UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

Filed by the Registrant  ☒Filed by a Party other than the Registrant  ☐

Check the appropriate box:

☐Preliminary Proxy Statement

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☒Definitive Proxy Statement

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☐Soliciting Material Pursuant to §240.14a‑12

 

Gold Resource Corporation

(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

 

 

 

 

 

 

 

 

 

 

 

 

GOLD RESOURCE CORPORATION, 2886 Carriage Manor Point, Colorado Springs, Colorado 80906

 

Gold Resource Corporation (“we”, “our”, “us” or “the Company”) is sending you this proxy statement and a proxy card or voting instruction form (or a Notice of Internet Availability of Proxy Materials, as applicable) in connection with the solicitation of proxies, on behalf of its Board of Directors, for the 2016 Annual Meeting of Shareholders to be held on Wednesday, June 15, 2016, at the Mining Exchange, a Wyndham Grand Hotel, 8 Nevada Avenue, Colorado Springs, Colorado 80903, or at any adjournment or postponement of the meeting.  This proxy statement, the enclosed proxy card or instruction form, and our 2015 annual report to shareholders, were first provided to our shareholders on or about May 6, 2016.  All shareholders are invited to attend the meeting in person. Please submit your vote by telephone, mobile device, the Internet, or, if you received your materials by mail, you can also complete and return your proxy or voting instruction form.

 

 

 

Table of Contents

 

 

 

Governance

 

PROPOSAL 1 - ELECTION OF DIRECTORS

 

 

 

 

 

 

Board Leadership Structure and Risk Oversight

 

The Board does not have a policy regarding the separation of the roles of CEO and Chairman of the Board, as the Board believes it is in the best interest of our Company to make that determination periodically based on the position and direction of our Company and the membership of the Board.  At the present time, our CEO and Chairman roles are separated.  Upon the retirement of our former Chairman and CEO, Jason Reid was appointed as CEO and the Board of Directors appointed Mr. Conrad to serve as Chairman of the Board.  As the longest tenured director and with significant experience serving on boards for the past thirty years, Mr. Conrad brings extensive knowledge of the Company’s history in addition to experience with various companies in natural resource industries.  He works closely with Jason Reid in his capacity as Chairman.  The Board also does not have a policy that designates a lead independent director at this time; however, Mr. Conrad, as Chairman of the Board and the longest tenured independent director, leads meetings of the independent directors.

 

Companies such as ours face a variety of risks, including financial reporting, legal, credit, liquidity, operational and cybersecurity risk. The Board believes an effective risk management system will (1) timely identify the material risks that we face, (2) communicate necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant Board Committee, (3) implement or oversee implementation of appropriate and responsive risk management strategies consistent with our risk profile, and (4) integrate risk management into our decision-making.

 

The Board as a whole oversees risk management after receiving briefings from management and advisors as well as based on its own analysis and conclusions regarding the adequacy of our risk management processes.

 

Board Diversity

 

We do not have a formal policy with regard to the consideration of diversity in identifying director nominees.  However, our Nominating and Governance Committee annually reviews the individual skills and characteristics of our directors, as well as the composition of the Board as a whole, and strives to nominate individuals with a variety of complementary skills so that, as a group, the Board possesses the appropriate talent, skills, and expertise to oversee our businesses.  This assessment includes consideration of independence, diversity, age, skills, expertise, time availability, and industry backgrounds in the context of the needs of the Board and our Company.  A broad range of perspectives are considered, including both the personal characteristics (gender, ethnicity, age) and experience (industry, professional, public service) of directors and prospective nominees to the Board.

 

Director Independence and Related Party Transactions

 

As of the date of this proxy statement, we have five directors, including four independent directors, as follows:

 

 

An “independent” director is a director whom the Board of Directors has determined satisfies the requirements for independence including those established under the Sarbanes–Oxley Act of 2002,

section 10A(m)(3) of the Exchange Act and under section 803A of the NYSE MKT LLC Company Guide (“NYSE MKT Rules”). 

 

We consider “related party transactions” to be transactions between the Company and (i) a director, officer, director nominee or beneficial owner of greater than five percent of our common stock; (ii) the spouse, parents, children, siblings or in-laws of any person named in (i); or (iii) an entity in which one of our directors and officers is also a director or officer or has a material financial interest.  The Audit Committee is vested with the responsibility of evaluating and approving any potential related party transaction, unless a special committee consisting solely of disinterested and independent directors  (as defined in the NYSE MKT Rules) is appointed by the Board of Directors.  Our policies and procedures for related party transactions are set forth in writing in our Corporate Governance Guidelines and Audit Committee Charter.

 

William Reid, the Company’s former Chairman, CEO and the father of Jason Reid and father-in law of Greg Patterson, previously acquired the building used for the Company’s executive headquarters and leases back a portion of the property to the Company for continued use as its executive offices. The Company also maintains an ongoing consulting arrangement with William Reid for services related to business development. Neither the fees paid under the lease nor the consulting agreement exceeded $120,000 individually or in the aggregate during 2015. The Audit Committee monitors the transactions with Mr. Reid and has determined them to be fair in price and in the best interest of the Company.

 

2015 Director Compensation

 

We pay our independent directors a monthly cash retainer fee based on factors including tenure, committee membership and chairman duties.  Mr. Conrad receives $20,000 per month as Chairman of the Board.  Mr. Falck receives $8,000 per month.  In 2015, Dr. Huber’s compensation was increased from $9,000 per month to $12,000 per month, reflecting the increased level of responsibility commensurate with serving as Chairman of the Audit Committee. During 2015, the directors each received options to purchase 75,000 shares of common stock. The directors also received an end-of-the year recognition award on the same basis as the named executive officers, consisting of $5,000 cash and a gold and silver round, which were grossed-up for income tax purposes, and are discussed in more detail in the Compensation and Discussion Analysis below.

 

The table below summarizes the compensation of our independent directors and whose compensation is not disclosed in the Summary Compensation Table for the fiscal year ended December 31, 2015:

 

 

All directors are reimbursed for reasonable and necessary expenses incurred in their capacities as such.

 

Board Committees and Meetings

 

The Board of Directors maintains an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee.  During the year ended December 31, 2015, the Board of Directors met nine times, including one non-executive session, and took action by consent in lieu of a

meeting on seven other occasions.  No director attended less than 75% of the Board meetings held during 2015.  All directors attended the 2015 Annual Shareholders’ Meeting.

 

Audit Committee.  The Audit Committee has been established to oversee the accounting and financial reporting of the Company and is currently comprised of Gary Huber as Chairman, Bill Conrad, and Tor Falck. Mr. Morrison will begin serving on the committee as a member effective June 15, 2016.  Each of the Audit Committee members is independent under the NYSE MKT Rules.  Among other duties, the Audit Committee is responsible for engaging the independent registered public accounting firm to conduct the financial audit for the Company and to confirm, prior to such engagement, that such independent registered public accounting firm is independent of the Company. 

 

It is the policy of the Audit Committee to review and approve the engagement of the independent auditors, including the scope, extent and procedures of audit and non-audit services to be performed for the Company, the content and results of the audit performed by the auditors and any recommendations made by the auditors and to oversee any other aspects of the engagement of the independent auditors, including but not limited to resolution of disagreements between management and the auditor regarding financial reporting and other audit, review or attest services, and the compensation to be paid therefore, and all other matters the Audit Committee deems appropriate.  The Audit Committee also oversees our financial reporting process, and is responsible for drafting an Audit Committee Report to be included with our proxy statement.

 

Our Board of Directors has determined that Dr. Huber, the Chairman of the Audit Committee, qualifies as an audit committee financial expert, as defined by the applicable regulations of the SEC, in that he has (i) an understanding of generally accepted accounting principles and financial statements; (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; (iii) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our financial statements, or experience actively supervising one or more persons engaged in such activities; (iv) an understanding of internal controls over financial reporting; and (v) an understanding of the audit committee functions.  Dr. Huber acquired these attributes through his experience serving as chairman of the audit committee, a director and executive officer of other publicly traded companies. 

 

The Audit Committee held six meetings during the last fiscal year and no Audit Committee member attended less than 75% of the meetings.  The full responsibilities of the Audit Committee are set forth in its formal written charter, which is available on our web site at www.goldresourcecorp.com.

 

Audit Committee Report.  The Audit Committee of the Board of Directors is pleased to present this Audit Committee Report:

 

We have reviewed and discussed the Company's audited consolidated financial statements for the year ended December 31, 2015 with management and have reviewed related written disclosures of KPMG LLP, our independent registered public accounting firm for 2015, as required by SAS 114, with respect to those statements.  We have reviewed the written disclosures and the letter from KPMG LLP required by Independence Standards Board No. 1 (Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees) and have discussed with KPMG LLP its independence in connection with its audit of our most recent financial statements.  Based on this review and these discussions, we recommended to the Board of Directors that the financial statements be included in our annual report on Form 10-K for the year ended December 31, 2015.

 

Gary C. Huber (Chairman and member)

Bill M. Conrad (member)

Tor Falck (member)

Compensation Committee.  The Compensation Committee, currently comprised of Bill Conrad (Chairman), Tor Falck and Gary Huber, is responsible for establishing the compensation of our CEO, reviewing and recommending the compensation of our executive officers and directors and making recommendations to the Board regarding our general compensation, benefits, perquisites, policies and practices, including, without limitation, our incentive compensation plans and equity-based compensation plans, and preparing a Compensation Committee Report to be included with our proxy statement.  Mr. Morrison will begin serving on the committee as a member effective June 15, 2016. Each of the Compensation Committee members meets the definition of “independent” as defined in the NYSE MKT Rules.  The Compensation Committee has adopted a formal charter, a copy of which is available on our website at www.goldresourcecorp.com.

 

In performing its functions, the Compensation Committee considers, among other things, the types and amounts of compensation that have been paid to our executives and directors in the recent past, as well as recent individual and overall Company performance.  The Compensation Committee held two meetings during the last fiscal year and no Compensation Committee member attended less than 75% of the meetings.

 

Compensation Committee Interlocks and Insider Participation.  No member of the Compensation Committee was ever an officer of the Company or served as an employee or participated in a related party transaction during the last fiscal year.  No member of the Compensation Committee or executive officer of our Company has a relationship that would constitute an interlocking relationship with executive officers or directors of another entity.

 

Nominating and Governance Committee.  The Nominating and Governance Committee is comprised of Bill Conrad (Chairman), Tor Falck and Gary Huber as members.  Mr. Morrison will begin serving on the committee as a member effective June 15, 2016. The Nominating and Governance Committee acts pursuant to its charter and is primarily responsible for (1) identifying and evaluating qualified individuals to become members of the Board or to fill any vacancies that arise, including suggestions from members of the Board as well as from shareholders, and to recommend such nominees to the Board; (2) determining the criteria for which the Committee will use to evaluate such candidates for director; (3) periodically reviewing the function and size of the Board and making recommendations to the Board; (4) evaluating the Company’s corporate governance practices and recommending any changes to those guidelines or constituent documents; (5) evaluating the effectiveness of the Board and its committees, its membership and its structure; and (6) developing effective continuing education guidelines for the members of the Board.  The Nominating and Corporate Governance Committee held one meeting during the last fiscal year at which all members were present.

 

The committee will consider director candidates nominated by shareholders and will apply the same criteria to all nominees, including shareholder recommendations.  A shareholder who wishes to recommend a prospective director nominee should send a letter directed to the attention of Jessica Browne, Corporate Secretary, 2886 Carriage Manor Point, Colorado Springs, CO 80906.  Such letter must be signed and dated and submitted by the date mentioned in this proxy statement under the heading “Proposals of Shareholders for Presentation at the Next Annual Meeting of Shareholders.”  The information required by Regulation 14A of the Securities Exchange Act must be included in or attached to the letter, including but not limited to:

 

 

Specific minimum qualifications for directors and director nominees which the committee believes must be met in order to be so considered include strategic managerial and financial skills and experience, expertise, and knowledge in areas that are important to us.  Other considerations include diversity, exemplary personal integrity and reputation, sound judgment, potential or actual conflicts of interest, and sufficient time and willingness to devote to the discharge of his or her duties.

 

Communications to the Board of Directors

 

Our Board of Directors maintains a policy of reviewing and considering communications from our shareholders.  Any shareholder who desires to contact the Board of Directors may do so by fax, telephone, or regular mail to the Board of Directors, via the attention of our Corporate Secretary, Jessica Browne.  Shareholders can also send electronic communications to the Board via e-mail to jessicabrowne@goldresourcecorp.com.  Such communications may also be forwarded to the Board by mail in a sealed envelope addressed to an individual director, the non-management directors or the Board by mailing to our corporate headquarters in Colorado Springs.  We will deliver the envelope unopened (1) if addressed to a director, to such director, (2) if addressed to the Board, to the Chairman of the Board who will report on the contents to the Board, or (3) if addressed to the non-management directors, to the Chair of the Audit Committee who will report on the contents to the non-management directors.

 

Our directors periodically review communications from shareholders and determine, at their discretion, whether the communication addresses a matter that is appropriate for consideration by the Board.  Directors may also attend the annual meeting of shareholders and receive communications directly from shareholders at that time. 

 

Code of Ethics

 

We maintain a written Code of Ethics, a copy of which is available on our website at www.goldresourcecorp.com. Any amendments to or waiver of the Code of Ethics will be made available on our website within four business days following the date of the event. Such information will remain available on our website for at least 12 months.

 

Share Ownership and Reporting

 

As of April 28, 2016, there are a total of 54,266,706 shares of our common stock outstanding, our only class of voting securities currently outstanding.  The following table describes the beneficial ownership of our voting securities as of April 28, 2016 by: (i) each of our directors, director nominees and named executive officers; (ii) all of our directors, director nominees, and officers as a group; and (iii) each shareholder known to us to own beneficially more than 5% of our common stock.  Unless otherwise stated, the address of each of the individuals is our address, 2886 Carriage Manor Point, Colorado Springs, CO 80906.  All ownership is direct, unless otherwise stated.

In calculating the percentage ownership for each shareholder, we assumed that any options owned by an individual exercisable within 60 days of this proxy statement are exercised, but not the options owned by any other individual.  Certain information regarding the ownership of shareholders believed to beneficially own more than 5% of our common stock has been obtained from reports filed by these shareholders with the SEC.

 

Section 16(a) Beneficial Ownership Reporting COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities.  Executive officers, directors and beneficial owners of greater than ten percent of our common stock are required by regulations of the SEC to furnish us with copies of all Section 16(a) reports they file.   To our knowledge, based solely upon a review of the copies

of such reports furnished to us, no such person failed to file on a timely basis any report required by such section during fiscal 2015.

 

 

Executive Compensation

 

Compensation Committee Report

 

The Compensation Committee is pleased to present the following Compensation Committee report: 

 

We have reviewed and discussed with management the Compensation Discussion and Analysis set forth in this proxy statement.  Based upon review of the discussions herein, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

Respectfully submitted,

 

Bill M. Conrad (Chairman and member)

Tor Falck (member)

Gary C. Huber (member)

 

Compensation Discussion and Analysis

 

The individuals who served as our principal executive officer and principal financial officer during the year ended December 31, 2015, as well as the other individuals included in the Summary Compensation Table below, are referred to as “named executive officers” throughout this Compensation Discussion and Analysis.

 

Overview of Compensation Philosophy, Objectives and Policies.  We attempted to meet two main objectives when we designed our executive and employee compensation.  First, the program is intended to be fully competitive so that we may attract, motivate and retain talented executives and key employees.  Second, the program is intended to create an alignment of interests between our executives and key employees, on the one hand, and our shareholders, on the other, such that a portion of each executive’s or key employee’s compensation consists of equity awards.  In this manner, if the price of our stock increases over time, our executive officers, key employees and our shareholders will benefit.  The compensation program is designed to reward performance that supports our principles of building shareholder value, and may also recognize individual performance from time to time.  The Compensation Committee is vested with the authority to review and recommend the compensation program structure and level of compensation for the executive officers, directors and key employees of the Company.

 

Our present compensation structure for the named executive officers generally consists of salary and incentive compensation.  The incentive component consists of a short-term cash portion and a long-term equity portion.  We believe the present structure achieves our compensation objectives; however, the Compensation Committee continues to consider additional ways to ensure consistency and enhance our Company’s compensation program and may add additional components or policies in order to assist our Company in achieving its compensation goals more effectively or efficiently.  We believe that the present compensation structure appropriately aligns the interests of the executives and key employees with our shareholders by encouraging equity ownership through awards of stock options and stock grants to executive officers and key employees and to motivate our named executive officers and other key employees to contribute to an increase in shareholder value.  While equity ownership is highly encouraged, we do not presently have a policy that requires our named executive officers or directors to own shares of our stock.

Annually the Compensation Committee reviews and recommends to the Board the level of compensation for the named executive officers and key employees.  Our CEO reports to the Committee regarding the individual performance of the other named executive officers.  Additionally, the Committee considers recommendations from the named executive officers regarding incentive compensation for key employees who report to that executive officer.

 

Elements and Mix of Compensation.  The Compensation Committee does not utilize an exact calculation in determining the breakdown of executive compensation among base pay, bonus pay and other forms of compensation; rather, the Compensation Committee takes into consideration all forms of compensation together.  When making decisions about individual compensation packages, our consideration of base salary ranges for the named executive officers is primarily based upon negotiations with that officer, taking into consideration work experience, individual and overall Company performance, level of responsibility, impact on the business, tenure, potential for advancement within the organization and the potential liability of being an officer of a public corporation.  Annual salaries for newly-hired executives are determined at the time of hire taking into account the above factors other than tenure.  Changes in an executive’s base salary may also take into consideration recent compensation, including bonuses and equity-based compensation. 

 

Cash bonuses are a form of short-term incentive compensation which may be recommended by the Compensation Committee at its discretion, based on individual and overall Company performance.  There is no specific bonus plan or policy in place setting forth timing of awards or establishing specific performance objectives.  The Compensation Committee, at its discretion, determines and recommends the amounts and timing of any bonus awards.  If applicable, and at the sole discretion of the Compensation Committee, a “merit-based” bonus may be recommended based on criteria such as exceptional individual and overall Company performance, assuming additional responsibility without an increase in base compensation, or such other criteria which the Compensation Committee may determine from time to time.

The long-term equity compensation component of our compensation program is comprised of equity awards and makes up a significant part of our named executive officers’ compensation package.  Under our Amended and Restated Non-Qualified Stock Option and Stock Grant Plan (which is referred to as the “Prior Plan” for consistency in the context of the proposal to approve a new equity incentive plan), we are authorized to issue non-qualified stock options, to make grants of stock and award grants of restricted stock to the officers, directors and key employees of our Company, including the named executive officers.  There is no specific policy or procedure in place setting forth the timing or amount of awards, although the outstanding awards and future compensation are reviewed at least annually.  The Compensation Committee, at its discretion, determines and recommends the amounts and timing of any equity awards.  The stock options are priced based on the closing market price of our common stock on the grant date, which in most cases is the date the Board approves the award.  The Board may, in its discretion, modify existing stock option awards without shareholder consent under the terms of the Prior Plan.

 

 The Board of Directors adopted and is recommending to the shareholders a new equity incentive plan in 2016 which will provide the Company with maximum flexibility in creating compensation packages. The Prior Plan has not been updated since 2010. Pursuant to the new plan, the Company can issue incentive stock options, SARs, restricted stock units and performance awards, which are not permissible under the Prior Plan. The proposed plan also implements additional corporate governance safeguards such as eliminating repricing without shareholder consent and limiting the number of awards any one individual may receive annually. For a more detailed discussion of the features of the proposed plan, please see Proposal 2 – Approval of 2016 Equity Incentive Plan below. 

 

Additional benefits provided to executive officers and key employees as part of their compensation packages include health insurance, a health expense reimbursement plan and a 401(k) retirement plan.  To the extent the named executive officers participate in these programs, they generally do so on the same basis as our other employees.  We believe these benefits are consistent with those offered by other companies with which we compete for executive talent.  Our named executive officers do not typically receive perquisites and we do not maintain any non-equity incentive plans, other than our discretionary cash bonus incentives described previously, nor do we maintain any deferred compensation plans.

 

The compensation for our directors is structured similar to that of our named executive officers.  Specifically, our directors receive a combination of cash and equity incentives in the form of stock grants or options to purchase our common stock.  The Compensation Committee reviews the form and amount of such compensation periodically to ensure that it is competitive and meeting our objectives discussed above.

 

Consideration of 2014 Say-on-Pay Vote.    At our 2014 Annual Shareholders’ Meeting, we submitted a proposal to approve an advisory (non-binding) resolution regarding the compensation program for our named executive officers (“2014 say-on-pay vote”), for which 76% of votes cast were in favor of the proposal.  The Compensation Committee believes this result indicates that a majority of our shareholders are satisfied with our executive compensation policies and decisions, and that our executive compensation program effectively aligns the interests of our named executive officers with the interests of our shareholders. The Compensation Committee considered the results of the 2014 say-on-pay vote, and no changes were deemed necessary regarding the policies and procedures used to determine executive compensation for 2014.

In connection with the implementation of the “say-on-pay” regulations, in 2011 an advisory vote was held on the frequency of the Company’s say-on-pay proposal. As recommended by the Board and previously approved by the shareholders, the advisory vote on executive compensation is to be held every three years beginning in 2011.  The next say-on-pay proposal will occur at the 2017 Annual Meeting, along with a proposal concerning the frequency of how often the Company will submit a say-on-pay proposal to shareholders (sometimes referred to as a “say-when-on-pay” proposal).  Our Board of Directors and the Compensation Committee review the voting results for our say-on-pay proposals in connection with their ongoing evaluation of our compensation programs and will consider the outcome of the vote when making future compensation decisions.

 

Specific Compensation Decisions.  Each of our named executive officers receives an annual salary under the terms of his respective employment agreement or contractual agreement.  In addition, each of our named executive officers has received stock options as part of his or her current compensation package.

 

The downturn experienced by the mining industry during the past several years persisted in 2015 with metal prices decreasing year over year. The Company continued to evaluate and implement cost-cutting measures during 2015 in light of declining revenues and decreasing available cash.  The Compensation Committee evaluated the executive compensation program during the 2015 fiscal year and weighed several factors, both positive (such as achievement of highest milled tonnes totals to date and fifth consecutive year of profitability) and negative (continued deteriorating metal prices and grade and lowered annual production guidance) and the Company’s overall financial health.  Based on all of the factors, the Compensation Committee determined not to award significant cash bonuses to its executive officers and directors. However, as part of end-of-the-year recognition for all Company employees and non-employee directors, the Committee approved and each named executive received a $5,000 cash bonus and a gold and silver round, for which the Company grossed up the awards for income tax purposes and the value of which is included in the “All Other Compensation” column in the table below.

 

The Compensation Committee, during its annual compensation review and in an effort to incentivize and retain individuals, determined that stock options would be an appropriate alternative to reward individual efforts without significantly impacting cash needed for operations. The Committee weighed the limited number of shares available for grant under in its current equity plan and determined what it believed would be an appropriate level of stock options to award to the named executive officers, non-employee directors and other key employees. The Compensation Committee and the Board of Directors recognized that the Company would have a need to increase in the near future the shares available for awards pursuant to its equity plan in an effort to remain competitive in attracting and retaining talented employees.

 

The Company adopted a new form of executive employment agreement in 2015 which provides an initial three-year term and an automatic renewal each successive one-year term thereafter unless either party provides notice of its intent not to renew. In addition to base salary, the executive is entitled to incentive compensation awarded in the discretion of the Compensation Committee or Board and which is subject to a clawback policy to be adopted by the Company. Upon termination of employment without cause or for good reason, the Company’s severance obligation is 18 months’ base salary. Upon termination of employment for a change in control, the Company’s severance obligation is 35 months’ base salary. The original employment agreements for Mr. Reid, Mr. Patterson and Ms. Browne contained a higher severance amount for termination without cause or with good reason in the amount of 35 months’ base salary. As inducement for each of these officers to allow their prior agreement to lapse and enter into the new agreement less beneficial to the officer, the Compensation Committee approved consideration consisting of $17,000 for Mr. Patterson and Ms. Browne ($1,000 for each months’ base salary reduction in the new agreement) and $34,000 for Mr. Reid ($2,000 for each months’ base salary reduction in the new agreement).  

 

There were no adjustments to the base salary of the named executive officers during 2015.  Mr. Labate succeeded Joe Rodriguez as Chief Financial Officer in May 2015, initially on an interim basis and then on a permanent basis in October. The Compensation Committee established Mr. Labate’s base salary at $330,000 annually effective October 1, 2015. 

 

Our Executive Officers

 

In addition to our CEO and President, Jason Reid, who also serves as a member of our Board of Directors and whose biographical information is disclosed under the heading “Directors,” our executive officers as of the date of this proxy statement include the following individuals:

 

John A. Labate.  John Labate, age 67, was appointed interim Chief Financial Officer in May 2015 and accepted the permanent position in October 2015. Prior to his appointment, he served as a consultant in accounting and finance matters in the mining industry since 2012 and to the Company since January 2014.  From August 2008 to February 2012, he served as Senior Vice President and Chief Financial Officer of Golden Star Resources Ltd., a gold mining company with securities listed on the NYSE MKT and TSX.  Prior to that, from March 2004 to August 2008 he was Vice President and Chief Financial Officer for Constellation Copper Corporation, a copper mining company with securities formerly traded on the TSX.   Mr. Labate has over 30 years’ experience in the mining industry and held senior financial management positions in mining and technology companies, including chief financial officer positions at Crown Resources Corporation and Applied Optical Technologies.  Mr. Labate received a bachelor’s degree in Accounting from San Diego State University. 

 

Richard M. Irvine.  Rick Irvine, age 52, joined the Company as Chief Operating Officer in March 2012 to supervise the mining operations in Mexico, evaluate other property opportunities in Mexico and globally.  Prior to joining the Company, Mr. Irvine was the General Manager for Goldgroup Mining Inc.

(TSX: GGC) at the Caballo Blanco project in Veracruz, Mexico since April 2011. From November 2009 to March 2011, he was based in Lima, Peru where he served as Country Manager for Minera Huallanca S.A., a mining company operating two underground mines in Peru and he oversaw the sale of these operations to Nyrstar SA (EUR: NYR.BR). From August 2008 to November 2009, he served as General Manager of Farallon Mining Ltd. (TSX: FAN) in Guerrero, Mexico. From October 2007 to September 2008, he served as Vice President and General Manager with Coeur d’Alene Mines Corporation (NYSE: CDE) where he supervised the San Bartolome project in La Paz, Bolivia. From December 2006 to October 2007, he was Manager of Operations for Pan American Silver Corporation (NASDAQ: PAAS / TSX: PAAS) and oversaw the design and development of the Manantial Espejo project in Argentina. Mr. Irvine has over 20 years of experience in the mining industry, including experience as a mine engineer and mine supervisor.  Mr. Irvine received a Bachelor’s degree in Geology in 1987 from the University of New Brunswick Fredericton and a Bachelor’s degree in Mining Engineering in 1990 from Queen’s University Kingston, Ontario.

 

Barry D. Devlin.  Barry Devlin, age 58, joined the Company in January 2013 as Vice President of Exploration.  From May 2007 through December 2012, he was Vice President, Exploration with Endeavour Silver Corp. (NYSE: EXK, TSX: EDR), a silver mining company with operations in Mexico.  Mr. Devlin has 35 years of professional experience in managerial phases of exploration and mine geology. He has participated in the discovery, acquisition and development of numerous mineral deposits in North and South America. Prior to his tenure at Endeavour Silver Corp., he served in various capacities with Hecla Mining Company (NYSE: HL) from May 1990 to April 2007, including as its Generative Exploration Manager, Exploration Manager—Guyana Shield, and Senior Geologist. Prior to joining Hecla Mining Company, Mr. Devlin worked as a project geologist for various U.S. and Canadian entities. Mr. Devlin is a member of the Association of Professional Engineers and Geoscientists of British Columbia, Fellow of the Geological Association of Canada, and member of the Society of Economic Geologists. He received his Bachelor of Science Degree in Geology (with honors) in 1981 and Masters of Science Degree in Geology in 1987, both from the University of British Columbia, Vancouver, British Columbia.

 

Gregory A. Patterson.   Greg Patterson, age 46, was appointed Vice President Corporate Development in October 2013. Since joining the Company in 2010, Greg has managed investor relations and participated in overall corporate strategy. Prior to joining the Company, Greg spent 15 years in marketing and territory sales management for two manufacturers of precision laboratory instruments. Greg holds a Bachelor's degree in Environmental Biology (1991) from the University of Colorado.  Mr. Patterson is the brother-in-law of Jason Reid, CEO, President and a director of the Company.

 

Jessica M. Browne.  Jessica Browne, age 39, joined the Company in June 2011 as its in-house counsel and was appointed Corporate Secretary in January 2013 and Vice President Legal in April 2014.  From 2002 until June 2011, Ms. Browne was in private practice at Denver area law firms, focusing her practice on corporate and securities law and mergers and acquisitions.  Ms. Browne received a Masters of Science Degree in Taxation Law from the University of Denver in 2005, a Juris Doctor from the University of Colorado School of Law in 2001 and a Bachelor in Science in Business Administration summa cum laude in 1997 from the University of Texas Dallas.

 

Our officers serve at the pleasure of the Board of Directors. 

 

Summary Compensation Table

 

The following table summarizes the total compensation of all persons serving as our CEO, CFO and our other executive officers (“named executive officers”) during 2015:

 

 

 

Employment Agreements.    As discussed in the Compensation Discussion & Analysis, we maintain written employment agreements with each of our named executive officers.  The employment agreements have a three year term from their effective date and are automatically renewable for subsequent one-year terms on each successive anniversary of the commencement of employment unless either party gives notice to the other that they do not wish to renew the agreement, provided such notice is given not less than 90 days prior to expiration.   In accordance with the terms of the employment agreements, each named executive officer receives his or her respective base salary and is eligible for a cash bonus in the discretion of the Compensation Committee.  Base salaries may be increased from time to time in the discretion of the Compensation Committee.  If we terminate the agreement without cause, or if the executive officer terminates the agreement “with good reason,” we would be obligated to pay an amount equal to 18 months’ base salary as provided in the agreement. 

 

Change in Control. Pursuant to the terms of these employment agreements, our named executive officers would also be entitled to certain payments in the event their employment is terminated under for a “change in control.” In that event, the named executive officer will receive 35 months’ base salary as a severance payment under the terms set forth in the agreement.

 

We presently know of no agreements regarding a change in control of the Company.  In the event of a change in control in the future, our named executive officers are entitled to certain compensation benefits as described in “Employment Agreements” above.

 

2015 Grants of Plan-Based Awards

 

The named executive officers each received an award of stock options during 2015 under the Company’s Amended and Restated Non-Qualified Stock Option and Stock Grant Plan (also referred to as the “Prior Plan” herein).  None of these awards are subject to performance targets and each grant is subject to a vesting schedule.  The Company does not maintain any non-equity incentive compensation plans, thus this information is omitted.  The table below shows certain information regarding grants of plan-based awards to those named executive officers during fiscal 2015:

 

 

As discussed in the Compensation Discussion and Analysis above, each of the named executive officers received options to purchase our common stock in September 2015 as long-term incentive compensation.  At that time, the Committee also recommended that Mr. Labate receive 200,000 options to purchase our common stock in connection with accepting the permanent CFO position. All of the awards have an exercise price of $2.30 per share, vest in equal installments over three years from the grant date and expire ten years from the date of grant. 

 

Outstanding Equity Awards at 2015 Fiscal Year-End

 

The following table summarizes the outstanding equity awards of our named executive officers’ at the fiscal year end December 31, 2015: 

 

 

2015 Option Exercises and Stock Vested

 

There were no option exercises or stock awards vested for the named executive officers during 2015, thus the corresponding table is omitted from this section. 

 

 

PROPOSAL 2 – APPROVAL OF 2016 EQUITY INCENTIVE PLAN

 

 

 

 

General Information

On March 4, 1999, the Board of Directors adopted the Gold Resource Corporation Non-Qualified Stock Option and Stock Grant Plan, which reserved 6,000,000 shares for issuance thereunder, and which

was then amended with shareholder approval at the 2010 Annual Meeting of Shareholders and renamed the Gold Resource Corporation Amended and Restated Stock Option and Stock Grant Plan (the “Prior Plan”) and increased the shares reserved for issuance to 10,000,000.  Since 1999, the Company has been granting equity awards pursuant to the Prior Plan.

On April 14, 2016, the Board adopted, subject to shareholder approval, the Gold Resource Corporation 2016 Equity Incentive Plan (the “2016 Plan”).  The 2016 Plan expands the types of award available under the Prior Plan and provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, stock grants, stock units, performance shares, performance share units and performance cash.  The 2016 Plan also permits the grant of awards that are intended to qualify for the “performance-based compensation” exception to the $1 million limitation on the deduction of compensation imposed by Section 162(m) of the Internal Revenue Code (the “Tax Code”).  If it is approved by shareholders, the 2016 Plan will supersede and replace the Prior Plan, provided that the Prior Plan will remain in effect until all awards granted under it have been exercised, forfeited, canceled, expired or otherwise terminated. 

As of April 14, 2016, a total of 360,000 shares remained available for grant under the Prior Plan.  In order to continue to have an appropriate supply of shares for equity incentives to recruit, hire and retain the talent required to successfully execute our business plans, the Company is asking the shareholders to approve the 2016 Plan which reserves 5,000,000  shares of common stock for grants, (and therefore increases the shares available for grants pursuant to any Company equity plan by 4,640,000 shares of common stock), plus shares from any award granted under the Prior Plan that terminates, expires or lapses for any reason in the future will be available for reissuance under the 2016 Plan.  The 360,000 shares remaining in the Prior Plan will not be issued pursuant to the Prior Plan. Based on estimated usage, the Company believes the additional shares requested will provide the Compensation Committee with sufficient shares for our equity compensation programs until our 2022 Annual Meeting. While reserving 4,640,000 new shares under the 2016 Plan will increase the potential dilution to our current shareholders, the Board believes that our equity compensation plan is well-managed and the flexibility to issue different types of awards such as RSUs may decrease the rate of dilution compared to issuances of stock options.  In preparing the 2016 Plan, the Company has taken into consideration current best practices with respect to equity-based compensation plans.  In this regard, the 2016 Plan contains the following provisions, which we believe reflect best practices for equity-compensation plans: (i) prohibits the repricing of stock options and SARs without shareholder approval, (ii) prohibits the grant of stock options and SARs with discounted exercise prices, (iii) prohibits the recycling of awards tendered in payment of an option or withheld to satisfy tax obligations; (iv) contains a definition of change in control whereby potential acceleration of awards will only occur in the event of an actual change in control transaction; (v) includes, as a general rule, double-trigger vesting following a change in control; and (vi) imposes a $500,000 limit on the value of awards that may be granted to any one participant who is a non-employee director during any 12-month period.

 

The following is a summary of the material terms of the 2016 Plan that may be of importance to you. The summary is qualified by reference to the full text of the 2016 Plan, which is attached to this proxy statement as Annex A.

 

Summary of Plan Features

Purpose

The Board believes that the 2016 Plan will promote the success and enhance the value of the Company by linking the personal interests of participants to those of Company shareholders.  The Board also believes that the 2016 Plan will enhance the Company’s ability to attract and retain qualified persons to perform services for the Company, by providing incentives to such persons to put forth maximum

efforts for the Company and by rewarding persons who contribute to the achievement of the Company’s economic objectives.

 

Administration

The 2016 Plan will be administered by the Compensation Committee.  The Compensation Committee must be comprised of at least two independent members of the Board.  Each Compensation Committee member must be a “non-employee director” as defined in Rule 16b-3 of the Securities Exchange Act, an “outside director” as defined in Section 162(m) of the Tax Code, and an “independent” director for purposes of the applicable NYSE Listing Rules.  The Compensation Committee, by majority action, is authorized to interpret the 2016 Plan, to prescribe, amend, and rescind rules and regulations relating to the 2016 Plan, to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company, and to make all other determinations necessary or advisable for the administration of the 2016 Plan, to the extent they are not inconsistent with the 2016 Plan.

Subject to the express provisions of the 2016 Plan, the Compensation Committee will have the authority to determine the participants who are entitled to receive awards under the 2016 Plan, the types of awards, the times when awards shall be granted, the number of awards, the purchase price, exercise price, or base value, if any, the period(s) during which such awards shall be exercisable (whether in whole or in part), the restrictions applicable to awards, and the form of each award agreement. Neither the award agreement nor the other terms and provisions of any award must be identical for each participant.  The Compensation Committee also will have the authority to modify existing awards, subject to specified provisions of the 2016 Plan and the listing requirements of the NYSE.  The 2016 Plan prohibits the Compensation Committee from repricing any previously granted option or SAR without first obtaining shareholder approval.

In the case of awards made to non-employee directors, the Board, and not the Compensation Committee, shall administer the 2016 Plan. 

Stock Subject to 2016 Plan

The total number of shares of common stock reserved under the 2016 Plan is 5,000,000, which includes the number of shares of stock that were authorized but unissued under the Prior Plan (360,000 shares) as of April 14, 2016 along with 4,640,000 additional shares of common stock.  Subject to the express provisions of the 2016 Plan, if any award granted under the 2016 Plan or any award outstanding under the Prior Plan terminates, expires, or lapses for any reason, or is paid in cash, any stock subject to or surrendered for after the date the 2016 Plan is approved by shareholders, such award will again be stock available for the grant of an award under the 2016 Plan.  The exercise of a stock-settled SAR, or broker-assisted “cashless” exercise of an option (or a portion thereof) will reduce the number of shares of stock available for issuance pursuant to the 2016 Plan by the entire number of shares of stock subject to that SAR or option (or applicable portion thereof), even though a smaller number of shares of stock will be issued upon such an exercise.  Also, shares of stock tendered to pay the exercise price of an option or tendered or withheld to satisfy a tax withholding obligation arising in connection with an award will not become available for use under the 2016 Plan.

Individual Limitations on Awards

The maximum number of shares of common stock that may be granted to any one participant during any 12-month period with respect to one or more awards is 1,000,000.  The maximum performance cash award payable during any 12-month performance period to any one participant is $1,000,000.  The aggregate grant date fair market value of awards granted to any one participant who is a non-employee director during any 12-month period with respect to one or more awards is $500,000.  The

maximum number of shares of common stock subject to incentive stock options under the 2016 Plan is the limit set forth in Section 5.1 of the 2016 Plan.

As of April 28, 2016, the closing price of the Company’s stock on the NYSE MKT was $3.08 per share.

Eligibility

All employees, officers, non-employee directors of, and consultants to, the Company or an affiliate, as determined by the Compensation Committee, are eligible to participate in the 2016 Plan.

Awards Available Under the 2016 Plan

The following types of awards may be granted pursuant to the 2016 Plan: incentive stock options, nonqualified stock options, SARs, restricted stock, restricted stock units, performance shares, performance share units, performance cash, stock grants and stock units.

Stock Options.  The Compensation Committee may grant incentive stock options and non-qualified stock options under the 2016 Plan.  Incentive stock options may be granted only to participants who are employees.  The exercise price of all options granted under the 2016 Plan must be at least 100% of the fair market value of the Company’s common stock on the date granted and no option may be exercised more than ten (10) years from the date of grant.  The Compensation Committee will determine how the exercise price of an option may be paid and the form of payment, including, without limitation, cash, shares of stock held for longer than six months (through actual tender or by attestation), any net-issuance arrangement or other property acceptable to the Compensation Committee (including broker-assisted “cashless exercise” arrangements), and how shares of stock will be delivered or deemed delivered to participants.  A participant will have no rights as a shareholder with respect to options until the record date of the stock purchase. 

Stock Appreciation Rights.  The Compensation Committee also may grant SARs under the 2016 Plan. SARs give the participant the right to receive the appreciation in value of one share of common stock of the Company. Appreciation is calculated as the excess of (i) the fair market value of a share of common stock on the date of exercise over (ii) the base value fixed by the Compensation Committee on the grant date, which may not be less than the fair market value of a share of common stock on the grant date.  Payment for SARs shall be made in cash, stock, or a combination thereof.  SARs are exercisable at the time and subject to the restrictions and conditions as the Compensation Committee approves, provided that no SAR may be exercised more than ten (10) years following the grant date.  

Restricted Stock.  The Compensation Committee may grant restricted stock under the 2016 Plan.  A restricted stock award gives the participant the right to receive a specified number of shares of common stock at a purchase price determined by the Compensation Committee (including and typically zero).  Restrictions limit the participant’s ability to transfer the stock and subject the stock to a substantial risk of forfeiture until specific conditions or goals are met.  The restrictions will lapse in accordance with a schedule or other conditions as determined by the Compensation Committee, which typically involve the achievement of specified performance targets and/or continued employment of the participant until a specified date.  As a general rule, if a participant terminates employment when the restricted stock is subject to restrictions, the participant forfeits the unvested restricted stock.

Restricted Stock Units.  The Compensation Committee also may grant restricted stock unit awards under the 2016 Plan. A restricted stock unit award gives the participant the right to receive common stock, or a cash payment equal to the fair market value of common stock (determined as of a specified date), in the future, subject to restrictions and a risk of forfeiture.  The restrictions typically involve the achievement of specified performance targets and/or the continued employment or service of the participant until a specified date.  Participants holding restricted stock units have no rights as a

shareholder with respect to the shares of stock subject to their restricted stock unit award prior to the issuance of such shares pursuant to the award.

Stock Grant Awards.  The Compensation Committee may grant stock grant awards upon such terms and conditions, and at any time, and from time to time, as the Committee shall determine.  A stock grant award gives the participant the right to receive (or purchase at such price as determined by the Committee) shares of stock, free of any vesting restrictions.  The purchase price, if any, for a stock grant award shall be payable in cash or in any other form of consideration acceptable to the Committee.  A stock grant award may be granted or sold in respect of past services or other valid consideration, or in lieu of any cash compensation owed to a participant.

Stock Unit Awards.  The Committee may grant stock unit awards upon such terms and conditions, and at any time, and from time to time, as the Committee shall determine.  A stock unit award gives the participant the right to receive shares of stock, or a cash payment equal to the fair market value of a designated number of shares, in the future, free of any vesting restrictions.  A stock unit award may be granted or sold in respect of past services or other valid consideration, or in lieu of any cash compensation owed to a participant.

Performance Shares.  The Compensation Committee also may grant performance share awards under the 2016 Plan.  A performance share award gives the participant the right to receive common stock of the Company if the participant achieves the performance goals specified by the Compensation Committee during a performance period specified by the Compensation Committee.  Each performance share will have a value determined by the Compensation Committee at the time of grant.

Performance Share Units.  The Compensation Committee also may grant performance share unit awards under the 2016 Plan.  A performance share unit award gives the participant the right to receive common stock of the Company, a cash payment or a combination of stock and cash, if the participant achieves the performance goals specified by the Compensation Committee during a performance period specified by the Compensation Committee.  Each performance share unit will have a value determined by the Compensation Committee at the time of grant.

Performance Cash.  The Compensation Committee may grant performance cash awards upon such terms and conditions, and at any time, and from time to time, as the Committee shall determine.  A performance cash award gives the participant the right to receive an amount of cash depending on the satisfaction of one or more performance goals for a particular performance period.  The achievement of the performance goals for a particular performance period will determine the ultimate value of the performance cash award.

Performance-Based Awards.  When the Compensation Committee grants options, restricted stock, restricted stock units, stock grants, stock units, performance shares, performance share units or performance cash, it may designate the award as a performance-based award.  Options and SARs granted pursuant to the 2016 Plan should, by their terms, qualify as performance-based awards.  Performance-based awards are intended to qualify for the “performance-based compensation” exception to the limitations on the deduction of compensation imposed by Section 162(m) of the Tax Code. Section 162(m) of the Tax Code only applies to “covered employees” as that term is defined in Section 162(m) of the Tax Code.  Therefore, only covered employees are eligible to receive awards that are designated as performance-based awards.  The Compensation Committee has complete discretion regarding whether to grant awards to covered employees that qualify for the “performance-based compensation” exception.  If the Committee designates a particular award as a performance-based award, the Compensation Committee will attempt to design and administer the award in a manner that will allow the award to qualify for the “performance-based compensation” exception under Section 162(m) of the Tax Code.  Nevertheless, the requirements of this exception are complex and in some respects vague and difficult to apply. Consequently, we cannot guarantee that compensation that is intended to qualify for the

“performance-based compensation” exception under Section 162(m) will in fact so qualify.  The Compensation Committee may, in its discretion, grant awards under the 2016 Plan to covered employees that do not qualify for the exception.

The payment of options, restricted stock, restricted stock units, stock grants, stock units, performance shares, performance share units or performance cash that are designated as performance-based awards is contingent upon a covered employee’s achievement of pre-established performance goals during a specified performance period.  Performance goals are based on any one or more pre-established performance criteria.  The pre-established performance criteria are limited to the following: net operating income before taxes and extraordinary charges against income; earnings before interest, and taxes; earnings before interest, taxes, depreciation, and amortization; pre- or after-tax net earnings; sales growth; production levels; unit costs; operating earnings; operating cash flow; return on net assets; return on shareholders’ equity; return on assets; return on capital; stock price growth; shareholder returns; gross or net profit margin; earnings per share; price per share of stock; market share; revenue; income; safety objectives; environmental objectives; and completion of major projects.  Any of the performance criteria may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group, indices, or any other basket of companies.  Performance goals may be expressed in terms of overall Company performance, the performance of a division, affiliate, or the performance of an individual.  Financial performance criteria may, but need not, be calculated in accordance with generally accepted accounting principles (“GAAP”) or any successor method to GAAP, including International Financial Reporting Standards.  The Compensation Committee shall, within the time prescribed by Section 162(m) of the Tax Code, define in an objective fashion the manner of calculating the performance criteria it selects to use for a particular performance period for a particular participant.

With respect to any performance-based award granted to a covered employee that qualifies for the “performance-based compensation” exception to the Section 162(m) limitation, the Compensation Committee has the discretion to: select the length of the performance period, the type of performance-based awards to be issued, the kind and/or level of performance goal or goals and whether the performance goal or goals apply to the Company, an affiliate or any division or business unit of any of them, or to the individual participant or any group of participants.  The Compensation Committee has the discretion to decrease, but not increase, the amount of compensation payable pursuant to any performance-based award. The Compensation Committee must certify in writing prior to the payment of any performance-based award that the performance goals and any other material terms and conditions precedent to such payment have been satisfied. 

The performance criteria and other related aspects of the 2016 Plan will be subject to shareholder approval again in 2021 if (as is currently the case) shareholder approval is then required to maintain the tax-deductible nature of performance-based compensation under the 2016 Plan.

The maximum performance-based award (other than a performance cash award) payable to any one participant for any 12-month period is 1,000,000 shares of stock (or the equivalent cash value).  The maximum performance cash award (or performance share unit payable in cash) payable to any one participant for any 12-month performance period is $1,000,000.  If the performance period is less than or exceeds 12 months, the dollar and share limits expressed in this paragraph shall be reduced or increased proportionally.

Restrictions

The Compensation Committee may impose such restrictions on any awards under the 2016 Plan as it may deem advisable, including restrictions under applicable federal securities law, under the requirements of any stock exchange upon which the Company’s common stock is then listed and under any blue sky or state securities law applicable to the awards.

Change in Control

In the event of a participant’s termination of employment without “cause” or “good reason” (as those terms are defined in the 2016 Plan), within 12 months following a change in control, all awards that are outstanding and unvested shall become fully vested and exercisable and all restrictions on such outstanding awards shall lapse as of the date of termination.

Non-transferability

Unless otherwise determined by the Compensation Committee, no award granted under the 2016 Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution or pursuant to a domestic relations order (that would otherwise qualify as a qualified domestic relations order as defined in the Tax Code or Title I of the Employee Retirement Income Security Act of 1974, but for the fact that it relates to an award granted under the 2016 Plan), or, if applicable, until the termination of any restricted or performance period as determined by the Compensation Committee.

Adjustment Provisions

If there is a change in the outstanding shares of stock because of a stock dividend or split, recapitalization, liquidation, merger, consolidation, combination, exchange of shares, or other similar corporate change, the aggregate number of shares of stock available under the 2016 Plan and subject to each outstanding award, and its stated exercise price or the basis upon which the award is measured, shall be adjusted by the Compensation Committee.  Moreover, in the event of such transaction or event, the Compensation Committee, in its discretion may provide in substitution for any or all outstanding awards under the 2016 Plan such alternative consideration (including cash) as it, in good faith, may determine to be equitable under the circumstances and may require in connection therewith the surrender of all awards so replaced. Any adjustment to an incentive stock option shall be made consistent with the requirements of Section 424 of the Tax Code.  Further, any adjustments made shall be made consistent with the requirements of Section 409A of the Tax Code.

Clawback

Every award granted under the 2016 Plan is subject to potential forfeiture or recovery to the fullest extent called for by law, any applicable listing standard, or any current or future clawback policy that may be adopted by the Company from time to time, including, without limitation, any clawback policy adopted to comply with any final rules issued by the Securities and Exchange Commission and the final listing standards to be adopted by the NYSE Stock Market pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Amendment, Modification and Termination of 2016 Plan

Subject to the Board’s right to terminate, amend or modify the 2016 Plan at any time, the 2016 Plan will remain in effect until all awards issued under the 2016 Plan expire, terminate, are exercised or are paid in full in accordance with the 2016 Plan provisions and any award agreement.  However, no award may be granted under the 2016 Plan after the tenth anniversary of the date the 2016 Plan is approved by the Company’s shareholders.

The Board has discretion to terminate, amend or modify the 2016 Plan. Any such action of the Board is subject to the approval of the shareholders to the extent required by the 2016 Plan, law, regulation or the rules of any exchange on which Company stock is listed.  Except as otherwise provided in the 2016 Plan, neither the Board, the CEO, nor the Compensation Committee may do any of the following without shareholder approval: reduce the purchase price, exercise price, or base value of any outstanding award, including any option or SAR; increase the number of shares available under the 2016 Plan; grant options

or SARs with an exercise price or base value that is below fair market value of a share of Company stock on the grant date; reprice previously granted option SARs; cancel any option or SAR in exchange for cash or any other award or in exchange for any option or SAR with an exercise price that is less than the exercise price for the original option or SAR; extend the exercise period or term of any option or SAR beyond 10 years from the grant date; expand the types of Awards available for grant under the 2016 Plan; or expand the class of individuals eligible to participate in the 2016 Plan.

Tax Withholding

The Company shall have the power to withhold, or require a participant to remit to the Company, an amount sufficient to satisfy federal, state, and local withholding tax requirements on any award under the 2016 Plan.  To the extent that alternative methods of withholding are available under applicable laws, the Company will have the power to choose among such methods.

Federal Income Tax Information

The following is a brief summary of certain of the federal income tax consequences of certain transactions under the 2016 Plan based on federal income tax laws in effect on April 28, 2016.  This summary is not intended to be exhaustive and does not describe state or local tax consequences.

As a general rule, a participant will not recognize taxable income with respect to any award at the time of grant except in the case of a participant who receives a restricted stock grant and makes the timely election permitted by Section 83(b) of the Tax Code.

Upon exercise of a nonqualified stock option, the lapse of restrictions on restricted stock, or upon the payment of SARs, restricted stock units, stock grants, stock units, performance shares, performance share units or performance cash, the participant will recognize ordinary taxable income in an amount equal to the difference between the amount paid for the award, if any, and the fair market value of the stock or amount received on the date of exercise, lapse of restriction or payment.  The Company will be entitled to a concurrent income tax deduction equal to the ordinary income recognized by the participant.

A participant who is granted an incentive stock option will not recognize taxable income at the time of exercise.  However, the excess of the stock’s fair market value over the option price could be subject to the alternative minimum tax in the year of exercise (assuming the stock received is not subject to a substantial risk of forfeiture or is transferable).  If stock acquired upon exercise of an incentive stock option is held for a minimum of two years from the date of grant and one year from the date of exercise, the gain or loss (in an amount equal to the difference between the sales price and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and the Company will not be entitled to any income tax deduction.  If the holding period requirements are not met, the incentive stock option will not meet the requirements of the Tax Code and the tax consequences described for nonqualified stock options will apply.

If certain awards fail to comply with Section 409A, a participant must include in ordinary income all deferred compensation conferred by the award, pay interest from the date of the deferral and pay an additional 20% tax.  The award agreement for any award that is subject to Section 409A may include provisions necessary for compliance as determined by the Compensation Committee.  The Company intends (but cannot and does not guarantee) that awards granted under the 2016 Plan will comply with the requirements of Section 409A or an exception thereto and intends to administer and interpret the 2016 Plan in such a manner.

Special Rules Applicable to Officers

In limited circumstances where the sale of stock that is received as the result of a grant of an award could subject an officer to suit under Section 16(b) of the Exchange Act, the tax consequences to the officer

may differ from the tax consequences described above.  In these circumstances, unless a special election has been made, the principal difference usually will be to postpone valuation and taxation of the stock received so long as the sale of the stock received could subject the officer or director to suit under Section 16(b) of the Exchange Act, but not longer than six months.

Tax Consequences to the Company or Its Affiliates

To the extent that an grantee recognizes ordinary income in the circumstances described above, the Company or the subsidiary for which the employee performs services will be entitled to a corresponding deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Tax Code and is not subject to the $1.0 million deduction limit for certain executive compensation under Section 162(m) of the Tax Code.

 

New Plan Benefits Table

 

Awards to employees, officers, directors and consultants under the 2016 Plan are made at the discretion of the Compensation Committee.  Therefore, the future benefits and amounts that will be received or allocated under the 2016 Plan are not determinable at this time. However, the following table provides information with respect to awards granted under the Prior Plan during the fiscal year ending December 31, 2015 to the Company’s named executive officers (individually), officers, including named executive officers (as a group), all current non-employee directors (individually and as a group), and all employees, including officers who are not named executive officers (as a group).

 

 

 

Securities authorized for issuance under equity compensation plans

 

The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under all of our equity compensation plans as of December 31, 2015.

 

 

 

Audit Matters

 

PROPOSAL 3 – RATIFICATION OF INDEPENDENT registered public ACCOUNTing firm

 

 

 

 

Although ratification is not required by our bylaws or otherwise, the Board is submitting this proposal as a matter of good corporate practice. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to recommend another independent registered public accounting firm. Even if the selection is ratified, the committee may recommend a different independent registered public accounting firm at any time during the year if it determines that this would be in the best interests the Company.

 

Auditor Review and Engagement Process

 

The Audit Committee is directly responsible for recommending the appointment, approving the compensation (including approval of the audit fees), retention and oversight of the independent registered public accounting firm that audits our financial statements and our internal control over financial reporting. The Audit Committee annually reviews the independence and performance of the independent auditors in deciding whether to retain the current firm or engage a different independent auditor. In the course of these reviews, the committee considers, among other things:

 

 

Change in Independent Auditors

 

On March 21, 2016, we dismissed KPMG LLP (“KPMG”) and engaged EKS&H LLLP (“EKSH”) after evaluating alternative engagements of independent registered public accounting firms, including retaining KPMG.  The decision to change was not due to any disagreements with KPMG and was primarily driven by an effort to align audit costs with expectations for a company of our size.

During the two years ended December 31, 2015, and the subsequent interim period through March 21, 2016, there were no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to KPMG’s satisfaction would have caused KPMG to make reference in connection with their opinion to the subject matter of the disagreement, or reportable events.

The audit reports of KPMG on the consolidated financial statements of the Company as of and for the year ended December 31, 2015 and 2014 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles, except that KPMG’s 2014 report was qualified as to the Company’s failure to maintain effectiveness of internal control over financial reporting as of December 31, 2014 because of the effect of a material weakness over financial reporting related to the accounting for income taxes, including the income tax provision and related tax assets and liabilities.  As of December 31, 2015, the material weakness related to our accounting for income taxes was remediated.

 

During the two most recent years ended December 31, 2015, and the subsequent interim period through March 21, 2016, we have not consulted with EKS&H regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and no written report or oral advice was provided to the Company by EKS&H that was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was the subject of a disagreement or a reportable event.

 

Fees Paid to Independent Auditors

 

The following tables set forth the fees billed by KPMG during 2015 and 2014 for services rendered in connection with our annual audits and quarterly reviews, as well as for any other non-audit services provided by the firm: 

 

Audit Fees.  This category includes fees related to the audit of our annual financial statements; review of financial statements included in our quarterly reports on Form 10-Q; the audit of management’s assessment of the effectiveness as well as the audit of the effectiveness of our internal control over financial reporting included in our Form 10-K as required by Section 404 of the Sarbanes-Oxley Act of 2002; and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements during those fiscal years.

 

Audit-Related Fees.  This category consists of assurance and related services provided by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.”

 

Tax Fees.  This category consists of professional services rendered by the independent registered public accounting firm primarily in connection with our tax compliance activities, including the preparation of tax returns and technical tax advice related to the preparation of tax returns.

 

All Other Fees. This category consists of fees for other corporate services that are not included in the other categories of fees.

 

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services

 

The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by the independent registered public accounting firm.  These services may include audit services, audit-related services, tax services and other services.  The independent auditors are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with such pre-approval.

 

During fiscal 2015, the Audit Committee approved in advance all audit and non-audit services to be provided by KPMG LLP.  The Audit Committee has determined that the non-audit services rendered by KPMG LLP during fiscal years 2015 and 2014 were compatible with maintaining the independence of the respective independent registered public accounting firms.

 

Auditor Independence

 

In addition to the limitations on non-audit services, we periodically review our relationship with the independent auditors to ensure it meets the standards for independence.  During its tenure with us, neither KPMG nor any of its respective members or associates, had any financial interest in the business or affairs, direct or indirect, or any relationship with us other than in connection with its duties as our independent auditors.  Prior to engaging EKSH for 2016, we determined that neither EKSH nor any of its respective members or associates, has any financial interest in the business or affairs, direct or indirect, or any relationship with us other than in connection with its duties as our independent auditors.    

 

 

 

 

Shareholder Proposals

 

We are not aware of any shareholder proposals for the 2016 Annual Meeting. We anticipate that the next annual meeting of shareholders will be held in June 2017.  Any shareholder who desires to submit a proper proposal for inclusion in the proxy materials related to the next annual meeting of shareholders must do so in writing in accordance with Rule 14a-8 of the 1934 Act, and it must be received at our principal executive offices no later than December 30, 2016 in order to be considered for inclusion in the proxy statement for the 2017 annual meeting of shareholders.  Shareholders who intend to nominate a director at the 2017 annual meeting of shareholders without including such proposal in the 2017 proxy statement must provide us with notice of such proposal no later than ninety days before the date of the annual meeting, or within twenty days from any announcement of the annual meeting details, if such announcement is made within ninety days or less from the date of the meeting.  Shareholders who intend to present any other proposals without including such proposal in the 2016 proxy statement must provide notice to us of such proposal no later than March 17, 2017.  For proposals sought to be included in our proxy statement, the proponent must be a record or beneficial owner entitled to vote on such proposal at the next annual meeting and must continue to own such security entitling such right to vote through the date on which the meeting is held.

 

Voting and Meeting Information

 

proxy solicitation and document request information

 

How We Will Solicit Proxies

 

Proxies will be solicited on behalf of the Board by mail, telephone, other electronic means or in person, and we will pay the solicitation costs, if any. We may use the services of our directors, officers, employees and contractors to solicit proxies, personally or by telephone, but at no additional salary or compensation.  We will also request banks, brokers and others who hold our common stock in nominee names to distribute proxy soliciting materials to beneficial owners and will reimburse these institutions for their reasonable out-of-pocket expenses.

 

The cost of the meeting, including the cost of preparing and mailing the meeting materials, will be borne by us. 

 

How We Use the E-Proxy Process (Notice & Access)

 

Since 2012, we have distributed proxy materials to certain of our shareowners over the Internet by sending them a Notice of Internet Availability of Proxy Materials that explains how to access our proxy materials and vote online. Many other companies have transitioned to this more contemporary way of distributing annual meeting materials. This “e-proxy” process, which was approved by the U.S. Securities and Exchange Commission in 2007, expedites our shareholders’ receipt of these materials, lowers the costs of proxy solicitation and reduces the environmental impact of our annual meeting.

 

If you received a Notice and would like us to send you a printed copy of our proxy materials, please follow the instructions included in your Notice or visit the applicable online voting website and request printed materials to be mailed at no cost to you.

 

If you received printed materials and would like to sign up to receive proxy materials electronically in the future, you may do so by following the instructions below.

 

 

How Documents Will Be Delivered to Beneficial Owners Who Share an Address (Householding of Proxy Materials)

 

If you are the beneficial owner, but not the record holder, of shares of the Company’s stock, and you share an address with other beneficial owners, your broker, bank or other institution is permitted to deliver a single copy of this proxy statement and our 2015 Annual Report for all shareholders at your address, unless a shareholder has asked the nominee for separate copies. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

 

 

How Shareholders Can Request Copies of Our Annual Report

 

Upon request we will furnish to any shareholder without charge a copy of our annual report on Form 10-K. The annual report on Form 10-K includes a list of all exhibits thereto. We will furnish copies of such exhibits upon written request and payment of our reasonable expenses in so furnishing the exhibits. Each such request by a beneficial owner of our shares must include a good faith representation that, as of the record date, the person requesting was a beneficial owner of Gold Resource Corporation common stock entitled to vote at the annual meeting of shareholders. You may request a copy by writing to Jessica Browne, Corporate Secretary, c/o Gold Resource Corporation, 2886 Carriage Manor Point, Colorado Springs, CO 80906 or calling (303) 320-7708.

 

 

VOTING INFORMATION

 

Who May Vote

 

The Board of Directors has fixed the close of business on April 8, 2016 as the record date for the determination of shareholders entitled to notice of, and to vote at the meeting.  Only shareholders of

record of our common stock at the close of business on that date are entitled to notice of, and to vote at the annual meeting. 

 

A list of shareholders entitled to vote at the annual meeting will be available for examination by any shareholder beginning May 6, 2016 at our principal executive offices and at the annual meeting as required by Colorado law.

 

How You Can Vote Before the Meeting

 

We encourage shareholders to submit their votes in advance of the meeting. You can ensure that your shares are voted at the meeting by submitting your proxy by touch-tone telephone at (800) 690-6903 or the Internet at www.proxyvote.com (following the instructions on your proxy card, voting instruction form or Notice of Internet Availability of Proxy Materials). Or, if you received your materials by mail, you can also complete and return the proxy or voting instruction form in the envelope provided.  If you vote in advance using one of these methods, you may still attend and vote at the meeting.

 

How You Can Vote in Person at the Meeting

 

Shareholders who attend the meeting in person may also vote at the annual meeting or may execute a proxy designating a representative to vote for them at the meeting.

 

 

How You Can Change Your Vote

 

You may change your vote by revoking your proxy at any time before it is exercised, which can be done by delivering written notice of revocation to us, by delivering a new proxy bearing a later date, or by voting in person at the meeting. (Presence at the meeting by a shareholder who has submitted a proxy does not in itself revoke the proxy.) If you are the beneficial owner of shares held for you in a brokerage, bank or other institutional account, you must contact that institution to revoke a previously authorized proxy.

 

How Many Securities Are Entitled to Vote

 

Our voting securities consist of our $0.001 par value common stock. As of the record date, there were 54,266,706 shares of common stock outstanding.  Each share of common stock is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on. Treasury shares are not voted. 

 

Voting Standards and Board Recommendations

 

Other than the matters identified below we know of no additional matters to be brought before the meeting:   

 

 

* Routine Proposal

 

Quorum.  The presence in person or by proxy of not less than one-third of the outstanding common stock of the Company as of the record date will constitute a quorum for the transaction of business at the 2016 Annual Meeting.  For purposes of determining the presence of a quorum, shares present at the annual meeting that are not voted, such as abstentions and “broker non-votes,” will be treated as shares that are present at the meeting.  If a quorum is not present in person and by proxy at the meeting, or if fewer shares are present in person or by proxy than the minimum required to take action with respect to any proposal presented at the meeting, the chairman of the meeting or the shareholders entitled to vote at such meeting, present in person or by proxy, have the power to adjourn the meeting to a date not more than 120 days after the original record date without notice other than announcement at the meeting.

 

Broker Non-Votes.  Broker non-votes occur when a bank or broker has not received directions from its customer and does not have the discretionary authority to vote the customer’s shares.  Brokers are only permitted to exercise discretion and vote on “routine proposals” (such as ratification of the independent auditor) without instructions from their customers.

 

We Have a Plurality Voting Standard for Director Elections. The four nominees for director receiving the greatest number of votes cast at the meeting in person or by proxy will be elected.  You may vote “FOR” one or more of the nominees or you may vote “WITHHOLD” for one or more of the nominees. You may not cumulate your votes for the election of directors. At the 2016 Annual Meeting, a vacancy will be created by a director not standing for re-election. We intend to reduce the size of the board immediately following the meeting to eliminate the vacancy. Proxies cannot be voted for a greater number of directors than the number of nominees in the proxy statement.

 

How Proxies Will Be Voted

 

Proxies Will be Voted as Specified or as Recommended by the Board. The shares represented by all valid proxies that are received on time will be voted as specified. When a valid proxy form is received and it does not indicate specific choices, the shares represented by that proxy will be voted in accordance with the Board’s recommendations (in this case, “FOR” each director nominee and proposal).

 

What Happens if Other Matters are Properly Presented at the Meeting? If any matter not described in this proxy statement is properly presented for a vote at the meeting, the persons named on the proxy form will vote in accordance with their judgment.

 

What Happens if a Director Nominee is Unable to Serve? We do not know of any reason why any nominee would be unable to serve as a director. If any nominee is unable to serve, the Board can either nominate a different individual or reduce the Board’s size. If it nominates a different individual, the shares represented by all valid proxies will be voted for that nominee.

 

attending the meeting

 

 

We invite all Gold Resource Corporation shareholders to attend the 2016 Annual Meeting. Your attendance in person at the meeting does not automatically revoke a proxy previously submitted by you and we encourage shareholders to cast their votes by proxy even if they intend to attend the meeting. Shareholders wishing to vote in person at the Annual Meeting must follow the instructions for voting in person discussed on page 31.

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION ABOUT US

 

The principal executive office of our Company is located at 2886 Carriage Manor Point, Colorado Springs, CO 80906.  Our telephone number at this address is (303) 320-7708. Our common stock is traded on the NYSE MKT under the symbol “GORO.”

 

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other information with the SEC.  The public may read and copy any materials filed with the SEC at its Public Reference Room at 100 F Street, N.E., Washington, DC 20549.  Please call the SEC at (800) SEC-0330 for further information on the Public Reference Room.  As an electronic filer, our public filings are maintained on the SEC’s internet site that contains reports, proxy statements, and other information regarding issuers that file electronically with the SEC.  The address of that website is http://www.sec.gov. 

 

Our annual report for the year ended December 31, 2015, including financial statements and schedules, is included with this proxy statement. 

 

We maintain a company website at www.goldresourcecorp.com from which you can alternatively access the reports we file with the SEC. Our committee charters and other important corporate governance documents are also available on our website. 

 

 

 

ANNEX A

 

 

GOLD RESOURCE CORPORATION
2016 EQUITY INCENTIVE PLAN

EFFECTIVE DATE:  [____________], 2016
Approved by Shareholders:  [____________], 2016
TERMINATION DATE:  [____________], 2026