Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Executive Severance Plan
On May 13, 2021, the Board of the Directors (the “Board”) of ServiceSource International, Inc. (the “Company”) approved the ServiceSource International, Inc. Executive Severance Plan (the “Plan”) which provides for the payment of cash severance and the provision of certain other termination benefits to members of senior management upon an involuntary termination of employment from the Company or its subsidiaries. The Plan is intended to replace any severance obligations contained in individual executive employment agreements between the Company and participating employees. Each of the Company’s executive officers has elected to participate in the Plan.
The Plan will be administered by the Compensation Committee of the Board. Any employee with the title of Senior Vice President or above is eligible to be selected to participate in the Plan. Participants with existing employment agreements are required to enter into a participation agreement which amends their employment agreement to remove any severance obligations therein as a pre-condition to Plan participation.
Severance benefits are payable under the Plan only if the participant is involuntarily terminated without “cause” or the participant resigns because of certain specified material adverse changes to the participant’s employment. Termination for any other reason does not result in the payment of severance. The cash severance benefits payable under the Plan are as follows: (a) CEO: 125% of base salary plus 125% of target annual corporate incentive plan (“CIP”); (b) Executive Vice Presidents: 100% of base salary plus 100% of target CIP; and (c) Senior Vice Presidents: 75% of base salary plus 75% of target CIP. Additionally, all U.S. employee participants are entitled to a lump sum cash payment equal to a certain number of months of COBRA premiums, as follows: (a) CEO: 15 months; (b) Executive Vice Presidents: 12 months; and (c) Senior Vice Presidents: 9 months. Cash severance amounts resulting from termination prior to a change in control are paid in equal monthly installments (CEO: 15 months; Executive Vice President: 12 months; and Senior Vice President: 9 months). Cash severance amounts resulting from termination at or after a change of control are paid in a lump sum. Severance under the Plan for international participants is reduced on a dollar-for-dollar basis by any notice period, statutory redundancy or other payments required to be provided to a participant in any non-US jurisdiction.
Plan participation requires adherence to the Plan’s restrictive covenants. These include (i) a requirement not to disclose confidential information or use confidential information to solicit Company clients; (ii) a 12-month non-solicitation of Company employees; and (iii) a 12-month non-compete. Each participant in the Plan must sign a full release of claims as a prerequisite to receiving any severance pay under the Plan. The Company may discontinue cash severance if a participant fails to abide by the restrictive covenants.
Prior to a change in control, the Board may amend the Plan, or provide for an early termination of the Plan, in its discretion, although any such amendment or early termination would not affect the rights of any participant in any material way unless either (i) the participant is given 6 months prior written notice or (ii) the Board gets the participant’s consent to the change. The terms of the Plan provide for its termination two years after a change in control.
The foregoing Summary of the Plan does not purport to be complete and is qualified in its entirety by reference to the Plan itself, which is filed hereto as Exhibit 10.1 and the form of Participation Agreement, which is filed hereto as Exhibit 10.2, and all such exhibits are incorporated herein by reference.
Amendment to 2020 Equity Incentive Plan
As discussed in Item 5.07 below, at the 2021 annual meeting of stockholders of the Company held on May 14, 2021 (the “Annual Meeting”), the stockholders voted to approve an amendment (the “Amendment”) to the Company’s 2020 Equity Incentive Plan (the “2020 Plan”) to increase the maximum number of shares of common stock of the Company that may be issued pursuant to awards under the 2020 Plan (the “Amended 2020 Plan”). The Amendment increases the number of reserved shares under the 2020 Plan from 6,200,000 to 15,200,000 shares. The remaining terms of the Amended 2020 Plan were not affected by the Amendment. The full text of the Amendment is attached hereto as Exhibit 10.3 and is incorporated herein by reference.
