Document:

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                                                                  Exhibit 10.126

                            PURCHASE AND SALE AGREEMENT

                             dated as of March 2, 2001

                                  by and between

                       BROWN & SHARPE MANUFACTURING COMPANY

                                     as Seller

                                        and

                           PRECISION PARK PARTNERS, LLC

                                     as Buyer

           with respect to approximately 169 acres of real property and
     improvements located on Frenchtown Road in North Kingstown, Rhode Island
          (with a portion thereof located in East Greenwich, Rhode Island
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                          PURCHASE AND SALE AGREEMENT

   THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered
into as of this 2nd day of March, 2001 (the "Effective Date"), by and between
BROWN & SHARPE MANUFACTURING COMPANY, a Delaware corporation having an address
at 200 Frenchtown Road, North Kingstown, Rhode Island 02852 ("Seller"), and
PRECISION PARK PARTNERS, LLC, a Rhode Island limited liability company having
an address at 333 Strawberry Field Road, Warwick, Rhode Island 02806
("Buyer").

                                   ARTICLE I

                                   PROPERTY

   Section 1.01. Property. Seller hereby agrees to sell and convey to Buyer,
and Buyer hereby agrees to purchase from Seller, upon the terms and conditions
set forth herein, those certain lots or parcels of land (the "Land"), with the
buildings, fixtures and improvements thereon (the "Improvements"), located at
200 Frenchtown Road, North Kingstown, Rhode Island, consisting of
approximately 169 acres (with a portion thereof located in East Greenwich,
Rhode Island), and more particularly described on Exhibit A attached hereto
and made a part hereof.

   TOGETHER ALSO with all right, title and interest of Seller, if any, in and
to (i) the land in the bed of any public street, road or avenue, open or
proposed, in front of or adjoining the Land, to the center line thereof,
(ii) any rights of way, easements, appurtenances, alleys, gores and strips of
land adjoining or appurtenant to the Land and used in conjunction therewith,
(iii) any water rights, riparian rights and powers, hereditaments and
appurtenances with respect thereto, all right, title and interest of Seller in
and to any side or spur railroad tracks and all rights of way appurtenant
thereto, (iv) any award made or to be made in lieu of any of the foregoing and
any unpaid award for damage to the Land or the Improvements by reason of
change of grade of any street, road or avenue; (v) any award made or to be
made with respect to the Route 4 Condemnation (as hereinafter defined); (vi)
the Existing Leases (hereinafter defined) and the Hexagon Lease (as
hereinafter defined); (vii) all rents and profits from the Existing Leases and
the Hexagon Lease applicable to any period from and after the Closing Date
(hereinafter defined), and any security or tenant deposit made by any tenant
to Seller whether or not refundable, together with interest required by law or
by the applicable Existing Lease to be paid thereon, and any other documents,
records or rights owned by Seller affecting or relating to the Land, the
Existing Leases or the Improvements; and (viii) all fixtures and/or personal
property listed on Exhibit B attached hereto and made a part hereof (the
"Personal Property").

   All of the foregoing items purchased under this Agreement are collectively
referred to as the "Property".

                                  ARTICLE II

                                PURCHASE PRICE

   Section 2.01. Purchase Price. The purchase price for the Property (the
"Purchase Price") shall be Fifteen Million Five Hundred Thousand and 00/100
Dollars ($15,500,000.00). The Purchase Price will be paid by Buyer to Seller
at the Closing (as hereinafter defined) and recording of the Deed (as
hereinafter defined) in cash or by wire transfer of immediately available
funds.

   Section 2.02. Use of Purchase Price. To enable Seller to make conveyance as
provided in this Agreement, Seller shall use the Purchase Price or any portion
thereof to clear the title of any or all encumbrances or interests, other than
the Permitted Encumbrances (as hereinafter defined), provided that all
instruments so procured are recorded simultaneously with the delivery of the
Deed or that provision for prompt recording thereof satisfactory to the
Buyer's attorneys are made on the date of Closing.

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   Section 2.03. Deposits. The Buyer shall make deposits against the Purchase
Price in the following manner:

     (a) Contemporaneously with the execution of this Agreement, Buyer shall
  deliver to CB Richard Ellis--N.E. Partners, L.P. (the "Escrow Agent") the
  sum of Fifty Thousand and 00/100 Dollars ($50,000.00) as earnest money
  hereunder (the "Initial Deposit");

     (b) On or before the expiration of the Review Period (as defined in
  Section 3.01) the Buyer shall deliver to the Escrow Agent the sum of Six
  Hundred Fifty Thousand and 00/100 Dollars ($650,000.00) (the "Additional
  Deposit");

   As used herein, the term "Deposit" shall mean both the Initial Deposit and
the Additional Deposit, together with all interest earned thereon.

   Any deposit amount required hereunder, may, at the option of Buyer, be in
the form of cash or check. The Escrow Agent shall place the Deposit in an
interest-bearing account at a bank designated by Buyer, with all interest
being paid to Buyer. At the Closing, the Deposit will be applied toward the
Purchase Price, but otherwise the Deposit will be held by the Escrow Agent,
returned to Buyer, or delivered to Seller, in accordance with the terms of
this Agreement.

                                  ARTICLE III

                                 REVIEW PERIOD

   Section 3.01. Review Period. Buyer has from the date of this Agreement
until 5:00 p.m., on May 2, 2001, which date is agreed to be sixty (60) days
from the date hereof (the "Review Period") to: (a) review and approve, at
Buyer's expense, such items (including the Existing Leases) and to conduct
such inspections, interviews, tests and audits as Buyer, in its sole
discretion, deems appropriate, including, without limitation, environmental
(including so-called phase I and II testing), engineering and zoning
inspections and investigations and review of those matters disclosed by survey
and any matters related to title to the Property; and (b) obtain financing for
the purchase of the Property.

   Section 3.02. Inspection. Buyer shall have the right, at all reasonable
times during the Review Period and until Closing to conduct on-site
inspections of the Property and physical inspections and tests of the Property
(including, without limitation, the right to enter and inspect all portions of
the Property), provided, however, that any invasive inspection or testing
shall require the prior consent of the Seller, which consent shall not be
unreasonably withheld, and shall be scheduled only upon prior notice to
Seller. Upon the completion of any inspection or test conducted pursuant to
the provisions hereof, the Buyer agrees, at its sole cost and expense, to
return the Property to the condition as existed prior to the commencement of
such inspection or test. Seller hereby agrees to fully cooperate with Buyer in
providing access to any and all information with respect to the Property
requested by Buyer, including the execution of any consents or applications
for information from government or quasi-governmental agencies. Buyer shall
indemnify Seller from any physical damage to the Property and personal injury
resulting from Buyer's entry on the Property during the Review Period.

   Section 3.03. Buyer's Notice. If for any or no reason Buyer, in its sole
and absolute discretion, is not satisfied with the results of such
inspections, interviews, tests or any other fact or situation with respect to
the Property, then in such event Buyer shall have the right to terminate this
Agreement by giving Seller and the Escrow Agent written notice thereof (the
"Buyer's Notice") on or before the expiration of the Review Period, and this
Agreement shall be immediately terminated upon Buyer's delivery of the Buyer's
Notice to Seller. The Seller shall be under no obligation in any event to
extend the Review Period. The Buyer's Notice need not set forth the reason for
such termination. Buyer's failure to deliver the Buyer's Notice on or before
the expiration of the Review Period shall be deemed a waiver of Buyer's right
to terminate this Agreement under this Section 3.03 and the terms of this
Agreement shall continue to bind the parties.

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   Section 3.04. Termination. If Buyer elects to terminate this Agreement by
(i) delivering the Buyer's Notice in accordance with and subject to the terms
of this Article III, or (ii) failing to pay the Additional Deposit as provided
in Section 2.03 of this Agreement, the parties hereto shall thereupon be
relieved of all liabilities and obligations hereunder and the Initial Deposit
shall be paid to Seller by Escrow Agent in consideration of the agreements of
Seller contained herein. Buyer expressly acknowledges and agrees that, if
Seller requests Escrow Agent to pay to Seller the Initial Deposit as a result
of Buyer's election to terminate this Agreement under the provisions of this
Article III, then the Escrow Agent shall have no obligation to independently
determine whether Seller has the right to receive the Initial Deposit, and the
Escrow Agent may rely solely upon the written instructions set forth in any
written notice delivered by Seller from and after such election, without the
joinder, approval or consent of Buyer. If Buyer elects to terminate this
Agreement in accordance with and subject to the terms of this Article III,
Buyer shall furnish Seller, upon such termination and without charge, a copy
of each study, report and any other document prepared by Buyer in connection
with Buyer's due diligence for the Property.

                                  ARTICLE IV

                           GOOD AND MARKETABLE TITLE

   Section 4.01. Conveyance. At the Closing, Seller will convey good and
marketable record fee simple and insurable (at Buyer's expense) title to the
Property to Buyer by a warranty deed (the "Deed") and good and marketable
title to the Personal Property by a bill of sale (the "Bill of Sale"), free
and clear of any and all deeds of trust, mortgages or other liens or
indebtedness, encumbrances, conditions, easements, rights-of-way, assessments
and restrictions, except for the following (collectively, the "Permitted
Exceptions"):

     (a) General real estate taxes for the year in which the Closing occurs
  and subsequent years not yet due and payable.

     (b) All easements, restrictions, rights-of-way, encroachments,
  covenants, reservations, agreements, leases, tenancies, licenses,
  conditions and other matters of record as of the date hereof, affecting all
  or any portion of the Property to the extent not disapproved by Buyer
  during the Review Period; Seller shall have no obligation to remove any
  such matters of record, provided, however, nothing contained herein shall
  deprive Buyer of its right to terminate this Agreement pursuant to the
  terms of Section 3.03 hereof.

     (c) The terms and provisions of the Hexagon Lease and of those leases
  listed on Exhibit C attached hereto and made a part hereof (the "Existing
  Leases").

   Section 4.02. Extension to Cure. If Seller shall be unable to give title or
to make conveyance, or to deliver possession of the Property, all as herein
stipulated, or if on the date of Closing the Property does not conform with
the provisions hereof, then Seller shall use good faith and reasonable efforts
to remove any defects in title, or to deliver possession as provided herein,
or to make the Property conform to the provisions hereof, as the case may be,
and the Closing shall automatically be extended for a period of sixty (60)
days (the "Extended Time"). If at the expiration of the Extended Time Seller
shall have failed so to remove any defects in title, deliver possession, or
make the Property conform, as the case may be, all as herein agreed, after
using good faith and reasonable efforts to do so, then, at Buyer's option, the
Deposit shall be forthwith refunded by Escrow Agent to Buyer and all other
obligations of all parties hereto shall cease and this Agreement shall be void
without recourse to the parties hereto.

   Buyer shall have the election, at either the original date of Closing or
the Extended Time, to accept such title as Seller can deliver to the Property
in its then condition and to pay therefore the Purchase Price without
deduction, in which case Seller shall convey such title.

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                                   ARTICLE V

                                    CLOSING

   Section 5.01. Closing. The purchase and sale of the Property will be held
at Edwards & Angell, LLP, 2800 Financial Plaza, Providence, Rhode Island or
such other place as may be agreed upon by Seller and Buyer, and will occur,
subject to satisfaction of all conditions precedent set forth in Section 9.01
of this Agreement at 10:00 a.m. local time on June 5, 2001 (the "Closing"). If
the day on which the Closing is scheduled to occur is a Sunday or holiday then
the Closing shall take place on the first business day thereafter.

   Section 5.02. Seller's Obligations. At the Closing, Seller shall execute
and deliver to Buyer, and/or cause the execution and delivery by all parties
other than Buyer of, the following:

     (a) The Deed (with payment by Seller of the required state and/or local
  documentary stamps and any other applicable tax transfers, if any, to be
  affixed thereto).

     (b) An assignment of leases, in the form attached hereto as Exhibit D,
  pursuant to which all of Seller's right, title and interest in and to the
  Existing Leases and the Hexagon Lease shall be assigned to Buyer and Buyer
  shall assume, from and after the Closing, all of Seller's rights and
  obligations under the Existing Leases and the Hexagon Lease (the
  "Assignment of Leases").

     (c) The Bill of Sale.

     (d) A FIRPTA affidavit in a form acceptable to Buyer and the title
  insurance company selected by Buyer (the "Title Company").

     (e) A Rhode Island Residency Affidavit, in a form acceptable to Buyer
  and the Title Company, sufficient to comply with the provisions of R.I.G.L.
  (S) 44-30-71.3 in order that there shall be no lien on the Property.

     (f) Evidence of Seller's good standing in each of Delaware and Rhode
  Island issued by the Secretary of State of each of Delaware and Rhode
  Island.

     (g) A good standing certificate from the Rhode Island Division of
  Taxation and, if the transaction is a sale of all or substantially all of
  the assets of Seller, a discharge of lien from the Division of Taxation.

     (h) Original counterparts (to the extent available) or copies of the
  Existing Leases and the Hexagon Lease (and lease files) and of all
  operating agreements, reciprocal easement agreements, options, warranties,
  guarantees, permits and other agreements related to the Property, including
  all modifications, supplements or amendments to each of the foregoing.

     (i) Copies of any permits, licenses and approvals relating to operation
  of the sewage treatment plant facility located at the Property and an
  assignment thereof to Buyer.

     (j) An assignment of any and all permits, licenses, approvals and
  warranties relating to the Property, to the extent assignable.

     (k) To the extent necessary to permit the Title Company to remove any
  exception in the owner's policy for mechanics' and materialmens' liens and
  general rights of parties in possession, an affidavit executed by Seller as
  to the absence of debts and liens and a listing of all parties in
  possession executed by Seller, made to Buyer and the Title Company and in a
  form acceptable to the Title Company, along with any other items reasonably
  required by the Title Company.

     (l) Evidence acceptable to the Title Company of Seller's authority to
  consummate the transactions contemplated by this Agreement.

     (m) Seller's certification that all representations and warranties made
  by Seller under this Agreement are true, complete and correct in all
  material respects as of the Closing.

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     (n) A settlement statement with respect to the purchase and sale of the
  Property (the "Settlement Statement").

     (o) To the extent the same are in Seller's possession, all original
  certificates of occupancy and licenses, permits, authorizations and
  approvals issued by the appropriate authorities with respect to the
  Property.

     (p) Any surveys and architect's plans, specifications and reports
  pertaining to the Property in Seller's possession and any licenses,
  permits, authorizations and approvals pertaining to the operation thereof.

     (q) Notice to each tenant advising such tenant of the sale of the
  Property and instructing such tenant to send all rent to such address as
  Buyer requests.

     (r) The information necessary to complete form 1099B and such other
  forms and information required by the Internal Revenue Code and regulations
  thereunder with respect to the transaction.

     (s) All other instruments and documents to which Buyer may be entitled
  under any provision of this Agreement.

     (t) Signed tenant estoppel certificates and subordination, non-
  disturbance and attornment agreements (on forms acceptable to Buyer and
  Seller) from each of the tenants under the Existing Leases and the Hexagon
  Lease.

     (u) An assignment of any surviving Service Contracts (as hereinafter
  defined), in the form attached hereto as Exhibit E.

   Section 5.03. Buyer's Obligations. At the Closing, Buyer shall pay the
Purchase Price to Seller in cash or by wire transfer of immediately available
funds, and shall execute and deliver to Seller the following:

     (a) The Assignment of Leases.

     (b) Buyer's certification that all representations and warranties made
  by Buyer under this Agreement are true, complete and correct in all
  material respects as of the Closing.

     (c) Appropriate evidence of Buyer's authority to consummate the
  transactions contemplated by this Agreement.

     (d) The Settlement Statement.

   Section 5.04. Possession. At the Closing, full possession of the Property,
subject only to the rights of the tenants under the Existing Leases and the
Hexagon Lease, shall be delivered by Seller to Buyer in the same condition as
it now is, reasonable wear and tear excepted. Buyer acknowledges that it is
purchasing the Property "AS IS".

                                  ARTICLE VI

                              CLOSING ADJUSTMENTS

   Section 6.01. Adjustments and Prorations.

   (a) Real and (if a lien on the Property) personal property taxes, fire
district (if any) taxes, water and sewer bills and any other costs or expenses
allocable to the parties hereto shall be prorated as of the Closing on the
basis of a 365-day year, except that if any amount to be prorated covers a
period of less than a year, the proration as to such amount shall be made as
of the Closing on the basis of the period so covered. Seller shall, at the
Closing, pay a pro rata share of all items so prorated to and including the
day of the Closing, and Buyer shall pay or assume the balance thereof. Seller
shall pay all utility charges on the Property for the period up to Closing.
The net amount of any adjustments shall be added to or subtracted from the
Purchase Price, as applicable. Any unpaid betterment or improvement
assessments (the "Assessments") constituting a lien against the Premises shall
be paid in the following manner: (i) Seller shall pay for all Assessments due
and payable prior to the calendar year 2001; (ii) Assessments due and payable
during the calendar year 2001 shall be prorated as of the Closing Date; and
(iii) Buyer shall pay for all Assessments due and payable in the calendar
years 2002 and beyond.

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   (b) Rents under the Existing Leases and the Hexagon Lease shall be prorated
as of the Closing based on the applicable period relating to such rents,
except that no proration shall be made for rents delinquent as of the Closing
(hereinafter called the "Delinquent Rents"). Delinquent Rents shall be any
rents that are more than thirty (30) days past due. The balance remaining from
any security deposits or prepaid rents which are held by Seller after
deductions previously made by Seller in accordance with the Existing Leases
and the Hexagon Lease shall be transferred to Buyer, provided, however, that
from and after the date hereof Seller will make no further deductions from any
security deposit without the prior written consent of Buyer, which consent
shall not be unreasonably withheld. Buyer shall assume all liability and
obligations relating to such security deposits and prepaid rents and shall
indemnify and hold Seller harmless from all claims, liabilities and
obligations relating thereto. Delinquent Rents, if any, shall be similarly
prorated as of the Closing, and Seller's share thereof shall be remitted to
Seller promptly when, as and if received by Buyer; provided, however, nothing
herein contained shall operate to require Buyer to institute any lawsuit or
other collection procedures to collect any Delinquent Rents. Amounts collected
by Buyer from tenants owing Delinquent Rents shall be applied first to rent
for the month in which the Closing occurs, then current rents owed by such
tenant and finally to Delinquent Rents owed by such tenant in the inverse
order in which the Delinquent Rents arose.

   Section 6.02. Transaction Costs. Each party will pay its own expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, (a) all costs and expenses stated
herein to be borne by a party, and (b) each party's respective legal fees and
expenses. Buyer, in addition to its other expenses, shall pay at the Closing
(i) all recording charges incident to the recording of the Deed, and (ii) all
premiums for Buyer's title insurance policy. Seller, in addition to its other
expenses, shall pay at the Closing the cost of any documentary stamps or other
sales or transfer taxes applicable to the sale.

   Section 6.03. Brokerage Commissions. Seller and Buyer acknowledge and agree
that neither has dealt with any real estate broker, agent or salesman, except
CB Richard Ellis--N.E. Partners, L.P. ("Ellis"). Seller and Buyer acknowledge
and agree that Seller shall be solely responsible for payment of any broker's
fee or commission due Ellis, and Seller shall indemnify, protect, defend and
hold harmless Buyer from any and all claims for any such fees or commissions
due Ellis. Seller and Buyer further acknowledge and agree that any other fees
or real estate commissions occasioned by the execution and/or consummation of
this Agreement shall be the sole responsibility of the party contracting
therefor, and such party agrees to indemnify, protect, defend and hold
harmless the other party from any and all claims for such other fees or real
estate commissions.

   Sections 6.04. Survival. The terms of this Article VI shall survive the
termination of this Agreement on the Closing and delivery of the Deed.

                                  ARTICLE VII

                             DEFAULT AND REMEDIES

   Section 7.01. Buyer's Default. If Buyer fails to close for any reason,
except (i) Seller's default or (ii) the permitted termination of this
Agreement by Buyer or Seller as herein expressly provided, Seller shall be
entitled to terminate this Agreement and to instruct the Escrow Agent to
deliver the Deposit to Seller as liquidated damages, which right shall be
Seller's sole remedy hereunder.

   Section 7.02. Seller's Default. If Seller is in default under the terms of
this Agreement, or if Seller fails to close for any reason, except (i) Buyer's
default or (ii) the permitted termination of this Agreement by either Seller
or Buyer as herein expressly provided, Buyer shall be entitled to terminate
this Agreement upon written notice to Seller and to request the Escrow Agent
to return the Deposit to Buyer. In addition to, but not in lieu of, the return
of the Deposit, Buyer shall be entitled to exercise any and all available
remedies at law, in equity or otherwise, including specific performance of
this Agreement.

   Section 7.03. Legal Fees. In the event of any litigation between the
parties with respect to the subject matter of this Agreement, the prevailing
party shall be entitled to recover its reasonable legal fees from the other
party.

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                                 ARTICLE VIII

                   REPRESENTATIONS, WARRANTIES AND COVENANTS

   Section 8.01. Seller's Representations. Seller hereby represents and
warrants to Buyer, as of the date hereof and as of the Closing, as follows:

     (a) Attached hereto as Exhibit C is a schedule of all Existing Leases.
  Seller covenants that it has previously and/or contemporaneously herewith
  delivered to Buyer true copies of all Existing Leases, and all amendments
  and agreements relating thereto. Seller covenants that prior to the Closing
  it will not enter into any new lease, or amend, modify, extend, assign or
  terminate any Existing Lease or the Hexagon Lease, or consent to any
  assignment or subletting under any Existing Lease or the Hexagon Lease,
  without the prior written consent of Buyer which consent shall not be
  unreasonably withheld or delayed. Except for the Existing Leases there are
  no other leases or occupancy agreements with respect to the Property. The
  Existing Leases are in full force and effect and there are no material
  defaults by either landlord or tenant thereunder;

     (b) The rent roll which is attached as Exhibit F hereto (the "Rent
  Roll") accurately and completely identifies, as of the date of this
  Agreement, all Existing Leases and the Hexagon Lease, including the terms
  thereof and any security deposits and prepaid rent held by Seller. All
  information set forth in the Rent Roll is true and accurate. The Rent Roll
  shall be mutually satisfactory to the parties and shall list, inter alia,
  the base rent, additional rent, options to extend, option rent and any
  rights of first refusal to lease or purchase.

     (c) Except as set forth on the Rent Roll, all rents which are payable by
  tenants under their respective Existing Leases are presently current.

     (d) Except as set forth on the Rent Roll, no tenant has paid rent for
  more than one (1) month in advance.

     (e) Seller shall, from and after the date of this Agreement to the
  Closing Date, perform and discharge its duties and obligations and
  otherwise comply with every material covenant and agreement of the landlord
  under the Existing Leases.

     (f) To the best knowledge of Seller, water, gas and electric lines to
  service the Property are located on or adjacent to the Property directly
  from a public street; there are no unpaid assessments or charges for the
  installation of any such utilities or for making connection thereto that
  have not been fully paid and Seller has no knowledge of any contemplated
  assessments or charges.

     (g) Each service or similar contract (excluding any applicable Permitted
  Encumbrances) relating to the ownership, operation or use of the Property,
  is accurately described on Exhibit G which is attached hereto
  (collectively, the "Service Contracts"). To the best of Seller's knowledge,
  (i) all of the Service Contracts are in full force and effect, and (ii)
  neither Seller nor the vendor under each Service Contract is in default of
  its obligations thereunder.

     (h) Seller has received no written notice alleging that the Property is
  in violation of any applicable building, environmental or zoning laws,
  rules, codes or regulations.

     (i) (i) Seller is not a party to any litigation, arbitration or
  administrative proceeding (1) with any past or present tenant of the
  Property, (2) with any person or entity having or claiming any interest in
  or lien on the Property, or (3) which affects or questions Seller's title
  to the Property or Seller's ability to perform its obligations under this
  Agreement.

         (ii) Seller knows of no presently pending litigation, arbitration or
  administrative proceeding and no litigation, arbitration or administrative
  proceeding has been threatened against Seller or the property, in either
  case, affecting or questioning Seller's title to, or use of, the Property
  or any part thereof.

     (j) Seller has received no written or other notice of any condemnation
  proceeding nor declaration of taking or other similar instrument filed
  against the Property, but has knowledge that the State of Rhode Island
  intends to take a portion of the Land for purposes of constructing a
  connector to Rhode Island State Route 4 (the "Route 4 Condemnation").

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     (k) To the best of Seller's knowledge, (i) there are no underground
  storage tanks on the Property, and (ii) any underground storage tanks
  previously existing on the Property were removed therefrom in accordance
  with applicable law and Seller has obtained closure certificates evidencing
  such removal.

     (l) Seller has not used or knowingly permitted the Property to be used,
  and to the best of Seller's knowledge, the Property has not been used for,
  storage, transfer, transportation or disposal of dangerous, toxic or
  hazardous materials, chemicals, wastes or similar substances or for the
  discharge of the same into the environment other than in the normal course
  of the businesses of Seller and Seller's tenants and in accordance with
  applicable law. Contemporaneously with the execution of this Agreement,
  Seller shall deliver to Buyer (to the extent in Seller's possession or
  control) copies of all environmental site assessments, site inspections,
  agreements and any other environmental due diligence relating to the
  Property.

     (m) The Seller is a corporation (i) duly organized, validly existing and
  in good standing under the laws of the State of Delaware, (ii) qualified to
  conduct business in the State of Rhode Island, and (iii) with full power
  and authority to execute and deliver this Agreement, to perform its
  covenants, agreements and obligations hereunder and to sell the Property.

     (n) This Agreement and its execution by Seller have been duly authorized
  and are a valid and binding obligations of Seller; and the transfer of the
  Property, and the consummation of the transactions contemplated hereby,
  will not result in any violation or breach of any indenture or agreement to
  which Seller is a party or by which Seller or the Property is affected or
  bound.

   The representations and warranties in this Section 8.01 are made by Seller
in order to facilitate Buyer's due diligence process and shall not survive the
Closing and delivery of the Deed. Notwithstanding the foregoing limitation,
the terms of Section 8.01(a)-(e) shall survive the Closing and delivery of the
Deed for a period of six (6) months.

   Section 8.02. Buyer's Representations.

     (a) Buyer hereby represents and warrants to Seller, as of the date
  hereof and as of the Closing, that Buyer has the legal capacity and
  complete authority to enter into and perform this Agreement, and no
  consent, approval or other action by any person or entity will be needed
  thereafter to authorize Buyer's execution and performance of this
  Agreement.

     (b) Buyer is a limited liability company duly organized and validly
  existing under the laws of the State of Rhode Island.

   Section 8.03. Operating Covenants. From the date hereof until the date of
Closing, the Seller shall not take any of the following actions with respect
to the Property:

     (a) make or permit any structural modifications of or additions to the
  Property without the Buyer's consent, which consent shall not be
  unreasonably withheld;

     (b) mortgage or otherwise further encumber or to permit liens (whether
  inchoate or not) upon the Property;

     (c) enter into any agreements relating to the operation or maintenance
  of the Property the term of which agreements shall extend beyond the date
  of Closing;

     (d) enter into any lease, license or other agreement with respect to the
  use or occupancy of the Property or otherwise grant or create any
  easements, restrictions or other encumbrances on or affecting the Property;
  or

     (e) amend, alter or modify any of the Existing Leases or the Hexagon
  Lease.

   Section 8.04. Route 4 Condemnation. From and after the date hereof, Seller
shall promptly deliver to Buyer copies of any and all notices, correspondence
and any other materials received by Seller with respect to the Route 4
Condemnation. Prior to the earlier of termination of this Agreement or
Closing, Seller will not enter into any agreement with any governmental entity
with respect to the Route 4 Condemnation without the prior written consent of
Buyer.

                                      D-8
<PAGE>

                                  ARTICLE IX

                             CONDITIONS PRECEDENT

   Section 9.01. Mutual Contingency. Seller's obligation to sell the Property
and Buyer's obligation to purchase the Property (as set forth in this
Agreement) shall be contingent upon Seller entering into a lease, prior to
Closing, with Hexagon Holdings, Inc. ("Hexagon") pursuant to which Seller
shall lease to Hexagon approximately 333,080 square feet of space in the
Improvements (the "Hexagon Lease"). The Hexagon Lease shall be in the form
attached hereto as Exhibit H.

   Section 9.02. Discovery. If either Seller or Buyer discovers, prior to or
at the Closing, that any representation or warranty of the other party is
false, misleading or inaccurate in any material respect, the discovering party
may (but shall not be obligated to), at such party's option, terminate this
Agreement and the parties hereto shall be relieved of all liabilities and
obligations hereunder and (a) if Buyer is the discovering party, Buyer shall
be entitled to the immediate return of the Deposit, together with all accrued
interest thereon, and to pursue Buyer's remedies under Article VII of this
Agreement, and (b) if Seller is the discovering party, Seller shall be
entitled to pursue Seller's remedies under Article VII of this Agreement.

                                   ARTICLE X

                                    NOTICES

   Any notice, demand or other communication which may or is required to be
given under this Agreement must be in writing and must be: (a) personally
delivered with a signed receipt; (b) transmitted by United States postage
prepaid mail, registered or certified mail, return receipt requested; (c)
transmitted by reputable overnight courier service, such as Federal Express;
or (d) transmitted by legible facsimile (with answer back confirmation) to
Buyer and Seller as listed below. Notices hereunder shall be directed as
follows:

     If to Seller:

       Brown & Sharpe Manufacturing Company
       200 Frenchtown Road
       North Kingstown, Rhode Island 02852
       Attention: James W. Hayes, III, Esq.--Secretary and General Counsel
       Facsimile: (401) 886-2214

     With a copy to (which copy shall not constitute notice):

       Edwards & Angell, LLP
       2800 Financial Plaza
       Providence, Rhode Island 02903
       Attention: Charles F. Rogers, Jr., Esq.
       Facsimile: (401) 276-6611

     If to Buyer:

       Precision Park Partners, LLC
       333 Strawberry Field Road
       Warwick, Rhode Island 02806
       Attn: John G. Laramee
       Facsimile:

     With a copy to (which copy shall not constitute notice):

       Holland & Knight LLP
       One Financial Plaza
       Providence, Rhode Island 02903
       Attention: David J. Tracy, Esq.
       Facsimile: (401) 824-5175

                                      D-9
<PAGE>

     If to Escrow Agent:

       CB Richard Ellis--N.E. Partners, L.P.
       10 Dorrance Street
       Providence, Rhode Island 02903
       Attention: Charles T. Francis
       Facsimile: (401) 831-3903

Notwithstanding the foregoing, any notices delivered by one party to the other
party under Article III shall be deemed given on the date and time of posting
if transmitted by United States mail, postage prepaid, registered or certified
mail, return receipt requested, to the respective addresses set forth above.
Buyer's counsel may deliver any notice under Article III on behalf of Buyer.

                                  ARTICLE XI

                                 RISK OF LOSS

   Section 11.01. Insurance. Until Closing, Seller shall at its sole cost and
expense keep the Property insured with standard all-risk coverage as provided
in Exhibit I attached hereto.

   Section 11.02. Minor Damage. In the event of "minor" loss or damage being
defined for the purpose of this Agreement as damage to the Property such that
the Property could be repaired or restored, in the opinion of an architect
mutually acceptable to Seller and Buyer (with any fees, costs or expenses
pertaining to such opinion to be borne equally by Buyer and Seller), to a
condition substantially identical to that of the Property immediately prior to
the event of damage at a cost equal to or less than Five Hundred Thousand and
00/100 Dollars ($500,000.00), neither Seller nor Buyer shall have the right to
terminate this Agreement due to such damage but Seller shall reduce the
Purchase Price by an amount equal to the cost to repair such damage (unless
such damage has been repaired prior to Closing) and the Closing shall take
place as provided herein, and in such event Seller shall retain all of
Seller's right, title and interest to any claims and proceeds Seller may have
with respect to any casualty insurance policies relating to the Property.

   Section 11.03. Major Damage. In the event of a "major" loss or damage
(being defined as any loss or damage which is not "minor" as defined
hereinabove), Buyer shall have the option of terminating this Agreement by
written notice to Seller, in which event Seller and Buyer shall thereupon be
released from any and all liability hereunder and the Deposit, together with
all accrued interest thereon, shall be immediately returned to Buyer by the
Escrow Agent. If Buyer elects not to terminate this Agreement, Buyer and
Seller shall proceed with the Closing, provided Seller shall assign all of
Seller's right, title and interest to any claims and proceeds Seller may have
with respect to any casualty insurance policies relating to the Property, and
Buyer shall receive a credit against the Purchase Price in an amount equal to
the aggregate amount of any deductible(s) under the insurance policies
assigned to Buyer, plus any costs to repair any such major damage not covered
by insurance provided, however, that any insurance proceeds remaining after
Buyer shall have so repaired or restored the Property shall be retained by
Buyer.

   Section 11.04. Condemnation. With the exception of the Route 4
Condemnation, if before the Closing any condemnation or eminent domain
proceedings are threatened or initiated against all or any portion of the
Property and, in the sole discretion of Buyer, such condemnation or eminent
domain proceedings would interfere with the current use of the Property, then
Buyer may terminate this Agreement upon written notice to Seller and Seller
and Buyer shall thereupon be released from any and all further liability
hereunder and the Initial Deposit, together with all accrued interest thereon,
shall be immediately returned to Buyer by the Escrow Agent. If Buyer does not
elect to terminate this Agreement within ten (10) business days after receipt
of written notice of the commencement of any such proceedings, or if, in the
opinion of Buyer, such condemnation or eminent domain proceedings would not
interfere with the current use of the Property, the Closing shall take place
as provided herein and Seller shall assign to Buyer at the Closing all rights
and interest of Seller in and to any condemnation awards payable or to become
payable on account of such condemnation or eminent domain proceedings. Buyer
shall have no right to terminate this Agreement with respect to the Route 4
Condemnation.

                                     D-10
<PAGE>

                                  ARTICLE XII

                                 MISCELLANEOUS

   Section. 12.01. Raw Land. Pursuant to Section 23-19.5-1 of the Rhode Island
General Laws of 1956, as amended, the Buyer acknowledges that the Rhode Island
Department of Environmental Management has not certified the Property for
development as part of a subdivision or approved the Property as being
suitable for on-site disposal of sanitary sewage or other liquid waste.

   Section 12.02. Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors, heirs, administrators and assigns. Without being relieved of any
liability under this Agreement, Buyer reserves the right to take title to the
Property in a name or nominee or assignee other than Buyer.

   Section 12.03. Amendments and Termination. Except as otherwise provided
herein, this Agreement may be amended or modified by, and only by, a written
instrument executed by Seller and Buyer.

   Section 12.04. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Rhode Island.

   Section 12.05. Merger of Prior Agreements. This Agreement supersedes all
prior written or oral agreements and understandings between the parties hereto
relating to the subject matter hereof.

   Section 12.06. Time of Essence. Time is of the essence to both Seller and
Buyer in the performance of this Agreement, and they have agreed that strict
compliance by both of them is required as to any date and/or time set out
herein, including, without limitation, the dates and times set forth in
Article III of this Agreement. If the final day of any period of time set out
in any provision of this Agreement falls upon a Saturday, Sunday or a legal
holiday under the laws of the State of Rhode Island, then and in such event,
the time of such period shall be extended to the next day which is not a
Saturday, Sunday or legal holiday.

   Section 12.07. Counterparts. This Agreement may be executed in identical
counterparts, each of which, when construed together, shall be deemed an
original hereof.

                     (The Next Page is the Signature Page)

                                     D-11
<PAGE>

   IN WITNESS WHEREOF, this Agreement has been executed by Buyer and Seller as
of the date and year first above written.

                                          Seller:

                                          Brown & Sharpe Manufacturing
                                           Company,
                                          a Delaware corporation

                                              /s/ Andrew C. Genor
                                          By: _________________________________
                                             Name: Andrew C. Genor
                                             Title: Chief Financial Officer

                                          Buyer:

                                          Precision Park Partners, LLC,
                                          a Rhode Island limited liability
                                           company

                                              /s/ John G. Laramee
                                          By: _________________________________
                                             Name: John G. Laramee
                                             Title: General Partner

                                     D-12
<PAGE>

                   AMENDMENT TO PURCHASE AND SALE AGREEMENT
                   ----------------------------------------

     This Agreement is made as of the 31st day of May 2001, by and between BNS
Co. (f/k/a Brown & Sharpe Manufacturing Company). A Delaware corporation
("Seller") and PRECISION PARK PARTNERS, LLC, a Rhode Island limited liability
company ("Buyer").

                                  WITNESSETH:

     WHEREAS, pursuant to Purchase and Sale Agreement dated as of March 2, 2001
by and between Seller and Buyer (the "Agreement"), Seller has agreed to sell and
Buyer has agreed to buy certain real estate and improvements located at 200
Frenchtown Road, North Kingstown, Rhode Island and more particularly described
in the Agreement; and

     WHEREAS, pursuant to the terms of the Agreement, Buyer was entitled to
conduct due diligence with respect to the property for a period of time defined
in the Agreement as the "Review Period"; and

     WHEREAS, pursuant to letter agreement between the parties, the Review
Period was extended until May 31, 2001; and

     WHEREAS, the parties wish to further extend the Review Period.

     NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt of which is hereby acknowledged, the parties hereby
agree as follows:

     1.   Review Period. The Review Period is hereby extended until 5:00 p.m.,
          -------------
local time on September 30, 2001.

     2.   Further Environmental Investigation. The parties acknowledge that
          -----------------------------------
Seller will retain Environmental Science Services, Inc. to conduct subsurface
investigation of the environmental condition of the Property. The cost of such
investigation will be paid by Seller.

     3.   Ratification. Except as amended hereby, the Agreement remains in full
          ------------
force and effect and is hereby ratified and confirmed.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.

           [the remainder of this page is left intentionally blank]
<PAGE>

     BNS Co., Inc. (f/k/a Brown & Sharpe Manufacturing Company)

     By:  /s/ Andrew C. Genor
          ---------------------------------------------
          Andrew C. Genor
          Vice President and Chief Financial Officer

          PRECISION PARK PARTNERS, LLC

     By:  /s/ John G. Laramee
          ---------------------------------------------
          John G. Laramee
          Member<PAGE>

                                                                    EXHIBIT 10.1

                          AGREEMENT CONCERNING VOTING
                          ---------------------------

     This Agreement Concerning Voting (as the same may be amended, modified, or
supplemented from time to time in accordance with the terms hereof, this
"Agreement") is entered into by (i) Covad Communications Group, Inc. ("Covad" or
the "Company") and (ii) the undersigned holders (each a "Consenting Noteholder")
of any of the Company's 13.5% Senior Notes due 2008, 12.5% Senior Notes due
2009, 12% Senior Notes due 2010, and 6.0% Convertible Notes due 2005
(collectively, the "Notes") in connection with a proposed financial
restructuring of the Company which is proposed to be accomplished by means of a
pre-negotiated plan of reorganization of the Company based upon the term sheet
annexed hereto as Appendix 1 (the "Plan") pursuant to Chapter 11 of title 11 of
the United States Code (the "Bankruptcy Code") to be confirmed by a United
States Bankruptcy Court (the "Bankruptcy Court").

     In consideration of the premises and the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each Consenting
Noteholder (collectively, the "Parties"), intending to be legally bound, hereby
agree as follows:

1.   Representations and Warranties: Consenting Noteholders and Company
     ------------------------------------------------------------------
     Agreements.
     ----------

     a.   Each of the Consenting Noteholders represents that it is (i) the sole
          beneficial owner of the principal amount of Notes set forth below next
          to its signature as of the date hereof and/or the investment advisor
          or manager for the beneficial owners of such Notes, as indicated on
          the signature pages below, having the power to vote and to dispose of
          such Notes on behalf of such beneficial owners, and (ii) entitled (for
          its own account or for the account of other persons claiming through
          it) to all of the rights and economic benefits of such Notes (any of
          such Notes, the "Relevant Notes").

     b.   Each of the Consenting Noteholders represents that: (i) it has made no
          prior assignment, sale, participation, grant, conveyance, or other
          transfer of, and has not entered into any other agreement to assign,
          sell, participate, grant, or otherwise transfer, in whole or in part,
          any portion of its right, title, or interest in the Relevant Notes,
          (ii) it is duly organized, validly existing, and in good standing
          under the laws of the jurisdiction of its organization with all
          requisite corporate power and authority to execute this Agreement and
          to consummate the transactions contemplated hereby; (iii) it has full
          corporate power and authority to execute and deliver and to perform
          its obligations under this Agreement, and the execution, delivery and
          performance hereof, and the instruments and documents
<PAGE>

          required to be executed by it in connection herewith (a) have been
          duly and validly authorized by it and (b) are not in contravention of
          its organizational documents or any material agreement applicable to
          it; and (iv) no proceeding, litigation, or adversary proceeding before
          any court, arbitrator, or administrative or governmental body is
          pending against it which would adversely affect its ability to enter
          into this Agreement or to perform is obligations hereunder.

     c.   The Company hereby represents and warrants that (i) it is duly
          organized, validly existing and in good standing under the laws of the
          jurisdiction of its organization with all requisite corporate power
          and authority to execute this Agreement and to consummate the
          transactions contemplated hereby; (ii) it has full corporate power and
          authority to execute and deliver and to perform its obligations under
          this Agreement, and the execution, delivery, and performance hereof,
          and the instruments and documents required to be executed by it in
          connection herewith (a) have been duly and validly authorized by it
          and (b) are not in contravention of its organizational documents or
          any material agreement applicable to it; and (iii) no proceeding,
          litigation, or adversary proceeding before any court, arbitrator, or
          administrative or governmental body is pending against it which would
          adversely affect its ability to enter into this Agreement or to
          perform its obligations hereunder.

2.   Consent to Plan Treatment.
     --------------------------

     Each of the Consenting Noteholders agrees and covenants that, subject to
(i) Sections 3 and 7 hereof, (ii) the Company being in full compliance with its
obligations hereunder, (iii) the Company' representations and warranties set
forth herein being true and correct, and (iv) receipt by such Consenting
Noteholder of, and subsequent Bankruptcy Court approval of, a disclosure
statement and other solicitation materials in respect of the Plan required by
the Bankruptcy Code that are consistent with the terms of this Agreement and are
not inconsistent with any applicable law:

     a.   in connection with the Company's solicitation of ballots with respect
          to the Plan, and provided that the terms of the Plan are completely
          consistent in all respects with the terms of the term sheet attached
          hereto as Appendix 1 (the "Term Sheet"), (i) the Company will cause
          the Bankruptcy Court to allow, or will provide in the Plan for the
          deemed allowance of, each Consenting Noteholder's claim based on the
          Relevant Notes (the "Allowed Claim"), and (ii) each of the Consenting
          Noteholders will timely vote (or, with respect to managed accounts,
          cause to be voted) its Allowed Claim then owned by such Consenting
          Noteholder in favor of the Plan by causing the delivery of its duly
          executed and completed ballot in favor of the Plan and will not change
          or withdraw (or cause to be changed or withdrawn) such vote(s).

     b.   so long as it remains the beneficial owner of, and/or investment
          advisor or
<PAGE>

          manager with respect to, the Relevant Notes, and so long as
          the Plan is completely consistent in all respects with the Term Sheet,
          each of the Consenting Noteholders will not at any time prior to the
          termination of this Agreement vote (or cause to be voted) in favor of,
          or otherwise propose, file, support, or encourage the filing of,
          directly or indirectly, any workout, restructuring, plan of
          reorganization, or plan of liquidation concerning the Company other
          than the Plan;

     c.   each of the Consenting Noteholders will not sell, transfer, pledge,
          hypothecate, or assign any of the Relevant Notes or any voting or
          participation or other interest therein prior to an Agreement
          Termination Event except to a purchaser or other entity who agrees
          prior to such transfer to be bound by all of the terms of this
          Agreement with respect to the Relevant Notes being transferred to such
          purchaser, which agreement shall be confirmed in writing (which
          writing may include a trade confirmation issued by a broker or dealer,
          acting as principal or as agent for the purchaser, stating that such
          agreement is a term of such transfer), in which event the Company
          shall be deemed to have acknowledged that its obligations to the
          Consenting Noteholder hereunder shall be deemed to constitute
          obligations in favor of such purchaser, and the Company shall confirm
          promptly that acknowledgment in writing if requested;

     d.   each of the Consenting Noteholders will not (i) object to, delay,
          impede, or take any other action to interfere, directly or indirectly,
          with acceptance, confirmation, or implementation of the Plan or
          approval of the disclosure statement associated with the Plan
          ("Disclosure Statement") (except as set forth in (f) below), or (ii)
          encourage in any fashion any person or entity to do any of the
          foregoing;

     e.   each of the Consenting Noteholders will (i) support and render such
          reasonable assistance requested by Company in the filing of the Plan,
          (ii) support and render such reasonable assistance requested by
          Company in the filing of the Disclosure Statement and (iii) permit
          disclosure in the Disclosure Statement of the existence and substance
          of this Agreement, including the Term Sheet; and

     f.   so long as the Disclosure Statement is filed in conjunction with a
          plan that is completely consistent in all respects with the terms of
          the Term Sheet, and other than suggesting additional disclosure for or
          the elimination of excess disclosure from the Disclosure Statement,
          each of the Consenting Noteholders will not object to or otherwise
          commence any proceeding to oppose or to alter the Disclosure Statement
          and will not take any action which would delay approval of the
          Disclosure Statement.

     The Company hereby covenants and agrees (a) to propose promptly the Plan
such that the Plan is completely consistent in all respects with the terms
described in the Term Sheet in accordance with the timeframe contemplated by the
Term Sheet and Section 3 hereof,  (b) as to the treatment to be afforded each of
the Consenting Noteholders, not to modify the Plan in any
<PAGE>

respect without the consent of the Consenting Noteholders, (c) not to propose,
file, support, encourage, vote for, or engage in discussions with any person or
entity concerning any restructuring, workout or plan of reorganization other
than the Plan, (d) permit disclosure in the Disclosure Statement of the
existence and substance of this Agreement, including the Term Sheet, (e) take
any action to encourage or support any Consenting Noteholder to breach its
Agreement Concerning Voting with the Company, and (f) take any action to
encourage or support any creditor to vote against the Plan or, in any regard, to
oppose approval of the Disclosure Statement or confirmation of the Plan.

4.   Termination of Agreement.
     ------------------------

     a.   This Agreement shall terminate upon the occurrence of any Agreement
          Termination Event (as defined below), unless the occurrence of such
          Agreement Termination Event is waived in writing by such Consenting
          Noteholder. If any Agreement Termination Event occurs (and has not
          been waived) at a time when Bankruptcy Court permission shall be
          required for a Consenting Noteholder to change or to withdraw (or
          cause to be changed or withdrawn) its vote(s) in favor of the Plan,
          the Company and the other Parties to this Agreement shall not oppose
          any attempt by such Consenting Noteholder to change or to withdraw (or
          cause to be changed or withdrawn) such vote(s) at such time.

     b.   For the purposes hereof an "Agreement Termination Event" shall mean
          any of the following:

          i.    the filing of a petition under the Bankruptcy Code in respect of
                the Company (the "Petition") shall not have occurred on or
                before August 15, 2001;
          ii.   the filing of the Plan and the Disclosure Statement shall not
                have occurred by September 14, 2001;
          iii.  the solicitation of acceptances with respect to the Plan shall
                not have occurred by November 14, 2001
          iv.   the effective date of the Plan shall not have occurred by
                January 14, 2002;
          v.    there occurs any change in the terms of the Plan affecting the
                treatment of the Notes, as a class, not previously consented to
                by the Consenting Noteholder whose obligations hereunder are to
                be terminated;
          vi.   the Company takes any action inconsistent with the timely
                pursuit of confirmation of the Plan in accordance with the
                timeframe set forth in this Section 3;
          vii.  the Company files a plan, or solicits votes on a prepackaged or
                pre-negotiated Chapter 11 plan of reorganization, which contains
                terms that are inconsistent in any respect with the terms
                described on Appendix 1;
          viii. the Company's Chapter 11 is dismissed or is converted to a case
                under Chapter 7 of the Bankruptcy Code.
<PAGE>

     The Consenting Noteholders shall have no liability to Company or each other
in respect of any termination of this Agreement in accordance with the terms
hereof.

4.   Further Acquisition of Securities.  This Agreement shall in no way be
     ---------------------------------
     construed to preclude the Consenting Noteholders from selling Notes or from
     acquiring additional Notes. However, any such additional Notes so acquired
     shall automatically be deemed to be Relevant Notes and to be subject to all
     of the terms of this Agreement. This Agreement shall in no way be construed
     to preclude the Consenting Noteholders from acquiring any other securities
     of Company, provided, however, that such securities may not be utilized by
     the Consenting Noteholders in contravention of the tenor of the Term Sheet
     and of this Agreement. The Consenting Noteholders further agree that,
     subject to their receipt of solicitation materials in respect of the Plan
     that are completely consistent in all respects with the terms of the Plan
     described on Appendix 1 and with the terms of this Agreement and are not
     inconsistent with any applicable law, they will vote (or cause to be voted)
     any such additional Notes in favor of the Plan, and shall not change or
     withdraw (or cause to be changed or withdrawn) such vote(s), for so long as
     this Agreement remains in effect by its terms.

5.   Amendments.  This Agreement may not be modified, amended or supplemented
     ----------
     except in writing signed by the party against whom the amendment is sought
     to be enforced.

6.   Disclosure of Individual Holdings.  Unless required by applicable law or
     ---------------------------------
     regulation (including, without limitation, the Bankruptcy Code and the
     United States securities laws and any rules or regulations of the
     Securities and Exchange Commission) or court order, which law, regulation,
     or order may require disclosure of the following, the Company shall not
     disclose any Consenting Noteholder's holdings of Relevant Notes without the
     prior written consent of the Consenting Noteholder whose individual
     holdings are to be disclosed. The foregoing shall not prohibit the Company
     from disclosing the approximate aggregate amount of Notes held by all
     Consenting Noteholders, each as a group, as the case may be, whether such
     disclosure is required by law, regulation or court order.

7.   Impact of Appointment to Creditors' Committee.  Notwithstanding anything
     ---------------------------------------------
     contained herein to the contrary, if any Consenting Noteholder is appointed
     to and serves on a committee of creditors in the Company's Chapter 11 case,
     the terms of this Agreement shall not limit such Consenting Noteholder's
     exercise, in its sole discretion, of its fiduciary duties to any person
     arising from its serving on such committee of creditors, and any such
     exercise in the sole discretion of such Consenting Noteholder of its
     fiduciary duties arising from its serving on such committee of creditors
     shall not be deemed to constitute a breach of the terms of this Agreement
     (but the fact of such service on such committee shall not otherwise affect
     the continuing validity or enforceability of this Agreement). The foregoing
     shall not modify or limit the obligations of Consenting Noteholders to vote
     their individual holdings of Relevant Notes and to take the other
<PAGE>

     actions required under this Agreement in their non-committee capacity.

8.   Governing Law; Jurisdiction; Service of Process.  This Agreement shall be
     -----------------------------------------------
     governed by and construed in accordance with the internal laws of the State
     of New York, without regard to any conflicts of law provision which would
     require the application of the law of any other jurisdiction. By its
     execution and delivery of this Agreement, each of the Parties hereby
     irrevocably and unconditionally agrees for itself that any legal action,
     suit or proceeding against it with respect to any matter under or arising
     out of or in connection with this Agreement or for recognition or
     enforcement of any judgment rendered in any such action, suit or
     proceeding, may be brought in the Bankruptcy Court, and, by execution and
     delivery of this Agreement, each of the parties hereby irrevocably accepts
     and submits itself to the nonexclusive jurisdiction of such court,
     generally and unconditionally, with respect to any such action, suit or
     proceeding. In the event any such action, suit or proceeding is commenced,
     the Parties hereby agree and consent that service of process may be made,
     and personal jurisdiction over any party hereto in any such action, suit or
     proceeding may be obtained by service of a copy of the summons, complaint
     and other pleadings required to commence such action, suit or proceeding
     upon the party at the address of such party set forth in Section 14 hereof
     unless another address has been designated by such party in a notice given
     to the other parties in accordance with Section 14 hereof.

9.   Specific Performance.  It is understood and agreed by the Parties that
     --------------------
     money damages would not be a sufficient remedy for any breach of this
     Agreement by any party and each non-breaching party shall be entitled to
     specific performance and injunctive or other equitable relief as a non-
     exclusive remedy of any such breach.

10.  Headings.  The headings of the Sections, paragraphs and subsections of this
     --------
     Agreement are inserted for convenience only and shall not affect the
     interpretation hereof.

11.  Binding Agreement Successors and Assigns; Joint and Several Obligations.
     -----------------------------------------------------------------------
     This Agreement shall be binding upon the Parties only upon the execution
     and delivery of this Agreement by the Consenting Noteholders listed on the
     signature pages hereto and the Company. This Agreement is intended to bind
     and to inure to the benefit of the Parties and their respective successors,
     assigns, heirs, executors, administrators and representatives. The
     agreements, representations and obligations of the Consenting Noteholders
     under this Agreement are several only and not joint in any respects. Each
     Consenting Noteholder is agreeing only with the Company, and not with any
     other holder of Notes.

12.  Prior Negotiations.  This Agreement, Appendix 1, and the agreements
     ------------------
     described in this Agreement and Appendix 1 (including the Plan) supersede
     all prior negotiations with respect to the subject matter hereof; provided,
     however, that nothing herein is intended to supersede any prior agreement
     between the parties in respect of the issue of confidentiality.
<PAGE>

13.  Counterparts.  This Agreement may be executed in one or more counterparts
     ------------
     (including by telecopier), each of which shall be deemed an original and
     all of which shall constitute one and the same Agreement.

14.  Notices.  All demands, notices, requests, consents, and communications
     -------
     hereunder shall be in writing and shall be deemed to have been duly given
     if personally delivered by courier service, messenger, or telecopy at, or
     if duly deposited in the mails, by certified or registered mail, postage
     prepaid-return receipt requested, to the following addresses, or such other
     addresses as may be furnished hereafter by notice in writing, to the
     following Parties:

     (a)  if to Company, to:

          Covad Communications Group, Inc.
          4250 Burton Drive
          Santa Clara, CA  95054
          Attn:  Brad Sonnenberg, Esq.
          Telecopy:  408-987-1111

          With a copy to:

          Brad R. Godshall, Esq.
          Pachulski, Stang, Ziehl, Young & Jones
          10100 Santa Monica Boulevard,
          Suite 1100Los Angeles, CA  90067
          Telecopy:  310-201-0760

     (b)  if to any Consenting Noteholder, to:

          such Consenting Noteholder at the address or telecopy number shown for
          such holder on the applicable signature page hereto, to the attention
          of the person who has signed this Agreement on behalf of such holder.

          With a copy to:

          David S. Rosner, Esq.
          Kasowitz, Benson, Torres & Friedman LLP
          1633 Broadway
          New York, NY 10019
          Telecopy: 212-506-1800

15.  Further Assurances.  Each of the Parties hereto agrees to execute and to
     ------------------
     deliver, or to cause to be executed and delivered, all such instruments,
     and to take all such action as the
<PAGE>

     other parties may reasonably request in order to effectuate the intent and
     purposes of, and to carry out the terms of, this Agreement.

16.  Approval of the Term Sheet.  Each of the Parties hereto agree to the term
     --------------------------
     sheet which is annexed hereto as Appendix 1 the terms of which are
     incorporated herein by reference as if fully set forth herein.

17.  Effectiveness of the Agreement.  This Agreement and the obligations
     ------------------------------
     described herein shall become effective only upon the occurrence of the
     following events: (i) the Company and Consenting Noteholders holding at
     least 50% of the Notes in terms of amount execute this Agreement; (ii) the
     execution of an escrow agreement in the form of Exhibit A to the Term Sheet
     (the "Escrow Agreement") and of the Certificate of Designation in the form
     of Exhibit B to the Term Sheet; and (iii) the placement of the Cash
     Consideration (as defined in the Term Sheet) into escrow in accordance with
     the Escrow Agreement.
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date set forth below.

     Dated: August __, 2001

                              COVAD COMMUNICATIONS GROUP, INC.
                              4250 Burton Drive
                              Santa Clara, CA  95054

                              By:______________________________________

                              Name:____________________________________

                              Title:_____________________________________

     CONSENTING NOTEHOLDERS:
     Principal Amount:  $____________________________

     Type of Note(s):________________________________

     Name:___________________________________________

     Address:________________________________________

     By:_____________________________________________

     Title:__________________________________________
<PAGE>

                                  Appendix 1

                              Settlement Proposal

                                   Term Sheet

Notes Defined               13.5% Senior Discount Notes due 2008 ("Discount
                            Notes"),12.5 Senior Reserve Notes due 2009 ("Reserve
                            Notes"), 12.0% Senior Notes due 2010 ("Senior
                            Notes") and 6.0% Convertible Senior Notes due 2005
                            ("Convertible Notes") (collectively, "Notes")

Exchange of Securities      Holders of the Notes ("Noteholders" or "Holders"),
                            including those on the four-member steering
                            committee of Noteholders with whom Covad has
                            negotiated this Term Sheet ("Committee"), shall
                            exchange claims based upon Notes for consideration
                            from Covad Communications Group, Inc. ("Covad" or
                            the "Company")
Note Claims Defined

Principal                   All claims for principal repayment

Accrued Interest            All claims for accrued and unpaid interest through
                            the date of exchange

Litigation                  All other claims held by Holders against the Company
                            or its past and present directors, officers, and
                            employees ("Released Parties") arising out of or
                            related to the Notes currently or previously owned
                            by such Holder. Each Holder shall also covenant not
                            to initiate a new suit but may participate in any
                            existing or future lawsuit against any of the
                            Released Parties in respect of the purchase or sale
                            of any other securities of the Company.
Consideration

Cash                        (a) $256,742,438 in cash (assuming a filing date of
                            August 15, 2001) (the "Cash Consideration") to be
                            distributed, pro rata, based on the allowed amount
                            of their claims under the Notes, to the Holders as
                            to which (i) the claims based on the Senior Notes
                            and the Convertible Notes include principal and
                            accrued but unpaid interest up to the date of the
                            filing of the Company's chapter 11 case ("Filing
                            Date"), (ii) the claims based on the Reserve Notes
                            include principal but not unpaid interest accrued to
                            the Filing Date (so long as this claim amount is
                            consistent with applicable bankruptcy law), and
                            (iii) the claims based on the Discount Notes include
                            principal accreted as of the Filing Date.(b) All
                            restricted cash escrowed at The Bank of New York
                            attributable to the Reserve Notes (minus any
                            standard escrow fees but including interest thereon
                            through the date of distribution), totaling
                            approximately $26.3 million, to be distributed, pro
                            rata, based on the principal amount of the Reserve
                            Notes, to the Holders of the Reserve Notes.
<PAGE>

Mandatorily                 Pro rata distribution in the same manner as for the
Convertible Preferred       Cash Consideration in (a) above of $100 million
Stock                       (which is deemed to be the aggregate liquidation
                            preference) of Mandatorily Convertible Preferred
                            Stock ("Preferred") which is convertible by the
                            Company in whole or in part into the Company's
                            Common Stock ("Common Stock") upon the occurrence of
                            Conversion Events (as defined and specified below).
                            The Preferred outstanding from time to time shall be
                            nonvoting and subordinated in right to all to be
                            issued debt or senior preferred equity securities
                            issued in conjunction with a Conversion Event.
Additional Features of
Mandatorily
Convertible Preferred
Stock                       The Company, at its election, may convert one fifth
                            of the Preferred for every $15 million raised
                            through one or more Conversion Events until all of
                            the Preferred is converted. There shall not be any
                            exercise price upon conversion. Each one fifth of
                            Preferred so converted shall convert into one-fifth
                            of the Underlying Shares (as defined below). The
                            Preferred is redeemable in cash at par (face amount)
                            by the Company (at the option of the Company) at any
                            time after issuance and prior to conversion upon
                            thirty days' prior notice to Noteholders. The
                            Preferred is convertible at any time at the option
                            of the Holder into Common Stock calculated as set
                            forth below.

Equity Upon                 The Preferred in the aggregate shall convert into
Conversion                  15% ownership of the existing Common Stock (the
                            "Underlying Shares"), subject to the antidilution
                            protections reflected in the Certificate (as defined
                            below). The Underlying Shares total approximately
                            32,000,000.
<PAGE>

Conversion Event            Only the following events resulting in the infusion
Defined                     of cash into Covad constitute "Conversion Events":
                            (a) The closing and draw upon of a bona fide secured
                            or unsecured loan to Covad by any third party other
                            than an Affiliate (as defined below) entered into on
                            an arms' length basis, on market terms, for use in
                            Covad's business operations and maturing not earlier
                            than nine months from the date of confirmation of
                            the Company's chapter 11 plan ("Confirmation Date").
                            (b) The closing of an equity investment in Covad by
                            any third party other than an Affiliate that is not,
                            prior to nine months from the Confirmation Date,
                            subject to any put or call nor is otherwise
                            redeemable. (c) The closing of an infusion in cash
                            in Covad by SBC, whether in settlement of contract
                            claims by Covad against SBC or the prepayment of
                            SBC's contractual obligations to Covad, or
                            otherwise, that is not refundable or repayable
                            before nine months following the Confirmation Date.
                            (d) The settlement of any pending, future or
                            contemplated litigation by Covad against any person
                            that is not refundable or repayable before nine
                            months following the Confirmation Date. For purposes
                            of this term sheet, "Affiliate" shall have the
                            meaning set forth in Rule 405 of the Securities Act
                            of 1933. A Conversion Event includes any combination
                            of any of the foregoing events.The following events,
                            regardless of whether they result in an infusion of
                            cash into Covad, are not "Conversion Events,"
                            ("Nonconversion Events"): (x) The merger of Covad
                            into any entity or of any entity into Covad,
                            regardless of how structured. (y)__The sale,
                            liquidation, or exchange by Covad of any or all of
                            its assets other than as provided in c. and d.
                            above.The Company and its adviser, Houlihan Lokey
                            Howard & Zukin ("HLHZ"), represent (in the case of
                            HLHZ, solely to the best of its knowledge) to the
                            Noteholders that, as of July 25, 2001 the Company
                            has neither sent to nor received from any party a
                            term sheet proposing a transaction that, if
                            consummated, would constitute a Nonconversion Event.
<PAGE>

Liquidation Preference      The unconverted portion of the Preferred shall be
                            entitled to be paid a liquidation preference up to
                            the outstanding "par value" of such Preferred ($100
                            million at issuance). As provided in the
                            Certificate, the Company shall not tender for,
                            repurchase, or redeem any existing Common Stock
                            other than a maximum of 260,000 shares of Common
                            Stock in the aggregate that may be repurchased
                            pursuant to existing restricted stock grants for
                            which the Company may pay no more than $400,000 in
                            the aggregate, nor shall the Company pay any
                            dividend on, or make any distribution on account of,
                            the Common Stock while any of the Preferred is
                            outstanding. The liquidation preference shall be
                            payable in whole or in part on the Preferred as set
                            forth below in the same form as such consideration
                            is received by Covad or its shareholders, as the
                            case may be, immediately in the following events
                            ("Immediate Payment Events"): (a) the merger of
                            Covad into any entity or of any entity into Covad,
                            regardless of how structured; or (b) the sale,
                            transfer, or other disposition of all or
                            substantially all of the Company's assets in a
                            single transaction or series of related
                            transactions. For the purposes hereof, the value of
                            consideration received by Covad shall be (i) the
                            amount of cash, cash equivalents, (ii) the average
                            market value of readily marketable securities for
                            the twenty trading days prior to closing, and (iii)
                            for all other forms of consideration, if the parties
                            cannot agree amongst themselves on the value of such
                            consideration, as conclusively determined by an
                            independent third-party financial expert jointly
                            selected by Covad and the Committee.
<PAGE>

Cash Segregation            If Noteholders holding 50% of the Notes (in terms of
                            principal amount) execute and deliver to the Company
                            an Agreement Concerning Voting substantially
                            identical to the Agreement to which this Term Sheet
                            is a part (the "ACV") on or before August 3, 2001,
                            the Company shall place the Cash Consideration into
                            escrow in accordance with an escrow agreement (the
                            "Escrow Agreement" and the "Escrow") attached hereto
                            as Exhibit A with a "noteholder agent" designated by
                            such Noteholders (the "Noteholder Agent"). The
                            Noteholder Agent shall bind himself to Covad to act
                            only in accordance with the terms set forth herein.
                            The Escrow Agreement shall (a) include customary
                            provisions, (b) provide for the transfer back to the
                            Company of the Cash Consideration if (i) the ACV is
                            breached by any of the Noteholders executing an ACV
                            and such breach materially and negatively impacts
                            the expected rights of or benefits to the Company
                            under the ACVs (it expressly being agreed that a
                            Company Return Event (as defined below) shall not
                            arise if a breach of an ACV occurs that, by reason
                            of ameliorative steps taken by the Company and/or
                            other Noteholders does not have a material, negative
                            impact on the Company), (ii) the Company files the
                            Plan (as defined below), solicits acceptances of the
                            Plan and Noteholders vote to reject the Plan in an
                            amount sufficient to defeat class acceptance of the
                            Plan (calculated as if no holders of claims other
                            than Note Claims are included in such class) (a
                            "Company Return Event"), and (c) provide for the
                            distribution to the Noteholders of the Cash
                            Consideration (i) on September 15, 2001 if, by such
                            date, the Company has not filed the Plan, (ii) on
                            November 15, 2001 if, by such date, the Company has
                            not begun soliciting acceptances on the Plan, (iii)
                            on January 15, 2002 if, by such date, the Plan has
                            not gone effective by its terms and Noteholders have
                            voted to accept the Plan in an amount necessary to
                            achieve class acceptance (calculated as if no
                            holders of claims other than Note Claims are
                            included in such class), or (iv) the Plan's
                            effective date if such date is earlier than January
                            15, 2002.The Company shall also grant the designated
                            Noteholder Agent a security interest in the
                            Company's interest in the Cash Consideration in
                            escrow, which security interest shall terminate
                            automatically upon (x) a Company Return Event or (y)
                            a notice of default is received (and not rescinded
                            within twenty days of receipt) under any of the
                            indentures relating to the Notes by reason of the
                            grant of such security interest.

Fees and Expenses           Prior to the Filing Date, Covad shall pay in full
                            all outstanding fees and expenses of the Committee's
                            professionals. On the effective date of Covad's
                            chapter 11 plan ("Effective Date"), Covad shall pay
                            in full all then outstanding fees and expenses of
                            the Committee's professionals arising first after
                            the Filing Date, subject to Bankruptcy Court
                            approval.
<PAGE>

Freely Tradeable            The Preferred and the Common Stock into which the
Securities                  Preferred is converted shall be afforded all
                            benefits of Bankruptcy Code (S) 1145 and such
                            provisions shall be included in the order confirming
                            the Company's Plan (as defined below) (the
                            "Confirmation Order"). Additionally, any Noteholders
                            who, based on holdings of the Notes, receive more
                            than 10% of the Preferred, to the extent each holds
                            more than 10% of the Preferred at the time of the
                            demand ("10% Holders"), collectively may demand one
                            registration for the resale of the Preferred which
                            shall reasonably remain effective for a period, and
                            which shall be subject to such blackout periods and
                            other terms and conditions set forth in a
                            Registration Rights Agreement, to be agreed to by
                            Covad and such 10% Holders giving due regard for the
                            burden to Covad imposed by this registration
                            requirement.

Chapter 11 Plan             The transactions contemplated by this Term Sheet
                            shall be effectuated through confirmation by Covad
                            of a chapter 11 plan ("Plan"). The Plan among other
                            things: (a) shall provide for the treatment of the
                            Notes as described in this Term Sheet with a
                            distribution from the Escrow being treated as a
                            distribution from assets of the Company's bankruptcy
                            estate; (b) shall be legally confirmable as a matter
                            of fact and law; (c) shall comply in all respects
                            with the requirements set forth in Sections 1123(a)
                            and 1129 of the Bankruptcy Code; (d) shall expressly
                            provide for the possible posteffective date sale or
                            liquidation of the Covad's assets and the
                            distribution of the proceeds therefrom, in
                            accordance with Section 1129 of the Bankruptcy Code,
                            in the event that Covad is unable to continue
                            operations; (e) may include other creditor claims
                            within the class of holders of Note Claims but
                            which, in any event, must provide for the delivery
                            of the aggregate consideration payable on Note
                            Claims under this Term Sheet solely to the Holders;
                            (f) may, at the discretion of the Company, leave any
                            or all allowed claims other than Note Claims
                            unimpaired; and (g) shall provide for necessary
                            amendments to the Company's articles of
                            incorporation and the filing of the certificate of
                            designation in respect of the Preferred
                            substantially in the form of Exhibit B hereto (the
                            "Certificate"). The petition for bankruptcy shall be
                            filed in the Bankruptcy Court for the District of
                            Delaware to the extent legally permissible and the
                            Company shall oppose in good faith any motion to
                            change venue. The Company shall use its best efforts
                            to have the Escrow Agreement assumed in the
                            bankruptcy case. The motion concerning such
                            assumption shall be filed on the first day of the
                            bankruptcy case and shall be advanced by the Company
                            without delay.
<PAGE>

                                   EXHIBIT B

                           CERTIFICATE OF DESIGNATION
                  AND DETERMINATION OF RIGHTS AND PREFERENCES
                   OF SERIES A CONVERTIBLE PREFERRED STOCK OF
                        COVAD COMMUNICATIONS GROUP, INC.

     Covad Communications Group, Inc., a Delaware corporation (the

"Corporation"), acting pursuant to (S) 151 of the General Corporation Law of
 -----------
Delaware, does hereby submit the following Certificate of Designation and
Determination of Rights and Preferences of its Convertible Preferred Stock,
Series A ("Certificate of Designation").
           --------------------------

     FIRST:  The name of the Corporation is Covad Communications Group, Inc.

     SECOND:  By unanimous consent of the Board of Directors of the Corporation
dated ___________, 2001, the following resolutions were duly adopted:

     WHEREAS the Certificate of Incorporation ("Certificate of Incorporation")
                                                ----------------------------
of the Corporation authorizes Preferred Stock ("Preferred Stock") consisting of
                                                ---------------
[_______________ (__________)] shares, par value $[___] per share, issuable from
time to time in one or more series; and

     WHEREAS the Board of Directors of the Corporation is authorized, subject to
limitations prescribed by law and by the provisions of Article IV of the
Corporation's Certificate of Incorporation, as amended, to establish and fix the
number of shares to be included in any series of Preferred Stock and the
designation, rights, preferences, powers, restrictions and limitations of the
shares of such series; and

     WHEREAS it is the desire of the Board of Directors to establish and fix the
number of shares to be included in a new series of Preferred Stock and the
designation, rights, preferences and limitations of the shares of such new
series;

     NOW, THEREFORE, BE IT RESOLVED that pursuant to Article IV of the
Certificate of Incorporation there is hereby established a new series of
[_________ (________)] shares of convertible preferred stock of the Corporation
(the "Series A Convertible Preferred Stock") to have the following rights,
      ------------------------------------
preferences, powers, restrictions and limitations:

     Section 1.  Dividends.

     So long as shares of Series A Convertible Preferred Stock remain
outstanding, the Corporation shall not, without the affirmative vote of the
holders of a majority of the outstanding shares of Series A Convertible
Preferred Stock, (i) pay, or declare and set aside for payment, any dividend of
cash, property or stock on any share of any class or series of capital stock,
including, without limitation, any other series of Preferred Stock or any Common
Stock ("Common Stock") (other than stock dividends giving rise to an adjustment
        ------------
under Section 4(c) hereof) or (ii) purchase, repurchase or redeem any share of
any class or
<PAGE>

series of capital stock, including, without limitation, any other series of
Preferred Stock or any Common Stock (other than a purchase or redemption made by
issuance for delivery of Junior Stock for Junior Stock, Parity Stock or Senior
Stock (in each case, as defined herein), Parity Stock for Parity Stock or Senior
Stock or Senior Stock for Senior Stock); provided, however, that the Corporation
                                         --------  -------
may, without such a vote, (a) repurchase shares of Common Stock for a maximum
aggregate consideration of $400,000 issued upon the exercise of stock purchase
rights granted to officers, directors, consultants and employees of the
Corporation under the terms of repurchase agreements substantially similar in
form to the repurchase agreements existing as of the date hereof, at a
repurchase price that is below the Trading Price (as defined below) of the
Common Stock; (b) pay, or declare and set aside for payment, any dividend of
cash, property or stock on shares of Senior Stock or Parity Stock which were
issued in connection with a Conversion Event (as defined herein), for an amount
which shall not exceed 20% per annum of the liquidation preference of such a
share; and (c) upon the expiration of nine (9) months from the Confirmation Date
(as hereafter defined), purchase, repurchase or redeem shares of Senior Stock or
Parity Stock which were issued in connection with a Conversion Event, for an
amount which shall not exceed the value of the consideration received by the
Corporation in respect of such shares of stock (plus accrued and unpaid
dividends, if any). For purposes of this Section, "Trading Price" means the
                                                   -------------
closing sales price, or average between the closing bid and ask prices if there
is no closing sales price, on the last day preceding the repurchase date on
which there were trades in the Common Stock.

     Section 2.  Liquidation, Dissolution, or Winding-Up.

     (a)  Distributions.   In the event of any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary (a
"Liquidation"), the holders of outstanding shares of Series A Convertible
 -----------
Preferred Stock shall be entitled to be paid, out of the assets of the
Corporation available for distribution to stockholders, before any payment shall
be made to or set aside for the holders of Junior Stock, an amount equal to
$[____] per share of Series A Convertible Preferred Stock (the "Series A
                                                                --------
Liquidation Value") (such amount to be subject to proportionate adjustment in
-----------------
the event of any stock dividend, stock split, combination of shares,
reorganization, recapitalization, reclassification or other similar event
occurring after the effective date of the Plan (as defined below) with respect
to the Series A Convertible Preferred Stock, plus all declared but unpaid
dividends on the Series A Convertible Preferred Stock through the date of such
Liquidation). [Note: The Series A Liquidation Value will be equal to $100
million divided by the number of shares of Series A Convertible Preferred Stock
that are issued in the Plan.]

     If upon any Liquidation, the assets lawfully available to be distributed to
the holders of Series A Convertible Preferred Stock under this Section 2(a) are
insufficient to permit payment to such stockholders of the full amount payable
pursuant to the preceding paragraph, then the holders of Series A Convertible
Preferred Stock and any Parity Stock will share equally and ratably in any
distribution of assets of the Corporation lawfully available for distribution in
proportion to the full liquidation preference and accumulated and unpaid
dividends, if any, to which each is entitled.

                                      -2-
<PAGE>

     Upon the completion of the distributions required in this paragraph (a) of
this Section 2, the holders of Series A Convertible Preferred Stock as such
shall have no right to or claim to any of the remaining assets of the
Corporation.

     (b)  Non-Cash Distributions.  In the event of a Liquidation resulting in
the availability of assets other than cash for distribution to the holders of
shares of Series A Convertible Preferred Stock, the holders of Series A
Convertible Preferred Stock shall be entitled to a distribution of cash and/or
other assets equal in value to the Series A Liquidation Value. In the event that
such distribution to the holders of shares of Series A Convertible Preferred
Stock shall include any assets other than cash, the value of such non-cash
assets shall be determined as follows: (i) the average of the closing sales
prices, or average between the closing bid and ask prices if there are no
closing sales prices, of readily marketable securities for the twenty trading
days prior to the delivery of notice by the Corporation to the holders of Series
A Convertible Preferred Stock with respect to the Liquidation pursuant to
Section 8, and (ii) for all other forms of assets, the Board of Directors shall
first determine in good faith the value of such assets for such purpose, and
shall notify all holders of shares of Series A Convertible Preferred Stock of
such determination. The value of such assets for purposes of the distribution
under this Section 2(b) shall be the value as so determined by the Board of
Directors, unless one or more of the members of the Steering Committee (as
defined below) who continue to be holders of shares of Series A Convertible
Preferred Stock or, in the absence of any such members, the holders of at least
25% of the outstanding shares of Series A Convertible Preferred Stock, shall
object thereto in writing within 30 days after the date of such notice. In the
event of such an objection, the value shall be conclusively determined by an
independent third party financial expert (to be jointly selected by the
Corporation and the objecting member(s) of the Steering Committee or the holders
of at least 25% of the outstanding shares of Series A Convertible Preferred
Stock, as applicable), at the Corporation's expense and shall be binding upon
the Corporation and the holders of shares of Series A Convertible Preferred
Stock. For purposes of this Section, "Steering Committee" means the four (4)
                                      ------------------
member steering committee of noteholders with whom the Corporation negotiated
the transaction pursuant to which the Series A Convertible Preferred Stock was
issued.

     Section 3.  Voting Rights.

     Except as otherwise expressly provided in this Certificate of Designation
or as required by applicable law, the holder of each share of Series A
Convertible Preferred Stock shall not be entitled to vote on any matters
submitted to a vote of stockholders of the Corporation by virtue of holding such
shares.  [The following to be inserted if the Bankruptcy Court permits the
Certificate of Incorporation to be amended to add the provision allowing the
Board of the Corporation and the Series A Convertible Preferred to amend this
Certificate of Designation: provided, however, each holder of a share of Series
                            --------  -------
A Convertible Preferred Stock shall be entitled to one vote per share of Series
A Convertible Preferred Stock on each amendment to this Certificate of
Designation under Section 242 of the Delaware General Corporation Law.]

     Section 4.  Conversion.  Shares of Series A Convertible Preferred Stock
shall be subject to conversion into shares of Common Stock or other securities,
properties, or rights, as set forth in this Section 4.

                                      -3-
<PAGE>

     (a)  Optional Conversion.

     (i)  Subject to and in compliance with the provisions of this Section 4,
any shares of Series A Convertible Preferred Stock (including, without
limitation, those shares for which a Redemption Notice has been delivered by the
Corporation under Section 5 but which shares have not yet been redeemed) may, at
any time or from time to time at the option of the holder, be converted into
fully paid and non-assessable shares of Common Stock. The number of shares of
Common Stock to which a holder of Series A Convertible Preferred Stock shall be
entitled upon such conversion shall be the product obtained by multiplying (A)
the number of shares of Series A Convertible Preferred Stock being converted, by
(B) [____] (the "Series A Conversion Rate"). [Note: In the version of the
                 ------------------------
Certificate of Designation that will be in effect when the Plan is confirmed,
the Series A Conversion Rate will be set so that the number of shares of Common
Stock issuable upon conversion of the Series A Convertible Preferred Stock (the
"Underlying Shares") would represent fifteen percent (15%) of the shares of
 -----------------
Common Stock outstanding, as of the effective date of the Corporation's Plan,
after giving effect to the issuance of the Underlying Shares and any other
securities of the Corporation to be issued under the Plan on the effective date
of the Plan (other than securities issued or issuable in connection with a
Conversion Event), but without giving effect to any shares issued pursuant to
the exercise of rights issued pursuant to the Corporation's Stockholder
Protection Rights Agreement (the "Rights Agreement") or any shares, options,
                                  ----------------
warrants or other securities issued or to be issuable in connection with a
Conversion Event (it being understood that a Conversion Event could occur before
the effective date of the confirmed Plan and prior to the issuance of the Series
A Convertible Preferred Stock). Each share of Common Stock issuable upon the
exercise or conversion, as applicable, of an outstanding option, warrant or
other security exercisable for or convertible into Common Stock (other than any
option, warrant or other security issued or to be issuable in connection with a
Conversion Event) with an exercise price or conversion price, as applicable, of
less than or equal to $0.85 per share of Common Stock shall be deemed
outstanding for purposes of the above calculation; provided, however, that
                                                   -----------------
rights issued or issuable pursuant to the Rights Agreement shall not be deemed
outstanding for purposes of the above calculation (it being understood that the
holders of the Underlying Shares issuable upon conversion of the Series A
Convertible Preferred Stock shall be entitled to receive rights pursuant to the
Rights Agreement to the extent that they would have been entitled to receive
them pursuant to the Rights Agreement had they been holders of such Underlying
Shares during the period from and after August 14, 2001 and prior to the
issuance of the Series A Convertible Preferred pursuant to the Plan).]

     (ii) To exercise conversion rights under this Section 4(a), a holder of
Series A Convertible Preferred Stock to be so converted shall (a) surrender the
certificate or certificates representing the shares being converted to the
Secretary of the Corporation at its principal office, accompanied by evidence of
proper assignment thereof to the Corporation and (b) shall give written notice
to the Secretary of the Corporation at that office that such holder elects to
convert such shares, such written notice to include the name or names (with
address or addresses) in which the certificate or certificates for shares of
Common Stock issuable upon such conversion shall be issued and such holder's
estimate of the number of shares of Common Stock issuable upon such conversion
(a "Conversion Notice"). Should a
    -----------------

                                      -4-
<PAGE>

holder of Series A Convertible Preferred Stock wish to receive an electronic
transmission of the shares of Common Stock issuable upon a conversion through
the DTC's DWAC system pursuant to Section 10(d) in lieu of delivery of physical
certificates, such holder shall (a) surrender the certificate or certificates
representing the shares being converted to the appropriate department of the
Corporation's transfer agent, accompanied by evidence of proper assignment
thereof to the Corporation, (b) shall give written notice to the Corporation's
transfer agent, with a copy to the Secretary of the Corporation, that such
holder elects to convert such shares, such written notice to include a request
that the delivery of the shares of Common Stock issuable upon such conversion be
effected through the DWAC system, proper DWAC instructions to enable the
Corporation's transfer agent to transmit the shares of Common Stock issuable
upon such conversion to the proper DWAC account and such holder's estimate of
the number of shares of Common Stock issuable upon such conversion (a "DWAC
                                                                       ----
Conversion Notice"), (c) comply with the requirements for transmissions
-----------------
through the DWAC system set forth in Section 10(d) and (d) comply with the
reasonable and customary policies and procedures of the Corporation's transfer
agent. The date when a Conversion Notice is delivered to the Corporation, or the
date when a DWAC Conversion Notice is delivered to the Corporation's transfer
agent, together with the certificate or certificates representing the shares of
Series A Convertible Preferred Stock being converted, shall be the "Conversion
                                                                    ----------
Date" with respect to such shares. As promptly as practicable after the
----
Conversion Date and in compliance with applicable securities laws, the
Corporation shall issue and shall deliver to the holder of the shares of Series
A Convertible Preferred Stock being converted, a certificate or certificates in
such denominations as such holder may request in writing for the number of full
shares of Common Stock issuable upon the conversion of such shares of Series A
Convertible Preferred Stock in accordance with the provisions of this Section 4,
plus cash as provided in Section 4(g) below in respect of any fraction of a
share of Common Stock issuable upon such conversion; provided, however,
                                                     --------  -------
that in the case of a transmission through the DWAC system in which all of the
conditions set forth in this Section 4 and in Section 10(d) have been met, the
Corporation shall cause its transfer agent to deliver (in accordance with, and
subject to the provisions of, Section 10(d)) the number of full shares of Common
Stock issuable upon the conversion of such shares of Series A Convertible
Preferred Stock in accordance with the provisions of this Section 4 no later
than the third trading day after the Conversion Date. In the event that the
Corporation does not timely fulfill its obligation to cause its transfer agent
to deliver the shares of Common Stock issuable upon the conversion of shares of
Series A Convertible Preferred Stock pursuant to a DWAC Conversion Notice, the
holder of the shares being converted may revoke the DWAC Conversion Notice at
any time prior to the delivery or issuance of such shares. A conversion shall be
deemed to have been effected immediately prior to the close of business on the
Conversion Date, and at such time the rights of the holder as holder of the
converted shares of Series A Convertible Preferred Stock shall cease and the
person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares of Common Stock
represented thereby.

                                      -5-
<PAGE>

     (b)  Mandatory Conversion by the Corporation.

     (i)  Conversion Events.  The Corporation, at its election, may convert some
or all of the shares of the then outstanding Series A Convertible Preferred
Stock as follows:

     For each aggregate $15,000,000 raised by the Corporation in connection with
one or more "Conversion Events" (as defined below), the Corporation may convert
             -----------------
up to that number of shares of Series A Convertible Preferred Stock having an
aggregate Series A Liquidation Value equal to $20,000,000 into the number of
fully paid and non-assessable shares of Common Stock into which such shares are
then convertible, until all outstanding Series A Convertible Preferred Stock is
converted.  The aggregate number of shares to be converted in respect of each
Conversion Event shall be apportioned among all of the holders of Series A
Convertible Preferred Stock, pro rata based on the number of shares of Series A
Convertible Preferred Stock held by each stockholder at the time of the
Conversion Event.

     A "Conversion Event" shall mean any of the following occurring on or after
        ----------------
August 9, 2001:  (a) the closing and draw upon of a bona fide secured or
unsecured loan to the Corporation by any third party other than an affiliate (as
that term is defined in Rule 405 of the Securities Act of 1933, hereinafter an

"Affiliate") entered into on an arms' length basis, on market terms, for use in
----------
the Corporation's business operations and maturing not earlier than nine months
from the date of confirmation of the Corporation's Chapter 11 Plan of
Reorganization of Covad Communications Group, Inc. (the "Plan") pursuant to
                                                         ----
which the Series A Convertible Preferred Stock was issued ("Confirmation Date");
                                                            -----------------
(b) the closing of an equity investment in the Corporation by any third party
other than an Affiliate that is not, prior to nine months from the Confirmation
Date, subject to any put or call nor is otherwise redeemable prior to nine
months after the Confirmation Date; (c) the closing of an infusion in cash in
the Corporation by SBC Communications Inc. ("SBC"), whether in settlement of
                                             ---
contract claims by the Corporation against SBC or the prepayment of SBC's
contractual obligations to the Corporation, or otherwise, that is not refundable
or repayable less than nine months after the Confirmation Date; or (d) the
settlement of any pending, future or contemplated litigation by the Corporation
against any person that is not refundable or repayable less than nine months
after the Confirmation Date.

     The following events, regardless of whether they result in an infusion of
cash into the Corporation, shall not be Conversion Events:  (a) the merger or
consolidation of the Corporation with or into another entity, regardless of how
structured or (b) the sale, liquidation or exchange by the Corporation of any or
all of its assets, other than in conjunction with Conversion Events described in
classes (c) and (d) of the immediately preceding paragraph.

     (ii) Mechanics of Mandatory Conversion.  To exercise conversion rights
under this Section 4(b), the Corporation shall give written notice to each of
the holders of record (at the close of business on the business day next
preceding the day on which notice is given) of Series A Convertible Preferred
Stock that the Corporation elects to convert shares of Series A Convertible
Preferred Stock at such holder's address as the same appears on the stock
register of the Corporation, which notice shall be certified by the Chief
Executive Officer of the Corporation and shall set forth: (i) the amount of
shares of Series A Convertible Preferred Stock being converted into Common Stock
in the aggregate and for

                                      -6-
<PAGE>

each holder of Series A Convertible Preferred Stock and (ii) a reasonably
detailed description of the Conversion Event or Events. Such notice shall not
contain any information which the Corporation in good faith considers to be
material non-public information, unless simultaneous with the giving of such
notice, the Corporation makes such information public. No defect in such notice
shall render the mandatory conversion invalid. The date specified for conversion
in such written notice sent by the Corporation (as long as such notice is
delivered at least 15 days prior to the date specified for conversion) shall be
the "Conversion Date" with respect to such shares. A s promptly as practicable
     ---------------
after the Conversion Date and compliance with applicable securities laws, the
Corporation shall issue and shall deliver to the holder of the shares of Series
A Convertible Preferred Stock being converted, a certificate or certificates in
such denominations as such holder may request in writing for the number of full
shares of Common Stock issuable upon the conversion of such shares of Series A
Convertible Preferred Stock in accordance with the provisions of this Section 4,
plus cash as provided in Section 4(g) below in respect of any fraction of a
share of Common Stock issuable upon such conversion. Such conversion shall be
deemed to have been effected immediately prior to the close of business on the
Conversion Date, and at such time the rights of the holder as holder of the
converted shares of Series A Convertible Preferred Stock shall cease and the
person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of shares of Common Stock
represented thereby.

     Upon any mandatory conversion of shares of Series A Convertible Preferred
Stock into shares of Common Stock pursuant to this Section 4(b), the holders of
such converted shares shall surrender the certificates formerly representing
such shares at the office of the Corporation or of any transfer agent for Common
Stock.  Thereupon, there shall be issued and delivered to each such holder,
promptly at such office and in its name as shown on such surrendered certificate
or certificates, a certificate or certificates for the number of shares of
Common Stock into which such shares of Series A Convertible Preferred Stock were
so converted and cash as provided in Section 4(g) below in respect of any
fraction of a share of Common Stock issuable upon such conversion.  The
Corporation shall not be obligated to issue certificates evidencing the shares
of Common Stock issuable upon such conversion unless and until certificates
formerly evidencing the converted shares of Series A Convertible Preferred Stock
are either delivered to the Corporation or its transfer agent, as hereinafter
provided, or the holder thereof notifies the Corporation or such transfer agent
that such certificates have been lost, stolen, or destroyed and executes and
delivers an agreement to indemnify the Corporation from any loss incurred by it
in connection therewith.

     (c)  Adjustments for Extraordinary Common Stock Events. Upon the happening
of an Extraordinary Common Stock Event (as defined in Section 4(j) hereof),
automatically and without further action, and simultaneously with the happening
of such Extraordinary Common Stock Event, the Series A Conversion Rate shall be
adjusted by multiplying the then effective Series A Conversion Rate by a
fraction, the denominator of which shall be the number of shares of Common Stock
outstanding (excluding treasury stock) immediately before such Extraordinary
Common Stock Event, and the numerator of which shall be the number of shares of
Common Stock outstanding (excluding treasury stock) immediately after such
Extraordinary Common Stock Event, and the product so

                                      -7-
<PAGE>

obtained shall thereafter be the Series A Conversion Rate. The Series A
Conversion Rate, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive Extraordinary Common Stock Event or Events.

     (d)  Adjustments for Reclassifications. If the Common Stock issuable upon
the conversion of Series A Convertible Preferred Stock shall be changed or
converted into the same or a different number of shares of any class(es) or
series of stock or into other securities or property, whether by
recapitalization, reorganization, reclassification, consolidation, merger, share
exchange, sale of all or substantially all of the assets of the Corporation to
any entity or any other transaction (other than an Extraordinary Common Stock
Event), then, and in each such event, the holder of each share of Series A
Convertible Preferred Stock shall have the right thereafter in lieu of the right
to convert such shares into Common Stock to convert such share into the kind and
amount of shares of stock and other securities and property receivable upon such
reorganization, reclassification or other event by holders of the number of
shares of Common Stock into which such shares of Series A Convertible Preferred
Stock might have been converted immediately prior to such reorganization,
reclassification or event, all subject to further adjustment as provided herein.

     (e)  Adjustments Upon Immediate Payment Events; Election to Receive
Consideration In Lieu of Adjustment. Either of the following transactions shall
be deemed an "Immediate Payment Event": (1) a merger or consolidation of the
              -----------------------
Corporation with or into another entity, regardless of how structured or (2) the
sale, transfer or other disposition of all or substantially all of the
Corporation's assets (viewed on a consolidated basis, considering assets of the
Corporation's subsidiaries as if they were assets of the Corporation) in a
single transaction or series of related transactions.

     The Corporation shall not consummate an Immediate Payment Event unless the
Corporation gives notice to the holders of Series A Convertible Preferred Stock
(i) that it intends to consummate an Immediate Payment Event, (ii) the date it
anticipates such consummation to occur and (iii) that in connection with, and
conditioned upon, the consummation of the Immediate Payment Event, each holder
of shares of Series A Convertible Preferred Stock may elect to require the
Corporation to redeem its shares of Series A Convertible Preferred Stock for an
amount per share of Series A Convertible Preferred Stock equal to the  amount
that a holder of a share of the Series A Convertible Preferred Stock would be
entitled to receive in the event of a Liquidation at the time of such Immediate
Payment Event under Section 2(a) hereof where the consideration received by the
Corporation or the holders of Common Stock, as applicable, in such Immediate
Payment Event constituted the assets to be distributed in such Liquidation (the
"Immediate Payment Redemption Amount") and in the same priority over payments in
 -----------------------------------
respect of other classes or series of capital stock of the Corporation as it
would be accorded upon such Liquidation under Section 2(a).  Such notice shall
not contain any information which the Corporation in good faith considers to be
material non-public information, unless simultaneous with the giving of such
notice, the Corporation makes such information public.  The Immediate Payment
Redemption Amount shall be paid in the same form, whether cash, securities or
other property, as the consideration received by the Corporation or the holders
of Common Stock, as applicable, in such Immediate Payment Event.  The value of
any non-cash consideration shall be determined in accordance with the
methodology for determining the value of non-cash assets set forth in Section
2(b) hereof; provided, that the value of readily
             --------

                                      -8-
<PAGE>

marketable securities shall be the average of the closing sales prices, or
average between the closing bid and ask prices if there are no closing sales
prices, of readily marketable securities for the twenty trading days prior to
the closing of the Immediate Payment Event. Each holder of shares of Series A
Convertible Preferred Stock that elects to require the Corporation to redeem its
shares of Series A Convertible Preferred Stock shall give written notice of such
election to the Corporation and surrender the certificate or certificates
representing the shares of Series A Convertible Preferred Stock with respect to
which such election is being made to the Corporation at the Corporation's
principal offices no later than 5 days before the anticipated consummation date
as set forth in the Corporation's notice with respect to the Immediate Payment
Event; provided, that any such election notice shall be effective if given not
       --------
later than 30 days after the date of the Corporation's notice, pursuant to
Section 8 hereof, with respect to the Immediate Payment Event. Upon the
consummation of the Immediate Payment Event, the Corporation shall pay the
Immediate Payment Redemption Amount for such shares with respect to which
certificates have been surrendered and each stock certificate surrendered for
redemption shall be canceled and retired. If the number of shares represented by
any certificate surrendered in respect of any such redemption exceeds the number
of shares to be redeemed from the holder thereof, the Corporation shall issue
and deliver to the surrendering holder, at the expense of the Corporation, a new
certificate representing the unredeemed balance of such shares. Unless the
Corporation defaults in the payment in full of the applicable Immediate Payment
Redemption Amount, the holders of shares of Series A Convertible Preferred Stock
who elect for redemption pursuant to this Section 4(e) shall cease to have any
further rights with respect to the shares of Series A Convertible Preferred
Stock they elect redemption from and after the date of consummation of the
Immediate Payment Event, other than the right to receive the Immediate Payment
Redemption Amount, without interest.

     (f)  Certificate as to Adjustments. In each case of an adjustment or
readjustment of the Series A Conversion Rate, the Corporation will promptly
furnish each holder of Series A Convertible Preferred Stock with a certificate,
prepared by the chief financial officer or treasurer of the Corporation, showing
such adjustment or readjustment, and stating in reasonable detail the facts upon
which such adjustment or readjustment is based.

     (g)  Fractional Shares.  No fractional shares of Common Stock or scrip
representing fractional shares shall be issued upon conversion of shares of
Series A Convertible Preferred Stock. Instead of any fractional shares of Common
Stock that would otherwise be issuable upon conversion of shares of Series A
Convertible Preferred Stock, the Corporation shall pay to the holder of the
shares of Series A Convertible Preferred Stock that were converted a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the market price per share of Common Stock (as determined in a manner
reasonably prescribed by the Board of Directors) at the close of business on the
Conversion Date.

     (h)  Partial Conversion.  In the event some but not all of the shares of
Series A Convertible Preferred Stock represented by a certificate or
certificates surrendered by a holder are converted, the Corporation shall
execute and deliver to or on the order of the holder, at the expense of the
Corporation, a new certificate representing the number of shares of Series A
Convertible Preferred Stock that were not converted.

                                      -9-
<PAGE>

     (i)  Reservation of Common Stock.  The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of shares of Series A
Convertible Preferred Stock, such number of shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares of
Series A Convertible Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series A Convertible Preferred
Stock, then the Corporation shall take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.

     (j)  Extraordinary Common Stock Event.  As used herein, "Extraordinary
                                                              -------------
Common Stock Event" means (i) the issuance of additional shares of Common Stock
------------------
as a dividend or other distribution on outstanding Common Stock, (ii) the
subdivision of outstanding shares of Common Stock into a greater number of
shares of Common Stock or (iii) the combination of outstanding shares of Common
Stock into a smaller number of shares of Common Stock.

     Section 5.  Optional Redemption.

     (a)  Redemption Notice.  The Corporation may, at any time, redeem all or a
portion of the outstanding shares of Series A Convertible Preferred Stock by
giving written notice (a "Redemption Notice") to each holder of record (at the
                          -----------------
close of business on the business day next preceding the day on which notice is
given) of the Series A Convertible Preferred on the Redemption Notice Date (as
defined below) at such holder's address as the same appears on the stock
register of the Corporation, specifying the aggregate number of shares to be
redeemed as well as the proportionate number of shares to be redeemed from each
holder; provided that failure to give such notice or any deficiency therein
        --------
shall not affect the validity of the procedure for the redemption of any shares
of Series A Convertible Preferred Stock to be redeemed except as to the holder
or holders to whom the Corporation has failed to give said notice or except as
to the holder or holders whose notice was defective. The date upon which such
notice is delivered to the holders of the Series A Convertible Preferred Stock
is referred to herein as a "Redemption Notice Date." The Corporation shall
                            ----------------------
redeem, out of funds legally available therefor, at the Redemption Price (as
provided for in Section 5(b) below) all shares of Series A Convertible Preferred
Stock stated in the Redemption Notice on a date specified therein (the
"Redemption Date") which shall be at least thirty (30) days but not more than 60
 ---------------
days after delivering the Redemption Notice, except for shares in respect of
which the Corporation receives a notice of conversion under Section 4(a) prior
to the Redemption Date, which shares shall be converted into shares of Common
Stock in accordance with Section 4(a). The aggregate number of shares to be
redeemed pursuant to a Redemption Notice shall be apportioned among all of the
holders of Series A Convertible Preferred Stock, pro rata based on the number of
shares of Series A Convertible Preferred Stock held by each stockholder at the
time of the Redemption Notice Date.

     (b)  Redemption Price.  The redemption price per share of Series A
Convertible Preferred Stock (the "Redemption Price") shall be equal to the
                                  ----------------
Series A Liquidation Value thereof.

                                     -10-
<PAGE>

     (c)  Mechanics of Redemption.  Each holder of shares of Series A
Convertible Preferred Stock to be redeemed shall surrender the certificate or
certificates representing such shares to the Corporation at the Corporation's
principal executive office, and thereupon the Corporation shall pay the
Redemption Price for such shares to be paid as described in Section 5(a) or 5(b)
hereof in immediately available funds, by wire transfer to an account designated
by the holder of such shares or by certified or bank check payable to the order
of such holder. Each stock certificate surrendered for redemption shall be
canceled and retired. If the number of shares represented by any certificate
surrendered in respect of any such redemption exceeds the number of shares to be
redeemed from the holder thereof, the Corporation shall issue and deliver to the
surrendering holder, at the expense of the Corporation, a new certificate
representing the unredeemed balance of such shares.

     (d)  Unless the Corporation defaults in the payment in full of the
applicable Redemption Price, the holders of shares of Series A Convertible
Preferred Stock called for redemption shall cease to have any further rights
with respect thereto from and after the Redemption Date, other than the right to
receive the Redemption Price, without interest.

     Section 6.  Negative Covenants.  The Corporation shall not, directly or
indirectly, without the affirmative vote of the holders of at least a majority
of the outstanding shares of Series A Convertible Preferred Stock, (i) amend the
Corporation's Certificate of Incorporation or the Bylaws of the Corporation by
merger, consolidation or otherwise (other than a merger or consolidation that
constitutes an Immediate Payment Event) so as to adversely affect the rights and
preferences of the Series A Convertible Preferred Stock, (ii) issue additional
shares of Series A Convertible Preferred Stock or (iii) pay or cause to be paid
any consideration, immediate or contingent, to any holder of Series A
Convertible Preferred Stock for or as an inducement to or in connection with the
solicitation of any consent, waiver or amendment of any of the terms of this
Certificate of Designation, unless such consideration is required to be paid to
all holders of Series A Convertible Preferred Stock who are bound by the
consent, waiver of amendment whether or not such holders consent, waive or agree
to amend.

     Section 7.  Status of Converted, Redeemed or Purchased Stock. All shares of
Series A Convertible Preferred Stock redeemed, converted, repurchased or
otherwise acquired by the Corporation shall be retired and cancelled and shall
be restored to the status of authorized but unissued shares of Preferred Stock,
without designation as to class or series, and may thereafter be reissued, but
not as shares of this Series A Convertible Preferred Stock.

     Section 8.  Notices of Record Dates, Etc.  In the event (i) the Corporation
establishes a record date to determine the holders of any class of securities
who are entitled to receive any dividend or other distribution, or (ii) there
occurs any capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, any transfer of all or substantially all of
the assets of the Corporation to any other company, or any other entity or
person, in a single transaction or series of related transactions or any
voluntary or involuntary dissolution, liquidation, or winding-up of the
Corporation, the Corporation shall deliver to each holder of Series A
Convertible Preferred Stock, in accordance with Section 10(a) hereof, at least
15 days prior to such record date or 30 days prior to the proposed

                                     -11-
<PAGE>

effective date of the transaction specified therein, as the case may be, a
notice specifying (a) the date of such record date for the purpose of such
dividend or distribution and a description of such dividend or distribution, (b)
the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation, or winding-up is expected to
become effective, and (c) the time, if any, that is to be fixed, as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for cash,
securities, and/or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation, or
winding-up.

     Section 9.  Ranking.  The Series A Convertible Preferred Stock shall, with
respect to dividends, redemption and the distribution of assets on Liquidation,
rank (i) senior to the Common Stock and any other class or series of capital
stock of the Corporation (whether now existing or hereafter created), which are
not either Parity Stock or Senior Stock (as such terms are defined below) (the
Common Stock and such other classes or series of capital stock of the
Corporation that are junior to the Series A Convertible Preferred Stock being
referred to herein as "Junior Stock"), (ii) on a parity with any class or series
                       ------------
of capital stock of the Corporation (whether now existing or hereafter created),
which is issued in connection with a Conversion Event and the terms of which
expressly provide that such class or series will rank on a parity with the
Series A Convertible Preferred Stock (such other classes or series of capital
stock of the Corporation that are on a parity with the Series A Convertible
Preferred Stock being referred to herein as "Parity Stock"), and (iii) junior to
                                             ------------
any class or series of capital stock of the Corporation (whether now existing or
hereafter created), which is issued in connection with a Conversion Event and
the terms of which expressly provide that such class or series will rank senior
to the Series A Convertible Preferred Stock (such other classes or series of
capital stock of the Corporation that are senior to the Series A Convertible
Preferred Stock being referred to herein as "Senior Stock").  Notwithstanding
                                             ------------
anything to the contrary set forth herein, the Corporation may issue Junior
Stock, Parity Stock and Senior Stock; provided, however, that the Corporation
                                      --------  -------
may not, without the affirmative vote of the holders of at least a majority of
the outstanding shares of Series A Convertible Preferred Stock, issue any Parity
Stock or Senior Stock with a liquidation preference or right to payment upon
redemption that is greater than the value of the consideration received by the
Corporation in respect of shares of such Parity Stock or Senior Stock (other
than dividends on such Parity Stock or Senior Stock paid in additional shares of
Parity Stock or Senior Stock within the limitations of Section 1, which the
Corporation shall be permitted to issue) (with the value of any non-cash
consideration determined in accordance with the methodology for determining the
value of non-cash assets set forth in Section 2(b)), plus accrued and unpaid
dividends, if any.

     Section 10.  Miscellaneous.

     (a)  Notices.  All notices, requests, payments, instructions or other
documents to be delivered hereunder to each holder of the Series A Convertible
Preferred Stock shall be deemed delivered to each holder of record if delivered
personally, mailed, certified or registered mail with postage prepaid, or sent
by reliable overnight courier, or facsimile transmission, to each holder of
record at its address or facsimile number appearing in the records of the
Corporation. Any notice or other communication to a holder of Series A
Convertible Preferred Stock in accordance with the provisions of this
Certificate of

                                     -12-
<PAGE>

Designation shall be deemed to have been delivered (i) three business days after
it is sent by certified or registered mail, postage prepaid, return receipt
requested, (ii) upon receipt when delivered by hand or transmitted by facsimile
(confirmation received) or (iii) one business day after it is sent by a reliable
overnight courier service, with acknowledgment of receipt requested.

     (b)  Transfer Taxes, Etc.  The Corporation shall pay any and all stock
transfer, documentary stamp taxes, and the like that may be payable in respect
of any issuance or delivery of shares of Series A Convertible Preferred Stock or
shares of Common Stock or other securities issued in respect of shares of Series
A Convertible Preferred Stock pursuant hereto or certificates representing such
shares or securities. The Corporation shall not, however, be required to pay any
such tax that may be payable in respect of any transfer involved in the issuance
or delivery of shares of Series A Convertible Preferred Stock or Common Stock or
other securities in a name other than that in which such shares were registered,
or in respect of any payment to any person other than the registered holder
thereof with respect to any such shares, and shall not be required to make any
such issuance, delivery or payment unless and until the person otherwise
entitled to such issuance, delivery, or payment has paid to the Corporation the
amount of any such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid or is not payable.

     (c)  Transfer Agents.  The Corporation may appoint, and from time to time
discharge and change, a transfer agent for the Series A Convertible Preferred
Stock. Upon any such appointment or discharge of a transfer agent, the
Corporation shall send written notice thereof to each holder of record of Series
A Convertible Preferred Stock.

     (d)  Electronic Transmission of Shares.  In lieu of delivering physical
certificates representing shares of Common Stock issuable upon conversion of
shares of Series A Convertible Preferred Stock, and provided that (i) the
Corporation's transfer agent is participating in the DTC FAST program and (ii)
such program so permits, upon the request of the holder of the shares of Series
A Convertible Preferred Stock being converted, the Corporation shall cause its
transfer agent to electronically transmit such shares to the holder by crediting
the account of the holder's prime broker with the DTC through the DWAC system
or, in the event that the Corporation's transfer agent is not able to credit the
holder's prime broker with the DTC through the DWAC system, by posting the
shares to the DWAC system. Shares transmitted electronically through the DWAC
system shall be deemed delivered immediately upon the crediting of such account
or the posting of such shares to the DWAC system, as applicable. It shall be the
holder's responsibility to instruct its broker to retrieve posted shares from
the DWAC system.

     IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by its President this ___ day of ___________, 2001.

                              By:_________________________________
                              Name:
                              Title:

                                     -13-

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