exv10w1



 






Exhibit 10.1




COVAD COMMUNICATIONS GROUP

2007 Executive Short Term Incentive Plan



This 2007 Executive Short Term Incentive Plan (the “Plan”) is effective as of January 1, 2007
and will continue to remain effective until modified or terminated in writing by the Compensation
Committee of Covad Communications Group (“Covad” or “Company”).




Plan Objectives:





	 	•	 	Ensure market competitiveness and to attract, motivate, and retain executives
	 
	 	•	 	Pay according to the Company’s performance to reinforce corporate financial goals with
respect to profitability and revenue





Plan Funding:



All compensation payable pursuant to the Plan are paid out of Covad general assets. There is no
account, fund, trust, or other set-aside of funds for payment of this compensation and, therefore,
such compensation will not be payable in the unlikely event that Covad’s general assets become
unavailable. Estimates of compensation that may become payable under the Plan are provided to the
Finance Team by the Compensation Team in Organizational Transformation each quarter.




Eligibility:



Only the following individuals (“Plan Executives”) are eligible to receive compensation

pursuant to the Plan:

Senior Vice Presidents*

Executive Vice Presidents

Chief Executive Officer




 



*  Officers that participate in a separate commission or other incentive plan are not eligible to
receive compensation under this Plan.




Compensation Payable Under the Plan:



Plan Executives are eligible to earn certain short-term incentive compensation under the Plan
(“Plan Award”) in addition to their salaries, bonuses or other compensation to which they are
entitled under their employment agreements or otherwise.



The Plan Award consists of four potential payments:





	 	(1)	 	Compensation contingent on the achievement by the Company of at least 90% of
its A-EBITDA goals established by the Company’s Board of Directors for the period from
January 1, 2007 through June 30, 2007 (“First Payment”);
	 
	 	(2)	 	Compensation contingent on the achievement by the Company of at least 90% of
its revenue goals established by the Company’s Board of Directors for the period from
January 1, 2007 through June 30, 2007 (“Second Payment”);
	 
	 	(3)	 	Compensation contingent on the achievement by the Company of at least 90% of
its A-EBITDA goals established by the Company’s Board of Directors for the period from
January 1, 2007 through December 31, 2007 (“Third Payment”); and




 









 






	 	(4)	 	Compensation contingent on the achievement by the Company of at least 90% of
its revenue goals established by the Company’s Board of Directors for the period from
January 1, 2007 through December 31, 2007 (“Fourth Payment”).




The First Payment is equal to the amount actually earned by the Plan Executive in other
compensation provided by Covad, including regular earnings, jury leave pay, PTO, floating holidays
and bereavement leave pay and excluding any bonus or incentive compensation paid under this Plan or
the 2006 Bonus Plan (the “2006 Plan”), during the period from January 1, 2007 through June 30, 2007
multiplied by certain other percentages as further described below (“Measure Percentages”).



The Second Payment is equal to the amount actually earned by the Plan Executive in other
compensation provided by Covad, including regular earnings, jury leave pay, PTO, floating holidays
and bereavement leave pay and excluding any bonus or incentive compensation paid under this Plan or
the 2006 Plan, during the period from January 1, 2007 through June 30, 2007 multiplied by the
Measure Percentages.



The Third Payment is equal to the difference of: (a) the amount actually earned by him or her in
other compensation provided by Covad, including regular earnings, jury leave pay, PTO, floating
holidays and bereavement leave pay and excluding any bonus or incentive compensation paid under
this Plan or the 2006 Plan, in the period from January 1, 2007 through December 31, 2007 multiplied
by the Measure Percentages and; (b) an amount equal to the First Payment.



The Fourth Payment is equal to the difference of: (a) the amount actually earned by him or her in
other compensation provided by Covad, including regular earnings, jury leave pay, PTO, floating
holidays and bereavement leave pay and excluding any bonus or incentive compensation paid under
this Plan or the 2006 Plan, in the period from January 1, 2007 through December 31, 2007 multiplied
by the Measure Percentages and; (b) an amount equal to the Second Payment.



The Measure Percentages equal the product of the following factors: (1) Weighted Percentages; (2)
Adjustment Percentages, (3) Individual Percentages, and (4) Achievement Percentages, as those terms
are defined below.



1. “Weighted Percentages” mean: (i) when applied to the First Payment and Third Payment, 75% if the
A-EBIDTA goal established by the Company for the applicable period is achieved or 0% if such goal
is not achieved; and (2) when applied to the Second Payment and Fourth Payment, 25% if the revenue
goal established by the Company for the applicable period is achieved or 0% if such goal is not
achieved. The following table is provided for illustrative purposes only.




	 	 	 	 	 	 	 	 	 
	Period	 	 	 	Measure	 	Weight
	January 1-June 30

	 	 	 	A- EBIDTA
	 	 	75	%
	 

	 	 	 	Revenue
	 	 	25	%
	 
	 	 	 	 	 	 	 	 
	January 1-December 31

	 	 	 	A- EBIDTA
	 	 	75	%
	 

	 	 	 	Revenue
	 	 	25	%





2. “Adjustment Percentages” mean 80% (40% annualized) when applied to the First Payment and Second
Payment and 100% when applied to the Third Payment and Fourth Payment.




 









 







3. “Individual Percentages” mean percentages assigned to each Plan Executive by the Compensation
Committee based on his or her position on June 30, 2007 for the First Payment and Second Payment or
December 31, 2007 for the Third Payment and Fourth Payment.



4. “Achievement Percentages” mean:





	 	(1)	 	when applied to the First Payment:






(a) the actual percentage achieved by the Company of the A-EBIDTA goal for the
period from January 1, 2007 through June 30, 2007 (“First Payment Percentage”) if
the First Payment Percentage equals or exceeds 90% and does not exceed 100%;


(b) 100% if the First Payment Percentage exceeds 100%; or


(c) 0% if the First Payment Percentage does not equal or exceed 90%;




	 	(2)	 	when applied to the Second Payment:






(i) the actual percentage achieved by the Company of the revenue goal for the period
from January 1, 2007 through June 30, 2007 (“Second Payment Percentage”) if the
Second Payment Percentage equals or exceeds 90% and does not exceed 100%;


(ii) 100% if the Second Payment Percentage exceeds 100%; or


(iii) 0% if the Second Payment Percentage does not equal or exceed 90%;




	 	(3)	 	when applied to the Third Payment:






(a) 80% if the actual percentage achieved by the Company for the A-EBIDTA goal for
the period from January 1, 2007 through December 31, 2007 (“Third Payment
Percentage”) is at least 90% and less than 99%;


(b) 100% if the Third Payment Percentage is at least 99% and is less than 105%;


(c) 110% if the Third Payment Percentage equals or exceeds 105%; or


(d) 0% if the Third Payment Percentage does not equal or exceed 90%;




	 	(4)	 	when applied to the Fourth Payment:






(i) 80% if the actual percentage achieved by the Company for the revenue goal for
the period from January 1, 2007 through December 31, 2007 (“Fourth Payment
Percentage”) is at least 90% and less than 99%;

(ii) 100% if the Fourth Payment Percentage is at least 99% and is less than 105%;


(iii) 110% if the Fourth Payment Percentage equals or exceeds 105%; or


(iv) 0% if the Fourth Payment Percentage does not equal or exceed 90%;


The First Payment will be earned only upon the achievement by the Company of at least 90% of its
A-EBITDA goals.



The Second Payment will be earned only upon the achievement by the Company of at least 90% of its
revenue goals.



The Third Payment will be earned only upon the achievement by the Company of at least 90% of its
A-EBITDA goals.




 









 







The Fourth Payment will be earned only upon the achievement by the Company of at least 90% of its
revenue goals.



The Company will make efforts to pay the First Payment and Second Payment within two to four weeks
after Covad’s earnings announcement in July of 2007 and to pay the Third Payment and Fourth Payment
within two to four weeks after Covad’s earnings announcement in February of 2008. The Company will
withhold all applicable taxes and other deductions from any Plan Award or portion thereof.




Leaves of Absence and Transfers to Other Incentive Plans:



The Plan Award payable to Plan Executives who take an approved leave of absence (other than for
military leave under USERRA), disability leave of absence, or who are offered another commission or
incentive plan will be based on their actual earnings during the period of time which they are
subject to the terms of the Plan. Payments for employees who are granted an approved leave of
absence for military leave under USERRA and who return within the prescribed period for guaranteed
reinstatement under USERRA will be determined in accordance with USERRA.




Terminations:



Plan Executives whose employment is voluntarily or involuntarily terminated on or after June 30,
2007 are eligible only for the compensation payable under the First Measure and Second Measure.
Plan Executives whose employment is voluntarily or involuntarily terminated on or after December
31, 2007 are eligible only for the compensation payable under the Third Measure and Fourth Measure.




Audit and Approval Procedure:



Plan Awards will be calculated by the Compensation Team. Earnings reports to assist in the
determination of Plan Awards should be provided to the Compensation Team by the Payroll Team within
two weeks of quarter close. The Senior Vice President, Organizational Transformation, will review
and authorize all payment for Plan Executives.




Problem Resolution:



Issues or
questions regarding Plan Awards should be sent in writing via email
to bonus@covad.com.
Any and all disputes regarding the Plan shall be settled by final and binding arbitration pursuant
to the arbitration agreement attached as Exhibit A.




At-Will Employment:



Nothing in this Plan shall be construed as any promise or guarantee of continued employment. All
Plan Executives are employed by the Company at will.




Plan Administration:



The Plan will be administered by the Compensation Team in Organizational Transformation in
accordance with all provisions stipulated in this Plan.




Plan Terms, Amendment or Termination:



This Plan supercedes any and all previous written and oral arrangements, programs and plans
previously offered by the Company, its subsidiaries, its affiliatied companies or employees of the
Company, its subsidiaries or its affiliated companies regarding short-term


 









 






incentive compensation. Covad expressly reserves the right to withdraw, amend, add to and terminate
the Plan, or any portion of it, in its sole discretion at any time, including but not limited to
changing or eliminating the amounts of compensation set forth hereunder, whether or not prior
notice of such actions has been provided to any affected individuals, to the fullest extent
permitted by law. The Plan and any portion thereof cannot be withdrawn, amended, added to or
terminated unless such withdrawal, amendment, addition or termination is in writing and executed by
the Compensation Committee. The provisions of the Plan are intended to serve as mere guidelines
for the potential payment of short-term incentive compensation under certain prescribed
circumstances and are not intended to provide any Plan Executive or other employee with a vested
right to the same.




 









 








Covad 2007 Short-Term Incentive Plan




Exhibit A




     Plan Executive hereby agrees and understands that any and all disputes regarding the Plan
shall be settled by final and binding arbitration before a single, neutral arbitrator in the County
of Santa Clara, California, or in the County where Plan Executive resides at the time the dispute
arises, at Plan Executive’s option, in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association, or its successor, and judgment upon
the award rendered may be entered in any court with jurisdiction.



     Plan Executive understands that this arbitration clause applies to all claims regarding the
Plan. Unless another limitations period is expressly mandated by statute, to be timely, any
dispute must be referred to arbitration within twelve (12) months of the incident or complaint
giving rise to the dispute. Disputes not referred to arbitration within such twelve (12) month
period shall be deemed waived, and the arbitrator shall deny any untimely claims.



     Plan Executive understands that the parties shall be entitled to discovery sufficient to
adequately arbitrate their claims, including access to essential documents and witnesses, as
determined by the arbitrator. In reaching a decision, the arbitrator shall adhere to relevant law
and applicable precedent, and shall have no power to vary therefrom. The arbitrator shall issue a
written decision making specific findings of fact and stating conclusions of law.



     Plan Executive understands that each party retains the right to file, in a court of competent
jurisdiction, an application for provisional injunctive and/or equitable relief in connection with
a claim relating to this Plan, and shall not be required to post a bond or other security in
seeking such relief unless specifically required by law. Although a court may grant provisional
remedies, the arbitrator shall at all times retain the power to grant permanent injunctive relief,
or any other final remedy. Plan Executive understands that the Company will pay the costs of
arbitration in excess of the costs Plan Executive would incur to bring such claim in a civil court.