Document:

<PAGE>

                                                                   Exhibit 10.2

                        COVAD COMMUNICATIONS GROUP, INC.

                        1998 EMPLOYEE STOCK PURCHASE PLAN

         The following constitute the provisions of the 1998 Employee Stock
Purchase Plan of Covad Communications Group, Inc.

         1.  Purpose. The purpose of the Plan is to provide employees of the
             -------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.

         2.  Definitions.
             -----------

         (a) "Board" shall mean the Board of Directors of the Company.
              -----

         (b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
              ----

         (c) "Common Stock" shall mean the common stock of the Company.
              ------------

         (d) "Company" shall mean Covad Communications Group, Inc. and any
              -------
Designated Subsidiary of the Company.

         (e) "Compensation" shall mean all base straight time gross earnings
              ------------
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.

         (f) "Designated Subsidiary" shall mean any Subsidiary which has been
              ---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.

         (g) "Employee" shall mean any individual who is an Employee of the
              --------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.

         (h) "Enrollment Date" shall mean the first Trading Day of each Offering
              ---------------
Period.

         (i) "Exercise Date" shall mean the last Trading Day of each Purchase
              -------------
Period.

<PAGE>

       (j)   "Fair Market Value" shall mean, as of any date, the value of Common
              -----------------
Stock determined as follows:

             (1)  If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;

             (2)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;

             (3)  For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement"); or

             (4)  In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.

       (k)   "Offering Periods" shall mean the periods of approximately
              ----------------
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after May 1 and November
1 of each year and terminating on the last Trading Day in the periods ending
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or before October 31,
2000. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan; provided, however, that no Offering Period may have a
duration exceeding twenty-seven (27) months.

       (l)   "Plan" shall mean this 1998 Employee Stock Purchase Plan.
              ----

       (m)   "Purchase Period" shall mean the approximately six-month period
              ---------------
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date; provided, however, that
the first Purchase Period under the Plan shall commence with the first Trading
Day on or after the date on which the Securities and Exchange Commission
declares the Company's Registration Statement effective and shall end on the
last Trading Day on or before October 31, 1999.

       (n)   "Purchase Price" shall mean 85% of the Fair Market Value of a
              --------------
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower. In the case of any person who owns stock representing more than ten
percent (10%) of the

                                      -2-

<PAGE>

voting power of all classes of stock of the Company or any parent or Subsidiary,
the per share exercise price shall be no less than 100% of the Fair Market Value
per share either on the Enrollment Date or on the Exercise Date, whichever is
lower.

           (o)  "Reserves" shall mean the number of shares of Common Stock
                 --------
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.

           (p)  "Subsidiary" shall mean a corporation, domestic or foreign, of
                 ----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.

           (q)  "Trading Day" shall mean a day on which national stock exchanges
                 -----------
and the Nasdaq System are open for trading.

    3.     Eligibility.
           -----------

           (a)  Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.

           (b)  Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.

           4.   Offering Periods. The Plan shall be implemented by consecutive,
                ----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 of each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
October 31, 2000. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without stockholder approval if such change is announced prior
to the scheduled beginning of the first Offering Period to be affected,
thereafter, and provided that no Offering Period exceeds twenty-seven (27)
months in duration.

                                      -3-

<PAGE>

       5.   Participation.
            -------------

            (a)   An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.

            (b)   Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.

       6.   Payroll Deductions.
            ------------------

            (a)   At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding twelve percent (12%) of
the Compensation which he or she receives on each pay day during the Offering
Period.

            (b)   All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.

            (c)   A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.

            (d)   Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during a Purchase Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.

            (e)   At the time the option is exercised, in whole or in part, or
at the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to

                                      -4-

<PAGE>

make available to the Company any tax deductions or benefits attributable to
sale or early disposition of Common Stock by the Employee.

          7.    Grant of Option. On the Enrollment Date of each Offering
                ---------------
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on each Exercise Date during such Offering Period
(at the applicable Purchase Price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided that
in no event shall an Employee be permitted to purchase during each Purchase
Period more than 5,000 shares of the Company's Common Stock (subject to any
adjustment pursuant to Section 19), and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 13 hereof.
The Board may, for future Offering Periods, increase or decrease, in its
absolute discretion, the maximum number of shares of the Company's Common Stock
an Employee may purchase during each Purchase Period of such Offering Period.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The option shall expire
on the last day of the Offering Period.

          8.    Exercise of Option.
                ------------------

                (a)   Unless a participant withdraws from the Plan as provided
in Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.

                (b)   If the Board determines that, on a given Exercise Date,
the number of shares with respect to which options are to be exercised may
exceed (i) the number of shares of Common Stock that were available for sale
under the Plan on the Enrollment Date of the applicable Offering Period, or (ii)
the number of shares available for sale under the Plan on such Exercise Date,
the Board may in its sole discretion (x) provide that the Company shall make a
pro rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the

                                      -5-

<PAGE>

shares available on the Enrollment Date of any applicable Offering Period
pursuant to the preceding sentence, notwithstanding any authorization of
additional shares for issuance under the Plan by the Company's stockholders
subsequent to such Enrollment Date.

        9.    Delivery. As promptly as practicable after each Exercise Date on
              --------
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.

        10.   Withdrawal.
              ----------

              (a)   A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.

              (b)   A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering Periods
which commence after the termination of the Offering Period from which the
participant withdraws.

        11.   Termination of Employment.
              -------------------------

        Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.

        12.   Interest. No interest shall accrue on the payroll deductions of a
              --------
participant in the Plan.

        13.   Stock.
              -----

              (a)   Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be one million (1,000,000) shares, plus an annual increase to be added on
the first day of the Company's

                                      -6-

<PAGE>

fiscal year beginning in 2000 equal to the lesser of (i) 2% of the outstanding
shares on such date, or (ii) an amount determined by the Board. Notwithstanding
the foregoing, at any such time as the offer and sale of securities pursuant to
the Plan is subject to compliance with Section 260.140.45 of Title 10 of the
California Code of Regulations ("Section 260.140.45"), the total number of
shares of Common Stock issuable upon the exercise of all outstanding options
(together with options outstanding under any stock option plan of the Company)
and the total number of shares provided under any stock bonus or similar plan of
the Company shall not exceed thirty percent (30%) (or such other higher
percentage limitation as may be approved by the stockholders of the Company
pursuant to Section 260.140.45) of the then outstanding shares of the Company as
calculated in accordance with the conditions and exclusions of Section
260.140.45.

          (b)   The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.

          (c)   Shares to be delivered to a participant under the Plan shall
be registered in the name of the participant or in the name of the participant
and his or her spouse.

    14.   Administration. The Plan shall be administered by the Board or a
          --------------
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.

    15.   Designation of Beneficiary.
          --------------------------

          (a)   A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.

          (b)   Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.

                                      -7-

<PAGE>

         16.    Non-Transferability. Notwithstanding any other provision in
                -------------------
this Plan, neither payroll deductions credited to a participant's account nor
any rights with regard to the exercise of an option or to receive shares under
the Plan may be assigned, transferred, pledged or otherwise disposed of in any
way other than by will or the laws of descent and distribution. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10 hereof.

         17.    Use of Funds. All payroll deductions received or held by the
                ------------
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.

         18.    Reports. Individual accounts shall be maintained for each
                -------
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.

         19.    Adjustments Upon Changes in Capitalization, Dissolution,
                --------------------------------------------------------
                Liquidation, Merger or Asset Sale.
                ---------------------------------

                (a) Changes in Capitalization. Subject to any required action by
                    -------------------------
the stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.

                (b) Dissolution or Liquidation. In the event of the proposed
                    --------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.

                                      -8-

<PAGE>

           (c)   Merger or Asset Sale. In the event of a proposed sale of all or
                 --------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.

     20.   Amendment or Termination.
           ------------------------

           (a)   The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 19 hereof,
no such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its stockholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. The Company shall obtain stockholder approval of any Plan amendment
to the extent necessary and desirable to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain stockholder approval in such a manner
and to such a degree as required.

           (b)   Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period (subject to the limitation under Section 2(k) hereof), establish the
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's
Compensation, and establish such other limitations or procedures as the Board
(or its committee) determines in its sole discretion advisable which are
consistent with the Plan.

           (c)   In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:

                                      -9-

<PAGE>

                (1)   subject to the limitation under Section 2(n) hereof,
altering the Purchase Price for any Offering Period including an Offering Period
underway at the time of the change in Purchase Price;

                (2)   shortening any Offering Period so that the Offering Period
ends on a new Exercise Date, including an Offering Period underway at the time
of the Board action; and

                (3)   allocating shares.

         Such modifications or amendments shall not require stockholder approval
or the consent of any Plan participants.

         21.    Notices. All notices or other communications by a participant
                -------
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.

         22.    Conditions Upon Issuance of Shares. Shares shall not be issued
                ----------------------------------
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

         As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

         23.    Stockholder Approval. The Plan shall be subject to approval by
                --------------------
the stockholders of the Company within twelve (12) months after the date the
Plan is adopted by the Board. Such stockholder approval shall be obtained in the
degree and manner required under applicable state and federal law and any stock
exchange rules. Any shares of Common Stock purchased under the Plan before
stockholder approval is obtained must be rescinded if stockholder approval is
not obtained within twelve (12) months before or after the Plan is adopted. Such
shares shall not be counted in determining whether such approval is obtained.

         24.    Term of Plan. Subject to Section 23 of the Plan, the Plan shall
                ------------
become effective upon the date of the Company's initial public offering of its
equity securities registered on Form S-1 with the Securities and Exchange
Commission. The Plan shall continue in effect for a term of ten (10) years from
the date the Plan is adopted by the Board or the Plan is duly approved by the
stockholders of the Company, whichever is earlier, unless sooner terminated
under Section 20 of the Plan.

                                      -10-

<PAGE>

           25.   Automatic Transfer to Low Price Offering Period. To the extent
                 -----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.

           26.   Provisions of Information. At least annually, purchasers of
                 -------------------------
shares of Common Stock, upon the exercise of an option, shall receive copies of
the Company's balance sheet and income statement for the just completed fiscal
year. The Company shall not be required to provide such information to key
employees whose duties in connection with the Company assure them access to
equivalent information.

                                      -11-<PAGE>

                                                                    EXhibit 10.3

                        COVAD COMMUNICATIONS GROUP, INC.

                                 1997 STOCK PLAN
   (amended effective as of the effective date of the Company's initial public
                                    offering)

     1. Purposes of the Plan. The purposes of this Stock Plan are to attract and
        --------------------
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees, Directors and Consultants and to
promote the success of the Company's business. Options granted under the Plan
may be Incentive Stock Options or Nonstatutory Stock Options, as determined by
the Administrator at the time of grant. Stock Purchase Rights may also be
granted under the Plan.

     2. Definitions. As used herein, the following definitions shall apply:
        -----------

        (a) "Administrator" means the Board or any of its Committees as shall be
             -------------
administering the Plan, in accordance with Section 4 of the Plan.

        (b) "Applicable Laws" means the requirements relating to the
             ---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.

        (c) "Board" means the Board of Directors of the Company.
             -----

        (d) "Code" means the Internal Revenue Code of 1986, as amended.
             ----

        (e) "Committee" means a committee of Directors appointed by the Board in
             ---------
accordance with Section 4 of the Plan.

        (f) "Common Stock" means the common stock of the Company.
             ------------

        (g) "Company" means Covad Communications Group, Inc., a Delaware
             -------
corporation.

        (h) "Consultant" means any person, including an advisor, who (I) is a
             ----------
natural person, (ii) provides bona fide services to the Company or a Parent or
Subsidiary, and (iii) provides services that are not in connection with the
offer or sale of securiteis in a capital-raising transaction, and that do not
directly or idirectly promote or maintain a market for the securities of the
Company.

        (i) "Director" means a member of the Board.
             --------

        (j) "Disability" means total and permanent disability as defined in
             ----------
Section 22(e)(3) of the Code.

        (k) "Employee" means any person, including Officers and Directors,
             --------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the

<PAGE>

Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive
Stock Options, no such leave may exceed ninety days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract. If reemployment
upon expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.

          (l) "Exchange Act" means the Securities Exchange Act of 1934, as
               ------------
amended.

          (m) "Fair Market Value" means, as of any date, the value of Common
               -----------------
Stock determined as follows:

              (i)   If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

              (ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or

              (iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

          (n) "Incentive Stock Option" means an Option intended to qualify as an
               ----------------------
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

          (o) "Inside Director" means a Director who is an Employee.
               ---------------

          (p) "Nonstatutory Stock Option" means an Option not intended to
               -------------------------
qualify as an Incentive Stock Option.

          (q) "Notice of Grant" means a written or electronic notice evidencing
               ---------------
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.

          (r) "Officer" means a person who is an officer of the Company within
               -------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

                                      -2-

<PAGE>

        (s)  "Option" means a stock option granted pursuant to the Plan.
              ------

        (t)  "Option Agreement" means an agreement between the Company and an
              ----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.

        (u)  "Option Exchange Program" means a program whereby outstanding
              -----------------------
Options are surrendered in exchange for Options with a lower exercise price.

        (v)  "Optioned Stock" means the Common Stock subject to an Option or
              --------------
Stock Purchase Right.

        (w)  "Optionee" means the holder of an outstanding Option or Stock
              --------
Purchase Right granted under the Plan.

        (x)  "Outside Director" means a Director who is not an Employee.
              ----------------

        (y)  "Parent" means a "parent corporation," whether now or hereafter
              ------
existing, as defined in Section 424(e) of the Code.

        (z)  "Plan" means this 1997 Stock Plan.
              ----

        (aa) "Restricted Stock" means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 11 of the Plan.

        (bb) "Restricted Stock Purchase Agreement" means a written agreement
              -----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.

        (cc) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
              ----------
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.

        (dd) "Section 16(b)" means Section 16(b) of the Exchange Act.
              ------------

        (ee) "Service Provider" means an Employee, Director or Consultant.
              ----------------

        (ff) "Share" means a share of the Common Stock, as adjusted in
              -----
accordance with Section 13 of the Plan.

        (gg) "Stock Purchase Right" means the right to purchase Common Stock
              --------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.

        (hh) "Subsidiary" means a "subsidiary corporation," whether now or
              ----------
hereafter existing, as defined in Section 424(f) of the Code.

     3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
        -------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 35.092.635 Shares (split-adjusted for the March 31, 2000
3-for-2 stock split effected as a stock dividend), plus (a) an annual increase
to be added on the first day of the Company's

                                      -3-

<PAGE>

fiscal year equal to the lesser of 3% of the outstanding Shares on such date, or
an amount determined by the Board, and (b) and additional 5,000,000 Shares for
the Year 2000 and 10,000,000 Shares for the Year 2001. The Shares may be
authorized, but unissued, reacquired Common Stock. In no event shall the
aggregate annual increase in the number of Shares which may be optioned and sold
under the Plan exceed 20,000,000 Shares of Common Stock. All share numbers in
this section will be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued shares
of Common Stock effected without receipt of consideration by the Company.
Notwithstanding the foregoing, at any such time as the offer and sale of
securities pursuant to the Plan is subject to compliance with Section 260.140.45
of Title 10 of the California Code of Regulations ("Section 260.140.45"), the
total number of shares of Common Stock issuable upon the exercise of all
outstanding Options (together with options outstanding under any stock option
plan of the Company) and the total number of shares provided under any stock
bonus or similar plan of the Company shall not exceed thirty percent (30%) (or
such other higher percentage limitation as may be approved by the stockholders
of the Company pursuant to Section 260.140.45) of the then outstanding shares of
the Company as calculated in accordance with the conditions and exclusions of
Section 260.140.45.

        If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.

     4. Administration of the Plan.
        --------------------------

        (a) Procedure.
            ---------

            (i)   Multiple Administrative Bodies. The Plan may be administered
                  ------------------------------
by different Committees with respect to different groups of Service Providers.

            (ii)  Section 162(m). To the extent that the Administrator
                  -------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

            (iii) Rule 16b-3. To the extent desirable to qualify transactions
                  ----------
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.

                                      -4-

<PAGE>

                (iv) Other Administration. Other than as provided above, the
                     --------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.

          (b) Powers of the Administrator. Subject to the provisions of the
              ---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:

              (i)    to determine the Fair Market Value;

              (ii)   to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;

              (iii)  to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder; (iv) to
approve forms of agreement for use under the Plan;

              (v)    to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Option or Stock Purchase Right or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;

              (vi)   to institute an Option Exchange Program;

              (vii)  to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;

              (viii) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

              (ix)   to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;

              (x)    to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by an Optionee
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable;

                                      -5-

<PAGE>

              (xi) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;

              (xii) to make all other determinations deemed necessary or
advisable for administering the Plan.

          (c) Effect of Administrator's Decision. The Administrator's decisions,
              ----------------------------------
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.

       5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
          -----------
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.

       6. Limitations.
          -----------

          (a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

          (b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.

          (c) The following limitations shall apply to grants of Options:

              (i)   No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than 2,000,000 Shares.

              (ii)  In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 2,000,000 Shares
which shall not count against the limit set forth in subsection (i) above.

              (iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.

              (iv)  If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the canceled Option will be counted against the limits
set forth in subsections (i) and (ii) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.

                                      -6-

<PAGE>

         7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
            ------------
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years from the date the Plan is adopted by the Board or the
Plan is duly approved by the stockholders of the Company, whichever is earlier,
unless terminated earlier under Section 15 of the Plan.

         8. Term of Option. The term of each Option shall not exceed ten (10)
            --------------
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.

         9. Stock Purchase Rights and Option Exercise Price and Consideration.
            -----------------------------------------------------------------

            (a) Exercise Price. The per share exercise price for the Shares to
                --------------
be issued pursuant to exercise of an Option or a Stock Purchase Right shall be
determined by the Administrator, subject to the following:

                (i)   In the case of an Option

                      (A) granted to an Employee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.

                      (B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price of a
Share: (i) granted under an Incentive Stock Option, shall be no less than 100%
of the Fair Market Value per Share on the date of grant and (ii) granted under a
Nonstatutory Stock Option, shall be no less than 85% of the Fair Market Value
per Share on the date of grant.

                (ii)  In the case of a Nonstatutory Stock Option intended to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.

                (iii) In the case of a Stock Purchase Right

                      (A) granted to an Employee who, at the time the Stock
Purchase Right is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share either on the date of grant or at the time the purchase
is consumated.

                      (B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less

                                      -7-

<PAGE>

than 85% of the Fair Market Value per Share on either the date of grant or at
the time the purchase is consumated.

         (b)  Waiting Period and Exercise Dates. At the time an Option is
              ---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.

         (c)  Form of Consideration. The Administrator shall determine the
              -----------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:

              (i)    cash;

              (ii)   check;

              (iii)  promissory note;

              (iv)   other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;

              (v)    consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;

              (vi)   a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;

              (vii)  any combination of the foregoing methods of payment; or

              (viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.

     10. Exercise of Option.
         ------------------

         (a)  Procedure for Exercise; Rights as a Stockholder. Any Option
              -----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. With the exception of an Option granted to an
Officer, Director or Consultant, no Option shall become exercisable at a rate
less than twenty percent (20%) per year over a period of five (5) years from the
date of grant of such Option, subject to the Optionee's continued service.
Subject to the foregoing, any Option granted hereunder shall terminate ten (10)
years after the date of grant of the Option, unless earlier terminated in
accordance with its provisions. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.

                                      -8-

<PAGE>

                   An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.

                   Exercising an Option in any manner shall decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.

               (b) Termination of Relationship as a Service Provider. If an
                   -------------------------------------------------
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination, provided that in no event shall an Optionee
who ceases to be a Service Provider for any reason, other than for Cause (as
such term is defined in the Optionee's Option Agreement, employment agreement,
or under applicable law), death, or Disability, have less than thirty (30) days
from the date of termination to exercise his or her Option (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for three (3) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.

               (c) Disability of Optionee. If an Optionee ceases to be a Service
                   ----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination, provided that
such period is not less than six (6) months from the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

                                      -9-

<PAGE>

              (d) Death of Optionee. If an Optionee dies while a Service
                  ------------------
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement, provided that such period is not less than six (6)
months from the date of termination (but in no event later than the expiration
of the term of such Option as set forth in the Notice of Grant), by the
Optionee's estate or by a person who acquires the right to exercise the Option
by bequest or inheritance, but only to the extent that the Option is vested on
the date of death. In the absence of a specified time in the Option Agreement,
the Option shall remain exercisable for twelve (12) months following the
Optionee's termination. If, at the time of death, the Optionee is not vested as
to his or her entire Option, the Shares covered by the unvested portion of the
Option shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

              (e) Buyout Provisions. The Administrator may at any time offer to
                  -----------------
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.

          11. Stock Purchase Rights.
              ---------------------

              (a) Rights to Purchase. Stock Purchase Rights may be issued either
                  ------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.

              (b) Repurchase Option. Unless the Administrator determines
                  -----------------
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The repurchase price of Restricted Stock held by Employees shall,
at the Administrator's discretion not be less than either (1) the Fair Market
Value of the Shares to be repurchased on the date of termination of the
purchaser's service, provided that such right terminates when the Company
becomes publicly traded, or (2) the original purchase price, provided that the
right of the Company to repurchase shall lapse at the rate of 20% of the Shares
per year over 5 years from the date the Stock Purchase Right is granted (without
respect to the date the Stock Purchase Right is exercised or becomes
exercisable). The right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the Shares within 90 days of the
purchaser's termination of service.

                                      -10-

<PAGE>

         (c) Other Provisions. The Restricted Stock Purchase Agreement shall
             ----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.

         (d) Rights as a Stockholder. Once the Stock Purchase Right is
             -----------------------
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.

     12. Non-Transferability of Options and Stock Purchase Rights. An Option or
         --------------------------------------------------------
Stock Purchase Right may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will, or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.

     13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
         ------------------------------------------------------------------
Asset Sale.
----------

         (a) Changes in Capitalization. Subject to any required action by the
             -------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.

         (b) Dissolution or Liquidation. In the event of the proposed
             --------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or

                                      -11-

<PAGE>

Stock Purchase Right will terminate immediately prior to the consummation of
such proposed action.

              (c) Merger or Asset Sale. In the event of a merger of the
                  --------------------
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.

          14. Date of Grant. The date of grant of an Option or Stock Purchase
              -------------
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.

          15. Amendment and Termination of the Plan.
              -------------------------------------

              (a) Amendment and Termination. The Board may at any time amend,
                  -------------------------
alter, suspend or terminate the Plan.

              (b) Stockholder Approval. The Company shall obtain stockholder
                  --------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.

              (c) Effect of Amendment or Termination. No amendment, alteration,
                  -----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless

                                      -12-

<PAGE>

mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.

     16. Conditions Upon Issuance of Shares.
         ----------------------------------

         (a) Legal Compliance. Shares shall not be issued pursuant to the
             ----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

         (b) Investment Representations. As a condition to the exercise of an
             --------------------------
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.

     17. Inability to Obtain Authority. The inability of the Company to obtain
         -----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

     18. Reservation of Shares. The Company, during the term of this Plan, will
         ---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

     19. Stockholder Approval. The Plan shall be subject to approval by the
         --------------------
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws. Any Option exercised before stockholder
approval is obtained must be rescinded if stockholder approval is not obtained
within twelve (12) months before or after the Plan is adopted. Such shares shall
not be counted in determining whether such approval is obtained.

     20. Provisions of Information. At least annually, Optionees and purchasers
         -------------------------
of Shares of Restricted Stock, upon the exercise of an Option or a Stock
Purchase Right, respectively, shall receive copies of the Company's balance
sheet and income statement for the just completed fiscal year. The Company shall
not be required to provide such information to key employees whose duties in
connection with the Company assure them access to equivalent information.

                                      -13-

<PAGE>

                        COVAD COMMUNICATIONS GROUP, INC.

                                 1997 STOCK PLAN

                             STOCK OPTION AGREEMENT

         Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.

I.       NOTICE OF STOCK OPTION GRANT
         ----------------------------

Name:
Address:

         The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:

         Grant Number                          ______________

         Date of Grant                         ______________

         Vesting Commencement Date             ______________

         Exercise Price per Share              $_____________

         Total Number of Shares Granted        ______________

         Total Exercise Price                  $_____________

         Type of Option:                       ____ Incentive Stock Option

                                               ____ Nonstatutory Stock Option

         Term/Expiration Date:                 ______________

         Vesting Schedule:
         ----------------

         This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:

         6/48 (or 12.5%) of the Shares subject to the Option shall vest six
months after the Vesting Commencement Date, and 1/48 (or approximately 2.083%)
of the Shares subject to the Option shall vest each month thereafter, subject to
Optionee's continuing to be a Service Provider on such dates.

         The Optionee shall have their vesting schedule proportionately adjusted
for any decrease in the scheduled number of shares by the decreased scheduled
number of hours worked in a work week, unless the Administrator determines
otherwise.

<PAGE>

     Termination Period:
     ------------------

     This Option shall be exercisable for thirty days after Optionee ceases to
be a Service Provider. Upon Optionee's death or Disability, this Option may be
exercised for one year after Optionee ceases to be a Service Provider. In no
event may Optionee exercise this Option after the Term/Expiration Date as
provided above.

II.  AGREEMENT
     ---------

     1.   Grant of Option. The Plan Administrator of the Company hereby grants
          ---------------
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase 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"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 15(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
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 as defined in
Section 422 of the Code. Nevertheless, to the extent that it exceeds the
$100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").

2.   Exercise of Option.
     ------------------

          (a)  Right to Exercise. This Option shall be exercisable during its
               -----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.

          (b)  Method of Exercise. This Option shall be exercisable by delivery
               ------------------
of an exercise notice in the form attached as Exhibit A (the Exercise Notice)
which shall state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and such other representations
and agreements as may be required 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 the aggregate Exercise
Price.

     No Shares shall be issued pursuant to the exercise of an Option unless such
issuance and such exercise complies with Applicable laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.

     3.   Optionee's Representations. In the event the Shares have not been
          --------------------------
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B.

                                      -2-

<PAGE>

     4.   Lock-Up Period. Optionee hereby agrees that, if so requested by the
          --------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.

     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 Optionee:

          (a)  cash or check;

          (b)  consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or

          (c)  surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.

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

     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 Plan and the terms of this Option.

     8.   Tax Consequences. Set forth below is a brief summary as of the date of
          ----------------
this Option of some of the federal tax consequences of exercise of this Option
and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

          (a)  Exercise of ISO. If this Option qualifies as an ISO, there will
               ---------------
be no regular 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 an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.

                                      -3-

<PAGE>

          (b)  Exercise of Nonstatutory Stock Option. There may be a regular
               -------------------------------------
federal income tax liability upon the exercise of a Nonstatutory Stock Option.
The Optionee 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 Optionee is an
Employee or a former Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee 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.

          (c)  Disposition of Shares. In the case of an NSO, if Shares are held
               ---------------------
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. In the case
of an ISO, if Shares transferred pursuant to the Option are held for at least
one year after exercise and of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.

          (d)  Notice of Disqualifying Disposition of ISO Shares. If the Option
               -------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.

     9.   Entire Agreement; Governing Law. The Plan is incorporated herein by
          -------------------------------
reference. The Plan and this Option 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 Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of California.

     10.  No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
          ---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN

                                      -4-

<PAGE>

EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE
VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY
WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

         Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.

         11. Vesting Acceleration on Change of Control.
             -----------------------------------------

             (a) Vesting Acceleration. In the event of a "Change of Control,"
                 --------------------
all of the Optionee's rights to purchase stock under this Agreement with the
Company shall be automatically vested in their entirety on an accelerated basis
and be fully exercisable:

                 (i) as of the date immediately preceding such "Change of
Control" in the event this stock option agreement is or will be terminated or
canceled (except by mutual consent) or any successor to the Company fails to
assume and agree to perform such stock option agreement as provided in Section
12 hereof at or prior to such time as any such person becomes a successor to the
Company; or

                 (ii) as of the date immediately preceding such "Change of
Control" in the event the Optionee does not or will not receive upon exercise of
the Optionee's stock purchase rights under such stock option agreement the same
identical securities and/or other consideration as is received by all other
shareholders in any merger, consolidation, sale, exchange or similar transaction
occurring upon or after such "Change of Control"; or

                 (iii) as of the date immediately preceding any "Involuntary
Termination" of the Optionee occurring upon or after any such "Change of
Control"; or

                 (iv) as of the date one (1) year following the first such
"Change of Control," provided that the Optionee shall have remained an employee
of the Company continuously throughout such one-year period, other than a
termination as a result of death or disability; whichever shall first occur (all
quoted terms as defined below).

             (b) Change of Control. "Change of Control" means the occurrence of
                 -----------------
any of the following events:

                 (i) 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 the

                                      -5-

<PAGE>

Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities; or

                   (ii)  A change in the composition of the Board of Directors
of the Company 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 Company 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 Company 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

                   (iii) The consummation of (A) a merger or consolidation of
the Company with any other entity, other than a merger or consolidation which
would result in the voting securities of the Company 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 the Company or such surviving entity) at least fifty percent (50%)
of the total voting power represented by the voting securities of the Company or
such surviving entity or the entity that controls the Company or such surviving
entity outstanding immediately after such merger or consolidation, or (B) the
sale or disposition by the Company of all or substantially all the Company's
assets; or

                   (iv)  The shareholders approve a plan of complete liquidation
of the Company.

               (c) Involuntary Termination. "Involuntary Termination" shall mean
                   -----------------------
without the Optionee's written consent: (i) termination by the Company of the
Optionee's employment with the Company other than for Cause; (ii) a material
reduction of or variation in the Optionee's duties, authority or
responsibilities, relative to the Optionee's duties, authority or
responsibilities as in effect immediately prior to such reduction or variation;
(iii) a reduction by the Company in the base salary of the Optionee as in effect
immediately prior to such reduction; (iv) a material reduction by the Company in
the kind or level of employee benefits, including bonuses, to which the Optionee
was entitled immediately prior to such reduction, with the result that the
Optionee's overall benefits package is materially reduced; (v) the relocation of
the Optionee to a facility or a location more than thirty (30) miles from the
Optionee's then present location; (vi) the failure of the Company to obtain the
assumption of this Agreement by any successor as required in Section 12 or (vii)
any act or set of facts that would under applicable law constitute a
constructive termination of Optionee.

               (d) Cause. "Cause" shall mean (i) any willful act of personal
                   -----
dishonesty, fraud or misrepresentation taken by the Optionee in connection with
his or her responsibilities as an employee which was intended to result in
substantial gain or personal enrichment of the Optionee at the expense of the
Company and was materially and demonstrably injurious to the Company; (ii) the
Optionee's conviction of a felony on account of any act which was materially and
demonstrably injurious to the Company; or (iii) the Optionee's willful and
continued failure to substantially perform his or her principal duties and
obligations of employment including under any written agreements (other than

                                      -6-

<PAGE>

any such failure resulting from incapacity due to physical or mental illness),
which failure is not remedied in a reasonable period of time after receipt of
written notice from the Company. For the purposes of this Section 11(d), no act
or failure to act shall be considered "willful" unless done or omitted to be
done in bad faith and without reasonable belief that the act or omission was in
or not opposed to the best interests of the Company. Any act or failure to act
based upon authority given pursuant to a resolution duly adopted by the Board of
Directors of the Company or based upon the advice of counsel for the Company
shall be conclusively presumed to be done or omitted to be done in good faith
and in the best interests of the Company.

         (e) Voluntary Resignation; Termination For Cause. If the Optionee
             --------------------------------------------
terminates employment as a result of an Involuntary Termination, the Optionee
shall be entitled to receive accelerated vesting under Section 11(a) hereof. If
the Optionee's continuous status as an employee of the Company terminates by
reason of the Optionee's voluntary resignation (and not Involuntary Termination)
or if the Optionee's continuous status as an employee of the Company is
terminated for Cause, in either case prior to such time as accelerated vesting
occurs as provided in Section 11(a) hereof, then the Optionee shall not be
entitled to receive accelerated vesting under Section 11(a) hereof.

     12. Successors.
         ----------

     Any successor to the Company (whether direct or indirect and whether by
purchase, merger or consolidation) 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 rights of the Optionee hereunder shall
inure to the benefit of, and be enforceable by, the Optionee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.

OPTIONEE:                                      COVAD COMMUNICATIONS GROUP, INC.

______________________________                 ______________________________
Signature                                      By

______________________________                 ______________________________
Print Name                                     Title

______________________________
______________________________
Residence Address

                                      -7-

<PAGE>

                                    EXHIBIT A
                                    ---------

                                 1997 STOCK PLAN

                                 EXERCISE NOTICE

Covad Communications Group, Inc.
2330 Central Expressway
Santa Clara, CA 95050

Attention: Secretary

         1. Exercise of Option. Effective as of today, ___________, 19__, the
            ------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Covad Communications
Group, Inc. (the "Company") under and pursuant to the 1997 Stock Plan (the
"Plan") and the Stock Option Agreement dated ________, 19___ (the "Option
Agreement"). The purchase price for the Shares shall be $_____, as required by
the Option Agreement.

         2. Delivery of Payment. Purchaser herewith delivers to the Company the
            -------------------
full purchase price of the Shares, as set forth in the Option Agreement.

         3. Representations of Optionee. Optionee acknowledges that Optionee has
            ---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

         4. Rights as Stockholder. Until the issuance of the Shares (as
            ---------------------
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares shall be issued to
the Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 11 of the Plan.

         5. Tax Consultation. Optionee understands that Optionee may suffer
            ----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.

         6. Successors and Assigns. The Company may assign any of its rights
            ----------------------
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.

<PAGE>

     7. Interpretation. Any dispute regarding the interpretation of this
        --------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.

     8. Governing Law; Severability. This Agreement is governed by the internal
        ---------------------------
substantive laws but not the choice of law rules, of California.

     9. Entire Agreement. The Plan and Option Agreement are incorporated herein
        ----------------
by reference. This Agreement, the Plan and the Option 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 Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee.

Submitted by:                                   Accepted by:

OPTIONEE:                                       COVAD COMMUNICATIONS GROUP, INC.

______________________________                  ______________________________
Signature By

______________________________                  ______________________________
Print Name                                      Its

Address:                                        Address:
-------                                         -------

______________________________                  2330 Central Expressway
______________________________                  Santa Clara, CA 95050

                                                ______________________________
                                                Date Received

                                      -2-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}]]