EXHIBIT 10.1
COVAD COMMUNICATIONS GROUP, INC.
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NOTE SECURED BY DEED OF TRUST
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$600,000.00 May 24, 1999
Santa Clara, California
FOR VALUE RECEIVED, Xxxxxx Xxxxxxxxx, XXX ("Xx. Xxxxxxxxx" or "Maker")
promises to pay to the order of Covad Communications Group, Inc. (the
"Company"), at its corporate offices at 0000 Xxxxxxx Xxxxxxxxxx, Xxxxxxxx X,
Xxxxx Xxxxx, Xxxxxxxxxx 00000, the principal sum of six hundred thousand dollars
($600,000.00), together with any accrued interest thereon, upon the terms and
conditions specified below.
1. Principal. The principal balance of this Note shall become due and
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payable in four (4) consecutive equal annual installments on each anniversary of
January 20, 1999, with the last such installment becoming due on January 20,
2003.
2. Interest. No interest shall accrue under the Note while the
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Maker continues his employment with the Company.
3. Special Forgiveness. For purposes of this special forgiveness
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provision, the special prepayment provision under Section 5, the acceleration
provisions of Section 7 and the employment requirements of Section 8 hereof, the
principal amount of this Note shall be forgiven by the Company in a series of
four (4) successive equal annual installments upon Xx. Xxxxxxxxx'x completion of
each year of employment with the Company measured from January 20, 1999, Xx.
Xxxxxxxxx'x date of hire.
In the event that, within twelve (12) months following the
effectiveness of a Change in Control (as defined below), Xx. Xxxxxxxxx either
(i) is terminated from his employment without Cause (as defined below) or (ii)
resigns from his employment for Good Reason (as defined below), any remaining
unpaid and unforgiven amount of principal shall be forgiven in full on an
accelerated basis at the time of such termination or resignation. In the case
of any resignation for Good Reason under this Note, the Maker must specify in
reasonable detail the basis for such resignation for Good Reason and give the
Company at least twenty (20) business days in which to correct the circumstances
prompting the resignation for Good Reason.
For purposes of applying the provisions of this Note, the following
definitions shall be in effect:
"Cause" shall mean (i) the repeated failure of the Maker to perform
the duties of that Maker's position with the Company in any substantial
respect following thirty (30) days prior notification in writing, (ii) the
Maker's conviction of a felony (other than a traffic violation) or of other
criminal conduct involving fraud, theft or any other act exhibiting serious
moral turpitude or (iii) any willful conduct by the Maker which has a
material adverse effect on the Company. A termination for any other reason
shall be considered a termination "without Cause."
"Change in Control" shall mean (i) a merger or consolidation in which
securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction; or (ii) the sale, transfer or other
disposition of all or substantially all of the assets of the Company in
complete liquidation or dissolution of the Company.
"Good Reason" shall mean (i) any reduction in the Maker's base salary,
unless such reduction is pursuant to a change in the Company's compensation
policies generally; (ii) a material adverse change in the nature of the
Maker's job duties; or (iii) a relocation of the Maker's base office,
without the Maker's consent, to an office that is more than fifty (50)
miles from the Maker's base office as of the date of this Note. A
resignation by either Maker under any other circumstances shall be
considered a resignation "without Good Reason."
4. Payment. Payment shall be made in lawful tender of the United
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States and shall be applied first to the payment of all accrued and unpaid
interest and then to the payment of principal. Prepayment of the principal
balance of this Note may be made in whole or in part at any time without
penalty.
5. Special Prepayment Provision. On the earlier of the date Mr.
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Xxxxxxxxx (i) is terminated from his employment for Cause or (ii) resigns from
his employment without Good Reason, any remaining unpaid and unforgiven amount
of principal shall become immediately due and payable.
6. Security; Full Recourse. The proceeds of the loan evidenced by
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this Note shall be applied solely to the purchase of the Maker's principal
residence in the City of Oakland, County of Alameda, State of California.
Payment of this Note shall be secured by a Deed of Trust on such principal
residence, as such property is more particularly described in Exhibit "A" to the
Deed of Trust, a copy of which Deed is attached hereto as Exhibit A. However,
the Maker shall remain personally liable for payment of this Note, and assets of
the Maker, in addition to the collateral under the Deed of Trust, may be applied
to the satisfaction of the Maker's obligations hereunder.
7. Events of Acceleration. If any of the following events shall
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occur and be continuing, then the Company may, at its option and without notice
to the Maker or any other person, declare the entire outstanding principal
balance of this Note, together with any other sums the Maker may owe to the
Company under or in connection with this Note or otherwise, together with
accrued interest thereon, immediately due and payable:
A. the Maker's failure to pay when due any principal or interest
hereunder, including the Maker's failure to pay any amounts due
under Section 5 hereof, and such default is continuing for a
period of ten (10) or more days after notice thereof from the
Company to the Makers; or
B. the sale, transfer, mortgage, assignment, encumbrance or lease,
whether voluntarily or involuntarily or by operation of law or
otherwise, of the
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property covered by the Deed of Trust, or any portion thereof or
interest therein, without the prior written consent of the
Company; or
C. the insolvency of the Maker, the commission of any act of
bankruptcy by the Maker, the execution by the Maker of a general
assignment for the benefit of creditors, the filing by or
against the Maker of any petition in bankruptcy or any petition
for relief under the provisions of the federal bankruptcy act or
any other state or federal law for the relief of debtors and the
continuation of such petition without dismissal for a period of
thirty (30) days or more, the appointment of a receiver or
trustee to take possession of any property or assets of the
Maker, or the attachment of or execution against any property or
assets of the Maker; or
D. the occurrence of any event of default under the Deed of Trust
securing this Note or any obligation secured thereby.
8. Employment Requirement. The benefits of the interest
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arrangements under this Note are not transferable by the Maker and are
conditioned on the future performance of substantial services by the Maker.
Upon Xx. Xxxxxxxxx'x cessation of employment with the Company,
interest shall accrue on any unpaid and unforgiven principal balance at the
minimum per annum rate, compounded semi-annually, required to avoid the
imputation of compensation income to the Maker under the Federal tax laws.
For purposes of applying the provisions of this Note, the Maker shall
be considered to remain in the Company's employ for so long as the Maker renders
services as a full-time employee of the Company, any successor entity of the
Company or one or more subsidiaries of the Company in which the Company has at
least a fifty percent (50%) direct or indirect ownership interest.
9. Certification. The Maker certifies that the Maker reasonably
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expects to be entitled to and will itemize deductions for Federal income tax
purposes for each year the Note is outstanding.
10. Collection. If action is instituted to collect this Note, the
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Maker promises to pay all costs and expenses (including reasonable attorney
fees) incurred in connection with such action.
11. Waiver. No previous waiver and no failure or delay by the
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Company in acting with respect to the terms of this Note or the Deed of Trust
shall constitute a waiver of any breach, default, or failure of condition under
this Note, the Deed of Trust or the obligations secured thereby. A waiver of any
term of this Note, the Deed of Trust or of any of the obligations secured
thereby must be made in writing and shall be limited to the express terms of
such waiver.
The Maker waives presentment, demand, notice of dishonor, notice of
default or delinquency, notice of acceleration, notice of protest and
nonpayment, notice of costs, expenses
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or losses and interest thereon, notice of interest on interest, and diligence in
taking any action to collect any sums owing under this Note or in proceeding
against any of the rights or interests in or to properties securing payment of
this Note.
12. Conflicting Agreements. In the event of any inconsistencies
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between the terms of this Note and the terms of any other document related to
the loan evidenced by the Note, the terms of this Note shall prevail.
13. Governing Law. This Note shall be construed in accordance with
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the laws of the State of California without resort to that State's conflict-of-
laws rules.
14. Due on Sale. If the Maker sells, conveys or alienates the
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property covered by the Deed of Trust, or any part thereof, or any interest
therein, or shall be divested of his title or any interest therein in any manner
or way, whether voluntarily or involuntarily, without the written consent of the
Company being first obtained, then the Company shall have the right, at its
option, except as prohibited by law, to declare an indebtedness or obligations
secured hereby, irrespective of the maturity date specified in any note
evidencing the same, immediately due and payable. Consent to one such
transaction shall not be deemed to be a waiver of the right to require such
consent to future successive transactions.
MAKER
/s/ Xxxxxx Xxxxxxxxx, III
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XXXXXX XXXXXXXXX, III
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EXHIBIT A
DEED OF TRUST
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