Document:

exv10w1

 

Exhibit 10.1

As approved by Board of Directors

April 26, 2007

COVAD COMMUNICATIONS GROUP, INC.

2007 EQUITY INCENTIVE PLAN

     1. PURPOSE. The purpose of the Covad Communications Group, Inc. 2007 Equity Incentive Plan
(the “Plan”) is to provide incentives to attract, retain and motivate eligible persons whose
present and potential contributions are important to the success of the Company, its Subsidiaries
by offering them an opportunity to participate in the Company’s future performance through awards
of Options, Restricted Stock, Stock Bonuses, Stock Appreciation Rights (“SARs”) and Restricted
Stock Units (“RSUs”). Capitalized terms not defined elsewhere in the text are defined in Section
25.

     2. SHARES SUBJECT TO THE PLAN.

          2.1 Number of Shares Available. Subject to Sections 2.2 and 21, seven million four
hundred thousand (7,400,000) Shares are available for grant and issuance under the Plan. Shares
subject to Awards that are cancelled, forfeited, settled in cash or that expire by their terms will
be returned to the pool of Shares available for grant and issuance under the Plan. If the Exercise
Price or Purchase Price of any Award, or the tax withholding with respect to any Award, is
satisfied by tendering Shares to the Company (by either actual delivery or attestation), or if an
SAR is exercised, only the net number of Shares issued to the Participant, will be deemed to have
been issued from the Plan and to have reduced the number of Shares remaining available for delivery
under this Plan. No more than one hundred million (100,000,000) Shares shall be issued pursuant to
the exercise of ISOs. The Company will reserve and keep available at least a sufficient number of
Shares to satisfy the requirements of all Awards.

          2.2 Adjustment of Shares. If the number of outstanding Shares is changed by a stock
dividend, recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company, without consideration,
then (a) the number of Shares reserved for issuance and future grant under the Plan set forth in
Section 2.1, (b) the Exercise Prices of and number of Shares subject to outstanding Options and
SARs, (c) the number of Shares subject to other outstanding Awards, (d) the maximum number of
shares that may be issued as ISOs set forth in Section 2.1; and (e) the maximum number of shares
that may be issued to an individual or to a new employee in any one fiscal year set forth in
Section 3, will be proportionately adjusted, subject to any required action by the Board or the
stockholders of the Company and compliance with applicable securities laws; provided that fractions
of a Share will not be issued but will either be replaced by a cash payment equal to the Fair
Market Value of such fraction of a Share or will be rounded down to the nearest whole Share, as
determined by the Committee; and provided further that the Exercise Price of any Option or SAR may
not be decreased to below the par value of the Shares.

     3. ELIGIBILITY. ISOs may be granted only to employees (including officers and directors who
are also employees) of the Company or Subsidiary. All other Awards may be granted to employees,
officers, directors, consultants, independent contractors and advisors of the Company or
Subsidiary. The Committee (or its designee under 4.1(c)) will from time to time determine in its
sole discretion and designate the eligible persons who will be granted Awards under the Plan. The
Plan is discretionary in nature, and the grant of Awards by the Committee is voluntary and
occasional. A person may be granted more than one Award under the Plan. However, no person will
be eligible to receive more than two million (2,000,000) Shares issuable from Awards granted in a
given calendar year, other than new employees of the Company or Subsidiary (including new employees
who are also officers and directors of the Company or Subsidiary), who are eligible to receive up
to a maximum of four million (4,000,000) Shares issuable under Awards granted in the calendar year
in which they commence their employment.

 

 

     4. ADMINISTRATION.

          4.1 Committee Authority. The Plan shall be administered by the Committee.
Notwithstanding any provision of the Plan to the contrary, administration of the Plan shall at all
times be limited by the requirement that any administrative action or exercise of discretion shall
be void (or suitably modified when possible) if necessary to avoid the application to any
Participant of taxation under Section 409A of the Code. Subject to the general purposes, terms and
conditions of the Plan, the Committee will have full power to implement and carry out the Plan.
Without limiting the previous sentence, the Committee will have the authority to:

	 	(a)	 	construe and interpret the Plan, any Award Agreement and any other agreement or
document executed pursuant to the Plan;
	 
	 	(b)	 	prescribe, amend and rescind rules and regulations relating to the Plan or any
Award, including determining the forms and agreements used in connection with the Plan;
provided that the Committee may delegate to the Company’s legal department the
authority to approve revisions to the forms and agreements used in connection with the
Plan that are designed to facilitate Plan administration, and that are not inconsistent
with the Plan or with any resolutions of the Committee relating to the Plan;
	 
	 	(c)	 	select persons to receive Awards; provided that the Committee may delegate to
one or more Executive Officers (who would also be considered “officers” under Delaware
law) the authority to grant an Award under the Plan to Participants who are not
Insiders;
	 
	 	(d)	 	determine the terms of Awards;
	 
	 	(e)	 	determine the number of Shares or other consideration subject to Awards;
	 
	 	(f)	 	determine whether Awards will be granted singly, in combination, or in tandem
with, in replacement of, or as alternatives to, other Awards under the Plan or any
other incentive or compensation plan of the Company or any Subsidiary;
	 
	 	(g)	 	grant waivers of Plan or Award conditions;
	 
	 	(h)	 	determine the vesting, exercisability, transferability, and payment of Awards;
	 
	 	(i)	 	correct any defect, supply any omission, or reconcile any inconsistency in the
Plan, any Award or any Award Agreement;
	 
	 	(j)	 	determine whether an Award has been earned;
	 
	 	(k)	 	amend the Plan;

(l) to take any action consistent with the terms of the Plan, either before or after an
Award has been granted, which it deems necessary or advisable to comply with any
governmental laws or regulatory requirement of a foreign country, including, but not limited
to, modifying or amending the terms and conditions governing any Awards or establishing any
local country plans as sub-plans to this Plan; or

	 	(m)	 	make all other determinations necessary or advisable for the administration of
the Plan.

          4.2 Committee Interpretation and Discretion. Any determination made by the Committee
with respect to any Award shall be made in its sole discretion at the time of grant of the Award
or, unless in contravention of any express term of the Plan or Award, at any later time, and such
determination shall be final and binding on the Company and all persons having an interest in any
Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement
shall be submitted by the Participant or Company to the Committee for review. The resolution of
such a dispute by the Committee shall be final and binding on the Company and the

 

 

Participant. The Committee may delegate to one or more Executive Officers the authority to review
and resolve disputes with respect to Awards held by Participants who are not Insiders, and such
resolution shall be final and binding on the Company and the Participant.

          4.3 Administation with respect to Section 162(m) of the Code. When necessary or
desirable for an Award to qualify as “performance-based compensation” under Section 162(m) of the
Code the Committee shall include at least two persons who are “outside directors” (as defined under
Section 162(m) of the Code) and at least two (or a majority if more than two then serve on the
Committee) such “outside directors” shall approve the grant of such Award and timely determine the
Performance Period and any Performance Factors upon which vesting of any portion of such Award is
to be subject. When required by Section 162(m) of the Code, then prior to settlement of any such
Award at least two (or a majority if more than two then serve on the Committee) such “outside
directors” then serving on the Committee shall determine and certify in writing the extent to which
such Performance Factors have been timely achieved and the extent to which the Shares subject to
such Award have thereby been earned.

     5. OPTIONS.

          5.1 Grant of Options. The Committee may grant Options to Participants and will
determine (a) whether the Options will be ISOs or NSOs; (b) the number of Shares subject to the
Option, (c) the Exercise Price of the Option, (d) the period during which the Option may be
exercised, (e) the vesting and exercisability of the Option and (f) all other terms and conditions
of the Option, subject to the provisions of this Section 5 and the Plan. Each Option granted under
the Plan will be evidenced by an Award Agreement, which shall expressly identify the Option as an
ISO or NSO. The date of grant of an Option will be the date on which the Committee makes the
determination to grant the Option, unless the Committee otherwise specifies a later date.

          5.2 Exercise Period; Expiration Date and Exercise. An Option will be exercisable
within the times or upon the occurrence of events determined by the Committee and set forth in the
Award Agreement governing such Option and subject to Company policies established by the Committee
(or by individuals to whom the Committee has delegated responsibility) from time to time. The
Committee may provide for Options to become exercisable at one time or from time to time,
periodically or otherwise (including, without limitation, upon the attainment during a Performance
Period of performance goals based on Performance Factors), in such number of Shares or percentage
of Shares subject to the Option as the Committee determines. The Award Agreement shall set forth
the Expiration Date; provided that no Option will be exercisable after the expiration of ten years
from the date the Option is granted; and provided further that no ISO granted to a Ten Percent
Stockholder will be exercisable after the expiration of five years from the date the Option is
granted.

          5.3 Exercise Price. The Exercise Price of an Option will be determined by the
Committee when the Option is granted and may not be less than the Fair Market Value on the date of
grant; provided that the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be
less than 110% of the Fair Market Value of the Shares on the date of grant.

          5.4 Vesting and Termination.

     (a) Vesting. Except as may be set forth in the Participant’s Award Agreement, any
Option granted to a Participant will cease to vest on the Participant’s Termination Date. If the
Participant does not exercise his or her Option within the time specified by the Committee or as
set forth in the Award Agreement, the Option shall terminate.

     (b) Post-Termination Exercise Period. Subject to Section 10.4, following a
Participant’s Termination, the Participant’s Option may be exercised to the extent vested and
exercisable as set forth below:

          (i) no later than three months after the Termination Date if a Participant is Terminated for
any reason except death or Disability, unless a different period of time period is specifically set
forth in the Participant’s Award Agreement; provided that no Option may be exercised after the
Expiration Date of the Option; or

 

 

          (ii) no later than twelve months after the Termination Date in the case of Termination due to
Disability or death, unless a different time period is specifically set forth in the Participant’s
Award Agreement; provided that no Option may be exercised after the Expiration Date of the Option.

          5.5 Limitations on ISOs. The aggregate Fair Market Value (determined as of the date
of grant) of Shares with respect to which ISOs are exercisable for the first time by a Participant
during any calendar year (under the Plan or under any other incentive stock option plan of the
Company or any Subsidiary) shall not exceed $100,000. If the Fair Market Value of Shares on the
date of grant with respect to which ISOs are exercisable for the first time by a Participant during
any calendar year exceeds $100,000, the Options for the first $100,000 worth of Shares to become
exercisable in that calendar year will be ISOs, and the Options for the Shares with a Fair Market
Value in excess of $100,000 that become exercisable in that calendar year will be NSOs. If the
Code is amended to provide for a different limit on the Fair Market Value of Shares permitted to be
subject to ISOs, such different limit shall be automatically incorporated into the Plan and will
apply to any Options granted after the effective date of the Code’s amendment.

          5.6 Notice of Disqualifying Dispositions of Shares Acquired on Exercise of an ISO.
The Award Agreement for an ISO shall require that, if a Participant sells or otherwise disposes of
any Shares acquired pursuant to the exercise of an ISO on or before the later of (a) the date two
years after the Date of Grant, and (b) the date one year after the exercise of the ISO (in either
case, a “Disqualifying Disposition”), the Participant shall immediately notify the Company in
writing of such Disqualifying Disposition.

          5.7 No Disqualification. Notwithstanding any other provision in the Plan, no term of
the Plan relating to ISOs will be interpreted, amended or altered, and no discretion or authority
granted under the Plan will be exercised, so as to disqualify the Plan under Section 422 of the
Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422
of the Code. Any outstanding ISO that is modified, extended, renewed or otherwise altered shall be
treated in accordance with Section 424(h) of the Code and the regulations thereunder.

     6. RESTRICTED STOCK AWARDS.

          6.1 Awards of Restricted Stock. A Restricted Stock Award is an offer by the Company
to sell to a Participant Shares that are subject to restrictions. The Committee will determine to
whom an offer will be made, the number of Shares the person may purchase, the Purchase Price, the
restrictions under which the Shares will be subject and all other terms and conditions of the
Restricted Stock Award. A Participant accepts a Restricted Stock Award by signing and delivering
to the Company an Award Agreement with full payment of the Purchase Price within 30 days from the
date the Award Agreement was delivered to the Participant. If the Participant does not accept the
Restricted Stock Award within 30 days, then the offer of the Restricted Stock Award will terminate,
unless the Committee determines otherwise. At least three years, as measured from the date of
grant, shall pass before any portion of a Restricted Stock Award may vest.

          6.2 Purchase Price. The Purchase Price for a Restricted Stock Award will be
determined by the Committee and may be less than Fair Market Value (but not less than the par value
of the Shares) on the date the Restricted Stock Award is granted. Payment of the Purchase Price
must be made in accordance with Section 11 of the Plan and the Award Agreement, and in accordance
with any procedures established by the Company.

          6.3 Termination. Except as may be set forth in the Participant’s Award Agreement, any
Restricted Stock Award will cease to vest on the Participant’s Termination Date.

     7. STOCK BONUS AWARDS.

          7.1 Awards of Stock Bonuses. A Stock Bonus Award is an award to a Participant of
Shares (which may consist of fully-vested Stock, Restricted Stock or Restricted Stock Units) for
services to be rendered or for past services already rendered to the Company or any Subsidiary and
any vesting requirement may be based on continuation in service or other factors (including,
without limitation, upon the attainment during a Performance

 

 

Period of performance goals based on Performance Factors). No payment will be required for Shares
awarded pursuant to a Stock Bonus Award (other than any minimum payment required by applicable law
which may be made in the form of any legally acceptable form of consideration).

          7.2 Form of Payment to Participant. The Stock Bonus Award shall be settled within the
period of time permitted under Section 409A of the Code without triggering the “additional tax”
under Section 409A(a)(1)(B) of the Code. Payment may be made in the form of cash, whole Shares, or
a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus
Award on the date of payment, and in either a lump sum payment or in installments, all as the
Committee determines.

          7.3 Termination of Participant. Except as may be set forth in the Participant’s Award
Agreement, any Stock Bonus Award will cease to vest on the Participant’s Termination Date.

     8. STOCK APPRECIATION RIGHTS.

          8.1 Awards of SARs. A Stock Appreciation Right (“SAR”) is an award to a Participant
that may be settled in Shares (which may consist of Restricted Stock or RSUs), having a value equal
to the value determined by multiplying the difference between the Fair Market Value on the date of
exercise over the Exercise Price and the number of Shares with respect to which the SAR is being
settled. The SAR may be granted for services to be rendered or for past services already rendered
to the Company, or any Subsidiary.

          8.2 Exercise Period and Expiration Date. A SAR will be exercisable within the times
or upon the occurrence of events determined by the Committee and set forth in the Award Agreement
governing such SAR (including, without limitation, upon the attainment during a Performance Period
of performance goals based on Performance Factors). The Award Agreement shall set forth the
Expiration Date; provided that no SAR will be exercisable after the expiration of ten years from
the date the SAR is granted.

          8.3 Exercise Price. The Committee will determine the Exercise Price of the SAR when
the SAR is granted, however the Exercise Price shall not be less than the Fair Market Value on the
date of grant.

          8.4 Termination.

     (a) Vesting. Any SAR granted to a Participant will cease to vest on the Participant’s
Termination Date. If the Participant does not exercise his or her SAR within the time specified by
the Committee or as set forth in the Award Agreement, the SAR shall terminate.

     (b) Post-Termination Exercise Period. Subject to Section 10.4, following a
Participant’s Termination, the Participant’s SAR may be exercised to the extent vested and
exercisable as set forth below:

          (i) no later than three months after the Termination Date if a Participant is Terminated for
any reason except death or Disability, unless a different period of time period is specifically set
forth in the Participant’s Award Agreement; provided that no SAR may be exercised after the
Expiration Date of the SAR; or

          (ii) no later than twelve months after the Termination Date in the case of Termination due to
Disability or death, unless a different time period is specifically set forth in the Participant’s
Award Agreement; provided that no SAR may be exercised after its Expiration Date.

     9. RESTRICTED STOCK UNITS.

          9.1 Awards of Restricted Stock Units. An RSU is an award to a Participant covering a
number of Shares that may be settled in cash, or by issuance of those Shares for services to be
rendered or for past services already rendered to the Company or any Subsidiary or achievement of
other factors (including, without limitation, upon the attainment during a Performance Period of
performance goals based on Performance Factors). At least three years, as measured from the date
of grant, shall pass before any portion of an RSU may vest.

 

 

          9.2 Form and Timing of Settlement. To the extent permissible under applicable law,
the Committee may permit a Participant to defer payment under a RSU to a date or dates after the
RSU is earned, provided that the terms of the RSU and any deferral satisfy the requirements to
avoid imposition of the “additional tax” provided under Section 409A(a)(1)(B) of the Code (or any
successor provision) and any regulations or rulings promulgated thereunder. Payment may be made in
the form of cash or whole Shares or a combination thereof in a lump sum payment, all as the
Committee determines.

     10. OTHER PROVISIONS.

          10.1 Distribution of Award Agreements and Plan. The Award Agreement, Plan and other
documents may be delivered in any manner (including electronic distribution or posting) that meets
applicable legal requirements.

          10.2 Form of Award Agreement(s). Each Award granted under the Plan will be evidenced
by an Award Agreement, which will be in substantially a form (which need not be the same for each
Participant) that the Committee or an officer of the Company (pursuant to Section 4.1(b)) has from
time to time approved, and will comply with and be subject to the terms and conditions of the Plan.

          10.3 Procedures for Exercising or Settling an Award. A Participant or Authorized
Transferee may exercise or settle Awards by following the procedures established by the Company’s
stock administration department, as communicated and made available to Participants through the
Company’s electronic mail system, intranet site or otherwise.

          10.4 Black-out Periods and Post-Termination Exercisability. In the event a
Participant is prevented from exercising an Option or the Company is unable to settle an Award due
to any trading restrictions currently in effect with respect to the Company’s Shares at the time of
such Participant’s Termination, then the length of time applicable to such trading restrictions
shall toll any post-termination exercise period until such trading restriction lapses.

          10.5 Limitations on Exercise. The Committee may specify a reasonable minimum number
of Shares that may be purchased on any exercise of an Option or SAR; provided that the minimum
number will not prevent a Participant from exercising an Option or SAR for the full number of
Shares for which it is then exercisable. An Option or a SAR may only be exercised by the personal
representative of a Participant or an Authorized Transferee or by the person or persons to whom a
Participant’s rights under the Option or SAR shall pass by such person’s will or by the laws of
descent and distribution of the state of such person’s domicile at the time of death, and then only
as and to the extent that such person was entitled to exercise the Option or SAR on the date of
death.

          10.6 Terms of Awards. The Committee will determine an Award’s terms, including,
without limitation: (a) the number of Shares deemed subject to the Award; (b) the time or times
during which the Award may be exercised and (c) such other terms and conditions and conditions as
the Committee deems appropriate. Awards may be subject to performance goals based on Performance
Factors during any Performance Period as may be set out in advance in the Participant’s Award
Agreement. The Committee may adjust the performance goals applicable to Awards to take into
account changes in law and accounting and to make such adjustments as the Committee deems necessary
or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances.

     11. PAYMENT FOR SHARE PURCHASES.

          11.1 Payment. Payment for Shares purchased pursuant to the Plan may be made by any of
the following methods (or any combination of such methods) that are described in the applicable
Award Agreement and that are permitted by law:

	 	(a)	 	in cash or cash equivalent (including by check);

 

 

	 	(b)	 	in the case of exercise by the Participant, a Participant’s guardian or legal
representative or the authorized legal representative of a Participant’s heirs or
legatees after a Participant’s death, by cancellation of indebtedness of the Company to
the Participant;
	 
	 	(c)	 	by surrender of shares of the Company’s Common Stock that either: (1) were
obtained by the Participant or Authorized Transferee in the public market; or (2) if
the shares were not obtained in the public market, they have been paid for within the
meaning of SEC Rule 144;
	 
	 	(d)	 	in the case of exercise by the Participant, Participant’s guardian or legal
representative or the authorized legal representative of a Participant’s heirs or
legatees after a Participant’s death, by waiver of compensation due or accrued to the
Participant for services rendered;
	 
	 	(e)	 	with respect only to purchases upon exercise of an Option, and provided that a
public market for the Shares exists:

	 	(1)	 	through a “same day sale” commitment from the Participant or
Authorized Transferee and an NASD dealer meeting the requirements of the
Company’s “same day sale” procedures and in accordance with law; or
	 
	 	(2)	 	through a “margin” commitment from the Participant or Authorized Transferee and
an NASD dealer meeting the requirements of the Company’s “margin” procedures and in
accordance with law.

          11.2 Issuance of Shares. Upon payment of the applicable Purchase Price or Exercise
Price and compliance with other conditions and procedures established by the Company for the
purchase of Shares, the Company shall issue the Shares registered in the name of the Participant or
Authorized Transferee and shall deliver certificates representing the Shares (in physical or
electronic form, as appropriate). The Shares may be subject to legends or other restrictions as
described in Section 15 of the Plan.

     12. WITHHOLDING TAXES.

          12.1 Withholding Generally. Whenever Shares are to be issued in satisfaction of
Awards granted under the Plan, the Company may require the Participant to remit to the Company an
amount sufficient to satisfy minimum federal, state, local and foreign income or social security
tax withholding requirements prior to the delivery of any certificate(s) for the Shares. If a
payment in satisfaction of an Award is to be made in cash, the payment will be net of an amount
sufficient to minimum satisfy federal, state, local and foreign income or social security tax
withholding requirements.

          12.2 Stock Withholding. When, under applicable tax laws, a Participant incurs income
or social security tax liability in connection with the grant, exercise, vesting or payment of any
Award that is subject to income or social security tax withholding and the Participant is obligated
to pay the Company the amount required to be withheld, the Committee may, in its sole discretion,
allow the Participant to satisfy the minimum withholding tax obligation by electing to have the
Company withhold from the Shares to be issued that number of whole Shares having a Fair Market
Value equal to the minimum amount required to be withheld, determined on the date that the amount
of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld
for this purpose shall be made in accordance with the requirements established by the Committee and
be in writing in a form acceptable to the Committee.

     13. PRIVILEGES OF STOCK OWNERSHIP. No Participant or Authorized Transferee will have any
rights as a stockholder of the Company with respect to any Shares until the Shares are issued to
the Participant or Authorized Transferee. After Shares are issued to the Participant or Authorized
Transferee, the Participant or Authorized Transferee will be a stockholder and have all the rights
of a stockholder with respect to the Shares including the right to vote and receive all dividends
or other distributions made or paid with respect to such Shares; provided, that if the Shares are
Restricted Stock, any new, additional or different securities the Participant or Authorized
Transferee may become entitled to receive with respect to the Shares by virtue of a stock dividend,
stock

 

 

split or any other change in the corporate or capital structure of the Company will be subject to
the same restrictions as the Restricted Stock; provided further, that the Participant or Authorized
Transferee will have no right to retain such dividends or distributions with respect to Shares that
are repurchased at the Participant’s original Exercise Price or Purchase Price pursuant to Section
15.

     14. TRANSFERABILITY. As may be permitted by the Committee (and to the extent permitted by
applicable law and the terms of the Award Agreement), a Participant may transfer an Award to an
Authorized Transferee. Absent such permission, no Award and no interest therein, shall be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution, and no Award may be made subject to execution, attachment or
similar process.

     15. RESTRICTIONS ON SHARES. At the discretion of the Committee, the Company may reserve to
itself and/or its assignee(s) in the Award documentation a right to repurchase all or a portion of
a Participant’s Shares that are not “Vested” (as defined in the Award documentation), following the
Participant’s Termination, at any time within ninety days after the later of (a) the Participant’s
Termination Date or (b) the date the Participant purchases Shares under the Plan, for cash or
cancellation of purchase money indebtedness with respect to Shares, at the Participant’s original
Exercise Price or Purchase Price; provided that upon assignment of the right to repurchase, the
assignee must pay the Company cash equal to the excess of the Fair Market Value of the Shares over
the original Purchase Price.

     16. CERTIFICATES. All certificates for Shares or other securities delivered under the Plan
(whether in physical or electronic form, as appropriate) will be subject to stock transfer orders,
legends and other restrictions that the Committee deems necessary or advisable, including without
limitation restrictions under any applicable federal, state or foreign securities law, or any
rules, regulations and other requirements of the SEC or any stock exchange or automated quotation
system on which the Shares may be listed.

     17. ESCROW. To enforce any restrictions on a Participant’s Shares, the Committee may require
the Participant to deposit all certificates representing Shares, together with stock powers or
other transfer instruments approved by the Committee, appropriately endorsed in blank, with the
Company or an agent designated by the Company, to hold in escrow until such restrictions have
lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions
to be placed on the certificates.

     18. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award shall not be effective unless
the Award is in compliance with all applicable state, federal and foreign securities laws, rules
and regulations of any governmental body, and the requirements of any stock exchange or automated
quotation system on which the Shares may then be listed, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding any other
provision in the Plan, the Company shall have no obligation to issue or deliver certificates for
Shares under the Plan prior to (a) obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable, and/or (b) completion of any registration or other
qualification of such shares under any state, federal or foreign law or ruling of any governmental
body that the Company determines to be necessary or advisable. The Company shall be under no
obligation to register the Shares with the SEC or to effect compliance with the registration,
qualification or listing requirements of any state, federal or foreign securities laws, stock
exchange or automated quotation system, and the Company shall have no liability for any inability
or failure to do so.

     19. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Award granted under the Plan shall
confer or be deemed to confer on any Participant any right to continue in the employ of, or to
continue any other relationship with, the Company or any Subsidiary or limit in any way the right
of the Company or any Subsidiary to terminate a Participant’s employment or other relationship at
any time, with or without cause, as applicable laws allow.

     20. REPRICING PROHIBITED; EXCHANGE AND BUYOUT OF AWARDS. The repricing of Options or SARs is
prohibited without prior stockholder approval. The Committee may, at any time or from time to
time, authorize the Company, with prior stockholder approval, in the case of an Option or SAR
exchange, and the consent of the respective Participants, to issue new Awards in exchange for the
surrender and cancellation of any or

 

 

all outstanding Awards. The Committee may at any time buy from a Participant an Option previously
granted with payment in cash, Shares or other consideration, based on such terms and conditions as
the Committee and the Participant shall agree.

     21. CORPORATE TRANSACTIONS.

          21.1 Assumption or Replacement of Awards by Successor. In the event of a Corporate
Transaction any or all outstanding Awards may be assumed or replaced by the successor corporation,
which assumption or replacement shall be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially similar
consideration to Participants as was provided to stockholders (after taking into account the
existing provisions of the Awards). The successor corporation may also issue, in place of
outstanding Shares of the Company held by the Participant, substantially similar shares or other
property subject to repurchase restrictions no less favorable to the Participant. In the event
such successor corporation, if any, refuses to assume or replace the Awards, as provided above,
pursuant to a Corporate Transaction or if there is no successor corporation due to a dissolution or
liquidation of the Company, such Awards shall immediately vest as to 100% of the Shares subject
thereto at such time and on such conditions as the Board shall determine and the Awards shall
expire at the closing of the Corporate Transaction.

          21.2 Other Treatment of Awards. Subject to any greater rights granted to Participants
under Section 21.1, in the event of a Corporate Transaction, any outstanding Awards shall be
treated as provided in the applicable agreement or plan of merger, consolidation, dissolution,
liquidation or sale of assets.

          21.3 Assumption of Awards by the Company. The Company, from time to time, also may
substitute or assume outstanding awards granted by another company, whether in connection with an
acquisition of such other company or otherwise, by either (a) granting an Award under the Plan in
substitution of such other company’s award, or (b) assuming such award as if it had been granted
under the Plan if the terms of such assumed award could be applied to an Award granted under the
Plan. Such substitution or assumption shall be permissible if the holder of the substituted or
assumed award would have been eligible to be granted an Award under the Plan if the other company
had applied the rules of the Plan to such grant. In the event the Company assumes an award granted
by another company, the terms and conditions of such award shall remain unchanged (except that the
exercise price and the number and nature of Shares issuable upon exercise of any such option will
be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects
to grant a new Option rather than assuming an existing option, such new Option may be granted with
a similarly adjusted Exercise Price. Shares subject to Awards granted to substitute or assume
outstanding awards granted by another company in connection with an acquisition shall not reduce
the number of Shares available for issuance under Section 2.1 of the Plan.

     22. ADOPTION, STOCKHOLDER APPROVAL and TERM. The Plan was adopted by the Board on April 26,
2007. The Plan shall become effective upon approval by stockholders of the Company, consistent
with applicable laws. The Plan will terminate ten years following the earlier of (i) the date it
was adopted by the Board or (ii) the date it became effective upon approval by stockholders of the
Company, unless sooner terminated by the Board pursuant to Section 23.

     23. AMENDMENT OR TERMINATION OF PLAN and AWARDS. The Board may at any time terminate, amend
or suspend the Plan in any respect, including without limitation amendment of any form of Award
Agreement or instrument to be executed pursuant to the Plan. Notwithstanding the foregoing,
neither the Board nor the Committee shall, without the approval of the stockholders of the Company,
amend the Plan in any manner that requires such stockholder approval pursuant to the Code or the
regulations promulgated thereunder as such provisions apply to ISO plans, or pursuant to the
Exchange Act or any rule promulgated thereunder. The Committee may modify, extend or renew
outstanding Awards and authorize the grant of Awards in substitution thereof; provided that any
such action (including any amendment to the Plan) may not, without the written consent of a
Participant, impair any of a Participant’s rights under Award previously granted.

     24. NONEXCLUSIVITY OF THE PLAN; UNFUNDED PLAN. Neither the adoption of the Plan by the Board,
the submission of the Plan to the stockholders of the Company for approval, nor any provision of
the Plan shall be construed as creating any limitations on the power of the Board to adopt such
additional arrangements

 

 

as it may deem desirable, including, without limitation, the granting of stock options and bonuses
otherwise than under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases. The Plan shall be unfunded. Neither the Company nor the Board
shall be required to segregate any assets that may at any time be represented by Awards made
pursuant to the Plan. Neither the Company, the Committee, nor the Board shall be deemed to be a
trustee of any amounts to be paid under the Plan.

     25. DEFINITIONS. As used in the Plan, the following terms shall have the following meanings:

     (a) “Authorized Transferee” means the permissible recipient, as authorized by this
Plan and the Committee, of an NSO that is transferred during the Participant’s lifetime by the
Participant by gift or domestic relations order. For purposes of this definition a “permissible
recipient” is: (i) a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law of the Participant, including any such person with such
relationship to the Participant by adoption; (ii) any person (other than a tenant or employee)
sharing the Participant’s household; (iii) a trust in which the persons in (i) or (ii) have more
than fifty percent of the beneficial interest; (iv) a foundation in which the persons in (i) or
(ii) or the Participant control the management of assets; or (v) any other entity in which the
person in (i) or (ii) or the Participant own more than fifty percent of the voting interest.

     (b) “Award” means any award under the Plan, including any Option, Stock Appreciation
Right, Restricted Stock, Restricted Stock Unit or Stock Bonus.

     (c) “Award Agreement” means, with respect to each Award, the written agreement between
the Company and the Participant setting forth the terms and conditions of the Award.

     (d) “Board” means the Board of Directors of the Company.

     (e) “Code” means the United States Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.

     (f) “Committee” means the Board and such other committee appointed by the Board to
administer the Plan.

     (g) “Company” means Covad Communications Group, Inc., a corporation organized under
the laws of the State of Delaware, or any successor corporation.

     (h) “Corporate Transaction” means (a) a merger or consolidation in which the Company
is not the surviving corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in
which there is no substantial change in the stockholders of the Company and the Awards granted
under the Plan are assumed or replaced by the successor corporation, which assumption shall be
binding on all Participants), (b) a dissolution or liquidation of the Company, (c) the sale of
substantially all of the assets of the Company, (d) a merger in which the Company is the surviving
corporation but after which the stockholders of the Company immediately prior to such merger (other
than any stockholder that merges, or which owns or controls another corporation that merges, with
the Company in such merger) cease to own their shares or other equity interest in the Company; or
(e) any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the
Code wherein the stockholders of the Company give up all of their equity interest in the Company
(except for the acquisition, sale or transfer of all or substantially all of the outstanding shares
of the Company).

     (i) “Disability” means a disability within the meaning of Section 22(e)(3) of the
Code.

     (j) “Effective Date” means the date stockholders approve the Plan pursuant
to Section 22 of the Plan.

     (k) “Exchange Act” means the United States Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder.

 

 

     (l) “Executive Officer” means a person who is an “executive officer” of the Company as
defined in Rule 3b-7 promulgated under the Exchange Act.

     (m) “Exercise Price” means the price at which a Participant who holds an Option or SAR
may purchase the Shares issuable upon exercise of the Option or SAR.

     (n) “Expiration Date” means the last date on which an Option or SAR may be exercised
as determined by the Committee.

     (o) “Fair Market Value” means, as of any date, the value of a share of the Company’s
Common Stock determined as follows:

	 	(1)	 	if such Common Stock is publicly traded and is then listed on a
national securities exchange, the last reported sale price on such date or, if
no such reported sale takes place on such date, the average of the closing bid
and asked prices on the principal national securities exchange on which the
Common Stock is listed or admitted to trading;
	 
	 	(2)	 	if such Common Stock is publicly traded but is not admitted to
trading on a national securities exchange, the average of the closing bid and
asked prices on such date, as reported online by a website designated by the
Committee in good faith; or
	 
	 	(4)	 	if none of the foregoing is applicable, by the Committee in
good faith.

     (p) “Insider” means an officer or director of the Company or any other person whose
transactions in the Company’s Common Stock are subject to Section 16 of the Exchange Act.

     (q) “ISO” means an Option designated by the Committee at the time of grant as
intended to receive the treatment provided under Section 422 of the Code.

	 	(r)	 	“NSO” means an Option that is not designated an ISO by the Committee at
the time of grant or does not qualify as an ISO at the time of grant (for example, an
Option granted to a non-employee).
	 
	 	(s)	 	“Option” means an Award pursuant to Section 5 of the Plan.
	 
	 	(t)	 	“Participant” means a person who receives an Award under the Plan.

     (u) “Performance Factors” include, but are not limited to, some or all of the factors
selected by the Committee from among the measures below to determine whether performance goals
established by the Committee and applicable to Awards have been satisfied:

	 	(1)	 	Net revenue and/or net revenue growth;
	 
	 	(2)	 	Earnings before income taxes and amortization and/or earnings
before income taxes and amortization growth;
	 
	 	(3)	 	Operating income and/or operating income growth;
	 
	 	(4)	 	Net income and/or net income growth;
	 
	 	(5)	 	Earnings per share and/or earnings per share growth;
	 
	 	(6)	 	Total stockholder return and/or total stockholder return
growth;
	 
	 	(7)	 	Return on equity;

 

 

	 	(8)	 	Operating cash flow return on income;
	 
	 	(9)	 	Adjusted operating cash flow return on income;
	 
	 	(10)	 	Economic value added; and
	 
	 	(11)	 	Individual business objectives.

     (v) “Performance Period” means the period of service determined by the Committee, not
to exceed five years, during which years of service or performance is to be measured for the Award.

     (w) “Purchase Price” means the price to be paid for Shares acquired under the Plan,
other than Shares acquired upon exercise of an Option or SAR.

     (x) “Restricted Stock Award” means an award of Shares pursuant to Section 6 of the
Plan.

     (y) “Restricted Stock Unit” means an Award granted pursuant to Section 9 of the Plan.

     (z) “SEC” means the United States Securities and Exchange Commission.

     (aa) “Securities Act” means the United States Securities Act of 1933, as amended, and
the regulations promulgated thereunder.

     (bb) “Shares” means shares of the Company’s Common Stock $0.001 par value, reserved
for issuance under the Plan, as adjusted pursuant to Sections 2 and 21, and any successor security.

     (cc) “Stock Appreciation Right” means an Award granted pursuant to Section 8 of the Plan.

(dd) “Stock Bonus” means an Award granted pursuant to Section 7 of the Plan.

     (ee) “Subsidiary” means any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company if, at the time of granting of the Award, each of the
corporations other than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the other corporations in
such chain.

     (ff) “Ten Percent Stockholder” means any person who directly or by attribution owns
more than ten percent of the total combined voting power of all classes of stock of the Company or
any Subsidiary.

     (gg) “Termination” or “Terminated” means, for purposes of the Plan with
respect to a Participant, that the Participant has ceased to provide services as an employee,
director, consultant, independent contractor or adviser to the Company or a Subsidiary; provided
that a Participant shall not be deemed to be Terminated if the Participant is on a Company approved
leave of absence; and provided further, that during any Company approved leave of absence, vesting
of Awards shall be suspended or continue in accordance with applicable Company policies. Subject
to the foregoing, the Committee shall have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant ceased to provide
services (the “Termination Date”); further, the Termination Date will not be extended by
any notice period mandated under local law.exv10w2

 

Exhibit 10.2

As approved by Board of Directors

April 26, 2007

COVAD COMMUNICATIONS GROUP, INC.

2007 EQUITY INCENTIVE PLAN

NOTICE OF STOCK OPTION GRANT

GRANT NUMBER:                     

     You (the “Participant” identified below) have been granted an option to purchase Common Stock
of the Company, subject to the terms and conditions of this Notice of Stock Option Grant (the
“Notice”), the 2007 Equity Incentive Plan, as amended from time to time (the “Plan”) and the Stock
Option Award Agreement (the “Option Agreement”) attached hereto, as follows. Terms defined in the
Plan, and not in this Notice, shall have the same meanings in this Notice.

	 	 	 	 	 
	 

	 	Date of Grant
	 	                    
	 

	 	Vesting Commencement Date
	 	                    
	 

	 	Expiration Date
	 	                    
	 

	 	Type of Option:
	 	                    

	 	 	 	 	 	 	 	 	 
	Total Number of Shares	 	Exercise Price per Share	 	Total Exercise Price
	 
	 	$	 	 	 	$	 	 

Post-Termination Exercise Period

	 	 	 
	Termination for Cause
	 	= None
	Voluntary or Termination without Cause Generally
	 	= 3 Months
	Disability or Death
	 	= 12 Months

Vesting Schedule:

     Subject to the limitations set forth in this Notice, the Plan and the Option Agreement, the
Option will vest and may be exercised, in whole or in part, in accordance with the following
schedule:

     [INSERT VESTING SCHEDULE]

     You acknowledge receipt of a copy of the Plan and the Option Agreement, and represent that you
are familiar with the terms and provisions thereof, and hereby accept the Option subject to all of
the terms and provisions hereof. You understand that nothing in this Notice, the Stock Option
Award Agreement or the Plan changes the at-will nature of your service relationship (whether as an
employee, Board member or independent contractor) whether with the Company or a Subsidiary. You
acknowledge and agree that vesting pursuant to the vesting schedule set forth above is earned only
so long as your service relationship (whether with the Company or a Subsidiary) is uninterrupted
(as determined by the Committee).

	 	 	 	 	 	 	 
	PARTICIPANT:	 	COVAD COMMUNICATIONS GROUP, INC.
	 
	 	 	 	 	 	 
	Signature:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Print Name:

	 	 	 	Its:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Date:

	 	 	 	Date:	 	 
	 

	 	 
	 	 	 	 

 

 

As approved by Board of Directors

April 26, 2007

COVAD COMMUNICATIONS GROUP, INC.

STOCK OPTION AWARD AGREEMENT

2007 EQUITY INCENTIVE PLAN

     Unless otherwise defined herein, the terms defined in the Company’s 2007 Equity Incentive Plan
(the “Plan”) shall have the same defined meanings in this Award Agreement (the “Agreement”).

     Participant has been granted an option to purchase Shares (the “Option”), subject to the terms
and conditions of the Plan, the Notice of Stock Option Grant (“Notice of Grant”) and this
Agreement.

     1. Vesting Rights. Subject to the applicable provisions of the Plan and this
Agreement, this Option may be exercised, in whole or in part, in accordance with the vesting
schedule set forth in the Notice of Grant.

     2. Termination Period.

          (a) General Rule. Except as provided below, and subject to the Plan, this Option may
be exercised for 3 months after termination of Participant’s employment with the Company. In no
event shall this Option be exercised later than the Term/Expiration Date set forth in the Notice of
Grant.

          (b) Death; Disability. Upon the termination of Participant’s employment with the
Company by reason of his or her Disability or death, or if a Participant dies within three months
of the Termination Date, this Option may be exercised for twelve months in the case of death or
Disability, after the Termination Date, provided that in no event shall this Option be exercised
later than the Term/Expiration Date set forth in the Notice of Grant.

          (c) Cause. Upon the termination of Participant’s employment by the Company for Cause,
the Option shall expire on such date of Participant’s Termination Date.

     3. Grant of Option. The Participant named in the Notice of Grant has been granted an
Option for the number of Shares set forth in the Notice of Grant at the exercise price per Share
set forth in the Notice of Grant (the “Exercise Price”). In the event of a conflict between the
terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and
conditions of the Plan shall prevail.

                    If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is
intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if this
Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule
of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option (“NSO”).

     4. Exercise of Option.

          (a) Right to Exercise. This Option is exercisable during its term in accordance with
the Vesting Schedule set forth in the Notice of Grant and the applicable provisions of the Plan and
this Agreement. In the event of Participant’s death, Disability, Termination for Cause or other
Termination, the exercisability of the Option is governed by the applicable provisions of the Plan,
the Notice of Stock Option Grant and this Agreement.

          (b) Method of Exercise. This Option is exercisable by delivery of an exercise notice
(the “Exercise Notice”), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other
representations and agreements as may be required by the Company pursuant to the provisions of the
Plan. The Exercise

 

 

As approved by Board of Directors

April 26, 2007

Notice shall be delivered in person, by mail, via electronic mail or facsimile or by other
authorized method to the Secretary of the Company or other person designated by the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully
executed Exercise Notice accompanied by such aggregate Exercise Price.

          (c) No Shares shall be issued pursuant to the exercise of this Option unless such issuance and
exercise complies with all relevant provisions of law and the requirements of any stock exchange or
quotation service upon which the Shares are then listed. Assuming such compliance, for income tax
purposes the Exercised Shares shall be considered transferred to the Participant on the date the
Option is exercised with respect to such Exercised Shares.

     5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Participant:

          (a) cash; or

          (b) check; or

          (c) a “broker-assisted” or “same day sale” (as described in Section 11(d) of the Plan); or

          (d) other method authorized by the Company.

     6. Non-Transferability of Option. This Option may not be transferred in any manner
other than by will or by the laws of descent or distribution or court order and may be exercised
during the lifetime of Participant only by the Participant. The terms of the Plan and this
Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the
Participant.

     7. Term of Option. This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with the Notice of Grant,
the Plan and the terms of this Agreement.

     8. U.S. Tax Consequences. For Participants subject to U.S. income tax, some of the
federal tax consequences relating to this Option, as of the date of this Option, are set forth
below. All other Participants should consult a tax advisor for tax consequences relating to this
Option in their respective jurisdiction. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS
AND REGULATIONS ARE SUBJECT TO CHANGE. THE PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

          (a) Exercising the Option.

               (i) Nonstatutory Stock Option. The Participant may incur regular federal income tax
liability upon exercise of a NSO. The Participant will be treated as having received compensation
income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Exercised Shares on the date of exercise over their aggregate Exercise Price. If the
Participant is an Employee or a former Employee, the Company will be required to withhold from his
or her compensation or collect from Participant and pay to the applicable taxing authorities an
amount in cash equal to a percentage of this compensation income at the time of exercise, and may
refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

               (ii) Incentive Stock Option. If this Option qualifies as an ISO, the Participant will
have no regular federal income tax liability upon its exercise, although the excess, if any, of the
aggregate Fair Market Value of the Exercised Shares on the date of exercise over their aggregate

 

 

As approved by Board of Directors

April 26, 2007

Exercise Price will be treated as an adjustment to alternative minimum taxable income for federal
tax purposes and may subject the Participant to alternative minimum tax in the year of exercise.

          (b) Disposition of Shares.

               (i) NSO. If the Participant holds NSO Shares for at least one year, any gain realized
on disposition of the Shares will be treated as long-term capital gain for federal income tax
purposes.

               (ii) ISO. If the Participant holds ISO Shares for at least one year after exercise
and two years after the grant date, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes. If the Participant disposes of ISO
Shares within one year after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income rates) to the extent
of the excess, if any, of the lesser of (A) the difference between the Fair Market Value of the
Shares acquired on the date of exercise and the aggregate Exercise Price, or (B) the difference
between the sale price of such Shares and the aggregate Exercise Price.

          (c) Notice of Disqualifying Disposition of ISO Shares. If the Participant sells or
otherwise disposes of any of the Shares acquired pursuant to an ISO on or before the later of (i)
two years after the grant date, or (ii) one year after the exercise date, the Participant shall
immediately notify the Company in writing of such disposition. The Participant agrees that he or
she may be subject to income tax withholding by the Company on the compensation income recognized
from such early disposition of ISO Shares by payment in cash or out of the current earnings paid to
the Participant.

          (d) Possible Effect of Section 409A of the Code. Section 409A of the Code applies to
arrangements that provide for the deferral of compensation. Generally, a stock option granted with
an exercise price per share of not less than the “fair market value” (determined in a manner
consistent with Section 409A of the Code and the regulations and other guidance promulgated
thereunder) per share on the date of grant of the stock option and with no other feature providing
for the deferral of compensation will not be subject to Section 409A of the Code. However, if the
exercise price of the stock option is less than such “fair market value” or the stock option has
another feature for the deferral of compensation, then if the stock option is not administered
within the parameters established under Section 409A the optionholder will be subject to additional
taxes. Also, the amount deemed to be deferred compensation under Section 409A of the Code will be
subject to ordinary income and employment taxes (in this respect the IRS has not yet indicated how
it will calculate the amount of deferred compensation subject to tax and the timing and frequency
of taxation, but it seems likely that the income will be measured and taxes imposed at least on the
vesting dates of the stock option). If Section 409A of the Code does apply to this Option, then
special rules apply to the timing of making and effecting certain amendments of this Option with
respect to distribution of any deferred compensation.

     9. Entire Agreement; Governing Law. The Plan is incorporated herein by reference.
The Plan, the Notice of Grant, and this Agreement constitute the entire agreement of the parties
with respect to the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Participant with respect to the subject matter hereof, and may
not be modified adversely to the Participant’s interest except by means of a writing signed by the
Company and Participant. This agreement is governed by Delaware law except for that body of law
pertaining to conflict of laws.

     10. No Rights as Employee, Director or Consultant. Nothing in this Agreement shall
affect in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the
Company, to terminate Participant’s employment, for any reason, with or without cause.

 

 

As approved by Board of Directors

April 26, 2007

     By your signature and the signature of the Company’s representative on the Notice of Grant,
you and the Company agree that this Option is granted under and governed by the terms and
conditions of the Plan, the Notice of Grant, and this Agreement. Participant has reviewed the
Plan, the Notice of Grant, and this Agreement in their entirety, has had an opportunity to obtain
the advice of counsel prior to executing the Notice of Grant, and fully understands all provisions
of the Plan, the Notice of Grant, and this Agreement. Participant hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Committee upon any questions
relating to the Plan, the Notice of Grant, and the Agreement. Participant further agrees to notify
the Company upon any change in the residence address indicated on the Notice of Grant.

 

 

No.                     

COVAD COMMUNICATIONS GROUP, INC.

2007 EQUITY INCENTIVE PLAN

STOCK OPTION EXERCISE AGREEMENT

     This Stock Option Exercise Agreement (the “Exercise Agreement”) is made and entered into as of
                                        ,                      (the “Effective Date”) by and between Covad Communications Group, Inc.,
a Delaware corporation (the “Company”), and the purchaser named below (the “Purchaser”).
Capitalized terms not defined herein shall have the meanings ascribed to them in the Company’s 2007
Equity Incentive Plan (the “Plan”).

	 	 	 
	Purchaser:
	 	 
	 

	 	 
	 
	 
	 	 
	 

	 	 
	 
	 	 
	Social Security Number:
	 	 
	 

	 	 
	 
	 	 
	Address:
	 	 
	 

	 	 
	 
	 	 
	 
	 

	 	 
	 
	 	 
	Total Number of Shares:
	 	 
	 

	 	 
	 
	 	 
	Exercise Price Per Share:
	 	 
	 

	 	 
	 
	 	 
	Type of Stock Option
	 	 
	 
	 	 
	(Check one):

	 	o Incentive Stock Option
	 

	 	o Nonqualified Stock Option

     1. EXERCISE OF OPTION.

          1.1 Exercise. Pursuant to exercise of that certain option (the “Option”) granted to
Purchaser under the Plan and subject to the terms and conditions of this Exercise Agreement,
Purchaser hereby purchases from the Company, and the Company hereby sells to Purchaser, the Total
Number of Shares set forth above (the “Shares”) of the Company’s Common Stock, at the Exercise
Price Per Share set forth above (the “Exercise Price”). As used in this Exercise Agreement, the
term “Shares” refers to the Shares purchased under this Exercise Agreement and includes all
securities received (i) in replacement of the Shares, (ii) as a result of stock dividends or stock
splits with respect to the Shares, and (iii) all securities received in replacement of the Shares
in a merger, recapitalization, reorganization or similar corporate transaction.

          1.2 Title to Shares. The exact spelling of the name(s) under which Purchaser will
take title to the Shares is:

	 	 	 
	 

	 	 
	 
	 	 
	 
	 

	 	 

 

 

As approved by Board of Directors

April 26, 2007

          Purchaser desires to take title to the Shares as follows:

	 	 	 	o Individual, as separate property
	 
	 	 	 	o Husband and wife, as community property
	 
	 	 	 	o Joint Tenants
	 
	 	 	 	o Other; please specify:                                                             

          1.3 Payment. Purchaser hereby delivers payment of the Exercise Price in the manner
permitted in the Stock Option Agreement as follows (check and complete as appropriate):

	 	 	 	o in cash (by check) in the amount of $                    , receipt of which
is acknowledged by the Company;
	 
	 	 	 	o by delivery of                      fully-paid, nonassessable and vested shares
of the Common Stock of the Company owned by Purchaser which have been
paid for within the meaning of SEC Rule 144, (if purchased by use of a
promissory note, such note has been fully paid with respect to such
vested shares), or obtained by Purchaser in the open public market, and
owned free and clear of all liens, claims, encumbrances or security
interests, valued at the current fair market value of $                     per
share;

	 
	 	 	 	o through a “broker-assisted” or “same day sale” program, commitment
from the Purchaser or Authorized Transferee and an NASD Dealer meeting
the requirements set forth by the Company; or

	 
	 	 	 	o through a “margin” commitment from Purchaser or Authorized
Transferee and an NASD Dealer meeting the requirements of the Company’s
“margin” procedures and in accordance with law.

     2. DELIVERY.

          2.1 Deliveries by Purchaser. Purchaser hereby delivers to the Company (i) this
Exercise Agreement and (ii) the Exercise Price and payment or other provision for any applicable
tax obligations.

          2.2 Deliveries by the Company. Upon its receipt of the Exercise Price, payment or
other provision for any applicable tax obligations and all the documents to be executed and
delivered by Purchaser to the Company under Section 2.1, the Company will issue a duly executed
stock certificate evidencing the Shares in the name of Purchaser.

     3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and warrants to
the Company that:

          3.1 Agrees to Terms of the Plan. Purchaser has received a copy of the Plan and the
Stock Option Agreement, has read and understands the terms of the Plan, the Stock Option Agreement
and this Exercise Agreement, and agrees to be bound by their terms and conditions. Purchaser
acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition
of the Shares, and that Purchaser should consult a tax adviser prior to such exercise or
disposition.

          3.2 Access to Information. Purchaser has had access to all information regarding the
Company and its present and prospective business, assets, liabilities and financial condition that
Purchaser reasonably considers important in making the decision to purchase the Shares, and
Purchaser

 

 

As approved by Board of Directors

April 26, 2007

has had ample opportunity to ask questions of the Company’s representatives concerning such
matters and this investment.

          3.3 Understanding of Risks. Purchaser has received and reviewed the Form S-8
prospectus for the Plan and Shares and is fully aware of: (i) the highly speculative nature of the
investment in the Shares; (ii) the financial hazards involved; (iii) the qualifications and
backgrounds of the management of the Company; and (iv) the tax consequences of investment in the
Shares. Purchaser is capable of evaluating the merits and risks of this investment, has the
ability to protect Purchaser’s own interests in this transaction and is financially capable of
bearing a total loss of this investment.

     4. COMPLIANCE WITH SECURITIES LAWS. Purchaser understands and acknowledges that the
exercise of any rights to purchase any Shares is expressly conditioned upon compliance with the
Securities Act and all applicable state securities laws. Purchaser agrees to cooperate with the
Company to ensure compliance with such laws.

     5. RESTRICTED SECURITIES.

          5.1 No Transfer Unless Registered or Exempt. Purchaser understands that Purchaser may
not transfer any Shares except when such Shares are registered under the Securities Act or
qualified under applicable state securities laws or unless, in the opinion of counsel to the
Company, exemptions from such registration and qualification requirements are available. Purchaser
understands that only the Company may file a registration statement with the SEC and that the
Company is under no obligation to do so with respect to the Shares, and may withdraw any such
registration statement at any time after filing. Purchaser has also been advised that exemptions
from registration and qualification may not be available or may not permit Purchaser to transfer
all or any of the Shares in the amounts or at the times proposed by Purchaser.

          5.2 SEC Rule 144. If Purchaser is an “affiliate” for purposes of Rule 144 promulgated
under the Securities Act, then in addition, Purchaser has been advised that Rule 144 requires that
the Shares be held for a minimum of one (1) year, and in certain cases two (2) years, after they
have been purchased and paid for (within the meaning of Rule 144). Purchaser understands
that Rule 144 may indefinitely restrict transfer of the Shares so long as Purchaser remains an
“affiliate” of the Company or if “current public information” about the Company (as defined in Rule
144) is not publicly available.

     6. RIGHTS AS A STOCKHOLDER. Subject to the terms and conditions of this Exercise
Agreement, Purchaser will have all of the rights of a stockholder of the Company with respect to
the Shares from and after the date that Shares are issued to Purchaser until such time as Purchaser
disposes of the Shares.

     7. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.

          7.1 Legends. Purchaser understands and agrees that the Company will place any legends
that may be required by state or U.S. Federal securities laws, the Company’s Certificate of
Incorporation or Bylaws, any other agreement between Purchaser and the Company or, subject to the
assent of the Company, any agreement between Purchaser and any third party.

          7.2 Stop-Transfer Instructions. Purchaser agrees that, to ensure compliance with any
restrictions imposed by this Exercise Agreement, the Company may issue appropriate “stop-transfer”
instructions to its transfer agent, if any, and if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.

          7.3 Refusal to Transfer. The Company will not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Exercise Agreement or (ii) to treat as owner of such Shares, or to accord the right to vote
or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.

 

 

As approved by Board of Directors

April 26, 2007

     8. TAX CONSEQUENCES. PURCHASER UNDERSTANDS AND REPRESENTS: (i) THAT PURCHASER HAS
REVIEWED THE PROSPECTUS PREPARED FOR THE PLAN AND CONSULTED PURCHASER’S PERSONAL TAX ADVISER IN
CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND (ii) THAT PURCHASER IS NOT RELYING ON
THE COMPANY FOR ANY TAX ADVICE. SET FORTH BELOW IS A BRIEF SUMMARY AS OF THE DATE THE PLAN WAS
ADOPTED BY THE BOARD OF SOME OF THE U.S. FEDERAL TAX CONSEQUENCES OF EXERCISE OF THE OPTION AND
DISPOSITION OF THE SHARES. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. PURCHASER SHOULD CONSULT THE PROSPECTUS AND PURCHASER’S
PERSONAL TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

          8.1 Exercise of Incentive Stock Option. If the Option qualifies as an ISO, there will
be no regular U.S. Federal income tax liability upon the exercise of the Option, although the
excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise
Price will be treated as a tax preference item for U.S. Federal alternative minimum tax purposes
and may subject Purchaser to the alternative minimum tax in the year of exercise.

          8.2 Exercise of Nonqualified Stock Option. If the Option does not qualify as an ISO,
there may be a regular U.S. Federal income tax liability upon the exercise of the Option.
Purchaser will be treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. If Purchaser is or was an employee of the Company, the Company may be
required to withhold from Purchaser’s compensation or collect from Purchaser and pay to the
applicable taxing authorities an amount equal to a percentage of this compensation income at the
time of exercise.

          8.3 Disposition of Shares. The following tax consequences may apply upon disposition
of the Shares.

               (a) Incentive Stock Options. If the Shares are held for more than twelve (12) months
after the date of the transfer of the Shares pursuant to the exercise of an ISO and are disposed of
more than two (2) years after the Date of Grant, any gain realized on disposition of the Shares
will be treated as long term capital gain for federal income tax purposes. If Shares purchased
under an ISO are disposed of within the applicable one (1) year or two (2) year period, any gain
realized on such disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price.

               (b) Nonqualified Stock Options. If the Shares are held for more than twelve (12)
months after the date of the transfer of the Shares pursuant to the exercise of an NQSO, any gain
realized on disposition of the Shares will be treated as long-term capital gain.

               (c) Withholding. The Company may be required to withhold from the Purchaser’s
compensation or collect from the Purchaser and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income.

     9. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of the Shares will
be subject to and conditioned upon compliance by the Company and Purchaser with all applicable
state and federal laws and regulations and with all applicable requirements of any stock exchange
or automated quotation system on which the Company’s Common Stock may be listed or quoted at the
time of such issuance or transfer.

     10. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under this
Exercise Agreement. No other party to this Exercise Agreement may assign, whether voluntarily or
by operation of law, any of its rights and obligations under this Exercise Agreement, except with
the prior written consent of the Company. This Exercise Agreement shall be binding upon and inure
to the benefit

 

 

As approved by Board of Directors

April 26, 2007

of the successors and assigns of the Company. Subject to the restrictions on transfer herein
set forth, this Exercise Agreement will be binding upon Purchaser and Purchaser’s heirs, executors,
administrators, legal representatives, successors and assigns.

     11. GOVERNING LAW. This Exercise Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to that body of laws
pertaining to conflict of laws.

     12. NOTICES. Any and all notices required or permitted to be given to a party
pursuant to the provisions of this Exercise Agreement will be in writing and will be effective and
deemed to provide such party sufficient notice under this Exercise Agreement on the earliest of the
following: (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business
day after deposit with an express overnight courier for United States deliveries, or two (2)
business days after such deposit for deliveries outside of the United States, with proof of
delivery from the courier requested; or (iii) three (3) business days after deposit in the United
States mail by certified mail (return receipt requested) for United States deliveries. All notices
for delivery outside the United States will be sent by express courier. All notices not delivered
personally will be sent with postage and/or other charges prepaid and properly addressed to the
party to be notified at the address set forth below the signature lines of this Exercise Agreement,
or at such other address as such other party may designate by one of the indicated means of notice
herein to the other parties hereto. Notices to the Company will be marked “Attention: Stock Plan
Administration”.

     13. FURTHER ASSURANCES. The parties agree to execute such further documents and
instruments and to take such further actions as may be reasonably necessary to carry out the
purposes and intent of this Exercise Agreement.

     14. TITLES AND HEADINGS. The titles, captions and headings of this Exercise Agreement
are included for ease of reference only and will be disregarded in interpreting or construing this
Exercise Agreement. Unless otherwise specifically stated, all references herein to “sections” will
mean “sections” to this Exercise Agreement.

     15. ENTIRE AGREEMENT. The Plan, the Notice, the Stock Option Agreement and this
Exercise Agreement constitute the entire agreement and understanding of the parties with respect to
the subject matter of this Exercise Agreement, and supersede all prior understandings and
agreements, whether oral or written, between or among the parties hereto with respect to the
specific subject matter hereof.

     16. COUNTERPARTS. This Exercise Agreement may be executed in any number of
counterparts, each of which when so executed and delivered will be deemed an original, and all of
which together shall constitute one and the same agreement.

     17. SEVERABILITY. If any provision of this Exercise Agreement is determined by any
court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any
respect, such provision will be enforced to the maximum extent possible given the intent of the
parties hereto. If such clause or provision cannot be so enforced, such provision shall be
stricken from this Exercise Agreement and the remainder of this Exercise Agreement shall be
enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not
enforceable) never been contained in this Exercise Agreement. Notwithstanding the forgoing, if the
value of this Exercise Agreement based upon the substantial benefit of the bargain for any party is
materially impaired, which determination as made by the presiding court or arbitrator of competent
jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good
faith negotiations.

 

 

As approved by Board of Directors

April 26, 2007

     IN WITNESS WHEREOF, the Company has caused this Exercise Agreement to be executed in
triplicate by its duly authorized representative and Purchaser has executed this Exercise Agreement
as of the Effective Date, indicated above.

	 	 	 	 	 	 	 
	COVAD COMMUNICATIONS GROUP, INC.	 	PURCHASER
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	(Signature)
	 
	 	 	 	 	 	 
	 	 	 
	(Please print name)	 	(Please print name)
	 
	 	 	 	 	 	 
	 	 	 	 	 
	(Please print title)	 	 	 	 
	 
	 	 	 	 	 	 
	Address:

	 	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 	 	 
	Fax No.:

	 	 	 	Fax No.	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Phone No.:

	 	 	 	Phone No.:	 	 
	 

	 	 
	 	 	 	 

[Signature page to Covad Communications Group, Inc. Stock Option Exercise Agreement]

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