Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On April 14, 2022, Stronghold Digital Mining, Inc. (the “Company”) announced that Ricardo Larroudé, the Company’s Chief Financial Officer, is leaving the Company no later than May 15, 2022 (the last day of Mr. Larroudé’s employment is referred to herein as “Separation Date”). Mr. Larroudé’s departure does not relate to any disagreements between he and the Company relating to any financial reporting, accounting principles or practices of the Company.
On April 14, 2022, the Company and Mr. Larroudé entered into a Transition and Separation Agreement and General Release of Claims (the “Separation Agreement”) whereby, subject to the terms of the Separation Agreement, Mr. Larroudé is eligible to receive: a cash payment of $129,330 plus unused vacation days as of the Separation Date, 92,975 shares of fully vested common stock, full vesting of all outstanding Company options, and reimbursement of the Company’s portion of COBRA premiums for twelve months following the Separation Date, as well as waiver of certain non-competition and non-solicitation terms. The Separation Agreement also includes release, non-disparagement, and continued cooperation provisions. Mr. Larroudé will receive his current salary and benefits through the Separation Date.
The foregoing description of the Separation Agreement is qualified in its entirety by reference to the Separation Agreement, including exhibits thereto, a copy of which will be filed as an exhibit to a subsequent Company filing.
On April 14, 2022, the Company’s Board of Directors (the “Board”) appointed Matthew Smith, 44, to succeed Mr. Larroudé, effective April 18, 2022 (the “Effective Date”). Mr. Smith will join the Company as Chief Financial Officer. As such, Mr. Smith will be the Company’s principal financial officer and principal accounting officer as of the Effective Date.
Mr. Smith has served as a member of the Company’s Board since November 2021. He served as the Founder and Managing Partner of Deep Basin Capital LP since January 2017. Mr. Smith has over 16 years of investment management experience in the energy, renewable, power and utility sectors across both public and private investments, including the roles of portfolio manager at Citadel’s Surveyor Capital Ltd. from June 2010 through January 2016, senior analyst in the energy and other cyclical sectors for Highfields Capital Management LP from January 2009 to December 2009 and Copper Arch Capital LLC from July 2005 to December 2007 and as a financial analyst at Equity Office Properties Trust from August 2001 to May 2003. Mr. Smith is a CFA Charterholder. Mr. Smith previously served as an independent director and audit committee member on the board of Spartan Acquisition Corp III (NYSE: SPAQ), a role that he held from May 2021 to March 2022. He holds a M.S. in Finance from the University of Wisconsin-Madison’s Applied Security Analysis Program (ASAP) and a B.B.A. from the University of Iowa Tippie College of Business. In connection with his appointment as Chief Financial Officer, Mr. Smith has resigned as a member and the Chairperson of both the Audit and Compensation Committees of the Company.
Mr. Smith executed an offer letter (the “Offer Letter”) on April 14, 2022 under which the initial terms of Mr. Smith’s annual compensation will be:
•an annual salary of $300,000;
•an annual cash bonus opportunity of up to $300,000;
•an initial equity award of 200,000 restricted stock units, vesting in equal amounts each month over three years;
•an initial equity award of 200,000 performance stock units, vesting in equal amounts each quarter over three years which may be settled into shares of common stock in an amount of zero to three times the number of performance stock units granted based on extent to which certain financial metrics set forth in the Offer Letter are achieved; and
•an annual equity award grant, subject to the approval of the Company’s Compensation Committee, in a mix of stock options, restricted stock, restricted stock units (“RSUs”) and/or performance stock units consistent with those granted to other executive officer equity participants.
If Mr. Smith is terminated without Cause or for Good Reason, as each is defined in the Offer Letter, within 18 months of the Effective Date, Mr. Smith is eligible to receive the sum of one year’s salary, a pro rata share of his annual bonus, reimbursement for of the cost of COBRA premiums for one year, and additional vesting of his RSU’s as set forth in the Offer Letter, subject to the execution and non-revocation of a general release of claims.
If Mr. Smith is terminated without Cause or for Good Reason within 60 days following a change in control that is consummated within 18 months following the Effective Date, Mr. Smith is eligible to receive to the sum of one year’s salary, one times the annual bonus for the year of termination plus any earned but not paid bonus for prior year, a lump sum amount equal to of the cost of COBRA premiums for 18 months, and accelerated vesting of 50% of the unvested RSU’s, subject to the execution and non-revocation of a general release of claims.
Mr. Smith will also be eligible to receive benefits and perquisites, consistent with those other executive officers are eligible to receive, including life and health insurance benefits, and participation in a qualified 401(k) savings plan. Mr. Smith recused himself from Compensation Committee discussions about his salary and benefits.
The foregoing description of the Offer Letter is qualified in its entirety by reference to the Offer Letter, including exhibits thereto, a copy of which will be filed as an exhibit to a subsequent Company filing.
Effective immediately, Sarah James will serve as Chairperson of the Audit Committee. The Board of the Company determined that Ms. James qualifies as an “audit committee financial expert” as defined in Item 407 of Regulation S-K and meets the independence criteria of both Nasdaq and the U.S. Securities and Exchange Commission. However, the Board determined that Ms. James does not satisfy the heightened independence standards applicable to the Audit Committee.