Executive Severance Plan
EXECUTIVE SEVERANCE PLAN FOR THE
CHIEF EXECUTIVE OFFICER AND SENIOR EXECUTIVE OFFICERS
1. Purpose. Poshmark, Inc. (the Company) considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. The Board of Directors of the Company (the Board) recognizes, however, that, the possibility of an involuntary termination of employment, either before or after a Change in Control (as defined in Section 2 hereof), exists and that such possibility, and the uncertainty and questions that it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. Therefore, the Board has determined that the Poshmark, Inc. Executive Severance Plan for the Chief Executive Officer and Senior Executive Officers (the Plan) should be adopted to reinforce and encourage the continued attention and dedication of the Companys Covered Executives (as defined in Section 2 hereof) to their assigned duties without distraction. Nothing in this Plan shall be construed as creating an express or implied contract of employment and nothing shall alter the at will nature of the Covered Executives employment with the Company.
2. Definitions. The following terms shall be defined as set forth below:
(a) Accounting Firm shall mean a nationally recognized accounting firm selected by the Company.
(b) Administrator means the Board or a committee thereof.
(c) Base Salary shall mean the higher of the Covered Executives (i) annual base salary in effect immediately prior to the Date of Termination or (ii) annual base salary in effect for the fiscal year immediately prior to the fiscal year in which the Date of Termination occurs.
(d) Cause shall mean, and shall be limited to, the occurrence of any one or more of the following events:
(i) conduct by the Covered Executive constituting a material act of misconduct in connection with the performance of his or her duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates;
(ii) the commission by the Covered Executive of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Covered Executive that would reasonably be expected to result in material injury or reputational harm to the Company or any of its subsidiaries and affiliates if he or she were retained in his or her position;
(iii) continued non-performance by the Covered Executive of his or her duties to the Company (other than by reason of the Covered Executives physical or mental illness, incapacity or Disability) which has continued for 30 days following written notice of such non-performance from the Company;
(iv) a material violation by the Covered Executive of the Proprietary Information and Inventions Agreement (or similar agreement) entered into between the Covered Executive and the Company or any other confidentiality, invention assignment or similar agreement with the Company;
(v) a material violation by the Covered Executive of one of the Companys material written employment policies that would reasonably be expected to result in material injury or reputational harm to the Company or any of its subsidiaries and affiliates if he or she were retained in his or her position; or
(vi) the Covered Executives failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the Covered Executives willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigation.
(e) Change in Control shall mean a Sale Event as defined in the Companys 2021 Stock Option and Incentive Plan, as may be amended from time to time.
(f) Change in Control Period shall mean the period beginning on the date three (3) months prior to a Change in Control and ending 12 months after the date of a Change in Control.
(g) Code shall mean the Internal Revenue Code of 1986, as amended.
(h) Covered Executives shall mean the Chief Executive Officer and the Senior Executive Officers designated by the Board in its discretion to participate in the Plan and who meet the eligibility requirements set forth in Section 4 of this Plan.
(i) Date of Termination shall mean the date that a Covered Executives employment, in any and all capacities, with the Company (or any successor) ends, which date shall be specified in the Notice of Termination. Notwithstanding the foregoing, a Covered Executives employment shall not be deemed to have been terminated solely as a result of the Covered Executive becoming an employee of any direct or indirect successor to the business or assets of the Company.
(j) Disability means disability as defined in Section 422(c) of the Code.
(k) Good Reason shall mean that the Covered Executive has complied with the Good Reason Process following the occurrence of any of the following events:
(i) a material diminution in the Covered Executives position, responsibilities, authority or duties;
(ii) a material reduction in the Covered Executives base salary;
(iii) the relocation of the Company office at which the Covered Executive is principally employed to a location more than 35 miles from such office; or
(iv) the failure of any successor to the Company to assume and agree to be bound by the terms and conditions of this Plan with respect to the applicable Covered Executive.
For purposes of Section 2(k)(i), a change in the reporting relationship or a change in a title will, by itself, be sufficient to constitute a material diminution of responsibilities, authority or duty.
(l) Good Reason Process shall mean:
(i) the Covered Executive reasonably determines in good faith that a Good Reason condition has occurred;
(ii) the Covered Executive notifies the Company or its successor in writing of the occurrence of the Good Reason condition within 30 days of the occurrence of such condition;
(iii) the Covered Executive cooperates in good faith with the Companys or its successors efforts, for a period of 30 days following such notice (the Cure Period), to remedy the condition;
(iv) notwithstanding such efforts, the Good Reason condition continues to exist following the Cure Period; and
(v) the Covered Executive terminates his or her employment and provides the Company or its successor with a Notice of Termination with respect to such termination, each within 30 days after the end of the Cure Period.
If the Company or the successor cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.
(m) Initial Public Offering shall mean the consummation of the underwritten public offering pursuant to an effective registration statement under the Securities Act covering the offer and sale by the Company of its equity securities, as a result of or following which the Companys common stock shall be publicly held.
(n) Notice of Termination shall mean a written notice which shall indicate the specific termination provision in this Plan relied upon for the termination of a Covered Executives employment and the Date of Termination.
(o) Participation Agreement shall mean an agreement between a Covered Executive and the Company that acknowledges the Covered Executives participation in the Plan.
(p) Release Requirement shall mean a Covered Executives execution and delivery to the Company of a separation agreement containing, among other provisions, an effective general release of claims in favor of the Company and related persons and entities, confidentiality, return of property and non-disparagement, in a form and manner satisfactory to the Company, and the expiration of any revocation period with respect thereto within 60 days of the Date of Termination.
(q) Securities Act means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
(r) Senior Executive Officer shall mean the Companys C-level executive officers (other than any Chief Executive Officer) and Senior Vice Presidents.
3. Administration of the Plan.
(a) Administrator. The Plan shall be administered by the Administrator except to the extent certain determinations have been delegated by the Administrator to certain officers of the Company.
(b) Powers of Administrator. The Administrator shall have all powers necessary to enable it properly to carry out its duties with respect to the complete control of the administration of the Plan. Not in limitation, but in amplification of the foregoing, the Administrator shall have the power and authority in its discretion to:
(i) construe the Plan to determine all questions that shall arise as to interpretations of the Plans provisions, including, but not limited to, determination of which individuals are Covered Executives, the benefits to which any Covered Executives may be entitled, the eligibility requirements for participation in the Plan and all other matters pertaining to the Plan;
(ii) adopt amendments to the Plan which are deemed necessary or desirable to comply with all applicable laws and regulations, including but not limited to Code Section 409A and the guidance thereunder;
(iii) make all determinations it deems advisable for the administration of the Plan, including the authority and ability to delegate administrative functions to a third party;
(iv) decide all disputes arising in connection with the Plan; and
(v) otherwise supervise the administration of the Plan.
(c) All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Covered Executives.
4. Eligibility. All Covered Executives selected by the Administrator who have executed and submitted to the Company a Participation Agreement, and satisfied such other requirements as may be determined by the Administrator, are eligible to participate in the Plan.
5. Termination Benefits Generally. In the event a Covered Executives employment with the Company is terminated for any reason, the Company shall pay or provide to the Covered Executive any earned but unpaid salary, unpaid expense reimbursements and accrued but unused leave entitlement, if applicable (collectively, the Accrued Benefits), within the time required by law but in no event more than 30 days after the Date of Termination.
6. Termination Not in Connection with a Change in Control. In the event the employment of a Covered Executive is terminated by the Company for any reason other than for Cause, and other than by reason of death or Disability, and such termination occurs outside of the Change in Control Period, then subject to such Covered Executives satisfaction of the Release Requirement, the Company:
(a) shall pay the Covered Executive a single lump sum cash amount equal to the sum of (i) 12 months Base Salary for the Companys Chief Executive Officer and six months Base Salary for any Senior Executive Officer; and (ii) a pro rata target annual bonus for the year in which the Date of Termination occurs to the extent a bonus for such year has not already been paid, based on the number of days in such year prior to the Date of Termination. Such amount shall be paid as soon as reasonably practicable, but not later than 60 days after the Date of Termination; and
(b) if the Covered Executive was participating in the Companys group health plan immediately prior to the Date of Termination and elects COBRA health continuation, then for a period of 12 months for the Companys Chief Executive Officer and six months for any Senior Executive Officer, following the Date of Termination, or until the Covered Executive becomes covered under a group health plan of another employer, whichever is earlier (the COBRA Coverage Period), the Company shall provide the Covered Executive, at the Companys sole expense, continued medical, dental and vision insurance benefit coverage in accordance with the provisions of COBRA, provided that the Covered Executive timely executes all necessary COBRA election documentation and remains eligible for COBRA coverage. After the Covered Executives COBRA Coverage Period, if the Covered Executive wishes to continue such COBRA coverage and is eligible therefor, the Covered Executive will be required to pay all requisite premiums for such continued coverage.
7. Termination in Connection with a Change in Control. In the event the employment of a Covered Executive is terminated (i) by the Company for any reason other than for Cause, or other than by reason of death or Disability, or (ii) by the Covered Executive for Good Reason, and, in each case, such termination occurs during the Change in Control Period, then subject to such Covered Executives satisfaction of the Release Requirement, the Company shall:
(a) pay the Covered Executive a single lump sum cash amount equal to the sum of (i) 18 months Base Salary for the Companys Chief Executive Officer and 12 months Base Salary for any Senior Executive Officer; and (ii) a pro rata target annual bonus for the year in which the Date of Termination occurs to the extent a bonus for such year has not already been paid, based on the number of days in such year prior to the Date of Termination. Such amount shall be paid as soon as reasonably practicable, but not later than 60 days after the Date of Termination; and
(b) if the Covered Executive was participating in the Companys group health plan immediately prior to the Date of Termination and elects COBRA health continuation, then for a period of 18 months for the Companys Chief Executive Officer and 12 months for any Senior Executive Officer following the Date of Termination, or until the Covered Executive becomes covered under a group health plan of another employer, whichever is earlier (the CIC Coverage Period), the Company shall provide the Covered Executive, at the Companys sole expense, continued medical, dental and vision insurance benefit coverage in accordance with the provisions of COBRA, provided that the Covered Executive timely executes all necessary COBRA election documentation and remains eligible for COBRA coverage. After the Covered Executives CIC Coverage Period, if the Covered Executive wishes to continue such COBRA coverage and is eligible therefor, the Covered Executive will be required to pay all requisite premiums for such continued coverage; and
(c) cause 100% of the outstanding and unvested equity awards held by the Covered Executive to immediately become fully exercisable and vested as of the Date of Termination (or the date of the Change in Control, if later); provided, that the performance conditions applicable to any stock-based awards subject to performance conditions will be deemed satisfied (if at all) in accordance with the terms set forth in the applicable award agreement.
For the avoidance of doubt, the severance pay and benefits provided in this Section 7 shall apply in lieu of, and expressly supersede, the provisions of Section 6 and no Covered Executive shall be entitled to the severance pay and benefits under both Sections 6 and 7 hereof.
8. Additional Limitation.
(a) Anything in this Plan to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of the Covered Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder (the Aggregate Payments), would be subject to the excise tax imposed by Section 4999 of the Code, then, (i) if the Company has not consummated an Initial Public Offering, (A) the Aggregate Payments payable to such Covered Executive under this Plan shall be reduced (but not below zero) to the extent necessary so that the maximum Aggregate Payments shall not exceed the Threshold Amount (the Reduction Amount), and (b) the Company shall use reasonable efforts to satisfy the shareholder approval requirements set forth in Q/A 7 of Treasury Regulations Section 1.280G-1 with respect to such Reduction Amount, and if such requirements are satisfied then such Reduction Amount shall become payable hereunder as if subsection (A) above had not applied thereto, and (ii) if the Company has consummated an Initial Public Offering, the Aggregate Payments shall be reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less than the amount at which the Covered Executive becomes subject to the excise tax imposed by Section 4999 of the Code; provided that such reduction shall only occur if it would result in the Covered Executive receiving a higher After Tax Amount (as defined below) than the Covered Executive would receive if the Aggregate Payments were not subject to such reduction. In such event, the Aggregate Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Aggregate Payments that are to be paid the furthest in
time from consummation of the transaction that is subject to Section 280G of the Code: (i) cash payments not subject to Section 409A of the Code; (ii) cash payments subject to Section 409A of the Code; (iii) equity-based payments and acceleration; and (iv) non-cash forms of benefits; provided that in the case of all the foregoing Aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c). For purposes of this Section, Threshold Amount shall mean three times the Covered Executives base amount within the meaning of Section 280G(b)(3) of the Code and the regulations thereunder, less one dollar.
(b) For purposes of this Section 8, the After Tax Amount means the amount of the Aggregate Payments less all federal, state, and local income, excise, employment and social security taxes imposed on the Covered Executive as a result of the Covered Executives receipt of the Aggregate Payments. For purposes of determining the After Tax Amount, the Covered Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes and social security at the highest marginal rates of individual taxation in each applicable state and locality, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.
(c) The determination as to whether a reduction in the Aggregate Payments shall be made pursuant to Section 8(a) shall be made by the Accounting Firm, which shall provide detailed supporting calculations both to the Company and the Covered Executive within 15 business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Company or the Covered Executive. Any determination by the Accounting Firm shall be binding upon the Covered Executive.
9. Proprietary Information and Inventions Agreement. As a condition to participating in the Plan, each Covered Executive shall continue to comply with the terms and conditions contained in the Proprietary Information and Inventions Agreement (or similar agreement) entered into between the Covered Executive and the Company. If a Covered Executive has not entered into a Proprietary Information and Inventions Agreement or similar agreement with the Company, he or she shall enter into such agreement prior to participating in the Plan.
10. Withholding. All payments made by the Company under this Plan shall be subject to any tax or other amounts required to be withheld by the Company under applicable law.
11. Section 409A.
(a) Anything in this Plan to the contrary notwithstanding, if at the time of the Covered Executives separation from service within the meaning of Section 409A of the Code, the Company determines that the Covered Executive is a specified employee within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Covered Executive becomes entitled to under this Plan would be considered deferred
compensation subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Covered Executives separation from service, or (B) the Covered Executives death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.
(b) The parties intend that this Plan will be administered in accordance with Section 409A of the Code and that all amounts payable hereunder shall be exempt from the requirements of such section as a result of being short term deferrals for purposes of Section 409A of the Code to the greatest extent possible. To the extent that any provision of this Plan is not exempt from Section 409A of the Code and ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner to comply with Section 409A of the Code. Each payment pursuant to this Plan is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). The parties agree that this Plan may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.
(c) To the extent that any payment or benefit described in this Plan constitutes non-qualified deferred compensation under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Covered Executives termination of employment, then such payments or benefits shall be payable only upon the Covered Executives separation from service. The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).
(d) All in-kind benefits provided and expenses eligible for reimbursement under this Plan shall be provided by the Company or incurred by the Covered Executive during the time periods set forth in this Plan. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(e) The Company makes no representation or warranty and shall have no liability to the Covered Executive or any other person if any provisions of this Plan are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.
12. Notice and Date of Termination.
(a) Notice of Termination. A termination of the Covered Executives employment shall be communicated by Notice of Termination from the Company to the Covered Executive or vice versa in accordance with this Section 12.
(b) Notice to Covered Executive or the Company. Any notices, requests, demands, and other communications provided for by this Plan shall be sufficient if in writing and delivered in person, or sent by registered or certified mail, postage prepaid, or sent by email to a Covered Executive at the last physical or email address the Covered Executive has filed in writing with the Company, or to the Company at the following physical or email address:
Poshmark, Inc. Attention: General Counsel
203 Redwood Shores Parkway, 8th Floor
Redwood City, CA 94065
13. No Mitigation. The Covered Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Covered Executive by the Company under this Plan.
14. Benefits and Burdens. This Plan shall inure to the benefit of and be binding upon the Company and the Covered Executives, their respective successors, executors, administrators, heirs and permitted assigns. In the event of a Covered Executives death after a termination of employment but prior to the completion by the Company of all payments due to him or her under this Plan, the Company shall continue such payments to the Covered Executives beneficiary designated in writing to the Company prior to his or her death (or to his or her estate, if the Covered Executive fails to make such designation).
15. Enforceability. If any portion or provision of this Plan shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Plan, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Plan shall be valid and enforceable to the fullest extent permitted by law.
16. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Plan, or the waiver by any party of any breach of this Plan, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
17. Non-Duplication of Benefits and Effect on Other Plans. Notwithstanding any other provision in the Plan to the contrary, the benefits provided hereunder shall be in lieu of any other severance payments and/or benefits provided by the Company, including any such payments and/or benefits pursuant to an employment agreement or offer letter between the Company and the Covered Executive.
18. No Contract of Employment. Nothing in this Plan shall be construed as giving any Covered Executive any right to be retained in the employ of the Company or shall affect the terms and conditions of a Covered Executives employment with the Company.
19. Amendment or Termination of Plan. The Company may amend or terminate this Plan at any time or from time to time, but no such action shall adversely affect the rights of any Covered Executive without the Covered Executives written consent.
20. Governing Law. This Plan shall be construed under and be governed in all respects by the laws of the State of California.
21. Obligations of Successors(a) . In addition to any obligations imposed by law upon any successor to the Company, any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company shall expressly assume and agree to perform this Plan in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
22. Effectiveness. This Plan shall be effective as of [ __ ], 2021.
PARTICIPATION AGREEMENT EXHIBIT