Document:

exv10w5

 

Exhibit 10.5

CHANGE OF CONTROL AGREEMENT

     This Change of Control Agreement (the “Agreement”) is made and entered into effective
as of __________, 2007, by
and between
______________ _____________ (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 severance plan or agreement in effect) equal to
the sum of (a) two (2) times Executive’s annualized rate of Base Salary in effect ninety (90) days
prior to the Effective Date of a Change in Control (b) two (2) 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

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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
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 two (2) 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 two (2) years, the 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 two (2) year period. Notwithstanding the
foregoing, if at anytime prior to the exhaustion of the two (2) 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, among other things, that 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.

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

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     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 the 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 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.

     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:

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          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 Company) 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 Parentor 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. 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.

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

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          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
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 any Executive Severance Plan in effect on or after September 7,
2007.

     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

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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 the
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.	 	[Executive]
	 
	 	 	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 
	 	 	 	 
	 
	 	Charles Hoffman	 	 
	 
	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 
	Covad Communications Company	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 
	 	 	 	 
	 
	 	Charles Hoffman	 	 
	 
	 	President and Chief Executive Officer	 	 

9exv4w1

 

Exhibit 4.1

VOICE SIGNAL TECHNOLOGIES, INC.

AMENDED AND RESTATED

1998 STOCK OPTION PLAN

     1. Definitions. As used in this Amended and Restated 1998 Stock Option Plan of Voice
Signal Technologies, Inc., the following terms shall have the following meanings:

     1.1. Board means the Company’s Board of Directors.

     1.2. Code means the Federal Internal Revenue Code of 1986, as amended.

     1.3. Committee means a committee appointed by the Board or, if no such
committee is appointed, the Board itself. Such committee or the Board, as the case may be,
shall be responsible for the administration of the Plan, as provided in section 5 of the
Plan.

     1.4. Company means Voice Signal Technologies, Inc., a Delaware corporation.

     1.5. Fair Market Value means (i) on any date prior to the
Initial Public Offering Date, the value of a share of Stock on any such date as determined
by the Committee or the Board, as the case may be, taking into consideration such factors
as it deems appropriate, and (ii) on the Initial Public Offering Date or on any date
thereafter, (A) the last sale price, on the preceding business day, of a share of Common
Stock on the principal national securities exchange on which the Common Stock is traded, if
the Common Stock is then traded on a national securities exchange; or (ii) the last sale
price, on the preceding business day, of the Common Stock reported in The National Stock
Market’s National Market, if the Common Stock is not then traded on a national securities
exchange; or (iii) the average of the closing bid and asked prices, on the preceding
business day, for the Common Stock quoted by an established quotation service for
over-the-counter securities, if the Common Stock is not then traded on a national
securities exchange or reported in The NASDAQ Stock Market’s National Market.

     1.6. Grant Date means the date as of which an Option is granted, as
determined under Section 7.

     1.7. Incentive Option means an Option which by its terms is to be
treated as an “incentive stock option” within the meaning of Section 422 of the Code.

     1.8. Initial Public Offering Date means the date of
the closing of the Company’s initial public offering of Common Stock.

 

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     1.9. Non-statutory Option means any Option that is not an Incentive
Option.

     1.10. Option means an option to purchase shares of Stock granted under the
Plan.

     1.11. Option Agreement means an agreement between the Company and an
Optionee, setting forth the terms and conditions of an Option.

     1.12. Option Price means the price paid by an Optionee for a share of
Stock upon exercise of an Option.

     1.13. Optionee means a person eligible to receive an Option, as provided in
Section 6, to whom an Option shall have been granted under the Plan.

     1.14. Plan means this 1998 Stock Option Plan of the Company, as amended from
time to time.

     1.15. Stock means common stock, par value $0.001 per share, of the Company.

     1.16. Stockholders Agreement means the Second Amended and Restated
Stockholders Agreement, dated September 30, 2002, between the Company and each of the
stockholders party thereto, as amended, modified and supplemented from time to time.

     1.17. Ten Percent Owner means a person who owns, or is deemed
within the meaning of Section 422(b)(6) of the Code to own, stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company (or its parent or
subsidiary corporations). Whether a person is a Ten Percent Owner shall be determined with
respect to each Option based on the facts existing immediately prior to the Grant Date of
such Option.

     1.18. Vesting Year for any portion of any Incentive Option means the
calendar year in which that portion of the Option first becomes exercisable.

     1.19 Voting Agreement means the Second Amended and Restated Voting
Agreement, dated September 30, 2002, by and among the Company and the stockholders party
thereto, as amended, modified and supplemented from time to time.

     2. Purpose. This Plan is intended to encourage ownership of Stock by employees,
directors and consultants of the Company and its subsidiaries and to provide additional incentives
for them to promote the success of the Company’s business. The Plan is

 

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intended to be an incentive stock option plan within the meaning of Section 422 of the Code but not
all Options granted hereunder are required to be Incentive Options.

     3. Term of the Plan. Options may be granted hereunder at any
time in the period commencing on the approval of the Plan by the Board and ending October 23, 2008.

     4. Stock Subject to the Plan. Subject to the
provisions of Section 17 of the Plan, at no time shall the number of shares of Stock then
outstanding which are attributable to the exercise of Options granted under the Plan, plus the
number of shares then issuable upon exercise of outstanding Options granted under the Plan (the
“Option Pool”), exceed 24,135,256 shares, provided that such aggregate number of shares,
automatically and without further action, shall increase, effective as of each Subsequent Closing
(as defined in that certain Series D Preferred Stock Purchase Agreement, dated September 30, 2002,
between the Company and the investors listed therein, as amended by that certain First Amendment,
dated as of September 29, 2003 (as amended and in effect from time to time the “Series D Purchase
Agreement”), by an additional number of shares of Stock such that, after taking into account the
issuance of the Additional Shares (as defined in the Series D Purchase Agreement) at such
Subsequent Closing, the Option Pool equals twenty percent (20%) of the fully diluted capitalization
of the Company as of such Subsequent Closing. Notwithstanding the foregoing, at no time shall the
Option Pool exceed 24,727,315 shares. Shares to be issued upon the exercise of Options granted
under the Plan may be either authorized but unissued shares or shares held by the Company in its
treasury. If any Option expires or terminates for any reason without having been exercised in
full, the shares not purchased thereunder shall again be available for Options thereafter to be
granted.

     5. Administration. The Plan shall be administered by the Committee. Subject to the
provisions of the Plan, the Committee shall have complete authority, in its discretion, to make or
to select the manner of making the following determinations with respect to each Option to be
granted by the Company: (a) the employee, director or consultant to receive the Option; (b)
whether the Option (if granted to an employee) will be an Incentive Option or Non-statutory Option;
(c) the time of granting the Option; (d) the number of shares subject to the Option; (e) the Option
Price; (f) the Option period; (g) the Option exercise date or dates; and (h) the effect of
termination of employment, consulting or association with the Company on the subsequent
exercisability of the Option. In making such determinations, the Committee may take into account
the nature of the services rendered by the respective employees, directors and consultants, their
present and potential contributions to the success of the Company and its subsidiaries, and such
other factors as the Committee in its discretion shall deem relevant. Subject to the provisions of
the Plan, the Committee shall also have complete authority to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to it, to determine the terms and provisions of
the respective Option Agreements (which need not be identical), and to make all other
determinations necessary or advisable for the administration of the Plan. The Committee’s
determinations on the matters referred to in this Section 5 shall be conclusive.

     6. Eligibility. An Option shall be granted only to an employee, director or
consultant of one or more of the Company or any subsidiary thereof.

 

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     7. Time of Granting Options. The granting of an Option shall
take place at the time specified in the Option Agreement. Only if expressly so provided in the
Option Agreement, shall the Grant Date be the date on which an Option Agreement shall have been
duly executed and delivered by the Company and the Optionee.

     8. Option Price. The Option Price under each Incentive Option shall be not
less than 100% of the Fair Market Value of Stock on the Grant Date, or not less than 110% of the
Fair Market Value of Stock on the Grant Date if the Optionee is then a Ten Percent Owner. The
Option Price under each Non-statutory Option shall not be so limited solely by reason of this
Section 8.

     9. Option Period. No Incentive Option may be exercised later than the tenth
anniversary of the Grant Date, but in any case not later than the fifth anniversary of the Grant
Date, if the Optionee is a Ten Percent Owner on the Grant Date. The Option period under each
Non-statutory Option shall not be so limited solely by reason of this Section 9. An Option may
become exercisable in such installments, cumulative or non-cumulative, as the Committee may
determine. In the case of an Option not otherwise immediately exercisable in full, the Committee
may accelerate the exercisability of such Option in whole or in part at any time, provided the
acceleration of the exercisability of any Incentive Option would not cause the Option to fail to
comply with the provisions of Section 422 of the Code.

     10. Limit on Incentive Option Characterization. No
Incentive Option shall be considered an Incentive Option to the extent that pursuant to its terms
it would permit the Optionee to purchase for the first time in any Vesting Year under that
Incentive Option more than the number of shares of Stock calculated by dividing the current limit
by the Option Price. The current limit for any Optionee for any Vesting Year shall be $100,000
minus the aggregate Fair Market Value at the applicable Grant Date of the number of shares of Stock
available for purchase for the first time in the Vesting Year under each other Incentive Option
granted to the Optionee under the Plan after December 31, 1986 and each other incentive stock
option granted to the Optionee after December 31, 1986 under any other incentive stock option plan
of the Company (and any parent and subsidiary corporations).

     11. Exercise of Option. An Option may be exercised by the Optionee
giving written notice, in the manner provided in Section 21, specifying the number of shares with
respect to which the Option is then being exercised. In the event that such notice of exercise is
given prior to the Initial Public Offering Date, such notice shall be accompanied by (x) payment in
the form of cash, or certified or bank check payable to the order of the Company, in an amount
equal to the aggregate Option Price of the shares of Stock to be purchased, (y) if the exercising
Optionee is not already a party to the Stockholders Agreement, an executed counterpart of the
Instrument of Adherence attached to the Stockholders Agreement as
Exhibit A thereto and (z) if the
exercising Optionee is not already a party to the Voting Agreement, an executed counterpart of the
Instrument of Adherence attached to the Voting Agreement as Exhibit A thereto. In the event that such notice of exercise is given
on or after the Initial Public Offering Date, such notice of exercise shall be accompanied by (x)
payment in the form of (A) cash, or certified or bank check payable to the order of the Company, in
an

 

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amount equal to the aggregate Option Price of the shares of Stock to be purchased, or (B) shares
of Common Stock having a Fair Market Value on the date the Option is exercised equal to the
aggregate Option Price of the shares of Stock to be purchased (provided that the use of shares of
Common Stock to exercise an option shall be subject to such restrictions as the Committee may
reasonably require to avoid adverse accounting effects), (y) if the Stockholders Agreement is then
still in effect and if the exercising Optionee is not already a party to the Stockholders
Agreement, an executed counterpart of the Instrument of Adherence attached to the Stockholders
Agreement as Exhibit A thereto and (z) if the Voting Agreement is then still in effect and if the
exercising Optionee is not already a party to the Voting Agreement, an executed counterpart of the
Instrument of Adherence attached to the voting Agreement as Exhibit A thereto.
Receipt by the Company of such notice, payment and, if applicable, executed counterparts shall
constitute the exercise of the Option. Within 30 days thereafter but subject to the remaining
provisions of the Plan, the Company shall deliver or cause to be delivered to the Optionee or his
agent a certificate or certificates for the number of shares then being purchased. Such shares
shall be fully paid and nonassessable.

     12. Restrictions on Issue of Shares.

          (a) Notwithstanding any other provision of the Plan, if, at any time, in the reasonable
opinion of the Company the issuance of shares of Stock covered by the exercise of any Option would
constitute a violation of law (including, without limitation, a violation of federal or state
securities law), the Company shall not be required to issue such shares of Stock unless and until
the Company and/or the exercising holder of such Option shall have taken any and all steps
reasonably necessary or required to ensure that such issuance would not cause or result in any such
violation of law. Such reasonably necessary or required steps may include, without limitation, (i)
seeking and obtaining any approvals from, or making filings with, such governmental agencies as may
be required under any applicable law, rule, or regulation, (ii) registering under the Securities
Act of 1933, as amended (the “Securities Act”), the shares of Stock to be issued upon exercise of
such Option or (iii) causing any such proposed issuance to qualify for or come within any exemption
from the registration requirements of the Securities Act or any applicable state securities laws.

          (b) Each certificate representing shares issued upon the exercise of an Option will bear
restrictive legends which may refer to this Plan and to applicable restrictions under the
Stockholders Agreement and the Voting Agreement.

     13. Investment Representations; Subsequent Registration.

          (a) Unless the shares to be issued upon exercise of an Option granted under the Plan have been
effectively registered under the Securities Act, the Company may, as a condition precedent to the
exercise of such Option, require that the exercising holder of such Option make such written
representations and warranties to the Company as the Company shall deem necessary or appropriate for purposes of confirming that the issuance of such
shares shall be exempt from the registration requirements of the Securities Act or any applicable
state securities laws and that the issuance of such shares is otherwise in compliance with all
applicable laws, rules and regulations, including, without limitation,

 

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federal and state securities
laws. The Company shall be under no obligation to issue any of such shares unless and until the
exercising holder of such Option make such written representations and warranties to the Company,
and the Company shall also be under no obligation to issue any of such shares if any of such
written representations and warranties is not true, correct or complete when made.

          (b) Each share of Stock issued pursuant to the exercise of an Option granted pursuant to this
Plan may bear a reference to the fact that no registration statement has been filed with the
Securities and Exchange Commission in respect such share and that the ability to resell such share
will be subject to certain restrictions on transfer imposed under applicable federal and state
securities laws.

          (c) If the Company shall deem it necessary or desirable to register under the Securities Act
or other applicable statutes any shares with respect to which an Option shall have been granted, or
to qualify any such shares for exemption from the Securities Act or other applicable statutes, then
the Company shall take such action at its own expense. The Company may require from each Option
holder, or each holder of shares of Stock acquired pursuant to the Plan, such information in
writing for use in any registration statement, prospectus, preliminary prospectus or offering
circular as is reasonably necessary for such purpose and may require reasonable indemnity to the
Company and its officers and directors from such holder against all losses, claims, damage and
liabilities arising from such use of the information so furnished and caused by any untrue
statement of any material fact therein or caused by the omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.

     14. Withholding; Notice of Disposition of
Stock Prior to Expiration of Specified
Holding Period.

          (a) Whenever shares are to be issued in satisfaction of an Option granted hereunder, the
Company shall have the right to require the Optionee to remit to the Company an amount sufficient
to satisfy federal, state, local or other withholding tax requirements if and to the extent
required by law (whether so required to secure for the Company an otherwise available tax deduction
or otherwise) prior to the delivery of any certificate or certificates for such shares.

          (b) The Company may require as a condition to the issuance of shares covered by any Incentive
Option that the party exercising such Option give a written representation to the Company which is
satisfactory in form and substance to its counsel and upon which the Company may reasonably rely,
that he or she will report to the Company any disposition of such shares prior to the expiration of
the holding periods specified by Section 422(a)(1) of the Code. If and to the extent that the realization of income in such a disposition
imposes upon the Company federal, state, local or other withholding tax requirements, or any such
withholding is required to secure for the Company an otherwise available tax deduction, the Company
shall have the right to require that the recipient remit to the Company an amount sufficient to
satisfy those requirements; and the Company may require as a condition

 

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to the issuance of shares
covered by an Incentive Option that the party exercising such option give a satisfactory written
representation promising to make such a remittance.

     15. Termination of Association with the
Company. If the Optionee’s employment or consulting relationship or other association with
the Company is terminated, whether voluntarily or otherwise, the Option, to the extent the Option
is exercisable on the date of termination, may be exercised by the Optionee, but only within 90
days after he or she ceases to be an employee or director of, or consultant to, the Company, unless
terminated earlier by its terms. Notwithstanding the foregoing, in the event that the applicable
Option Agreement with respect to an Option shall contain specific provisions governing the effect
that any such termination shall have on the exercisability of such Option, such provisions in the
Option Agreement shall, to the extent that they are inconsistent with the provisions of this
Section 15, control and deem to supersede the provisions of this Section 15. For purposes of this
Section 15, military or sick leave shall not be deemed a termination of employment or other
association, provided that it does not exceed the longer of 120 days or the period during
which the absent Optionee’s reemployment rights, if any, are guaranteed by statute or by contract.

     16. Transferability of Options. Incentive Options shall not be
transferable, otherwise than by will or the laws of descent and distribution, and may be exercised
during the life of the Optionee only by the Optionee. Nonstatutory Options shall not be
transferable, otherwise than by will or the laws of descent and distribution, and may be exercised
during the life of the Optionee only by the Optionee; provided, however, that
Nonstatutory Options may be transferred to a third party if and to the extent authorized and
permitted by the Committee, whereupon any such third party may exercise such Nonstatutory Option,
at any time and from time to time thereafter, subject to and upon the terms and conditions set
forth in this Plan and the Option Agreement relating to such Nonstatutory Option. In granting its
authorization and permission to any proposed transfer of a Nonstatutory Option to a third party,
the Committee may impose conditions or requirements that must be satisfied by the transferor or the
third party transferee prior to or in connection with such transfer, including, without limitation,
any conditions or requirements that may be necessary or desirable, in the sole and absolute
discretion of the Committee, to ensure that such proposed transfer complies with applicable
securities laws or to prevent the Company, such transferor or such third party transferee from
violating or otherwise not being in compliance with applicable securities laws as a result of such
transfer. For purposes of this Section 16, the term Nonstatutory Option shall include an Option
that was an Incentive Option at the time of grant, but that has been subsequently been disqualified
or otherwise lost its status as an Incentive Option.

     17. Adjustment of Number and Kind of
Option Shares. In the event of any stock dividend payable in Stock or any split-up
or contraction in the number of shares of Stock after the date of an Option Agreement and prior to the exercise in full of the Option, the number
of shares subject to such Option Agreement and the price to be paid for each share subject to the
Option shall be proportionately adjusted. In the event of any reclassification, exchange,
conversion or change of outstanding shares of Stock, or in case of any consolidation or merger of
the Company with or into another company, or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or

 

- 8 -

substantially as a whole, shares of stock or
other securities equivalent in kind and value to those shares an Optionee would have received if he
or she had held the full number of shares of Stock subject to the Option immediately prior to such
reclassification, exchange, conversion, change, consolidation, merger, sale or conveyance and had
continued to hold those shares (together with all other shares, stock and securities thereafter
issued in respect thereof) to the time of the exercise of the Option shall thereupon be subject to
the Option. Upon dissolution or liquidation of the Company, the Option shall terminate, but the
Optionee (if at the time in the employ of, retained as a consultant to, or otherwise associated
with, the Company or any of its subsidiaries) shall have the right, immediately prior to such
dissolution or liquidation, to exercise the Option to the extent exercisable on the date of such
dissolution or liquidation. No fraction of a share shall be purchasable or deliverable upon
exercise, but in the event any adjustment hereunder of the number of shares covered by the Option
shall cause such number to include a fraction of a share, such number of shares shall be adjusted
to the nearest smaller whole number of shares. In the event of changes in the outstanding Stock by
reason of any stock dividend, split-up, contraction, reclassification, or change of outstanding
shares of Stock of the nature contemplated by this Section 17, the number of shares of Stock
available for the purpose of the Plan as stated in Section 4 shall be correspondingly adjusted.

     18. Reservation of Stock. The Company shall at all times during the
term of each Option reserve or otherwise keep available such number of shares of Stock as will be
sufficient to satisfy the requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.

     19. Limitation of Rights in Stock; No
Special Employment or Other Rights. The Optionee shall not
be deemed for any purpose to be a stockholder of the Company with respect to any of the shares of
Stock covered by an Option, except to the extent that such Option shall have been exercised with
respect thereto and, in addition, a certificate shall have been issued therefor and delivered to
the Optionee or his agent. Any Stock issued pursuant to the exercise of any Option shall be
subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the
Certificate of Incorporation, the By-laws of the Company, the Stockholders Agreement or the Voting
Agreement. Nothing contained in the Plan or in any Option shall confer upon any Optionee any right
with respect to the continuation of his or her employment or other association with, or retention
as a consultant by, the Company (or any subsidiary), or interfere in any way with the right of the
Company (or any subsidiary), subject to the terms of any separate employment or consulting
agreement or provision of law or corporate articles or by-laws to the contrary, at any time to
terminate such employment or consulting agreement or other association or to increase or decrease
the compensation of the Optionee from the rate in existence at the time of the grant of an Option.

     20. Termination and Amendment of the Plan.
The Board may at any time terminate the Plan or make such modifications of the Plan as it shall
deem advisable. No termination or amendment of the Plan may, without the consent of the Optionee
to whom any Option shall theretofore have been granted, adversely affect the rights of such
Optionee under such Option.

 

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     21. Notices and Other Communications. All notices and other
communications required or permitted under the Plan shall be effective if in writing and if
delivered or sent by certified or registered mail, return receipt requested (a) if to the Optionee,
at his or her residence address last filed with the Company, and (b) if to the Company, at 150
Presidential Way, Woburn, MA 01801, Attention: Daniel L. Roth and Thomas Lazay, with a copy to the
Assistant Secretary of the Company, presently, Julio Vega, at Bingham McCutchen LLP, 150 Federal
Street, Boston, MA 02110, or to such other persons or addresses as the Optionee or the Company may
specify by a written notice to the other from time to time.

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