Document:

exv10w3

 

Exhibit 10.3

COVAD COMMUNICATIONS GROUP, INC.

EXECUTIVE SEVERANCE PLAN

AND

SUMMARY PLAN DESCRIPTION

Effective Date: January 1, 2008 until December 31, 2009

Version Date: January 2008

 

 

COVAD COMMUNICATIONS GROUP, INC.

EXECUTIVE SEVERANCE PLAN

AND

SUMMARY PLAN DESCRIPTION

Section 1. Introduction. The Covad Communications Group, Inc. (“Parent”) Executive Severance Plan
(the “Plan”) is primarily designed to provide those eligible executive employees of Parent and any
of its subsidiaries or affiliated entities, including but not limited to Covad Communications
Company (collectively, the “Company”) whose employment is involuntarily terminated with financial
assistance while they are seeking new employment opportunities. The Plan is effective for eligible
executive employees of the Company who are notified on any date starting on January 1, 2008 and
ending on December 31, 2009 that their employment will be terminated. Only eligible executive
employees of the Company shall be entitled to severance benefits under the Plan.

Section 2. Plan Document and Summary Plan Description. This Plan is designed to be an “employee
welfare benefit plan,” as defined in Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”). This Plan is governed by ERISA and, to the extent applicable, the laws
of the State of California. This document constitutes both the official plan document and the
required summary plan description under ERISA.

Section 3. Definitions.

     A. “Involuntary Termination” means any involuntary termination of your employment by
the Company other than as a result of the following:

	 	(1)	 	“Disability” which means any medically determinable physical or
mental impairment that has lasted for a continuous period of not less than six
months and can be expected to be permanent or of indefinite duration, and that
renders you unable to perform the essential functions of your job with or
without reasonable accommodation;
	 
	 	(2)	 	death; or
	 
	 	(3)	 	“Cause” which means any of the following:

	 	a)	 	conviction of any felony which includes as an
element of the crime a premeditated intent to commit the act;
	 
	 	b)	 	any serious misconduct in the course of
employment or material violation of the Company’s Code of Conduct or
Employee Guide; or
	 
	 	c)	 	habitual neglect of your duties (other than on
account of Disability) which materially adversely affects your
performance of your duties and continues for 30 days following your
receipt of notice from the Chief Executive Officer or the Board of
Directors which specifically identifies the nature of the habitual
neglect and the

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duties that are materially adversely affected and states that, if not
cured, such habitual neglect constitutes grounds for termination
(“Notice of Habitual Neglect”);

except that Cause shall not mean:

	 	(i)	 	bad judgment or negligence unless it materially
adversely affects your performance of your duties and continues for 30
days following your receipt of a Notice of Habitual Neglect;
	 
	 	(ii)	 	any act or omission believed by you in good
faith to have been in or not opposed to the interest of the Company
(without intent to gain, directly or indirectly, a profit to which you
were not legally entitled);
	 
	 	(iii)	 	any act or omission with respect to which a
determination could properly have been made by the Board of Directors
that you met the applicable standard of conduct for indemnification or
reimbursement under Parent’s by-laws, any applicable indemnification
agreement, or applicable law, in each case in effect at the time of
such act or omission; or
	 
	 	(iv)	 	any act or omission with respect to which
notice of termination is given more than 12 months after the earliest
date on which any member of the Board of Directors of your employer,
not a party to the act or omission, knew or should have known of such
act or omission.

Section 4. Eligibility to Participate.

     A. General Rules. You will generally be eligible to participate and to receive benefits under
the Plan if you meet all of the following requirements:

          1. you are a regular full-time employee of the Company in Salary Grades SMP, M4J, M5K,
M6K or M7M; provided that employees who are classified by the Plan sponsor for payroll and
tax withholding purposes as independent contractors or who are classified by the Plan
sponsor as temporary agency employees and treated as payroll employees of the temporary
agency, for such time as they are so classified, regardless of any determination by a court
or agency that they are common law employees of the plan sponsor are not regular full-time
employees for purposes of the Plan.

          2. you are notified in writing on any date starting on January 1, 2008 and ending on
December 31, 2009 that you are subject to an Involuntary Termination and that you may
participate in the Plan;

          3. you have returned to the Company all company documents created or received by you
during your employment (electronic and paper) with the exception

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only of your personal copies of documents evidencing your hire, termination,
compensation, benefits and stock options, and any other documents you have received as a
shareholder of the Company;

          4. you have returned to the Company all items of property provided to you for your use
during employment with the Company including, but not limited to, computers (laptops or
otherwise), software, modems, routers, cell phones, all peripherals, building access/ID
cards, keys and passes, and credit and calling cards issued to you;

          5. you execute the General Release of All Claims, a copy of which is attached as
Exhibit A, within five (5) days after the effective date of the termination of your
employment (“Termination Date”) if you are under age forty (40), or you execute the General
Release of All Claims, a copy of which is attached as Exhibit B, within forty-five (45) days
(or, if the offer of benefits hereunder is made to only one employee, twenty-one (21) days)
after the Termination Date if you are age forty (40) or over and you do not rescind or
revoke the General Release of All Claims (such General Releases of All Claims hereinafter
referred to as the “General Release”); and

          6. none of the exceptions listed below applies to you.

     B. Exceptions. In addition to all of the other criteria that may be discussed elsewhere in
this Plan that render you ineligible for severance benefits, you will not be eligible for
severance benefits under this Plan if:

          1. any of the exceptions set forth in Section 3.A.(1) through (3), inclusive, applies
to you;

          2. you voluntarily terminate employment, unless such voluntary termination occurs after
you receive notice of Involuntary Termination which would otherwise qualify you for benefits
and the Plan Administrator determines, in its sole discretion, that your earlier voluntary
termination is in the best interests of the Company;

          3. you are a temporary or seasonal employee or work for the Company solely as a leased
employee, independent contractor, consultant or agent or you are otherwise classified as
such by the Company (whether or not such classification is upheld upon governmental or
judicial review);

          4. any other separation, severance or salary continuation arrangement, program or plan
applies to you and is in effect on your Termination Date; or

          5. you will have been classified as an employee in Salary Grade SMP, M4J, M5K, M6K or
M7M for less than one (1) year as of the date that you are notified of the Involuntary
Termination of your employment.

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Section 5. Severance Benefits.

     A. Time of Payment and Form of Benefit. If you are eligible for severance benefits under the
Plan, you will receive these benefits in the form of a single lump sum payment (unless the Plan
Administrator determines, in its sole discretion, to pay such benefits in installments). All
payments under the Plan are subject to applicable withholdings. Severance benefits will be paid as
soon as administratively feasible after your termination of employment with the Company upon the
occurrence of all of the following events:

          1. the Involuntary Termination of your employment;

          2. the Company’s receipt of your executed General Release; and

          3. the expiration of any rescission or revocation period applicable to your executed
General Release.

     Notwithstanding any other provision of the Plan, all payments under the Plan will be completed
by March 15 of the calendar year following the year in which the Involuntary Termination occurs,
and will in no event be deferred to a later calendar year.

     B. Amount of Severance Pay. If you do not sign the General Release or if you sign the General
Release and revoke or rescind it, you will not be eligible to receive any benefits under the Plan
pursuant to Section 4.A.5. If you are eligible to receive benefits under the Plan, including but
not limited to signing the General Release and, if applicable, not rescinding or revoking it, the
amount of your severance benefit will generally be determined in accordance with the guidelines set
forth below, measured as of the Termination Date:

          1. You will receive: (a) an amount equal to your annualized Salary if you are an
employee in Salary Grade M7M; or (b) an amount equal to your semi-annualized Salary if you
are an employee in Salary Grade SMP, M4J, M5K or M6K;

          2. If you are a commissioned sales employee, you will receive a payment in addition to
the benefits to which you are entitled under Section 5.B.1. This payment will be equal to
the average amount of commissions that you earned in one calendar day multiplied by: (a)
three hundred and sixty-five (365) calendar days if you are a commissioned sales employee in
Salary Grade M7M; or (b) one hundred and eighty (180) calendar days if you are a
commissioned sales employee in Salary Grade SMP, M4J, M5K or M6K. The “average amount of
commissions that you earned in one calendar day” will be determined by averaging the
commissions that you actually earned in the final three calendar months of your employment
with the Company pursuant to your applicable commission plan.

          3. “Salary” generally means your annual base salary determined as of the Termination
Date and generally does not include, for example, bonuses, overtime compensation, incentive
pay, shift premiums or differentials, compensation associated with employee stock options or
stock purchase plans, reimbursements, or expense allowances. “Your annualized Salary” means
the base salary you would have earned during the three hundred and sixty-five (365) calendar
days immediately following the

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Termination Date. “Your semi-annualized Salary” means the base salary you would have
earned during the one hundred and eighty (180) calendar days immediately following the
Termination Date

          4. Notwithstanding any other provision of this Plan to the contrary, if the Federal
Worker Adjustment and Retraining Notification Act or any similar state law (“WARN Laws”)
requiring a notice period prior to the termination of your employment applies to such
termination and you are eligible to receive benefits under the Plan, you will be entitled to
receive benefits pursuant to Section 5.B.1. and, if applicable, 5.B.2; provided, however,
that those benefits will be reduced by an amount equal to the amount of compensation that
the Company provided you during any notice period required by the applicable WARN Laws and
that, if the amount of benefits payable after such reduction is equal to $0 or less, you
will not be entitled to receive any benefits under this Plan.

     C. Other Severance Agreements. The Plan Administrator may, as it deems appropriate and in its
sole discretion, authorize severance benefits in an amount different from the guideline amount.
Under certain circumstances, the Plan Administrator may, in its sole discretion, waive or modify,
with respect to one or more classes of employees, the eligibility requirements for severance
benefits or modify the method of calculating their severance benefits.

     D. Vacation Pay. You will also receive a lump sum payment for all your accrued and unused
vacation through the Termination Date in a separate paycheck.

     E. Reemployment. You will have no right of re-employment with the Company or any successor in
interest of the Company (“Affiliated Entity”). However, in the event you are re-employed by the
Company or an Affiliated Entity during the period following the Termination Date that is equal to
the number of days for which you will receive Salary under Section 5.B.1, you will be required to
repay to the Company or its Affililated Entity, as appropriate, an amount equal to the Salary that
you received pursuant to Section 5.B.1 and, if applicable, Section 5.B.2.

Section 6. COBRA Continuation Coverage. Your existing coverage under the Company’s group health
plan (and, if applicable, the existing group health coverage for your eligible dependents) will end
on the last day of the month in which your employment terminates. You and your eligible dependents
may then be eligible to elect temporary continuation coverage under the Company’s group health plan
in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”). You and your eligible dependents will be provided with a COBRA election form and notice
which describe your rights to continuation coverage under COBRA. If you are eligible for severance
benefits under the Plan at the time of your termination of employment (including but not limited to
signing the General Release and, if applicable, not rescinding or revoking it) and you timely elect
COBRA continuation coverage, then the Company will pay for COBRA coverage for you and, if
applicable, your eligible dependents (such payments shall not include COBRA coverage with respect
to the Company’s Section 125 health care reimbursement plan) for twelve (12) months if you are an
employee in Salary Grade M7M or for six (6) months if you are an employee in Salary Grade SMP, M4J,
M5K or M6K; provided, however, that such coverage will not be provided to you or your dependents if
you are entitled to COBRA coverage pursuant to any other agreements, arrangements, programs or
plans. After such period of Company-paid COBRA coverage, you

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(and, if applicable, your eligible dependents) may continue COBRA coverage at your own expense in
accordance with COBRA. No provision of this Plan will affect the continuation coverage rules under
COBRA. Therefore, the period during which you must elect to continue the Company’s group health
plan coverage under COBRA, the length of time during which COBRA coverage will be made available to
you, and all your other rights and obligations under COBRA will be applied in the same manner that
such rules would apply in the absence of this Plan. Any such election is your responsibility, not
the Company’s.

In addition, the Company shall provide, at no cost to you, continued eligibility for you and your
eligible dependents in the Company’s Employee Assistance Program for twelve (12) months if you are
an employee in Salary Grade M7M or for six (6) months if you are an employee in Salary Grade SMP,
M4J, M5K or M6K; provided that you are eligible for severance benefits under the Plan (including
but not limited to signing the General Release and, if applicable, not rescinding or revoking it).

Section 7. Other Employee Benefits. All non-health benefits (such as life insurance and disability
coverage) terminate as of the Termination Date (except to the extent that any conversion privilege
is available thereunder). This Plan does not affect any vested benefits you may have under stock
option, stock purchase, or 401(k) plans of the Company; your rights, if any, under these plans,
including any rights you may have to exercise vested option shares, continue as set forth in the
documents governing such plans.

Section 8. Plan Administration. As the Plan Administrator, the Company has full discretionary
authority to administer and interpret the Plan, including discretionary authority to determine
eligibility for participation and for benefits under the Plan, the amount of benefits (if any)
payable per participant, and to interpret ambiguous terms. The Plan Administrator may delegate any
or all of its administrative duties to personnel of the Company. Any such delegation will carry
with it the full discretionary authority of the Plan Administrator to carry out the delegated
duties. The Company, as the Plan Administrator, will indemnify and hold harmless any person to
whom it delegates its responsibilities; provided, however, such person does not act with gross
negligence or willful misconduct. All determinations by the Plan Administrator or its delegate
will be final and conclusive upon all persons.

Section 9. Benefits. All benefits will be paid from the general assets of the Company. The
Company will not establish a trust to fund the benefits which may become due and payable under the
Plan. The benefits provided under the Plan are not assignable and may be conditioned upon your
compliance with any confidentiality agreement you have entered into with the Company or upon your
compliance with any Company policy or program.

Section 10. Claims Procedure.

     A. Initial Benefit Claim Procedure.

Benefits under this Plan will be calculated and paid automatically to eligible participants. If,
however, you believe that you were not paid the benefits due and owing to you, you may file a claim
with the Administrator. The claim must be in writing and state the basis on which you claim
additional benefits. No claim for Plan benefits shall be valid unless it is submitted in

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writing to the Administrator within sixty (60) days following the receipt or denial of the disputed
benefit. Employees who are denied Plan benefits at the termination of their employment and who
feel they are entitled to Plan benefits must file a claim for Plan benefits within sixty (60) days
following their Termination Date.

If your claim for benefits under the Plan is denied in whole or in part, you will be notified by
the Administrator in writing or electronically within ninety (90) days after the date the claim is
delivered to the Administrator. Any electronic notification shall comply with Department of Labor
regulations regarding such matters. If the Administrator determines that special circumstances
require an extension of time for processing the claim, you will be given written notice of the
extension prior to the expiration of the initial ninety (90) day period. The extension notice
shall indicate the special circumstances requiring an extension of time and the date by which the
Plan expects to decide the claim. In no event shall such extension exceed a period of ninety (90)
days from the end of the initial period.

The notification for denied benefits claims will be written in understandable language and will
state: (i) the specific reasons for denial of the claim, (ii) specific references to Plan
provisions on which the denial is based, (iii) a description (if appropriate) of any additional
material or information necessary for you to perfect the claim, and (iv) an explanation of the
Plan’s review procedure and the time limits applicable to such procedures and a statement of your
rights to bring a civil action under Section 502(a) of ERISA if your claim for benefits is denied
on appeal.

     B. Review of Denied Claims.

Within sixty (60) days after a claim has been denied, in whole or in part, if you wish to pursue
your claim further, you (or your authorized representative) may request a review by submitting to
the Administrator a written statement: (a) requesting a review of the denial of the claim; (b)
setting forth all of the grounds upon which the request for review is based and any facts in
support thereof; and (c) setting forth any issues or comments which you deem relevant to the claim.
You may, in addition to written comments, submit documents, records, and other information
relating to the claim for benefits. You will be provided, upon request and free of charge,
reasonable access to, and copies of, all documents, records and other information relevant to the
claim for benefits (other than legally privileged documents). A document, record or other
information shall be considered “relevant” to the claim if the document, record or other
information (i) was relied upon in making the benefit determination; (ii) was submitted, considered
or generated in the course of making the benefit determination, without regard to whether it was
relied upon in making the benefit determination; or (iii) if it demonstrates the Administrator’s
compliance with administrative processes and safeguards.

The Administrator shall make a decision on review within sixty (60) days after the receipt of your
request for review by the Plan, unless the Administrator determines that special circumstances
(such as the need to hold a hearing) require an extension of time for processing the claim. If the
Administrator determines that an extension of time for processing is required, written notice of
the extension shall be furnished to you prior to the termination of the initial sixty (60) day
period. In no event shall such extension exceed a period of sixty (60) days from the end of the
initial period. The extension notice shall indicate the special circumstances

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requiring an extension of time and the date by which the Plan expects to make its determination on
review.

The Administrator will provide you with written or electronic notification of the Plan’s benefit
determination on review. An adverse benefit determination shall set forth (i) the specific
reason(s) for the adverse determination; (ii) reference to the specific Plan provisions on which
the benefit determination is based; (iii) a statement that you are entitled to receive, upon
request and free of charge, reasonable access to, and copies of all documents, records and other
information relevant to your claim for benefits; and (iv) a statement of your rights to bring a
civil action under Section 502(a) of ERISA.

No legal action for benefits under this Plan may be brought until this claims procedure has been
exhausted, both initially and on appeal. No legal action may be commenced or maintained against
the Plan or the Company more than one year after the claims procedure is fully exhausted.

Section 11. Plan Terms; Effect on Prior Plans. With the exception of any Change in Control
Agreement that you may have with the Company, the Plan supersedes any and all prior separation,
severance and salary continuation offers, arrangements, programs and plans which were previously
offered to you by the Company or any employee of the Company.

Section 12. Plan Amendment or Termination. The Company reserves the right to terminate or amend
the Plan at any time and in any manner. Any action amending or terminating the Plan shall be in
writing and executed by the Chief Financial Officer, Senior Vice President or other senior
executive in charge of Organizational Transformation or Human Resources. The provisions of the
Plan are intended to serve as mere guidelines for the payment of severance benefits under certain
prescribed circumstances and are not intended to provide any employee with a vested right to
severance benefits. Accordingly, any termination or amendment of the Plan may be made effective
immediately with respect to any benefits not yet paid, whether or not prior notice of such
amendment or termination has been given to affected employees. This Plan terminates by its own
terms when all benefits hereunder have been paid.

Section 13. Taxes. The Company will withhold taxes and all other applicable payroll deductions
from any payment of severance benefits. Notwithstanding any other provision of this Plan, any
payment hereunder that is subject to IRC Section 409A(a)(2)(B)(i) shall not be made before the date
that is six months after the date of separation from service or, if earlier, the date of death. To
the extent that this Plan or any plan, program or award of the Company is subject to Section 409A,
the terms and conditions of this Plan and such other plan, program or award shall be construed and
interpreted to the maximum extent reasonably possible, without altering the fundamental intent of
the plan, program or award, to avoid the imputation of any tax, penalty or interest under Section
409A.

Section 14. No Right to Employment. No provision of the Plan is intended to provide you or any
other employee with any right to continue employment with the Company or any Affiliated Entity or
otherwise affect the right of the Company or any such Affiliated Entity, which right is hereby
expressly reserved, to terminate the employment of any individual at any time for any reason, with
or without cause.

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Section 15. Statement of ERISA Rights. As a participant in the Plan, you are entitled to certain
rights and protections under the ERISA. ERISA provides that all Plan participants shall be
entitled to:

	 	•	 	Examine, without charge, at the Plan Administrator’s office and at other
specified locations such as worksites, all Plan documents, including all documents
filed by the Plan with the U.S. Department of Labor, such as plan descriptions.
	 
	 	•	 	Obtain copies of all Plan documents and other Plan information upon written
request to the Plan Administrator. The Plan Administrator may make a reasonable charge
for the copies.

In addition to creating rights for certain employees of the Company under the Plan, ERISA imposes
duties upon the people who are responsible for the operation of the employee welfare benefit plan.
The people who operate the Plan (called “fiduciaries”) have a duty to do so prudently and in the
interest of the Company’s employees who are covered by the Plan.

No one, including your employer or any other person, may fire you or otherwise discriminate against
you in any way to prevent you from obtaining a welfare benefit to which you are entitled under the
Plan or from exercising your rights under ERISA.

If your claim for a welfare (severance) benefit is denied in whole or in part, you must receive a
written explanation of the reason for the denial. You have the right to have the Plan review and
reconsider your claim, all within certain time schedules. Under ERISA, there are steps you can
take to enforce the above rights. For instance, if you request materials from the Plan and do not
receive them within thirty (30) days, you may file suit in a federal court. In such a case, the
court may require the Plan Administrator to provide the materials and pay you up to $110 a day
until you receive the materials, unless the materials were not sent because of reasons beyond the
control of the Plan Administrator. If you have a claim for a severance benefit which is denied or
ignored, in whole or in part, you may file suit in a federal or a state court. If it should happen
that the Plan fiduciaries misuse the Plan’s money (if any) or if you are discriminated against for
asserting your rights, you may seek assistance from the U.S. Department of Labor or you may file
suit in a federal court. The court will decide who should pay court costs and legal fees. If you
are successful in your lawsuit, the court may order the party you have sued to pay your legal
costs, including attorney fees. However, if you lose, the court may order you to pay these costs
and fees, for example, if it finds that your claim or suit is frivolous.

If you have any questions about the Plan, you should contact the Plan Administrator. If you have
any questions about this statement or about your rights under ERISA, you should contact the nearest
office of the Pension and Welfare Benefits Administration, U.S. Department of Labor, listed in your
telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits
Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C.
20210. You may also obtain certain publications about your rights and responsibilities under ERISA
by calling the publications hotline of the pension and Welfare Benefits Administration.

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Section 16. Execution. Covad Communications Group, Inc. has caused its duly authorized officer to
execute this Plan on this 7th day of September to be effective on January 1, 2008.

	 	 	 	 	 
	 	COVAD COMMUNICATIONS GROUP, INC.

 	 
	 	By:  	/s/ Charles Hoffman
 	 
	 	 	Charles Hoffman 	 
	 	 	President and Chief Executive Officer 	 

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ADDITIONAL PLAN INFORMATION

	 	 	 
	Name of Plan:
	 	Covad Communications Group, Inc. Executive Severance Plan
	 
	 	 
	Company Sponsoring Plan:
	 	Covad Communications Group, Inc.
	 
	 	110 Rio Robles
	 
	 	San Jose, California 95134
	 
	 	 
	Employer Identification Number:
	 	94-3255161
	 
	 	 
	Plan Number:
	 	550
	 
	 	 
	Plan Year:
	 	The calendar year.
	 
	 	 
	Plan Administrator:
	 	Covad Communications Group, Inc.
	 
	 	c/o Deborah Perry, Senior Vice President,
	 
	 	Organizational Transformation
	 
	 	110 Rio Robles
	 
	 	San Jose, California 95134
	 
	 	Phone: (408) 952-6400
	 
	 	 
	Direct Inquiries to:
	 	Lesley Ngai, HR Specialist
	 
	 	(408) 952-6400
	 
	 	 
	Agent for Service of Legal
Process:
	 	Plan Administrator
	 
	 	 
	Type of Plan:
	 	Severance Plan/Employee Welfare Benefit Plan
	 
	 	 
	Plan Costs:
	 	The cost of the Plan is paid by Covad Communications
	 
	 	Group, Inc. and/or its subsidiaries
	 
	 	 

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Exhibit A

GENERAL RELEASE OF ALL CLAIMS

     I, ___________________________________
[employee name], hereby make on behalf of myself, my heirs, executors,
administrators, successors, and assigns, the following agreements and acknowledgements in
consideration of the payments and
benefits _____________________ [amount of benefit] to be received by me under the Covad
Communications Group, Inc. Executive Severance Plan (the “Plan”):

I. Release and Waiver of All Claims

     A. I hereby agree that I fully and forever discharge, waive and release any and all claims and
causes of action of any kind that I may have had or now have against Covad Communications Company,
and any of its affiliates, predecessors, successors, parents, subsidiaries or assigns and any of
their respective officers, directors, agents, employees, and representatives (collectively, the
“Company” or “Covad”) arising out of or relating in any way to my employment with the Company and
the termination thereof, including but not limited to: (1) claims of wrongful discharge, breach of
contract, breach of the covenant of good faith and fair dealing, violation of public policy,
defamation, personal injury, infliction of emotional distress, negligence, fraud, and retaliation;
(2) claims under Title VII of the 1964 Civil Rights Act, as amended, the Equal Pay Act of 1963, 42
U.S.C. § 1981, the Americans with Disabilities Act, the Civil Rights Act of 1866, the Employee
Retirement Income Security Act of 1974, as amended, Workers Adjustment and Retraining Notification
Act and any other federal laws and regulations relating to employment; (3) any laws and regulations
of California and its local governments relating to employment including but not limited to the
California Fair Employment and Housing Act, the California Labor Code including Section 1197.5
thereof, and the California Family Rights Act; and (4) any analogous laws and regulations of any
state other than California and the local governments of each such state; and excluding any claims
I may have for unemployment and workers’ compensation insurance benefits.

     B. I hereby agree that I fully and forever waive any and all rights and benefits conferred
upon me by the provisions of Section 1542 of the Civil Code of the State of California, which
states as follows: “[a] general release does not extend to claims which the creditor [i.e.,
employee] does not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the debtor [i.e., the
Company],” and by any analogous law of any state other than California.

     C. I understand that various lawsuits have been brought against the Company alleging fraud
and/or other legal violations relating to transactions in the Company’s securities, and that some
of those cases have been brought as purported class actions on behalf of various classes of persons
who acquired such securities. I have made my own determination as to whether I wish to consult
with the law firms purporting to represent such classes, and as to whether I am eligible to and
wish to pursue claims against the Company in connection with such cases. I understand

 

 

that by signing this Agreement I will be precluded from pursuing such claims, and will be waiving
any rights I might otherwise have had as a result of such lawsuits.

          I agree and understand that if, hereafter, I discover facts different from or in addition to
those which I now know or believe to be true, that the waivers of this General Release of All
Claims (“General Release”) shall be and remain effective in all respects notwithstanding such
different or additional facts or the discovery thereof.

II. Confidential Information & Company Employees

          I hereby agree and understand that:

     A. I am required to return to the Company immediately upon my termination of employment all
Company Information, including but not limited to notebooks, notes, manuals, memoranda, records,
diagrams, blueprints, bulletins, formulas, reports, computer programs, or other data or
memorializations of any kind, as well as any Company property or equipment, that I have in my
possession or under my control. I further agree and understand that I am not entitled or
authorized to keep any portions, summaries or copies of Company Information, and that I am under a
continuing obligation to keep all Company Information confidential and not to disclose it to any
third party in the future. I understand that the term “Company Information” includes, but is not
limited to, the following:

	 	•	 	Trade secret, information, matter or thing of a confidential, private or secret
nature, connected with the actual or anticipated products, research, development or business
of the Company or its customers, including information received from third parties under
confidential conditions; and
	 
	 	•	 	Other technical, scientific, marketing, business, product development or financial
information, the use or disclosure of which might reasonably be determined to be contrary to
the interests of the Company.

     B. I am prohibited for a period of one (1) year after the termination of my employment, from
soliciting for employment, whether as an employee, independent contractor, or agent, any Company
employee; and for that same time period I am prohibited from encouraging or otherwise enticing any
Company employee to terminate his or her employment with the Company.

     C. The promises and agreements of this Section II. are a material inducement to the Company to
provide me with the payments and benefits under the Plan and that, for the breach thereof, the
Company will be entitled to pursue its legal and equitable remedies against me, including, without
limitation, the right to immediately cease payments made pursuant to the Plan and/or seek
injunctive relief; provided, however, this General Release will remain in full force and effect.

2

 

III. Entire Agreement

          I agree and understand that this General Release contains the entire agreement between the
Company and me with respect to any matters referred to in the General Release, and supersedes any
and all previous oral or written agreements.

IV. No Admission

          I agree and understand that neither the fact nor any aspect of this General Release is
intended, should be deemed, or should be construed at any time to be any admission of liability or
wrongdoing by either myself or the Company.

V. Severability

          I agree and understand that if any provision, or portion of a provision, of this General
Release is, for any reason, held to be unenforceable, that such unenforceability will not affect
any other provision, or portion of a provision, of this General Release and this General Release
shall be construed as if such unenforceable provision or portion had never been contained herein.

VI. Dispute Resolution

          I hereby agree and understand that any and all disputes regarding any alleged breach of this
General Release 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 I reside at the time
the dispute arises, at my 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. I understand that this
arbitration clause applies to all claims, including claims under federal or state employment or
civil rights laws (other than claims for workers’ compensation or unemployment insurance benefits).
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. I understand 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. I understand 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 General Release, 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. I understand that the Company will pay the costs of
arbitration in excess of the costs I would incur to bring such claim in a civil court.

3

 

VII. Time to Consider and Sign General Release

          I understand that I may have five (5) days after receipt of this General Release within which
I may review and consider, discuss with an attorney of my own choosing and at my own expense, and
decide whether or not to sign this General Release. I understand that, if I do not sign the
General Release within this five-day period, this General Release will not become effective and no
payments and benefits under the Plan will be provided to me.

VIII. Effective Date

          I understand that this General Release becomes effective immediately upon signing it.

IX. Miscellaneous Acknowledgements

     A. I hereby acknowledge that I understand that, but for my signing of this General Release, I
would not be entitled to nor would I be provided with any of the payments and benefits under the
Plan. I understand that no payments and benefits will be provided to me until this General Release
becomes effective. I understand further that, even if I did not sign this General Release, I would
still be entitled to:

          1. All wages, including any paid vacation, less applicable deductions, earned by me
through my termination date; and

          2. The opportunity, if I am eligible, to elect, at my sole expense, to continue to
participate in (and, if applicable, my dependents are eligible to elect to continue their
participation in) the group health insurance plans provided by the Company pursuant to the
terms and conditions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended (“COBRA”).

     B. I hereby acknowledge that any agreement that I signed in connection with my employment with
the Company regarding employee inventions, authorship, proprietary and confidential information
shall remain in full force and effect following the termination of my employment.

4

 

EMPLOYEE’S ACCEPTANCE OF GENERAL RELEASE

BEFORE SIGNING MY NAME TO THIS GENERAL RELEASE, I STATE THAT: I HAVE READ IT; I UNDERSTAND IT AND
KNOW THAT I AM GIVING UP IMPORTANT RIGHTS; I AM AWARE OF MY RIGHT TO CONSULT WITH AN ATTORNEY
BEFORE SIGNING IT; AND I HAVE SIGNED IT KNOWINGLY AND VOLUNTARILY.

Date delivered to employee __________________, 200_

Signed this _______day of _______, 200_

	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Employee’s Signature 	 
	 	 	 
	 
	 	 	 
	 	
 	 
	 	Employee’s Name (Printed) 	 
	 	 	 
	 

     Copies of the signed release or revocation letter should be mailed or faxed to:

Lesley Ngai

Covad Communications Company

Human Resources Dept.

110 Rio Robles

San Jose, California 95134

Fax: (408) 952-7404

5

 

Exhibit B

GENERAL RELEASE OF ALL CLAIMS

     I, ______________________________
[employee name], hereby make on behalf of myself, my heirs, executors,
administrators, successors, and assigns, the following agreements and acknowledgements in
consideration of the payments and
benefits ________________ [amount of benefit] to be received by me under the Covad
Communications Group, Inc. Executive Severance Plan (the “Plan”):

I. Release and Waiver of All Claims

     A. I hereby agree that I fully and forever discharge, waive and release any and all claims and
causes of action of any kind that I may have had or now have against Covad Communications Company,
and any of its affiliates, predecessors, successors, parents, subsidiaries or assigns and any of
their respective officers, directors, agents, employees, and representatives (collectively, the
“Company” or “Covad”) arising out of or relating in any way to my employment with the Company and
the termination thereof, including but not limited to: (1) claims of wrongful discharge, breach of
contract, breach of the covenant of good faith and fair dealing, violation of public policy,
defamation, personal injury, infliction of emotional distress, negligence, fraud, and retaliation;
(2) claims under the Age Discrimination in Employment Act of 1967, as amended, Title VII of the
1964 Civil Rights Act, as amended, the Equal Pay Act of 1963, 42 U.S.C. § 1981, the Americans with
Disabilities Act, the Civil Rights Act of 1866, the Employee Retirement Income Security Act of
1974, as amended, Workers Adjustment and Retraining Notification Act and any other federal laws and
regulations relating to employment; (3) any laws and regulations of California and its local
governments relating to employment including but not limited to the California Fair Employment and
Housing Act, the California Labor Code including Section 1197.5 thereof, and the California Family
Rights Act; and (4) any analogous laws and regulations of any state other than California and the
local governments of each such state; and excluding any claims I may have for unemployment and
workers’ compensation insurance benefits.

     B. I hereby agree that I fully and forever waive any and all rights and benefits conferred
upon me by the provisions of Section 1542 of the Civil Code of the State of California, which
states as follows: “[a] general release does not extend to claims which the creditor [i.e.,
employee] does not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the debtor [i.e., the
Company],” and by any analogous law of any state other than California.

     C. I understand that various lawsuits have been brought against the Company alleging fraud
and/or other legal violations relating to transactions in the Company’s securities, and that some
of those cases have been brought as purported class actions on behalf of various classes of persons
who acquired such securities. I have made my own determination as to whether I wish to consult
with the law firms purporting to represent such classes, and as to whether I am eligible to and
wish to pursue claims against the Company in connection with such cases. I understand that by
signing this Agreement I will be precluded from pursuing such claims, and will be waiving any
rights I might otherwise have had as a result of such lawsuits.

6

 

          I agree and understand that if, hereafter, I discover facts different from or in addition to
those which I now know or believe to be true, that the waivers of this General Release of All
Claims (“General Release”) shall be and remain effective in all respects notwithstanding such
different or additional facts or the discovery thereof.

II. Confidential Information & Company Employees

     I hereby agree and understand that:

     A. I am required to return to the Company immediately upon my termination of employment all
Company Information, including but not limited to notebooks, notes, manuals, memoranda, records,
diagrams, blueprints, bulletins, formulas, reports, computer programs, or other data or
memorializations of any kind, as well as any Company property or equipment, that I have in my
possession or under my control. I further agree and understand that I am not entitled or
authorized to keep any portions, summaries or copies of Company Information, and that I am under a
continuing obligation to keep all Company Information confidential and not to disclose it to any
third party in the future. I understand that the term “Company Information” includes, but is not
limited to, the following:

	 	•	 	Trade secret, information, matter or thing of a confidential, private or secret
nature, connected with the actual or anticipated products, research, development or business
of the Company or its customers, including information received from third parties under
confidential conditions; and
	 
	 	•	 	Other technical, scientific, marketing, business, product development or financial
information, the use or disclosure of which might reasonably be determined to be contrary to
the interests of the Company.

     B. I am prohibited for a period of one (1) year after the termination of my employment, from
soliciting for employment, whether as an employee, independent contractor, or agent, any Company
employee; and for that same time period I am prohibited from encouraging or otherwise enticing any
Company employee to terminate his or her employment with the Company.

     C. The promises and agreements of this Section II. are a material inducement to the Company to
provide me with the payments and benefits under the Plan and that, for the breach thereof, the
Company will be entitled to pursue its legal and equitable remedies against me, including, without
limitation, the right to immediately cease payments made pursuant to the Plan and/or seek
injunctive relief; provided, however, this General Release will remain in full force and effect.

7

 

III. Entire Agreement

          I agree and understand that this General Release contains the entire agreement between the
Company and me with respect to any matters referred to in the General Release, and supersedes any
and all previous oral or written agreements.

IV. No Admission

          I agree and understand that neither the fact nor any aspect of this General Release is
intended, should be deemed, or should be construed at any time to be any admission of liability or
wrongdoing by either myself or the Company.

V. Severability

          I agree and understand that if any provision, or portion of a provision, of this General
Release is, for any reason, held to be unenforceable, that such unenforceability will not affect
any other provision, or portion of a provision, of this General Release and this General Release
shall be construed as if such unenforceable provision or portion had never been contained herein.

VI. Dispute Resolution

          I hereby agree and understand that any and all disputes regarding any alleged breach of this
General Release 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 I reside at the time
the dispute arises, at my 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. I understand that this
arbitration clause applies to all claims, including claims under federal or state employment or
civil rights laws (other than claims for workers’ compensation or unemployment insurance benefits).
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. I understand 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. I understand 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 General Release, 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. I understand that the Company will pay the costs of
arbitration in excess of the costs I would incur to bring such claim in a civil court.

8

 

VII. Waiver

          By signing this Agreement, I acknowledge that:

	 	a.	 	I have carefully read, and understand, this Agreement;
	 
	 	b.	 	I have been given forty-five (45) days to consider my rights and
obligations under this Agreement and to consult with an attorney; provided,
however, that I am entitled to only twenty-one (21) days for this purpose if the
offer of benefits under the Plan is made to only one employee.
	 
	 	c.	 	I have been provided a notice by the Company, as required by the
Older Workers Benefit Protection Act of 1990, that informed me about the
decisional units covered by the reduction in force program, the eligibility
factors for the reduction in force program, the factors used in selecting
employees for participation in the program, any time limits applicable to the
program, the job titles and ages of the employees in my decisional unit selected
for participation in the program and the job titles and ages of the employees in
the same decisional unit not selected for participation in the program; provided,
however, that I am not entitled to this notice if the offer of benefits under the
Plan is made to only one employee.
	 
	 	d.	 	The Company advised me to consult with an attorney and/or any other
advisors of my choice before signing this Agreement;
	 
	 	e.	 	I understand that this Agreement is legally binding and by
signing it I give up certain rights;
	 
	 	f.	 	I have voluntarily chosen to enter into this Agreement and have not
been forced or pressured in any way to sign it;
	 
	 	g.	 	I knowingly and voluntarily release Company, including its
affiliates, predecessors, successors, parents, subsidiaries or assigns and any of
their respective officers, directors, agents, employees, and representatives from
any and all claims I may have, known or unknown, in exchange for the payments I
have obtained by signing this Agreement, and that these payments are in addition
to any payments I would have otherwise received if I did not sign this Agreement;
	 
	 	h.	 	The General Release in this Agreement includes a waiver and release
of all claims I may have under the Age Discrimination in Employment Act of 1967
(29 U.S.C. § 621 et seq.); and
	 
	 	i.	 	This Agreement does not waive any rights or claims that may arise
after this Agreement is signed and becomes effective, which is eight (8) days
after I sign it.

9

 

VIII. Opportunity to Revoke and Effective Date

          I understand that this General Release will not become effective until expiration of the
seventh (7th) day after I sign it; provided that I do not revoke it during those seven (7) days,
and that for a period of seven (7) days after I sign this General Release, I may revoke it. I
agree and understand that if I decide to revoke this General Release after I sign it, I can do so
only by delivering a written notification of my revocation to the Company by no later than the
seventh (7th) day after I sign this General Release, as follows:

Lesley Ngai

Covad Communications Company

Human Resources Dept.

110 Rio Robles

San Jose, California 95134

Fax: (408) 952-7404

IX. Miscellaneous Acknowledgements

     A. I hereby acknowledge that I understand that, but for my signing of this General Release and
failure to revoke it during seven (7) days thereafter, I would not be entitled to nor would I be
provided with any of the payments and benefits under the Plan. I understand that no payments and
benefits will be provided to me until this General Release becomes effective. I understand further
that, even if I did not sign this General Release or if I sign and then revoke it within seven (7)
days thereafter, I would still be entitled to:

          1. All wages, including any paid vacation, less applicable deductions, earned by me
through my termination date; and

          2. The opportunity, if I am eligible, to elect, at my sole expense, to continue to
participate in (and, if applicable, my dependents are eligible to elect to continue their
participation in) the group health insurance plans provided by the Company pursuant to the
terms and conditions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended (“COBRA”).

     B. I hereby acknowledge that any agreement that I signed in connection with my employment with
the Company regarding employee inventions, authorship, proprietary and confidential information
shall remain in full force and effect following the termination of my employment.

10

 

EMPLOYEE’S ACCEPTANCE OF GENERAL RELEASE

BEFORE SIGNING MY NAME TO THIS GENERAL RELEASE, I STATE THAT: I HAVE READ IT; I UNDERSTAND IT AND
KNOW THAT I AM GIVING UP IMPORTANT RIGHTS; I AM AWARE OF MY RIGHT TO CONSULT WITH AN ATTORNEY
BEFORE SIGNING IT; AND I HAVE SIGNED IT KNOWINGLY AND VOLUNTARILY.

Date delivered to employee _________, 200_

Signed this ______day of __________, 200_

	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Employee’s Signature 	 
	 	 	 
	 
	 	 	 
	 	
 	 
	 	Employee’s Name (Printed) 	 
	 	 	 
	 

     Copies of the signed release or revocation letter should be mailed or faxed to:

Lesley Ngai

Covad Communications Company

Human Resources Dept.

110 Rio Robles, San Jose, California 95134

Fax: (408) 952-7404

11exv10w4

 

Exhibit 10.4

CHANGE OF CONTROL AGREEMENT

     This Change of Control Agreement (the “Agreement”) is made and entered into effective
as of September 7, 2007, by and between Charles E. Hoffman (the “Executive”) and Covad
Communications Group, Inc. (“Parent”) and its Subsidiaries (collectively the “Company”).

     Section 1. RECITALS.

     A. It is expected that Parent from time to time will consider the possibility of acquisition
by another entity, or that a change in control may otherwise occur with or without the approval of
Parent’s Board of Directors (the “Board”). The Compensation Committee of the Board (the
“Committee”) recognizes that such consideration can be a distraction to the Executive, an executive
officer of the Company, and can cause the Executive to consider alternative employment
opportunities. The Committee has determined that it is in the best interests of Parent and its
shareholders to assure that the Company will have the continued dedication and objectivity of the
Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined
below) of Parent.

     B. The Committee believes that it is in the best interests of the Company and its shareholders
to provide the Executive with an incentive to continue his or her employment with the Company and
to motivate the Executive to maximize the value of Parent upon a Change of Control.

     C. The Committee believes that it is imperative to provide the Executive with certain benefits
under certain circumstances in connection with a Change of Control, which benefits are intended to
provide the Executive with financial security and sufficient encouragement to remain with the
Company notwithstanding the possibility of a Change of Control.

     D. To accomplish the foregoing objectives, the Committee has directed the Company, upon
execution of this Agreement by the Executive, to agree to the terms provided in this Agreement.

     Section 2. AGREEMENT. In consideration of the mutual covenants contained in this Agreement,
and in consideration of the continuing employment of Executive by the Company, the parties agree as
follows:

     A. Term of Agreement. This Agreement shall terminate upon the earlier of: (a) the
termination of Executive’s employment for any reason prior to, and not in connection with, a Change
of Control; (b) September 7, 2009; or (c) the date that all obligations of the parties hereto with
respect to this Agreement have been satisfied. Notwithstanding the foregoing, in the event a
Change in Control occurs during the original or any extended term of this Agreement, this Agreement
will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such
Change in Control occurred; or (ii) until all obligations of the Company hereunder have been
fulfilled, and until all benefits required hereunder have been paid to the Executive.

     B. At-Will Employment. The Company and the Executive acknowledge that the Executive’s
employment is and shall continue to be at-will, as defined under applicable law. If

 

 

the Executive’s employment terminates for any reason, including (without limitation) any
termination prior to, and not in connection with, a Change of Control, the Executive shall not be
entitled to any payments or benefits, other than as provided by this Agreement, or as may otherwise
be available in accordance with applicable law and the terms of the Company’s established employee
plans and written policies at the time of termination.

     C. Separation Benefits Upon Certain Events Following Change of Control. If: (1) the
Executive’s employment is terminated (an “Involuntary Termination”) by the surviving entity
without Cause (as defined below) during the twenty-four (24) month period following a Change of
Control (the “Protected Period”); (2) the Executive resigns under circumstances that
constitute a Resignation for Good Reason (as defined below) during the Protected Period; or (3) the
Company or a successor company repudiates or breaches any material provision of this Agreement,
Executive shall be entitled to the following separation benefits:

          1. Stock Options and Restricted Stock. The terms of the 1997 Stock Plan, 2003
Employee Stock Purchase Plan and 2007 Equity Incentive Plan and the terms of any agreement with
respect to stock options, restricted stock or other equity compensation held by Executive shall
govern such equity compensation and are incorporated herein by reference.

          2. Severance Pay. Executive shall be entitled to receive within sixty (60) days
following the termination of Executive’s employment, an amount (less any severance pay to which the
Executive would be eligible to receive under any other severance plan or agreement in effect) equal
to the sum of (a) three (3) times Executive’s annualized rate of Base Salary in effect ninety (90)
days prior to the Effective Date of a Change in Control (b) three (3) times Executive’s annual
targeted amount under the Company’s short and/or long-term cash incentive programs, as such
opportunities exist ninety (90) days prior to the Effective Date of a Change of Control, subject to
all applicable taxes, adjusted as follows: If the total sum of (a) and (b) is equal to or over 120%
of three times Executive’s “base amount” determined for purposes of IRC Section 280G, Executive
will receive a gross up for taxes imposed on Executive pursuant to IRC Section 4999 at the same
time the payments subject to IRC Section 4999 excise taxes are paid or, in the event that
additional excise taxes on such payments are assessed by the Internal Revenue Service (“IRS”), by
the end of Executive’s year following Executive’s year in which Executive remits the IRC section
4999 taxes to the IRS; if the total sum of (a) and (b) is less than 120% of three times the
Executive’s “base amount” determined for purposes of IRC Section 280G, the amount payable under
this Agreement is capped at an amount such that the aggregate present value of all “parachute
payments” (computed as of the date of the Change of Control) equals 2.99 times Executive’s “base
amount” determined for purposes of IRC Section 280G, and there shall be no gross up for taxes
imposed on the executive pursuant to IRC Section 4999.

          3. COBRA Continuation Coverage. Executive’s existing coverage under the Company’s
group health plan (and, if applicable, the existing group health coverage for his or her eligible
dependents) will end on the last day of the month in which his or her employment terminates.
Executive and his or her eligible dependents may then be eligible to elect temporary continuation
coverage under the Company’s group health plan in accordance with the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”). Executive and his or her eligible dependents
will be provided with a COBRA election form and notice which describe his or her rights to
continuation coverage under COBRA. If Executive is eligible

2

 

for severance benefits under this Agreement at the time of the termination of employment and
Executive timely elects COBRA continuation coverage, then the Company will pay for COBRA coverage
for him or her and, if applicable, his or her eligible dependents for three (3) years; provided
that such payments shall not include COBRA coverage with respect to the Company’s Section 125
health care reimbursement plan. To comply with IRC Section 409A, this coverage will be provided in
a manner that precludes benefits provided in one calendar year from affecting the amount of
benefits available in another calendar year. If after eighteen (18) months or any other time prior
to the expiration of three (3) years, Executive (and his or her eligible dependents) are no longer
eligible for COBRA (or CalCOBRA) coverage, Executive will be paid a monthly amount equal to the
amount the Company properly paid for his or her COBRA coverage for the last month of COBRA (or
CalCOBRA) coverage, and no more, for the remainder of the three (3) year period. Notwithstanding
the foregoing, if at anytime prior to the exhaustion of the three (3) years, Executive commences
employment with an employer that offers health benefits substantially equal to or better than the
health benefit coverage offered by Company to him or her pursuant to COBRA, as determined by the
Company, whether or not Executive elects to receive such other health benefits, the payment by the
Company of the COBRA coverage cost will terminate as of his or her commencement of such employment.
After such period of Company-paid COBRA coverage, Executive (and, if applicable, his or her
eligible dependents) may continue COBRA coverage at his or her own expense in accordance with COBRA
(or CalCOBRA). No provision of this Agreement will affect the continuation coverage rules under
COBRA. Therefore, the period during which Executive must elect to continue the Company’s group
health plan coverage under COBRA, the length of time during which COBRA coverage will be made
available to him or her, and all his or her other rights and obligations under COBRA will be
applied in the same manner that such rules would apply in the absence of this Agreement. Any such
election is Executive’s responsibility, not the Company’s.

          4. Other Terminations. The Executive shall not be entitled to receive any benefits
under this Agreement in the event the Executive’s employment terminates: (1) for any reason other
than those described in Section 2.C.; (2) prior to, and not in connection with, the occurrence of a
Change of Control; (3) for Cause; or (4) after the Protected Period.

          5. Execution of Release of Claims. As a condition precedent to any Company obligation
to Executive pursuant to Section 2.C., Executive shall, upon or promptly following his last day of
employment with the Company, provide the Company with a valid, executed general release agreement
in a form acceptable to the Company, and such release agreement shall have not been revoked by the
Executive pursuant to any revocation rights afforded by applicable law. The Company shall have no
obligation to make any payment to the Executive pursuant to Section 2.C. unless and until the
release agreement contemplated by this Section 2.C.5 becomes irrevocable by the Executive in
accordance with all applicable laws, rules and regulations. The Executive agrees that the general
release agreement will require that, among other things, the Executive acknowledge, as a condition
to the payment of any benefits under Section 2.C. that such payments shall constitute the exclusive
and sole remedy for any termination of his employment, and the Executive will be required to
covenant, as a condition to receiving any such payment, not to assert or pursue any other remedies,
at law or in equity, with respect to any termination of employment.

3

 

          6. Section 409A. Notwithstanding any other provision of this Agreement, any payment
hereunder that is subject to IRC Section 409A(a)(2)(B)(i) shall not be made before the date that is
six months after the date of Executive’s separation from service or, if earlier, the date of death.
To the extent that this Agreement or any plan, program or award of the Company in which the
Executive participates or which has been or is granted by the Company to the Executive, as
applicable, is subject to Section 409A, the Company and the Executive agree that the terms and
conditions of this Agreement and such other plan, program or award shall be construed and
interpreted to the maximum extent reasonably possible, without altering the fundamental intent of
the agreement, to avoid the imputation of any tax, penalty or interest under Section 409A.

     Section 3. DEFINITION OF TERMS. The following terms referred to in this Agreement shall have
the following meanings:

          A.
“1934 Act”: the Securities Exchange Act of 1934, as amended, and the regulations
thereunder.

          B.
“Base Salary”: the salary of record paid to the Executive by the Company as annual
salary excluding amounts received under incentive or other bonus plans.

          C.
“Beneficial Owner”: as defined in Rule 13d-3 of the SEC under the 1934 Act.

          D.
“Cause”: defined as any of the following: (i) conviction of any felony which
includes as an element of the crime a premeditated intent to commit the act, (ii) any serious
misconduct in the course of employment or material violation of the Company’s Code of Conduct or
Employee Guide; (iii) habitual neglect of Executive’s duties (other than on account of
“disability”, as defined below) which materially adversely affects the performance of Executive’s
duties and continues for thirty (30) days following Executive’s receipt of notice from the Company,
which specifically identifies the nature of the habitual neglect and the duties that are materially
adversely affected and states that, if not cured, such habitual neglect constitutes grounds for the
termination of employment; except that Cause shall not mean: (1) bad judgment or negligence unless
it materially adversely affects the performance of Employee’s duties and continues for thirty (30)
days following Employee’s receipt of the notice described in Section 3.C.(iii); (2) any act or
omission believed by Executive in good faith to have been in or not opposed to the interest of the
Company (without intent to gain, directly or indirectly, a profit to which Executive was not
legally entitled); (3) any act or omission with respect to which a determination could properly
have been made by the Company that Executive met the applicable standard of conduct for
indemnification or reimbursement under such employer’s by-laws, any applicable indemnification
agreement, or applicable law, in each case in effect at the time of such act or omission; or (4)
any act or omission with respect to which notice of termination is given more than twelve (12)
months after the earliest date on which any member of the Committee, not a party to the act or
omission, knew or should have known of such act or omission. “Cause” for purposes of this Agreement
shall also mean Executive’s death or “disability”, which is defined as any medically determinable
physical or mental impairment that has lasted for a continuous period of not less than six (6)
months and can be expected to be

4

 

permanent or of indefinite duration, and that renders Executive unable to perform the
essential functions of his or her job even with reasonable accommodation.

          E.
“Change of Control”: shall include the occurrence of any of the following events:

          1. Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of Parent representing fifty percent (50%) or more of
the total voting power represented by the Parent’s then outstanding voting securities; or

          2. A change in the composition of the Board of Directors of Parent occurring within a two-year
period as a result of which fewer than a majority of the directors are “Incumbent Directors”
“Incumbent Directors” shall mean directors who either (A) are directors of Parent as of the date
hereof, or (B) are elected, or nominated for election, to the Board of Directors with the
affirmative votes (either by a specific vote or by approval of the proxy statement of the Parent in
which such person is named as a nominee for election as a director without objection to such
nomination) of at least a majority of the Incumbent Directors at the time of such election or
nomination; or

          3. The consummation of (A) a merger or consolidation of Parent with any other entity, other
than a merger or consolidation which would result in the voting securities of Parent outstanding
immediately prior thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or the entity that controls Parent or such
surviving entity) at least fifty percent (50%) of the total voting power represented by the voting
securities of Parent or such surviving entity or the entity that controls Parent or such surviving
entity outstanding immediately after such merger or consolidation, or (B) the sale or disposition
by the Parent of all or substantially all Parent’s assets; or

          4. The shareholders approve a plan of complete liquidation of Parent.

          F. “Code”: the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.

          G. “Effective Date”: means the first date on which a Change of Control occurs during
the Agreement Term. Despite anything in this Agreement to the contrary, if the Company terminates
Executive’s employment before the date of a Change of Control, and if Executive reasonably
demonstrates that such termination of employment (a) was at the request of a third party who had
taken steps reasonably calculated to effect the Change of Control or (b) otherwise arose in
anticipation of the Change of Control, then “Effective Date” shall mean the date immediately before
the date of such termination of employment.

5

 

          H. “Resignation For Good Reason”: shall mean, subject to the right of either party to
arbitrate a dispute with respect thereto in accordance with the terms of this Agreement,
Executive’s resignation as a result of and within 360 days of the initial existence of one of the
following:

          1. A material diminution in Executive’s reporting requirements, responsibilities, authority or
duties held by, exercised by and assigned to him or her at any time during the 90-day period
immediately before the Effective Date of the Change of Control;

          2. Executive is requested to principally perform services at a location more than 40 miles
from the location where Executive was performing them during the 90-day period immediately before
the Effective Date of the Change of Control;

          3. A reduction of ten percent (10%) or more in Executive’s Base Salary, other than a reduction
implemented with his or her consent or a reduction that is equivalent to a reduction in Base Salary
imposed on peer executives of Parent (if Executive is an employee of Parent) or a Subsidiary (if
Executive is an employee of a Subsidiary); or

          4. A significant reduction by the Company of the Executive’s aggregate incentive opportunities
under the Company’s short and/or long-term incentive programs, as such opportunities exist ninety
(90) days prior to the Change of Control, which results in a material negative change in overall
compensation.

provided, however, that in all cases described above, Executive must give the Company notice of the
existence of the conditions constituting Good Reason within ninety (90) days of the initial
condition occurring and the Company must be provided a period of at least thirty (30) days during
which it may remedy the condition.

          I. “SEC”: the Securities and Exchange Commission.

          J. “Subsidiary” or “Subsidiaries”: any corporation as defined in Section
424(f) of the Code with the Company being treated as the employer corporation for purposes of this
definition, and any partnership or limited liability company in which Parent or any Subsidiary has
a direct or indirect interest (whether in the form of voting power or participation in profits or
capital contribution) of 50% or more. The determination of Subsidiary status shall be made, in the
case of a Change of Control, at the time of the occurrence of the event constituting a Change of
Control; and in the case of an event relating to employment status or benefits, at the time such
event occurs.

          K. “Voting Securities”: means securities of a corporation that are entitled to vote
generally in the election of directors of such corporation.

     Section 4. NOTICE & ARBITRATION

     A. Notice. Notices and all other communications contemplated by this Agreement shall
be in writing and shall be deemed to have been duly given when personally delivered or when mailed
by U.S. registered or certified mail, return receipt requested and postage prepaid.

6

 

Mailed notices to the Executive shall be addressed to the Executive at the home address that
the Executive most recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, 110 Rio Robles, San Jose, CA
95134, and all notices shall be directed to the attention of the Senior Vice President in charge of
Human Resources.

     B. Arbitration and Dispute Resolution.

          1. In the event disputes arise between them (other than claims that Executive may have for
workers’ compensation or unemployment insurance benefits, or claims based on any state or federal
law that have been determined by the controlling judicial authority of appropriate jurisdiction not
to be arbitrable pursuant to pre-dispute arbitration agreements such as this arbitration
provision), both Parties will be bound by this arbitration clause which provides for final and
binding arbitration for disputes arising out of or relating to Executive’s employment with the
Company, the termination of Executive’s employment, and/or any agreements previously or hereafter
entered into between Executive and the Company. The parties shall arbitrate such disputes under
the most recently issued National Rules for the Resolution of Employment Disputes of the American
Arbitration Association. All disputes shall be resolved by a single arbitrator, who shall be an
attorney duly admitted to practice in California, selected by the Company and Executive.
Notwithstanding the foregoing, unless otherwise prohibited by applicable law, 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 described above as subject to these arbitration
provision, including any claims relevant to the application for provisional relief, and shall not
be obligated to post a bond or other security in seeking such relief unless specifically required
by law.

          2. Once the arbitration has commenced, both the Company and Executive shall have the right to
conduct normal civil discovery, the extent and quantity of such shall be subject to the discretion
of the selected arbitrator. The arbitrator shall have the exclusive authority to resolve any
issues relating to the arbitrability of the dispute or the validity or interpretation of this
arbitration provision, to rule on motions to dismiss and/or motions for summary judgment applying
the standards governing such motions under the California Code of Civil Procedure, and shall be
empowered to award either Party any remedy at law or in equity that the prevailing party would
otherwise have been entitled to had the matter been litigated in court. The arbitrator shall issue
a decision or award in writing, stating the essential findings of fact and conclusions of law.
Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction.
Costs shall be allocated such that Executive will not incur any costs other than that which would
be incurred to file a civil action in the Superior Court for the State of California or other court
with proper jurisdiction over the dispute.

          3. BOTH THE COMPANY AND EXECUTIVE EXPRESSLY WAIVE ANY RIGHT THAT EITHER PARTY HAS OR MAY HAVE
TO A CIVIL JURY TRIAL. ONLY AN ARBITRATOR, NOT A JUDGE OR JURY, WILL DECIDE ANY SUCH DISPUTE.
BOTH PARTIES AGREE THAT NO ACTION MAY BE BROUGHT IN COURT EXCEPT ACTIONS TO COMPEL ARBITRATION, TO
OBTAIN THE DISMISSAL OF ACTIONS FILED IN COURT IN CONTRAVENTION OF THIS

7

 

ARBITRATION AGREEMENT, OR TO SEEK PROVISIONAL RELIEF AS MAY BE ALLOWED BY STATE OR FEDERAL
LAW.

          4. Although all claims arising between the parties are subject to arbitration, unless
otherwise prohibited by applicable law, 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 Agreement, including any claims relevant to the
application for provisional relief, and shall not be obligated to post a bond or other security in
seeking such relief unless specifically required by law. Although a court may grant provisional
injunctive and/or equitable relief, the arbitrator shall at all times retain the power to grant
permanent injunctive relief, or any other final remedy.

     Section 5. MISCELLANEOUS PROVISIONS.

     A. Successors. Any successor to Parent (whether direct or indirect and whether by
purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of
the Parent’s business and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a succession. The
terms of this Agreement and all of Executive’s rights hereunder shall inure to the benefit of, and
be enforceable by, the Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.

     B. No Duty to Mitigate. Executive shall not be required to mitigate the amount of any
payment contemplated by this Agreement (whether by seeking new employment or in any other manner),
nor, except as otherwise provided in this Agreement, shall any such payment be reduced by any
earnings that Executive may receive from any other source.

     C. Waiver. No provision of this Agreement shall be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by
an authorized officer of the Company (other than Executive). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same condition or
provision at another time.

     D. Whole Agreement. No agreements, representations or understandings (whether oral or
written and whether express or implied) which are not expressly set forth in this Agreement have
been made or entered into by either party with respect to the subject matter hereof. This
Agreement supersedes any agreement of the same title and/or concerning similar subject matter dated
prior to the date of this Agreement, including but not limited to any Change of Control Agreement
previously offered by the Company, and by execution of this Agreement both parties agree that any
such predecessor agreement shall be deemed null and void; provided, however, that nothing in this
Agreement is intended to supersede: (1) any Executive Severance Plan in effect on or after
September 7, 2007; or (2) any obligation of Covad to pay salary continuation benefits to the
Executive pursuant to the letter dated May 29, 2001 from the Company to the Executive whereby Covad
made an offer of employment to the Executive.

8

 

     E. Choice of Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California without reference to conflict of
laws provisions.

     F. Severability. If any term or provision of this Agreement or the application
thereof to any circumstance shall, in any jurisdiction and to any extent, be invalid or
unenforceable, such term or provision shall be ineffective as to such jurisdiction to the extent of
such invalidity or unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions of this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or unenforceable, and a suitable and
equitable term or provision shall be substituted therefore to carry out, insofar as may be valid
and enforceable, the intent and purpose of the invalid or unenforceable term or provision.

     G. Legal Fees and Expenses. The parties shall each bear their own expenses, legal
fees and other fees incurred in connection with this Agreement.

     H. No Assignment of Benefits. The rights of any person to payments or benefits under
this Agreement shall not be made subject to option or assignment, either by voluntary or
involuntary assignment or by operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor’s process, and any action in violation of this subsection
(h) shall be void.

     I. Employment Taxes. All payments made pursuant to this Agreement will be subject to
withholding of applicable income and employment taxes unless otherwise expressly noted.

     J. Assignment by the Company. The Company may assign its rights under this Agreement
to an affiliate (including a parent or subsidiary) without Executive’s consent, and an affiliate
may assign its rights under this Agreement to another affiliate of the Company without Executive’s
consent; provided, however, that no assignment shall be made if the book value of the assignee is
less than the book value (as determined in accordance with Generally Accepted Accounting
Principles) of the Company at the time of assignment. In the case of any such assignment, the term
“Company” when used in a section of this Agreement shall mean the entity that actually employs
Executive.

     K. Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together will constitute one and the same instrument.

     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the day and year first above written.

	 	 	 	 	 
	Covad Communications Group, Inc.	 	Charles E. Hoffman
	 
	 	 	 	 
	By:
	 	/s/ Larry Irving	 	/s/ Charles Hoffman
	 
	 	 	 
	 

	
	 	Its:  Director and
Chairperson of the Compensation Committee	 	 

9

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