Agreed, it's much better to be upfront about it, to avoid wasting time and money on employees that don't fit in (and, as a side effect, avoid hurting those people).

The reason I believe they're showing a work environment that would be toxic to me, is that the line "> adequate performance gets a generous severance package" does not stand alone, it's only part of it, they're giving me the general vibe that I should be constantly scared of being the next one to go, that my best will only be good enough until they find someone better..

I don't mind competition, there's always competition, but for me personally, I don't want fierce competition and high pressure to be part of my daily life, not outside recreational activities where the stakes are "get fired for doing an adequate job". I like to do more than is expected, but if what is expected is by definition more than what is needed, well, then I would have to do more than more than what is needed, I don't even know what that is, and I'd not want to constantly think about it and wear myself down from trying to achieve it.