vested percentage under the old vesting schedule or the Vested percentage under the new vesting schedule. This paragraph shall supersede any inconsistent provisions of the Plan.

11.6

Merger: Continuance of Plan. In the event of a merger, sale, consolidation, reorganization, or other transfer of assets, or other transaction in which a successor in interest (other than the Plan Sponsor itself) takes over and carries on the business of the Plan Sponsor, the successor in interest to the Plan Sponsor may adopt and continue this Plan by written direction to the Trustee, and thereafter shall be deemed to be the Plan Sponsor under this Plan. If no such written direction is given to the Trustee within 120 days after such successor in interest commences carrying on the business of the Plan Sponsor, then the Plan shall be deemed to have terminated as of the effective date of such event.

11.7

Merger: Termination of Plan. In the event of any merger or consolidation with, or transfer of assets or liabilities to any other plan, each Participant shall be entitled, in the event that this Plan is then immediately terminated, to a benefit immediately after the merger, consolidation, or transfer equal to or greater than the benefit the Participant would have been entitled to receive if this Plan had been terminated immediately prior to such merger, consolidation, or transfer. However, this Plan shall not merge or consolidate with, and assets will not be transferred from this Plan to any other qualified plan which would require that the Accounts payable under this Plan in the form of Stock become subject to the requirements of distributions in the form of a qualified joint and survivor annuity or preretirement survivor annuity as a result of such transfer.

* * * * End of Article 11 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 47
Prepared by Holland & Hart LLP

Article 12.
PARTICIPATING EMPLOYERS

12.1

Adoption by Other Employers. Any member of the Related Group that the Plan Sponsor designates and declares as eligible to participate in the Plan may adopt and become a party to this Plan and Trust as a Participating Employer , effective as of the date of the applicable participation agreement, subject to the terms and conditions as the Plan Sponsor may prescribe, including but not limited to the following:

(a)	the instruments to be executed and delivered by such member of the Related Group to the Trustee and to the Plan Sponsor;

(b)	the extent to which the Plan Sponsor shall act as agent or representative of such member of the Related Group under the Plan; and

(c)	authorization of the Committee to act for such member of the Related Group and its employees who will become Participants under the Plan.

12.2

Participating Employer Required To Use Same Trust Agreements. The participation of each Participating Employer shall be conditioned on the timely payment by the Participating Employer of its proportional share of premiums, benefits and/or contributions under the Plan, and as required by the Plan Sponsor, on the timely payment by the Participating Employer of its proportional share of expenses resulting from administration of the Plan. Subject to such Participating Employer’s right to withdraw from the Plan, the Participating Employer has no power or obligation to amend or consent to any amendment made by the Plan Sponsor , and agrees that such member and its employees shall be bound by all the provisions, conditions, and limitations of the Plan, as amended from time to time, as fully as if the Participating Employer was an original party to the Plan.

12.3

Forfeitures. All forfeitures shall be used to reduce the total required contribution from the Plan Sponsor and any Participating Employer on behalf of Participants of the Plan Sponsor and of any Participating Employers. The total required contributions reduced pursuant to the preceding sentence shall only be those that are made following the event giving rise to such forfeiture.

12.4

Employee Transfers. In the event of a transfer of an Employee between entities participating in the Plan, the transferred Employee shall retain his or her accumulated Service and eligibility. No such transfer shall effect a separation from Service hereunder, and the Employer to which the Employee is transferred shall thereupon become obligated hereunder with respect to such Employee in the same manner as was the Employer from whom the Employee was transferred.

12.5

Participating Employer’s Contribution. All contributions made by a Participating Employer shall be determined in accordance with this Plan separately by each Participating Employer, but the assets of this Plan shall, on an ongoing basis, be available to pay benefits to all Participants and beneficiaries under the Plan without regard to the Employer which contributed such assets, subject to all of the terms and conditions of this Plan. On the basis of the information furnished by the Committee, the Trustee shall keep separate books and records concerning the affairs of each Participating Employer hereunder and as to the accounts and credits of the Employees of each Participating Employer.

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 48
Prepared by Holland & Hart LLP

12.6

Designation of Agent. Each Participating Employer shall be deemed to be a part of this Plan; provided, however, that with respect to all of its relations with the Trustee and Committee for the purpose of this Plan, each Participating Employer, by entering into a participation agreement with the Plan Sponsor, irrevocably designates the Plan Sponsor as its agent.

12.7	Committee’s Authority. The Committee shall have authority to make any and all necessary rules or regulations, binding upon all Participating Employers and all Participants, to effectuate the purpose of this Plan.

12.8

Discontinuance of Participation. Any Participating Employer may withdraw from the Plan effective as of the last day of any Plan Year by giving at least 30 days prior written notice to the Plan Sponsor and the Trustee. Upon any such withdrawal, the Trustee shall value the assets of the Trust as of the Valuation Date that coincides with or next precedes the date of such withdrawal, and the Trustee shall set apart that portion of the Trust, which, as certified by the Committee, is attributable to such withdrawing Participating Employer. The Plan Sponsor shall have the right, in its sole discretion, to discontinue, revoke or otherwise terminate at any time the participation of a Participating Employer.

* * * * End of Article 12 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 49
Prepared by Holland & Hart LLP

Article 13.
GENERAL PROVISIONS

13.1

Employer-Employee Relationship. Neither the adoption of the Plan, the establishment of the Trust, any modification of either, the creation of any fund or account, nor the payment of any benefits, shall be construed as giving to any Participant or other person any legal or equitable right against the Employer or any of its officers or employees, the Trustee or the Committee, except as expressly provided for in the Plan and Trust or as modifying in any way the terms of employment of any Participant.

13.2

Exclusive Benefit of Participants. Employer Contributions under the Plan shall be irrevocably made for the exclusive benefit of the Participants and their Beneficiaries and no part of said contributions or earnings thereon shall in any event revert to the Employer, except as otherwise provided herein.

If an Employer Contribution is non-deductible or was made due to a mistake in fact, then the non-deductible or mistaken contribution may be returned to the Employer, provided that the return is accomplished within one year after the date the contribution is determined to be non-deductible or the mistaken contribution was made.

With respect to contributions returned pursuant to this section, earnings attributable to the contributions shall not be returned to the Employer but losses attributable thereto shall reduce the amount to be returned. In addition, if the return of contributions pursuant to this section would reduce the Account of any Participant to an amount that is less than the balance that would have been in the Account if the mistaken or nondeductible amount not been contributed, then the amount to be returned to the Employer shall be limited to avoid such reduction.

13.3

Inalienability. No Participant shall have the right to assign, transfer, encumber, or anticipate the Participant’s interest in the Trust, or any payments to be made under this Plan, and no benefits, payments, rights, or interest of a Participant of any kind or nature shall be in any way subject to any legal process to levy upon, garnishee, or attach the same for payment of any claim against a Participant, except as provided in Section 6.8 ; nor shall any Participant have any right to receive distributions except as they are lawfully made out of the Trust as and when due and payable under the terms of this Plan. Notwithstanding the anything herein to the contrary, to the extent permitted by Code Section 401(a)(13), the benefits payable under this Plan may be offset by an amount set forth in a court order, judgment, consent order, decree or settlement agreement in connection with a breach of fiduciary duty owed to the Plan.

13.4

Incapacity of Participant or Beneficiary. If any Participant or Beneficiary entitled to receive a distribution under this Plan (the “Distributee”) is, as determined by the Committee in a uniform and nondiscriminatory manner, unable to apply such distributions to her or her own best interest, whether because of illness, accident or other incapacity (mental, physical or legal), the Committee may, in its sole discretion, direct the Trustee to make distributions in one or more of the following ways:

(a)

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 50
Prepared by Holland & Hart LLP

directly to the Distributee;

(b)	to the duly appointed legal guardian or conservator of the Distributee;

(c)	to the Spouse of the Distributee;

(d)	to a custodian under any applicable Uniform Gifts to Minors Act or Uniform Transfers to Minors Act;

(e)	to an adult relative or friend of the Distributee, or to one residing with the Distributee, pursuant to appropriate legal appointment (including durable power of attorney) for the benefit of the Distributee.

Any such payment shall be a distribution for the account of such Distributee and shall, to the extent thereof, be a complete discharge of any liability under the Plan to such Distributee. The Committee’s reliance on the written instrument of agency governing a relationship between the Distributee entitled to distribution and the person to whom the Committee directs distribution shall be fully protected as though the Committee made such distribution directly to the Distributee as a competent person. In the absence of actual knowledge to the contrary, the Committee may assume that the instrument of agency was validly executed, that the Distributee was competent at the time of execution and that at the time of reliance, the agency has not been amended or terminated. The decision of the Committee shall be final and binding on all interested parties, and the Committee shall be under no duty to see to the proper application of the funds.

13.5	Expenses. The Plan shall pay all reasonable Plan expenses, including but not limited to expenses of administration and Trustee compensation, unless paid by the Employer.

13.6

Severability. In the event that any provision of this Plan shall be unenforceable, in whole or in part, such provision shall be limited to the extent necessary to render the same valid, or shall be excised from this Plan, as circumstances require to effectuate the intent of the Employer, and this Plan shall be construed as if said provision had been incorporated herein as so limited, or as if said provision had not been included herein, as the case may be .

13.7	Applicable Law. To the extent not preempted by ERISA or other applicable federal law, the provisions of the Plan shall be construed and administered according to the laws of the State of Colorado.

13.8

Word Usage. Words used in this instrument in the singular shall include the plural and the plural the singular, and words used in the masculine gender shall include the feminine. Capitalized terms shall be deemed to have the meaning given them pursuant to Article 1 , or if such term is defined within a section, such meaning given by that section for purposes of that section only.

* * * * End of Article 13 * * * *

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 51
Prepared by Holland & Hart LLP

IN WITNESS WHEREOF, the Plan Sponsor, the Trustees and each of the Participating Employers have caused this amendment and restatement of the Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan and Trust Agreement to be executed this 30th day of January, 2012, effective as of January 1, 2012.

SCOTT’S LIQUID GOLD-INC.

Plan Sponsor

By: /s/ Mark E. Goldstein

Title: COB/President/CEO

Date: January 30, 2012

TRUSTEES

By: /s/ Mark E. Goldstein

Mark E. Goldstein

Date: January 30, 2012

By: /s/ Jeffrey R. Hinkle

Jeffrey R. Hinkle

Date: January 30, 2012

By: /s/ Jeffry B. Johnson

Jeffry B. Johnson

Date: January 30, 2012

By:

Dennis P. Passantino

Date:

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 52
Prepared by Holland & Hart LLP

Participating Employers

SLG CHEMICALS, INC.

By: /s/ Mark E. Goldstein

Title: COB/President/CEO

Date: January 30, 2012

SLG PLASTICS, INC.

By: /s/ Mark E. Goldstein

Title: COB/President/CEO

Date: January 30, 2012

SLG TOUCH-A-LITE, INC.

By: /s/ Mark E. Goldstein

Title: COB/President/CEO

Date: January 30, 2012

ADVERTISING PROMOTIONS INCORPORATED

By: /s/ Mark E. Goldstein

Title: COB/President/CEO

Date: January 30, 2012

NEOTERIC COSMETICS, INC.

By: /s/ Mark E. Goldstein

Title: COB/President/CEO

Date: January 30, 2012

5280954_1.DOCX

Scott’s Liquid Gold-Inc. Employee Stock Ownership Plan	1/2012 53
Prepared by Holland & Hart LLP

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-48213, 333-67141, 333-51710, 333-126028, 333-156191 and 333-176400) of Scott’s Liquid Gold-Inc. and subsidiaries of our report dated March 28, 2014, with respect to the consolidated financial statements of Scott’s Liquid Gold, Inc. and subsidiaries, which report appears in the December 31, 2013 annual report or Form 10-K of Scott’s Liquid Gold-Inc. and subsidiaries.

/s/ EKS&H LLLP

March 28, 2014

Denver, Colorado

Exhibit 24

Powers of Attorney

Each of the undersigned Directors and/or Executive Officers of Scott’s Liquid Gold-Inc. (the “Company”) hereby authorize Mark E. Goldstein and Barry J. Levine as their true and lawful attorneys-in-fact and agents (1) to sign in the name of the undersigned, and file with the Securities and Exchange Commission the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2013, and any amendments to such annual report; and (2) to take any and all actions necessary or required in connection with such annual report to comply with the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated there under.

Signature	Title	Date
/s/ Mark E. Goldstein
Mark E. Goldstein	Director, Chairman of the Board, Chief Executive Officer and President	March 19, 2014
/s/ Barry J. Levine
Barry J. Levine	Director, Treasurer, Chief Financial Officer, Chief Operating Officer and Corporate Secretary	March 19, 2014

/s/ Sharon D. Garrett	Director	March 19, 2014
Sharon D. Garrett
/s/ Mark D. Goodman
Mark D. Goodman	Director	March 19, 2014
/s/ Gerald J. Laber
Gerald J. Laber	Director	March 19, 2014
/s/ Philip A. Neri
Philip A. Neri	Director	March 19, 2014

EXHIBIT 31.1

CERTIFICATION

I, Mark E. Goldstein, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Scott’s Liquid Gold-Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 28, 2014		/s/ Mark E. Goldstein
		Mark E. Goldstein
		President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

I, Barry J. Levine, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Scott’s Liquid Gold-Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 28, 2014

/s/ Barry J. Levine

Barry J. Levine

Treasurer, Chief Financial Officer,

Chief Operating Officer and Corporate Secretary

EXHIBIT 32.1

CERTIFICATION OF ANNUAL REPORT ON FORM 10-KQ OF

SCOTT’S LIQUID GOLD-INC.

FOR THE YEAR ENDED DECEMBER 31, 2013

Each of the undersigned hereby certifies, for the purposes of Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Scott’s Liquid Gold-Inc. (“Scott’s Liquid Gold”), that to his knowledge:

1. This Annual Report on Form 10-K fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Scott’s Liquid Gold.

This written statement is being furnished to the Securities and Exchange Commission as an exhibit to the Annual Report on Form 10-K. A signed original of this statement has been provided to Scott’s Liquid Gold and will be retained by Scott’s Liquid Gold and furnished to the Securities and Exchange Commission or its staff upon request.

This Certification is executed as of March 28, 2014.

/s/ Mark E. Goldstein

Mark E. Goldstein

President and Chief Executive Officer

/s/ Barry J. Levine

Barry J. Levine

Treasurer, Chief Financial Officer,

Chief Operating Officer and Corporate Secretary