Pursuant to his employment agreement, if the company terminates Mr. Sharma’s employment other than for “cause” or if Mr. Sharma terminates employment for “good reason” (each as defined in the agreement) prior to the end of the term, in addition to receiving earned but unpaid pay and unreimbursed business expenses, he will be eligible to receive continued payment of his base salary for a period of 12 months and reimbursement for the company’s portion of group medical, dental and vision insurance premiums for up to 12 months following such termination, subject to possible early termination if Mr. Sharma and his dependents are no longer entitled to such coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) or company plans, subject to timely execution of a release of claims in favor of the company.
If a change of control occurs and the company terminates Mr. Sharma’s employment other than for “cause” during the term and within two years following such change of control, then, in lieu of the severance payments described above, Mr. Sharma would be entitled to receive a lump sum payment equal to one year of base salary at the rate in effect at the date of termination or, if higher, on the date of the change of control. In addition, the company will pay the full cost of Mr. Sharma’s continued participation in the company’s group health and dental plans for one year or, if less, for so long as he remains entitled to continue such participation under applicable law, subject to timely execution of a release of claims in favor of the company.
Additionally, if Mr. Sharma’s employment is terminated due to his death or if he becomes disabled during his employment through any illness, injury, accident or condition of either a physical or psychological nature and, as a result, is unable to perform substantially all of his duties and responsibilities hereunder, with or without reasonable accommodation as required by law, for a period of more than one hundred twenty (120) days during any period of three hundred and sixty-five (365) consecutive calendar days, then MicroVision will make provision for contribution of the employer-portion of premiums under COBRA for a period of up to 12 months for Mr. Sharma and his dependents, as applicable.
Mr. Sharma is not entitled to receive any tax gross-up payment for any “golden parachute” excise tax, as described in Section 280G and Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), incurred in respect of payments or benefits payable under Mr. Sharma’s employment agreement or otherwise. If any payments or benefits would be subject to such excise tax under Section 280G and Section 4999 of the Code, they will be reduced if and to the extent the reduction is more favorable to Mr. Sharma on an after-tax basis.
Following the approval of our 2022 Equity Incentive Plan by shareholders in June 2022, Mr. Sharma was granted PRSUs covering 2,800,000 shares that are only earned if specific stock price targets are met, with each target representing a very substantial increase over the current price. These PRSU awards are more fully described later in this compensation discussion and analysis.
Tax Equalization. During 2022, with our focus on developing relationships with European automotive OEMs and our acquisition of Hamburg-based Ibeo, Mr. Sharma was required to spend a substantial amount of time working on the company’s behalf in Germany. To the extent that Mr. Sharma incurs a tax burden in Germany as a result of this work, our Board has approved a tax equalization plan whereby the company will cover incremental taxes required to be paid in connection with Mr. Sharma’s work in Germany. We expect that the tax equalization plan will result in a net-neutral tax position for Mr. Sharma such that he will neither benefit from nor owe additional tax due to his business travel. With the January 2023 closing of the Ibeo acquisition and our significant recent expansion of operations in Germany, we anticipate that the tax equalization plan will apply again in 2023.
2022 Compensation—Our Other Executive Officers
Base Salaries. Base salaries for our named executive officers are determined for each executive based on position, responsibility, experience and competitive market data. Base salaries are adjusted from time to time to recognize various levels of responsibility, promotions, individual performance, market conditions and internal equity issues. Rather than applying a formulaic approach, the Compensation Committee awards base salaries for our named executive officers within the context of our overall merit increase system considering level of responsibility, individual performance, market competitive factors, and the critical role of the executive in our future growth and strategy.
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