Algorhythm Holdings has replaced its chief executive and board chairman: Andrew Thompson resigned effective Oct. 30, and director Gregory D. Smith took both roles on Nov. 2. The company says Thompson’s departure was not the result of a disagreement over its operations, policies or practices.
Smith’s employment agreement provides for substantial cash and stock compensation, including a large initial restricted-stock award and additional equity incentives. It also sets out significant severance and change-in-control protections.
Key details
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Leadership change: Smith, 67, has served on Algorhythm’s board since September. He will serve as CEO and chairman, reporting to the board. Thompson’s resignation took effect immediately on Oct. 30.
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Smith’s background: Before becoming a business owner, Smith spent more than 30 years in management roles at IBM, including work as a delivery project executive for a large overseas client. Since 2011, he has owned a property-management company; since 2020, he has also owned a restaurant.
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Term and salary: Smith’s agreement began Nov. 2 and runs for an initial two years, then renews annually unless either side gives at least 90 days’ notice that it will not renew. His annual base salary is $375,000, rising to $480,000 if specified performance metrics and conditions are met. The salary cannot be reduced without his written consent.
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Annual bonus: Smith may earn a bonus of up to 50% of his base salary. Half depends on remaining employed for the full fiscal year; the other half depends on performance objectives.
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Initial stock award: Once enough shares are available under the company’s equity plan, Algorhythm is to grant Smith 2,119,542 restricted shares. Half will be fully vested when granted; the other half will vest on the first anniversary of his start date if he remains in service.
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Future equity awards: Smith is eligible for annual equity awards with a grant-date value of at least twice his base salary, or a higher value determined by an independent compensation consultant. Those awards may have vesting periods of up to four years. If the equity plan does not have enough shares, the company must use its best efforts to seek shareholder approval for an increase. If approval is not obtained within 12 months, the company must pay cash equal to the value of the portion that could not be granted.
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Change-in-control payments: For each change in control during his employment term, Smith is entitled to a lump-sum bonus equal to his base salary plus his maximum annual bonus, multiplied by whichever is greater: the number of years remaining in the employment term, including partial years, or two.
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Severance: If Algorhythm terminates Smith without cause, he resigns for good reason, or the company does not renew his agreement, he is entitled—subject to signing a release and complying with restrictive covenants—to a lump sum equal to twice his base salary plus maximum annual bonus. The agreement also provides up to 18 months of COBRA premium reimbursement and full accelerated vesting of outstanding equity awards.
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Termination after a change in control: If one of those qualifying terminations occurs within 12 months after a change in control, Smith is entitled to an additional lump sum equal to his base salary plus maximum annual bonus for the termination year, or the prior year if that amount is greater. His outstanding equity awards would vest in full immediately before the change in control is completed.
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Other termination provisions: If Smith’s employment ends because of death or disability, he or his estate is entitled to a lump sum equal to his maximum annual bonus for that year. The agreement also includes confidentiality and intellectual-property provisions, and one-year non-compete and non-solicitation restrictions. The non-compete does not apply if he is terminated without cause or resigns for good reason.
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Share count: Algorhythm reported 40,848,979 shares of common stock issued as of Nov. 4.
Plain-English implications
Smith will combine the CEO and chairman roles, and his agreement includes substantial equity compensation, severance and change-in-control benefits. The initial stock grant depends on sufficient shares being available under the company’s equity plan; if shareholder approval to increase the plan’s share pool is not obtained within 12 months, the company must pay cash for the portion it cannot grant.