Document:

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                                                                     EXHIBIT 4.2

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                         RESALE AND MARKETING AGREEMENT

                                 BY AND BETWEEN

                             SBC COMMUNICATIONS INC.

                                       AND

                        COVAD COMMUNICATIONS GROUP, INC.

================================================================================

                               SEPTEMBER 10, 2000

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                                TABLE OF CONTENTS

                                                                            Page
                                                                           -----
ARTICLE I DEFINITIONS..........................................................2

ARTICLE II EFFECTIVE DATE AND TERM.............................................6
         2.1      Effective Date and Term......................................6

ARTICLE III SALES AND MARKETING OF COVAD PRODUCTS..............................6
         3.1      Wholesale Sales of Covad Products to SBC.....................6
         3.2      Resale of Covad Products by SBC..............................8
         3.3      Non-Exclusivity.............................................12
         3.4      Protection of SBC Customer Information......................12
         3.5      Protection of CPNI..........................................12
         3.6      Law Enforcement Processes...................................12

ARTICLE IV SYSTEMS INTEGRATION................................................13
         4.1      Need For Systems Integration................................13
         4.2      Manual Processes............................................13

ARTICLE V ACKNOWLEDGEMENT OF RIGHT TO COMPETE.................................14
         5.1      Acknowledgement of Right to Compete.........................14

ARTICLE VI PRICING AND PAYMENT................................................14
         6.1      MFN Pricing.................................................14
         6.2      Product Pricing and Mix.....................................14
         6.3      Churn Rebate................................................15
         6.4      Payment Terms...............................................15
         6.5      Audit Rights................................................17
         6.6      Efficiency Gains............................................18

ARTICLE VII DELIVERY AND QUALITY OF COVAD PRODUCTS............................18
         7.1      Competitive Services and Products...........................18
         7.2      Benchmarking of SLAs........................................18
         7.3      Content of SLAs.............................................19
         7.4      Non-Performance of SLAs.....................................19
         7.5      Regulatory Authority........................................19
         7.6      Identification of Technical Difficulties....................19
         7.7      Covad Access to SBC Customer Premises.......................20
         7.8      Covad Facilities............................................20
         7.9      Title and Power.............................................21
         7.10     Customer-Provided Equipment.................................21
         7.11     Service Charges.............................................21
         7.12     Removal of Equipment........................................21

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ARTICLE VIII TERMINATION......................................................22
         8.1      Termination.................................................22
         8.2      Failure to Satisfy SLAs.....................................22
         8.3      Failure to Comply With Deployment Schedules.................23
         8.4      Bankruptcy, Insolvency, Etc.................................23
         8.5      Covad Change in Control Event...............................24
         8.6      Timing......................................................24
         8.7      Transition..................................................24

ARTICLE IX SOFTWARE TERMS.....................................................25
         9.1      License.....................................................25
         9.2      Conflict With the Network and Product Planning Agreement....26

ARTICLE X CONFIDENTIAL AND PROPRIETARY INFORMATION............................26
         10.1     General.....................................................26
         10.2     Obligation to Protect Proprietary Information...............26
         10.3     Judicial or Administrative Proceedings......................27
         10.4     Loss or Unauthorized Use....................................27
         10.5     Proprietary Information Exchange Agreements.................27
         10.6     Nondisclosure Agreements....................................27
         10.7     Termination.................................................27
         10.8     Irreparable Injury by Disclosure to Competitors.............27
         10.9     Survival of Nondisclosure Obligations.......................28

ARTICLE XI REGULATORY FILINGS.................................................28
         11.1     Regulatory Submissions......................................28
         11.2     Modification or Amendment of this Agreement.................28

ARTICLE XII INDEMNIFICATION...................................................29
         12.1     General.....................................................29
         12.2     Notice......................................................29
         12.3     Assumption of Defense of Claim..............................29
         12.4     Right of Indemnified Party To Undertake Defense.............30
         12.5     Claim of Infringement.......................................30

ARTICLE XIII REPRESENTATIONS AND WARRANTIES...................................30
         13.1     Organization, Standing and Authority........................30
         13.2     No Violation................................................31
         13.3     Consents and Approvals......................................31
         13.4     CALEA.......................................................31

ARTICLE XIV LIMITATION OF LIABILITY...........................................31
         14.1     Limited Responsibility......................................31
         14.2     Limitation of Damages.......................................32
         14.3     Warranty Disclaimer.........................................32

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ARTICLE XV INTELLECTUAL PROPERTY..............................................33
         15.1     Retention of Intellectual Property Rights...................33
         15.2     Allocation of Intellectual Property Rights..................33
         15.3     Securing Patent Rights......................................33
         15.4     Branded Products and Services...............................34
         15.5     Assignment Documents........................................34
         15.6     License to Use Covad Marks..................................34
         15.7     No Infringement.............................................35

ARTICLE XVI APPLICABLE TAXES..................................................36
         16.1     Payment of Taxes............................................36
         16.2     Assessments.................................................36
         16.3     Reimbursement of Taxes on Covad Products....................36
         16.4     Certificate of Exemption....................................36
         16.5     Tax Indemnification by Covad................................37
         16.6     Schedule of Taxes...........................................37
         16.7     Audits......................................................37
         16.8     Collection..................................................38
         16.9     Cooperation.................................................38

ARTICLE XVII INDEPENDENT CONTRACTOR...........................................38
         17.1     Covad Warranty of Independent Contractor Status.............38

ARTICLE XVIII COVAD'S USE OF SBC SERVICES.....................................40
         18.1     SBC as Preferred Provider...................................40

ARTICLE XIX MINORITY, WOMEN AND DISABLED VETERANS BUSINESS ENTERPRISES........41
         19.1     Covad's Commitment..........................................41
         19.2     Definitions.................................................41

ARTICLE XX COVENANTS..........................................................43
         20.1     Publicity...................................................43
         20.2     Third Party Warranties......................................43
         20.3     Unauthorized Warranties.....................................43
         20.4     Cooperation.................................................43

ARTICLE XXI GENERAL...........................................................44
         21.1     Americans With Disabilities Act.............................44
         21.2     Amendment...................................................44
         21.3     Assignment..................................................44
         21.4     Attachments.................................................44
         21.5     Cooperation.................................................44
         21.6     Costs, Expenses and Attorneys' Fees.........................44
         21.7     Dispute Resolution..........................................44
         21.8     Entire Agreement; Further Agreements........................45

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         21.9     Environmental Hazard........................................45
         21.10    Execution...................................................45
         21.11    Force Majeure...............................................45
         21.12    Good Faith Performance......................................46
         21.13    Governing Law...............................................46
         21.14    Insurance...................................................46
         21.15    Joint Work Product..........................................46
         21.16    Labor Relations.............................................46
         21.17    No Solicitation.............................................47
         21.18    No Waiver...................................................47
         21.19    Nonexclusive Dealings.......................................47
         21.20    Notices.....................................................47
         21.21    Relationship of Parties; Independent Contractor.............48
         21.22    Rules of Construction.......................................49
         21.23    Severability................................................49
         21.24    Third Party Warranties......................................49
         21.25    Third Party Beneficiaries; Disclaimer of Agency.............50
         21.26    Use of Contractors and Agents...............................50

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                         RESALE AND MARKETING AGREEMENT

     This Resale and Marketing Agreement ("Agreement"), dated as of September
10, 2000 (the "Effective Date"), is made by and between SBC Communications Inc.,
a Delaware corporation having its principal office at 175 East Houston Street,
San Antonio, Texas, 78205 (together with its affiliates, "SBC"), and Covad
Communications Group, Inc., a Delaware corporation having its principal office
at 4520 Burton Drive, Santa Clara, California 95054 (together with its
affiliates, "Covad"). SBC and Covad are individually referred to as a "Party"
and collectively referred to as the "Parties."

                                    RECITALS

     WHEREAS, Covad and SBC have entered into a Settlement Agreement of
concurrent date herewith to resolve certain disputes between the Parties (the
"Settlement Agreement") and have agreed, as part of the Settlement Agreement, to
enter into other agreements, pursuant to which SBC and SBC's Affiliates will
collocate equipment in space leased from Incumbent Local Exchange Carriers
("ILEC") by Covad (the "Collocation Agreement"); and

     WHEREAS, Covad and SBC also are entering into a Network and Product
Planning Agreement pursuant to which Covad and SBC will create mechanisms to
facilitate the expansion of Covad's network to support SBC's resale of Covad's
DSL services (the "Network and Product Planning Agreement"), it being understood
that nothing in this Agreement or any related agreement will limit Covad's
ability to develop products or deploy facilities in order to compete with SBC;
and

     WHEREAS, Covad currently provides digital subscriber line ("DSL") service,
DSL plus Internet protocol ("IP") products and services and other
Telecommunications Services; and

     WHEREAS, SBC desires to resell Covad Products to SBC's retail customers in
both Out-of-Region Markets and In-Region Markets, and Covad desires to sell the
Covad Products to SBC on a wholesale basis;

     NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the Collocation Agreement, the Settlement Agreement, and the Network
and Product Planning Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, SBC and Covad
agree as follows:

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                                   ARTICLE I

                                  DEFINITIONS

     The following definitions shall apply whenever the words appearing in bold
are used in the Agreement.

     "ACT" or "COMMUNICATIONS ACT" shall mean the federal Communications Act of
1934, as amended, including by the Telecommunications Act of 1996, and as it may
be amended in the future.

     "AFFILIATE" means, with respect to a Person, a Person that directly or
indirectly Controls, or is Controlled by, or is under common Control with such
other Person.

     "ANNUAL REVENUE COMMITMENT" shall mean the annual revenue commitment set
forth for each Commitment Year in Section 3.2.1.

     "APPLICABLE LAW" shall mean, with respect to any Party, any statute, law,
regulation, ordinance, rule, judgment, rule of common law, order, decree, award,
concession, grant franchise, license agreement, or other governmental
restriction of any similar form or decision or determination by, or any
interpretation or administration of any of the foregoing by, any Governmental
Entity, whether in effect as of the date hereof or thereafter, and in each case
as amended, applicable to such Party or its Affiliates or their respective
assets.

     "BENEFICIAL OWNER" means, with respect to any security, a Person that
Beneficially Owns such security.

     "BENEFICIALLY OWN," and variants thereof, means having the right to vote or
dispose of, or "beneficially own" as determined pursuant to Rule 13d-3 under the
Exchange Act as in effect on the date of this Agreement, including pursuant to
any agreement, arrangement or understanding.

     "BUSINESS CUSTOMER" shall mean an end-user of Covad Products that is
located at a business address.

     "BUSINESS DAY" shall mean a week day except for New Years Day, Martin
Luther King Day, President's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

     "BUSINESS LINE" shall mean SDSL products and services, including but not
limited to TeleSpeed 144, TeleSpeed 192, TeleSpeed 384, TeleSpeed 768, TeleSpeed
1.1, TeleSpeed 1.5, and comparable future product and service offerings.

     "CHURN" shall mean the disconnection of an SBC-ordered DSL line.

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     "COMMITMENT PERIOD" shall mean the period commencing on October 1, 2000 and
terminating in accordance with ARTICLE VIII of this Agreement.

     "COMMITMENT YEAR" shall mean the twelve-month period from October 1 to
September 30, commencing on October 1, 2000 and continuing through the remainder
of the Commitment Period.

     "CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of management and policies by one Person or group
of Persons acting in concert, provided, however, that the legal ownership or
Beneficial Ownership, directly or indirectly, by one Person or group of Persons
acting in concert of more than 50% of the Voting Securities shall always be
deemed Control.

     "COVAD CHANGE IN CONTROL EVENT" shall be deemed to have occurred if there
shall be consummated (i) any consolidation or merger of Covad with another
Person, other than a transaction in which, immediately after such transaction,
all or substantially all of the Beneficial Owners of Covad's Voting Securities
immediately prior to such transaction own, directly or indirectly, securities
representing a majority of the Total Voting Power of the entity surviving or
resulting from any such transaction or such entity's parent entity, (ii) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the Assets of Covad to
any Person, or (iii) the acquisition of Control of Covad by any Person other
than in a transaction in which, immediately after such transaction, all or
substantially all of the Beneficial Owners of Covad's Voting Securities
immediately prior to such transaction own, directly or indirectly, securities
representing a majority of the Total Voting Power of the entity surviving or
resulting from any such transaction or such entity's parent entity.

     "COVAD NETWORK" shall mean the Network Facilities used by Covad to provide
Telecommunications Service.

     "COVAD PRODUCTS" shall mean (a) Covad's existing DSL and DSL plus IP
products and services, (b) any future enhancements, upgrades or improvements to
such services and (c) any other Telecommunications Service offered by Covad
during the term of this Agreement.

     "CUSTOMER" shall mean a Residential or Business Customer of SBC that is the
end-user of the Covad Products.

     "CUSTOMER PROPRIETARY NETWORK INFORMATION" ("CPNI") shall have the meaning
set forth in the Act and the rules and regulations of the FCC.

     "CPE" shall mean customer premises equipment.

     "DATA SYSTEMS" shall mean the hardware and/or software data processing
systems used to process, exchange, analyze, store and retrieve data concerning
systems

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for pre-ordering, ordering, service activation, service assurance and billing
(commonly known as operating support systems), and separate technical systems,
such as middleware software, that permit the Parties' disparate operating and/or
administrative systems to interoperate.

     "EARLY TERMINATION AMOUNT" shall have the meaning set forth in Section 8.6.

     "EFFECTIVE DATE" shall have the meaning set forth in the preamble hereto.

     "EXISTING CUSTOMER" shall mean a customer of Covad that is taking service
or has placed a firm order for service.

     "FCC" or "FEDERAL COMMUNICATIONS COMMISSION" shall mean the Federal
Communications Commission created pursuant to the Act or any successor agency.

     "GOVERNANCE COMMITTEE" shall mean the body established by the Parties to
coordinate their activities pursuant to the Network and Product Planning
Agreement, as set forth therein.

     "GOVERNMENTAL ENTITY" shall mean any government or political subdivision
thereof, including without limitation, any regional or municipal authority, any
governmental department, ministry, commission, board, bureau, agency, regulatory
authority, instrumentality, judicial, or administrative body, having
jurisdiction over the matter or matters in question.

     "ILEC" shall mean an incumbent local exchange carrier, as defined in the
Act.

     "IN-REGION MARKETS" shall mean markets in the states in which SBC's
subsidiaries are ILECs.

     "LEAD OFFERING" as used herein means the marketing and promotion of only
SDSL Covad Products unless and until (i) the prospective customer specifically
rejects the offered SDSL service or a package of telecommunications services
that includes SDSL service, or (ii) the prospective customer specifically
requests an ADSL service or a package of telecommunications services that
includes ADSL service, or requests lower price or functionality options than
those provided through SDSL.

     "NEW PRODUCTS" shall have the meaning given in Section 3.1.8.

     "OPERATING AGREEMENTS" shall mean this Agreement, the Network and Product
Planning Agreement, the Collocation Agreement, and such other agreements as the
Parties may designate as Operating Agreements.

     "OUT-OF-REGION MARKETS" shall mean markets outside the states in which
SBC's subsidiaries are ILECs.

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     "PERSON" shall mean any natural person or any sole proprietorship,
corporation, limited liability corporation, partnership, limited partnership,
limited liability partnership, joint venture, or other business entity, but
shall not include any Governmental Entity or organization.

     "PRODUCT" shall mean one or more Telecommunications Services of the type
and functionality typically provided by Covad with specified features and
functions which when consisting of more than one Telecommunications Service are
marketed as a package.

     "PROPRIETARY INFORMATION" shall mean information of a confidential and
proprietary nature that a Party has a right to possess and which that Party
maintains in confidence.

     "REGULATORY LICENSE" shall mean any license, approval, consent,
authorization, grant or other authority issued by the FCC, any State public
utility commission, municipal or county government or agency or any other
governmental consent that is required to perform any activity under this
Agreement, but shall not be construed to mean any license, approval, consent,
authorization, grant or other authority that may be issued or become available
under Section 271 of the Act.

     "RESIDENTIAL CUSTOMER" shall mean an end-user of Covad Products that is
located at a residential address.

     "REVENUE COMMITMENTS" shall mean the Annual Revenue Commitment and Total
Revenue Commitment guaranteed by SBC to Covad arising from the sale of Covad
Products over the Term as specified in ARTICLE III.

     "SBC CUSTOMER INFORMATION" shall mean information concerning any SBC
Customer concerning the location, type of service, quantity of service and any
other information that is included in the definition of Customer Proprietary
Network Information.

     "SBC PRODUCT" shall mean any Covad Product resold and provided by SBC to a
Customer.

     "SERVICE ORDER" shall mean an order for Covad Products submitted by SBC to
Covad as set forth in Section 3.1.1.

     "SHORTFALL PAYMENT" shall mean the payment by SBC to Covad of the amount by
which SBC's sales are insufficient to meet its Annual Revenue Commitment by the
end of any year, as set forth in Section 3.2.1.2.

     "TELECOMMUNICATIONS SERVICE" shall mean a telecommunications service as
defined in the Act.

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     "TERM" shall have the meaning given in Section 2.1.

     "TOTAL REVENUE COMMITMENT" shall have the meaning given in Section 3.2.1.

     "TOTAL VOTING POWER" means the aggregate number of votes which may be cast
by holders of Voting Securities in respect of Voting Securities.

     "VOTING SECURITIES" means securities of Covad ordinarily having the power
to vote for the election of directors of Covad, provided, that when the term
"Voting Securities" is used with respect to any other Person, it means the
capital stock or other equity interests of any class or kind ordinarily having
the power to vote for the election of directors or other members of the
governing body of such Person.

                                   ARTICLE II

                            EFFECTIVE DATE AND TERM

2.1  EFFECTIVE DATE AND TERM.

     This Agreement shall become effective as of the Effective Date and will
     terminate on the earlier of (a) September 30, 2006, (b) the date that the
     Total Revenue Commitment is met, or (c) any earlier termination pursuant to
     ARTICLE VIII (the "Term"). However, if the Total Revenue Commitment is met
     before September 30, 2006, SBC shall have the option of extending the Term
     under the same terms and conditions, without any additional Revenue
     Commitments, until September 30, 2006.

                                  ARTICLE III

                     SALES AND MARKETING OF COVAD PRODUCTS

3.1  WHOLESALE SALES OF COVAD PRODUCTS TO SBC.

     3.1.1 SALE OF SERVICES TO SBC. Beginning October 1, 2000, Covad shall sell
          to SBC, pursuant to the terms of this Agreement and upon SBC's
          submission of a Service Order to Covad, and SBC shall have the right
          to market and resell all Covad Products to any Customers, subject to
          and in accordance with the provisions of Sections 3.1.2 and 3.1.8, for
          resale in Out-of-Region Markets and In-Region Markets.

     3.1.2 LIMITATIONS ON SBC SALES OF COVAD PRODUCTS. Notwithstanding Section
          3.1.1, SBC shall not directly or through its partners, (a) advertise,
          offer or promote (including without limitation direct marketing,

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          telemarketing, internet web sites, email solicitations, or other forms
          of advertising or promotion) the sale of Telesurfer, TeleSurfer + IP,
          TeleSurfer Pro, TeleSurfer Pro + IP, TeleSurfer Plus, TeleSurfer Plus
          + IP, or other ADSL Covad Products to Business Customers, nor (b)
          offer Covad's Telesurfer Plus product (384-1.5/128) in a package
          comparable to SBC's existing business DSL product.

     3.1.3 Notwithstanding Section 3.1.2, nothing in this Resale Agreement shall
          prevent SBC from advertising or promoting ADSL products to Business
          Customers in any market, provided that SBC uses its own brands in
          connection with such marketing efforts, and such marketing efforts are
          designed to promote the sale of ADSL products that are not provisioned
          by means of Covad Products.

     3.1.4 Notwithstanding Section 3.1.2, SBC may publish and distribute printed
          or electronic (e.g., Email) materials, make available web pages, that
          include (a) ADSL service designed for Business Customers, and (b)
          descriptions of packages of telecommunications services designed for
          Business Customers that include ADSL services, and such ADSL services
          may be provisioned by means of Covad Products in areas where SBC does
          not otherwise have alternative ADSL facilities available, provided
          that SBC uses its own brands in connection with such marketing
          efforts, and provided that such printed or electronic (e.g., Email)
          materials also include descriptions of (x) SDSL service designed for
          Business Customers, and (y) packages of telecommunications services
          designed for Business Customers that include SDSL service. Nothing in
          this Section 3.1.4 shall be construed to relieve SBC of its
          obligations under Section 3.1.6 in connection with any direct sales
          presentation by SBC's sales representatives to a Business Customer.

     3.1.5 Notwithstanding Section 3.1.2, SBC shall have the right to sell ADSL
          services to Business Customers that request them or request lower
          price or functionality options than those provided through SDSL, and
          SBC will not be responsible for identifying the nature of, or
          otherwise qualifying customers to receive Telesurfer Pro, Telesurfer
          Plus, or other ADSL Covad Products intended for Residential Customers.

     3.1.6 Notwithstanding Section 3.1.2, with respect to any direct sales
          presentation to a Business Customer, so long as an SDSL Covad Product
          was presented to such customer as the Lead Offer, then SBC may
          subsequently offer an ADSL Covad Product to such customer.

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     3.1.7 ORDERING PROCEDURES AND INTERVALS. Covad shall provision Covad
          Products to SBC pursuant to the mutually agreed processes, procedures
          and forms.

     3.1.8 NEW AND ENHANCED COVAD PRODUCTS. New Covad Products or enhancements
          to Covad Products that are commercially released by Covad during the
          term of the Resale Agreement shall be made commercially available to
          SBC at the same time they are commercially available in the market to
          Covad or any other Person, upon rates, terms and conditions which
          comply with Section 6.1.

3.2  RESALE OF COVAD PRODUCTS BY SBC.

     3.2.1 REVENUE COMMITMENTS. SBC shall make guaranteed payments to Covad in
          the total amount of Six Hundred Million Dollars ($600,000,000.00)
          arising from the sale of Covad Products over the Term of the Agreement
          (the "Total Revenue Commitment"), in accordance with the following
          payment schedule for each Commitment Year, subject to calculation and
          adjustment as provided in this Agreement:
<TABLE>

<S>                   <C>          <C>           <C>           <C>           <C>           <C>           <C>
--------------------- ------------ ------------- ------------- ------------- ------------- ------------- -------------
   Commitment               1            2             3             4             5             6           Total
      Year
--------------------- ------------ ------------- ------------- ------------- ------------- ------------- -------------
   Cumulative
    Revenue
   Commitment           $23,009       $91,569       $246,642      $396,405      $511,524      $600,000      $600,000
 (in thousands)
--------------------- ------------ ------------- ------------- ------------- ------------- ------------- -------------
    Annual
   Revenue
  Commitment            $23,009       $68,560       $155,073      $149,763      $115,119       $88,476      $600,000
   (in thousands)
--------------------- ------------ ------------- ------------- ------------- ------------- ------------- -------------
</TABLE>

          3.2.1.1 If SBC exceeds its Annual Revenue Commitment for any
               Commitment Year, the amount by which it exceeds its Annual
               Revenue Commitment shall be carried forward toward satisfying
               SBC's Annual Revenue Commitment for the following Commitment
               Year.

          3.2.1.2 If SBC's payments to Covad do not meet SBC's Annual Revenue
               Commitment by the end of any Commitment Year, SBC shall pay any
               such shortfall (the "Shortfall Payment") to Covad no later than 3
               months after the end of such Commitment Year. Any Shortfall
               Payment shall be credited to SBC as a prepayment against future
               Covad Products purchased by SBC. The Shortfall Payment shall
               count towards the Annual Revenue Commitment for the previous
               Commitment Year, it being understood that the Covad Products
               subsequently sold and paid for by the credit arising from the
               Shortfall Payment will then not count towards

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               the Revenue Commitment. To the extent that SBC has, as the time
               of the termination of this Agreement, a credit for prepaid
               services arising from Shortfall Payments, SBC shall have one year
               following such termination to purchase Covad Products that may be
               paid for with such credit. Following such one-year period, the
               credit will expire and Covad will have no further obligation to
               provide Covad Products paid for with such credit unless Covad, in
               its sole discretion, elects to extend the one-year period. The
               calculation of SBC's fulfillment of its Cumulative Revenue
               Commitment shall take into account all payments for Covad
               Products made by SBC to Covad as specified in this Agreement and
               any Shortfall Payments.

          3.2.1.3 All payments to Covad for purchases of Covad Products by SBC,
               or payments made to Covad on behalf of SBC by any channel or
               aggregator used by SBC, shall count towards the Total Revenue
               Commitment. These payments will include recurring monthly charges
               (as specified in Addendum 1) for Covad's DSL and DSL plus IP
               products and services that Covad makes available to SBC, as well
               as nonrecurring charges for installation of these services and
               for the Churn Rebate provided for in Section 6.3. However, any
               sales made on behalf of SBC by a third party shall not count
               towards any preexisting volume commitment made by such third
               party to Covad.

          3.2.1.4 SBC's Revenue Commitments shall be calculated in accordance
               with Addendum 2 to account for the quantity of installed business
               DSL lines realized by SBC. SBC's Revenue Commitments shall be
               adjusted where appropriate as set forth in Addendum 2, and a
               revenue true-up process will be conducted in accordance with that
               Addendum.

          3.2.1.5 In the event that Covad fails to meet the deployment schedules
               set forth in Schedule 4.3 of the Network and Product Planning
               Agreement, SBC's Revenue Commitments shall be reduced for each
               location in which Covad fails to deploy on-schedule by the
               difference between a reasonable forecast of SBC's revenues if the
               deployment schedule had been met and the actual revenues received
               for such location. In the event that Covad makes investments at
               the request of SBC which it otherwise would not have made, and
               such investments are not utilized due to lack of demand, SBC will
               compensate Covad for Covad's unrecovered capital costs associated
               with such investments as provided in the Network and Product
               Planning Agreement.

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     3.2.2 LEAD SUPPLIER. With respect to any sales channel in any In-Region
          Market or Out-of-Region Market, SBC may elect to have one or more
          Persons of its choosing fulfill the role of lead supplier of Covad
          Products to Customers in order to respond to demand, and such entity
          will have the right to purchase Covad Products pursuant to this
          Agreement. Subject to Section 3.2.1.3, any payments to Covad for
          purchases made by such Person serving as lead supplier will count
          towards SBC's Annual Revenue Commitment and Total Revenue Commitment.

     3.2.3 SALES OF CPE. To the extent that SBC sells a Product which includes
          CPE provided by Covad, the CPE sales will count towards the Revenue
          Commitments, up to a maximum of Fifty Million Dollars
          ($50,000,000.00). The price of CPE provided by Covad to SBC shall be
          equal to Covad's out-of-pocket costs for such CPE, including any
          discounts, promotional benefits or other adjustments of published
          prices from which Covad benefits.

          3.2.3.1 If Covad elects to exit the business of providing CPE after
               the Effective Date but prior to October 1, 2000, SBC's Total
               Revenue Commitment shall be reduced by Fifty Million Dollars
               ($50,000,000.00).

          3.2.3.2 If Covad elects to exit the business of providing CPE on or
               after October 1, 2000 until the termination of this Agreement,
               Covad shall give SBC at least ninety (90) days written notice of
               such election, and SBC's Revenue Commitments shall be reduced,
               depending upon the date of such exit, by the following amounts,
               the difference between which shall be pro-rated on a monthly
               basis:

<TABLE>

<S>               <C>             <C>            <C>             <C>            <C>            <C>
----------------- -------------- --------------- -------------- --------------- -------------- --------------
   Exit Date       < 0.5 Yrs.      < 1.0 Yrs.     < 1.5 Yrs.      < 2.0 Yrs      < 2.5 Yrs.     < 3.0 Yrs.
----------------- -------------- --------------- -------------- --------------- -------------- --------------
    $ Amount           46M            42M             35M            28M             14M            7M
----------------- -------------- --------------- -------------- --------------- -------------- --------------
</TABLE>

          3.2.3.3 Notwithstanding the foregoing, SBC reserves the right to
               utilize its own supplier agreements and CPE, subject to Covad's
               prior approval of product interoperability, which shall not be
               unreasonably withheld, and certification of all such CPE. SBC's
               use of its own CPE supplier agreements or its own CPE shall not
               reduce the Revenue Commitments.

     3.2.4 MARKETING PLAN. SBC will develop sales strategies and forecasts at
          appropriate intervals relating to this Agreement. These forecasts will
          include anticipated sales of DSL lines and the other Covad Products
          that SBC will sell to meet the Revenue Commitments. SBC will not be

                                       10

<PAGE>

          penalized for failure to achieve line sales forecasts, but will only
          be committed to and responsible for the Revenue Commitment.

     3.2.5 ARRANGEMENT START-UP FEE. Upon execution of this Agreement, SBC shall
          pay Twenty Million Dollars ($20,000,000.00) (the "Arrangement Start-Up
          Fee") to Covad to assist Covad's development of processes, products,
          systems, and functionalities necessary to support the arrangements
          between SBC and Covad under this Agreement (the "Covad Arrangement
          Costs"), including without limitation the development of (a) the
          TeleSurfer Plus product, (b) the NIC card installation service, (c)
          the Non-Truck-Roll installation service and (d) related operational
          support systems. Payment of the Arrangement Start-Up Fee shall not
          affect other obligations of SBC as set forth herein. Subject to
          ARTICLE IV, following payment of the Arrangement Start-Up Fee, SBC
          shall have no further liability whatsoever for Covad Arrangement
          Costs, and Covad shall bear all such further Covad Arrangement Costs.

     3.2.6 BRANDING; ADVERTISING REIMBURSEMENT. Subject to Section 3.1.2, SBC
          shall be permitted to offer, market and sell the Covad Products in
          SBC's own brand name or any brand name selected by SBC, and in
          combination with its own Internet access service, or in combination
          with any other Internet access service, goods or services from any
          source. SBC may, in its sole and absolute discretion, co-brand the
          Covad Products (including all advertisements, brochures, mailings and
          the like) with the tag line "The Internet as it should be," the Covad
          name and logo, and the legend "DSL service provided by Covad" or
          equivalent in conformity with Covad's branding practices. During the
          first eighteen (18) months of the Term, and regardless of whether SBC
          elects to co-brand Covad's service, Covad will reimburse SBC for up to
          Fifteen Million Dollars ($15,000,000.00) for fees incurred by SBC for
          advertising selected by SBC and used to promote Covad Products,
          including advertising to promote primary demand for DSL services that
          can be satisfied by Covad Products. Such reimbursements shall be
          payable upon SBC's presentation to Covad of a fee statement or its
          equivalent and reasonable documentation demonstrating that SBC has
          paid such expenses. SBC shall not be entitled to any reimbursements
          under this Section 3.2.6 after the first eighteen (18) months of the
          Term.

     3.2.7 RELATIONSHIP WITH CUSTOMER. With respect to any SBC Product, SBC
          shall have all contractual relationships with Customers, and unless
          otherwise agreed to in writing by the Parties, shall provide Customers
          with all aspects of customer care, including but not limited to
          receiving trouble reports, service inquiries, inquiries concerning
          billing questions and disputes, change orders, and orders for
          additional Covad Products. Any dealings Covad may have with a Customer
          in connection with the

                                       11

<PAGE>

          provision of SBC Products to that customer shall be as a
          representative or agent of SBC; provided that Covad shall have no
          obligation to display logos of SBC or its affiliates or to market SBC
          products or services unless otherwise agreed by the Parties.

3.3  NON-EXCLUSIVITY.

     Nothing in this Agreement shall be construed to prevent Covad from selling
     or marketing its services through any and all retail and wholesale channels
     of its choice, including direct sales, or to prevent SBC from utilizing
     other channels or aggregators of its choice to sell or market Covad
     Products or any other services offered or resold by SBC. SBC may resell
     Covad Products within both In-Region Markets and Out-of-Region Markets.

3.4  PROTECTION OF SBC CUSTOMER INFORMATION. Covad hereby acknowledges and
     agrees that SBC Customer Information is sensitive and confidential business
     information that is entitled to treatment as Proprietary Information
     subject to the provisions of ARTICLE X of this Agreement. Covad hereby
     covenants and agrees that it will not use any SBC Customer Information for
     any purpose other than that which is necessary for it fulfill its
     obligations under this Agreement. Covad further hereby covenants and agrees
     that, in order to assure compliance with this Section 3.4, it shall employ
     systems and procedures (including employee training as appropriate) that
     are designed to assure, to the extent practicable, that only those
     personnel with a need to know in order to provide Covad Products to SBC and
     to SBC Customers shall have access to SBC Customer Information. Where
     necessary and appropriate to assure the confidentiality of SBC Customer
     Information, Covad shall restrict access to SBC Customer Information to
     specified employees. In no event shall Covad allow any of its retail sales
     employees or agents to access information concerning SBC Customer
     Information, except that Covad's Chief Executive Officer, Chief Operating
     Officer, Senior Vice President Sales, or officers holding positions with
     comparable responsibility may have access to such information on a need to
     know basis and subject to the confidentiality requirements of ARTICLE X.

3.5  PROTECTION OF CPNI. Unless the Parties otherwise agree, Covad hereby
     covenants and agrees that it will comply with the provisions of the Act and
     the rules of the FCC thereunder with respect to CPNI. Covad's obligations
     under this Section inure to the benefit of SBC and shall be in addition to
     and notwithstanding any Covad obligation to comply with the Act and the
     rules of the FCC, except that nothing in this Section shall require Covad
     to act in a manner inconsistent with the Act or the rules of the FCC.

3.6  LAW ENFORCEMENT PROCESSES.

     Each Party shall be responsible for complying with any law enforcement
     subpoena or similar law enforcement process received by that Party. The
     Parties

                                       12

<PAGE>

     shall cooperate as may be necessary to comply with valid law enforcement
     subpoena and similar processes, including requests to place wire taps, pen
     registers, or similar devices on end user services, PROVIDED, HOWEVER, that
     either Party may, in the exercise of its reasonable judgment, challenge the
     legality of any law enforcement process received by either Party. In such
     event, the other Party shall cooperate with the Party challenging the law
     enforcement process.

                                   ARTICLE IV

                              SYSTEMS INTEGRATION

4.1  NEED FOR SYSTEMS INTEGRATION.

     The Parties understand and agree that, in order to achieve the purposes of
     this Agreement, the Parties' networks and Data Systems must communicate and
     interoperate efficiently and in accordance with reasonable commercial
     standards, and that SBC desires to have those Data Systems flow through to
     SBC such data and information as may be necessary for SBC to provide Covad
     Products to SBC Customers as contemplated by this Agreement. In order to
     provide this level of interoperability, Covad shall make available to SBC,
     as promptly as possible after acceptance by SBC, the electronic Data
     Systems developed by the Parties for exchanging information related to
     pre-ordering, ordering, provisioning, service activation, service
     assurance, maintenance, repair and billing for Covad Products. SBC hereby
     covenants and agrees that it will not use any of Covad's Data Systems for
     any purpose other than that which is intended by Covad and is necessary for
     SBC to fulfill its obligations under this Agreement.

4.2  MANUAL PROCESSES.

     Pending deployment of the electronic Data Systems, Covad and SBC shall
     employ mutually agreed upon manual processes for exchanging information
     related to pre-ordering, ordering, provisioning, service activation,
     service assurance, maintenance, repair and billing for Covad Product. The
     Parties hereby stipulate and agree that these manual processes are interim
     systems to be used for as limited a period of time as practicable until the
     Parties develop and deploy electronic Data Systems.

                                       13

<PAGE>

                                   ARTICLE V

                      ACKNOWLEDGEMENT OF RIGHT TO COMPETE

5.1  ACKNOWLEDGEMENT OF RIGHT TO COMPETE.

     Each Party acknowledges and understands that it remains at all times solely
     responsible for the success and profits of its business, and that the other
     Party makes no promises, warranties or representations regarding business
     success or prospects of business success in connection with the provision
     of the Covad Products being sold and marketed pursuant to this Agreement,
     except to the extent that SBC is obligated to satisfy the Revenue
     Commitments. Each Party acknowledges and understands that the other Party
     will continue to market services directly to the public, subject to the
     terms of this Agreement, and that such marketing may from time to time
     bring the Parties into direct or indirect competition. Each Party
     acknowledges and understands that except as expressly provided in the
     Operating Agreements, nothing in this Agreement diminishes or restricts in
     any way the rights of the other Party to engage in competition for
     customers or to market its services to competitors of the first Party.

                                   ARTICLE VI

                              PRICING AND PAYMENT

6.1  MFN PRICING.

     Covad will offer Covad Products to SBC (including DSL transport and IP
     connectivity in the case only of the DSL plus IP product) at prices and
     upon terms and conditions that are at least as favorable to SBC as those
     that Covad offers to other purchasers of comparable products whose volumes
     of purchases from Covad are comparable to or less than SBC's ("MFN
     Pricing"). Covad's obligation to provide MFN Pricing to SBC shall apply to
     any special or promotional offering by Covad.

6.2  PRODUCT PRICING AND MIX.

     The initial prices that SBC shall receive from Covad for Business Lines
     (SDSL) and Consumer Lines (ADSL) are set forth in Addendum 1. For Covad's
     Consumer (ADSL) service, SBC shall receive from Covad the line sharing
     prices set forth in Addendum 1. If SBC requests a second line ADSL service,
     then SBC will be charged for the second line ADSL service, the professional
     installation, and the CPE at the prices set forth in Addendum 1. SBC shall
     purchase at least 35% (as defined in Addendum 2) of all lines as Business
     Lines (SDSL or TeleSpeed lines).

                                       14

<PAGE>

     6.2.1 SALES IN EXCESS OF 35%. For each 1% increase over 35% (as defined in
          Addendum 2) in the mix of installed Business Lines sold by or on
          behalf of SBC (net of Churn) during any Commitment Year, SBC's Total
          Revenue Commitment shall be decreased as set forth in Addendum 2.

     6.2.2 SALES BELOW 35%. To the extent SBC fails to reach 35% (as defined in
          Addendum 2) Business Lines, SBC's Total Revenue Commitment will be
          increased as set forth in Addendum 2. For each 1% below the 35% in the
          mix of installed Business Line sold by or on behalf of SBC (net of
          Churn), SBC's Total Revenue Commitment shall increase as set forth in
          Addendum 2.

     6.2.3 DEFINITION OF 35%. For the purposes of this Section 6.2, SBC's
          satisfaction or failure to satisfy the 35% Business Lines commitment
          shall be determined as set forth in Addendum 2.

6.3  CHURN REBATE.

     For every SBC-ordered DSL line installed by Covad that is disconnected
     within 1 year of the date of installation, SBC shall pay Covad a Churn
     Rebate of [redacted] provided that SBC shall not be liable for any such
     payment to the extent that SBC can demonstrate that the disconnect was
     reasonably attributable to service outages or quality problems for which
     Covad is or was responsible, excluding service outages or quality problems
     that are reasonably attributable to an SBC-affiliated ILEC.

6.4  PAYMENT TERMS.

     6.4.1 DUE DATE AND INVOICE. Subject to the provisions of Section 6.4.5, all
          amounts stated on each monthly invoice are due and payable thirty-five
          (35) days from the date of the invoice ("Due Date"); provided,
          however, that SBC may deduct from any amount due, any credit or remedy
          amount authorized under ARTICLE VII for Covad's failure to meet the
          identified performance specifications set forth in Addendum 3, and any
          Disputed Amounts, in accordance with Section 6.4.5. SBC shall itemize
          the credit or remedies that are deducted from the payment. SBC shall
          remit payment to Covad at the remittance address. In the event SBC
          fails to make full payment of the undisputed amounts to the proper
          address by the Due Date, SBC shall also pay a late fee in the amount
          of the lesser of one and one-half percent (1 1/2%) of the unpaid
          balance per month or the maximum lawful rate under applicable state
          law which shall accrue from the Due Date. SBC acknowledges and
          understands that all charges are computed exclusive of any applicable
          federal, state or local use, excise, valued added, gross receipts,
          sales and privilege taxes, tax or charge levied to support the
          Universal Service Fund contemplated by the Communications Act, taxes
          on Payphone Charges, duties, fees or similar

                                       15

<PAGE>

          liabilities (other than general income or property taxes imposed on
          Covad), whether charged to or against Covad, or SBC associated with
          the Service or Other Service provided to SBC ("Additional Charges").
          Such Additional Charges are not classified as Service charges and
          shall be paid by SBC in addition to all other charges provided for in
          this Agreement.

     6.4.2 BILLING PERIODS. Covad will bill SBC monthly for the Covad Products
          provided hereunder. Charges for usage and all prorated monthly
          recurring charges (prorated monthly charges for Covad Products
          provided for less than a calendar month), installation and other
          non-recurring charges shall be billed following the receipt of any
          such Covad Products. Charges for all monthly recurring charges for
          full months during which Covad Products are to be provided shall be
          billed one month in advance of the beginning of the month in which the
          Covad Products are to be provided.

     6.4.3 TIMELINESS. Covad will render invoices for Covad Products not later
          than the tenth Business Day after the monthly billing cycle in which
          any usage is recorded. Covad shall account, and bill SBC for, not less
          than (1) 97.0% of all usage no later than the first available monthly
          billing cycle after the usage is recorded, (2) 98.0% of all usage no
          later than the second available monthly billing cycle after the usage
          is recorded and (3) 99.8% of all usage no later than the third
          available monthly billing cycle after the usage is recorded. Covad
          hereby waives all charges for any usage not billed by the fourth
          billing cycle unless Covad can document that the delayed billing was
          caused by SBC, its Affiliates, or the ILEC, unless the Parties agree
          in writing to a longer time period, or is otherwise excused under this
          Agreement. In all events, Covad's failure to bill for any charge
          within two years after the date on which the service was rendered
          shall constitute a waiver of any claim for those charges. This waiver
          is SBC's sole remedy for invoicing delay.

     6.4.4 ACCURACY. Unless the Parties agree otherwise in writing, with respect
          to any monthly billing cycle, the accuracy of the raw billing
          information that Covad supplies to SBC with respect to the Covad
          Products shall be at least equal to the industry standard for
          similarly situated companies providing similar services (excluding any
          DSL Affiliate of an ILEC), and in any event shall not be less than
          90.0%, where Covad cannot document that such raw billing inaccuracy
          was caused by SBC, any of its Affiliates, or the ILEC.

     6.4.5 PAYMENT DISPUTES. If SBC in good faith disputes any portion of an
          invoice it must pay the undisputed amount of the invoice on or before
          its Due Date and provide written notice to Covad of the billing
          dispute within sixty (60) days thereafter. Such notice must include
          documentation substantiating the dispute. The Parties will make a good
          faith effort to resolve billing disputes

                                       16

<PAGE>

          expeditiously. If SBC has already made payment of a disputed charge
          and a dispute is resolved in favor of SBC, SBC shall receive a credit
          on its next invoice for the amount determined to be due, including
          interest in the amount of the lesser of one percent (1%) per month or
          the maximum rate allowed by law from the date SBC paid the disputed
          amount.

     6.4.6 SUSPENSION OF SERVICE. In the event payment in full is not received
          from SBC on or before ninety (90) days following the Due Date (less
          any amounts disputed pursuant to Section 6.4.5), Covad shall have the
          right, after giving SBC ten (10) days written notice, to suspend all
          or any portion of the Covad Products provided to SBC. If only a
          portion of the Covad Products is suspended and SBC does not cure
          within ten days of such partial suspension, Covad may suspend all or
          any additional portions of the Covad Products provided to SBC. Covad
          may continue suspension until such time as SBC has paid in full all
          charges (less any amounts disputed pursuant to Section 6.4.5), then
          due, including any late fees as specified in this Agreement.

6.5  AUDIT RIGHTS.

     SBC shall have the right to request an independent audit of Covad's books
     and records by an independent, nationally recognized accounting firm
     mutually acceptable to SBC and Covad with respect to MFN Pricing as
     described in Section 6.1 not more than once during each twelve-month period
     during the Term by giving written notice to Covad.

     6.5.1 SCOPE OF AUDIT. SBC and Covad shall agree upon the scope and
          materiality standards aspects of the audit, provided that the audit
          shall not exceed the scope of MFN pricing as described in Section 6.1.
          The terms of the engagement of the auditor shall specifically define
          the scope of the audit and materiality standards, and shall require,
          in the case of a quantitative evaluation, a valid statistical sampling
          of any information reviewed. Prior to any audit, the auditor must
          agree to be bound by a customary non-disclosure agreement.

     6.5.2 COOPERATION. Covad shall cooperate fully in connection with any
          audit, providing access to any and all relevant books, records and
          contracts and causing its employees, accountants, and other
          representatives and agents to cooperate fully with the auditor. Covad
          shall maintain its billing and associated records in accordance with
          accepted accounting principles and shall retain those books and
          records for at least two years after an invoice is sent to SBC. If an
          audit is requested, Covad will retain those books and records until
          such time as the audit is completed.

     6.5.3 FINDINGS. The auditor shall submit to SBC and Covad a full report of
          the findings of the audit, which report shall specify the conformity
          or extent of non-conformity with Covad's obligations under this
          Agreement that were

                                       17

<PAGE>

          the subject of the audit. The determination of the auditor will be
          final and binding upon Covad and SBC.

     6.5.4 COSTS. The audit will be at SBC's expense, unless the auditor
          determines that Covad has failed to provide MFN Pricing in any
          material respect (as determined by the auditor), in which case the
          audit will be at Covad's expense. If the auditor determines that Covad
          is not in compliance with its obligations that were the subject of the
          audit, then Covad will make adjustments on a retroactive basis to
          reflect adjustments in either SBC's or Covad's favor in accordance
          with the findings of the auditor.

6.6  EFFICIENCY GAINS.

     The Parties shall consider methods to equitably share reduced input costs
     and efficiency gains during the Term of this Agreement that affect the cost
     of the Covad Products.

                                  ARTICLE VII

                     DELIVERY AND QUALITY OF COVAD PRODUCTS

7.1  COMPETITIVE SERVICES AND PRODUCTS.

     The Covad Products shall be competitive from a quality perspective as
     measured against comparable competitive offerings and shall meet or exceed
     the quality and performance standards met by Covad in providing services to
     others who place a volume of orders with Covad comparable or less than the
     volume of orders placed by SBC. The Covad Products that are the subject of
     this Agreement shall be competitive in characteristics and performance with
     the products and services SBC is deploying in the In-Region Markets to the
     extent that Covad is able to secure line-sharing and other arrangements
     with the relevant ILEC that are the same in term, conditions, and practice
     as the line-sharing and other arrangements SBC ILECs provide to themselves,
     or to SBC's advanced services Affiliate. In all events, and subject to
     Sections 7.4, 8.1 et seq., and 8.2 et seq., the Covad Products shall remain
     competitive with the service level commitments, operational standards and
     performance standards Covad set forth in Addendum 3 ("SLAs"), or as the
     SLAs may be modified over time pursuant to the benchmarking analysis to be
     undertaken at least annually pursuant to Section 7.2.

7.2  BENCHMARKING OF SLAS.

     Given the dynamic nature of the telecommunications industry, the Parties
     recognize that offering high quality, competitive services will necessitate
     periodic review of the SLAs and their modification over time. Accordingly,
     the Parties

                                       18

<PAGE>

     shall review, at least annually, the SLAs to determine whether they are
     competitive with those offered in the industry so that the Covad Products
     offered pursuant to this Agreement are of the appropriate competitive
     quality. The Parties recognize and agree that SBC's ability to solicit
     potential customers for Covad Products, and Covad's ability to provide the
     Covad Products, is dependent on the provision of services of the highest
     quality and reliability to customers. Where the SLAs are not competitive,
     the Parties shall adjust them in order to meet, or exceed, industry
     standards.

7.3  CONTENT OF SLAS.

     As set forth more particularly in Addendum 3, Covad shall offer SLAs
     covering the Covad Network, the Customer's circuit, and the circuit from
     the SBC Network to the Covad Network. The SLAs shall contain commitments
     regarding the following performance parameters: (1) network availability;
     (2) network delay; (3) message delivery; (4) mean response time; (5) mean
     time to restore service; and (6) ordering system reliability. In addition,
     Covad shall offer SLAs covering the work it performs or equipment it
     provides with respect to (1) customer installation; (2) CPE warranty; and
     (3) inside wire warranty.

7.4  NON-PERFORMANCE OF SLAS.

     In the event that Covad fails to perform in accordance with the SLAs set
     forth in Addendum 3, Covad shall compensate SBC as set forth in that
     Addendum. In addition, Covad shall indemnify SBC for any and all
     liabilities arising from Covad's failure to meet the SLAs with Customers to
     the extent such liability is attributable to Covad's failure to satisfy the
     commitments, standards and performance levels set forth in the SLAs.

7.5  REGULATORY AUTHORITY.

     Covad and SBC shall each maintain and keep in full force and effect any and
     all Regulatory Licenses necessary for it or its Affiliates to perform its
     obligations under this Agreement.

7.6  IDENTIFICATION OF TECHNICAL DIFFICULTIES.

     The Parties shall work together and coordinate their efforts, in accordance
     with such procedures as they may adopt from time to time and in a manner
     consistent with the Act, to identify, isolate, and resolve technical
     difficulties with respect to the Covad Products that are reported by
     Customers or identified by the Parties. SBC shall refer to Covad any
     trouble reports received from Customers and, to the extent consistent with
     the Act, Covad shall keep SBC advised of its efforts to resolve such
     trouble.

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<PAGE>

7.7  COVAD ACCESS TO SBC CUSTOMER PREMISES.

     7.7.1 Where Covad agrees to install or maintain equipment used in
          connection with Covad Products resold by SBC that is to be installed
          on the customer premise, SBC shall take, and shall use commercially
          reasonable methods to cause its customers to take, reasonable steps to
          provide access to premises to the extent reasonably requested by Covad
          for the provision of Covad Products, or the maintenance of equipment,
          facilities and systems relating to the Covad Products. Covad shall
          notify SBC at least two (2) business days in advance of any regularly
          scheduled maintenance that will require access to the SBC Customer
          premises.

     7.7.2 Covad personnel installing or maintaining any equipment used by an
          SBC Customer in connection with Covad Products shall adhere to the
          guidelines Covad has established for conduct on customer premises and
          to any reasonable guidelines or rules SBC shall establish and provide
          to Covad.

     7.7.3 Covad personnel on the premises of an SBC Customer shall not
          volunteer that Covad is the provider of the Covad Products and, to the
          extent any inquiries are made of Covad personnel on the premises of an
          SBC customer, Covad personnel shall advise the SBC Customer, its
          officers, employees, agents, consultants, etc. that Covad is
          performing services under contract or agreement with SBC; provided,
          however, that this provision shall not restrict the display of Covad
          logos on its employees and their equipment, shall not require Covad
          personnel to display SBC logos, or to market SBC products.

     7.7.4 The rules set forth in this ARTICLE VII and any requirements adopted
          by the Network Operating Committee or any other Committee established
          pursuant to the Network and Product Planning Agreement shall apply to
          any contractor, subcontractor, agent or representative of Covad in the
          same manner as to Covad and its officers, employees, and agents

7.8  COVAD FACILITIES.

     SBC shall not, and shall use its reasonable efforts to cause its customers
     to not, rearrange, disconnect, remove, attempt to repair, or otherwise
     tamper with any of the facilities or equipment that Covad installs on SBC's
     or the customer's premises to deliver the Covad Products, except upon
     Covad's consent. Equipment that Covad provides at a premises for use in
     connection with Covad Products shall not be used for any purpose other than
     that for which Covad provided it. If SBC, SBC Customers, or their agents
     attempt to operate or maintain any Covad facilities or equipment without
     Covad's approval, in addition to any other remedies hereunder, SBC shall
     pay Covad for any actual damage to Covad-owned equipment caused thereby. In
     no event shall Covad be liable to

                                       20

<PAGE>

     SBC or any other person for interruption of service, or for any other loss,
     cost or damage, caused by or related to improper use or maintenance of
     Covad-owned equipment by SBC, SBC Customers, or any third party not
     authorized by Covad. Notwithstanding anything in this Section 7.8, SBC
     shall not be responsible for damage to or failure of Covad equipment
     resulting from normal wear and tear.

7.9  TITLE AND POWER.

     Title to all facilities provided by Covad (except those sold to SBC or SBC
     Customers) and used to provide the Covad Products shall remain with Covad.
     The electric power that such facilities consume on the premises of SBC or
     SBC Customers shall be provided and maintained at the expense of SBC or
     SBC's Customer.

7.10 CUSTOMER-PROVIDED EQUIPMENT.

     Covad shall not be responsible for the operation of any equipment provided
     by SBC Customers, who shall be responsible for maintaining the equipment
     required to provide answer supervision in accordance with Subpart D of part
     68 of the Rules of the FCC, as those rules may be amended in the future.

7.11 SERVICE CHARGES.

     SBC shall be responsible for the payment of service charges, to be billed
     in accordance with the provisions of Section 6.4.2, for visits by Covad to
     the premises when the trouble report results from causes attributable to
     any party other than Covad.

7.12 REMOVAL OF EQUIPMENT.

     Where SBC uses Covad equipment in connection with the provision of Covad
     Products to an SBC Customer whose service is terminated, interrupted or
     suspended or where Covad equipment is replaced because of a Service
     upgrade, SBC shall, at Covad's option, either return all Covad-owned
     equipment to Covad at SBC's expense or allow Covad to remove all
     Covad-owned equipment. Any Covad equipment returned or removed pursuant to
     the preceding sentence shall be in good working condition, subject to
     normal wear and tear, and shall be returned by SBC or reclaimed by Covad,
     as the case may be, within thirty (30) days of SBC's receipt of Covad's
     choice of the option selected pursuant to the first sentence of this
     Section 7.12. Where Covad equipment must be returned for repair, the
     procedures for handling such matters shall be worked out in accordance with
     the procedures set forth in the Network and Product Planning Agreement.

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<PAGE>

                                  ARTICLE VIII

                                  TERMINATION

8.1  TERMINATION.

     This Agreement may be terminated, without penalty or termination charges,
     by the mutual written consent of Covad and SBC. Either Party may, but shall
     not be obligated to, terminate this Agreement:

     8.1.1 for failure by any Party to make a payment when due, upon thirty (30)
          days notice in writing to the defaulting Party, except that the
          defaulting Party may cure the breach upon payment of the amount due
          within the thirty (30) day notice period; provided, however, that SBC
          shall not have a right to cure if it fails to make timely payment for
          three consecutive months, or fails to make timely payment four times
          in a consecutive twelve (12)-month period;

     8.1.2 for material breaches of Service ordered pursuant to this Agreement
          that result from the other Party's fraud, material misrepresentation,
          willful misconduct or other intentional unlawful act affecting the
          delivery of the Service, after the non-defaulting Party provides
          thirty (30) days written notice and if the defaulting Party fails to
          cure within the thirty (30) day notice period;

     8.1.3 for a material breach of this Agreement, other than a failure to
          comply with SLAs, upon sixty (60) days notice in writing to the
          defaulting Party in the event of a material breach of this Agreement
          by such defaulting Party, unless the defaulting Party cures the breach
          within the sixty (60) day notice period.

8.2  FAILURE TO SATISFY SLAS.

     SBC shall have the right to terminate this Agreement for material breach
     (as defined below) of the reliability, performance and service standards
     set forth in Addendum 3 ("SLAs"). . A material breach of the SLAs shall
     only exist if the aggregate monthly credits resulting from breaches of the
     SLAs exceed 35 % of the total amount invoiced to SBC by Covad for three (3)
     consecutive months or for six (6) months in any twelve (12) month period.
     In the event that SBC terminates this Agreement pursuant to this Section
     8.2, Covad shall (a) not assess termination charges or penalties which may
     otherwise be charged to SBC under this Agreement, and SBC shall have no
     further liability under this Agreement to meet its Revenue Commitment, (b)
     provide SBC and its Customers an orderly transition of Covad Products to a
     new provider in accordance with Section 8.7, and (c) reimburse SBC for its
     out-of-pocket expenses associated with transitioning its Customers to the
     new DSL provider. The remedies described in this Section 8.2 and

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     those set forth in the applicable SLA shall constitute SBC's sole remedies
     with respect to Covad Product performance failures.

     8.2.1 Covad shall not be held responsible for failing to meet the
          performance metrics set forth in Addendum 3 if such failure is due to
          SBC's or its Customers' personnel, applications, equipment, or
          facilities, the ILEC's failure to perform in a timely fashion,
          provided, however, that where Covad recovers in the form of a cash
          payment or credit any damages or other compensation from the ILEC as a
          result of the ILEC's failure to perform, Covad shall reasonably
          allocate to SBC a portion of that recovery according to the harm
          suffered by SBC as relative to the harm suffered by Covad and its
          partners other than SBC. Covad shall be responsible and liable to SBC
          for the remedies set forth in Addendum 3 where a failure to meet any
          performance metrics is due to the performance or actions of Covad's
          contractors and subcontractors.

8.3  FAILURE TO COMPLY WITH DEPLOYMENT SCHEDULES.

     As set forth in the Network Product and Planning Agreement, SBC shall have
     the right to terminate this Agreement in the event of Covad's material
     failure to meet the deployment requirements of the Network Product and
     Planning Agreement.

8.4  BANKRUPTCY, INSOLVENCY, ETC.

     This Agreement shall expire and terminate automatically and without notice
     in the event that any Party hereto:

     8.4.1 ceases to do business as a going concern;

     8.4.2 is unable or admits in writing its inability to pay its debts as they
          become due;

     8.4.3 commences or authorizes a voluntary case or other proceeding seeking
          liquidation, reorganization, suspension of payments or other relief
          with respect to itself or its debts under any bankruptcy, insolvency
          or other similar law now or hereafter in effect or seeking the
          appointment of a trustee, receiver, liquidator, custodian or other
          similar official of it or any substantial part of its property, or
          consents to any such relief or to the appointment of or taking
          possession by any such official in an involuntary case or other
          proceeding commenced against it, or makes a general assignment for the
          benefit of creditors, or fails to pay a substantial portion of its
          debts as they become due, or takes any corporate action to authorize
          any of the foregoing, is insolvent, bankrupt or the subject of a
          receivership; or

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     8.4.4 has any substantial part of its property subjected to any levy,
          seizure, assignment or sale for or by any creditor or governmental
          agency without such levy, seizure, assignment or sale being released,
          lifted, reversed, or satisfied within ten (10) days.

8.5  COVAD CHANGE IN CONTROL EVENT.

     During the first two years of the Term, in the event of a Covad Change in
     Control Event, SBC shall have the right, in its sole and absolute
     discretion at any time during the one hundred eighty (180) days following
     the Covad Change in Control Event, by providing written notice to Covad, to
     either (a) terminate this Agreement 30 days after the date of the
     termination notice, or (b) terminate this Agreement one year after the date
     of the termination notice. If SBC elects a termination in 30 days, then SBC
     shall pay the Early Termination Amount (as defined below) in cash to Covad
     within 60 days following the date of the termination notice. If SBC elects
     a termination in one year, then the Total Revenue Commitment that SBC must
     satisfy as of the date of such termination shall be equal to the Early
     Termination Amount. In all events, Covad shall not be obligated to (i)
     return any portion of the Revenue Commitment satisfied by SBC or (ii) pay
     SBC any amount in any form as a result of termination under this paragraph.
     The Early Termination Amount shall be the difference between (a) the amount
     of the original Total Revenue Commitment that has been satisfied on that
     date which is 30 days after the date of the Termination Notice (including
     any increases or decreases arising pursuant to Section 6.2), and (b) one
     hundred million dollars ($100,000,000.00). After the first two years of the
     Term, in the event of a Covad Change in Control Event, SBC shall have the
     right in its sole and absolute discretion to terminate this Agreement at
     any time during the one hundred eighty (180) days following such Covad
     Change in Control Event by providing written notice to Covad, and in such
     case no Early Termination Amount or other liability of any kind shall be
     due to Covad as a result of such termination. The date of termination shall
     be set by SBC in its notice, but shall not be less than thirty (30) days
     after the date of the notice.

8.6  TIMING.

     The Party having the right to terminate shall exercise such right within a
     reasonable period of time, but in no event more than one hundred eighty
     (180) days from actual notice of the event or circumstances permitting
     termination by such Party.

8.7  TRANSITION.

     The Parties recognize that the Covad Products are vital to SBC and must be
     continued in accordance with the terms of this Agreement after the
     cancellation or other termination of the Agreement while SBC transitions to
     new arrangements required for the continued provision of the Covad Products
     to SBC Customers.

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     Accordingly, the Parties hereby agree, to cooperate in developing and
     implementing an orderly and efficient transition that will minimize any
     adverse effects on (a) the quality and availability of the Covad Products,
     (b) SBC's ability to provide the quality and variety of services offered to
     its customers prior to termination, and (c) SBC Customers. Unless SBC is in
     material breach of this Agreement on account of non-payment for Covad
     Products, Covad will, as part of such transition, and if requested by SBC
     prior to the expiration of the Term, continue to provide the Covad Products
     for a period of not less than nine (9) months after the expiration of the
     Term (or such lesser period as SBC may specify), on the terms and
     conditions set forth in this Agreement. Beginning nine (9) months after the
     expiration of the Term, SBC shall pay prevailing market prices charged to
     similarly situated customers for any Covad Products that SBC purchases from
     Covad.

                                   ARTICLE IX

                                 SOFTWARE TERMS

9.1  LICENSE.

     If and to the extent that SBC or SBC Customers require the use of Covad
     licensed software ("Covad Licensed Software") in order to use the Covad
     Products supplied under any service order, then SBC and SBC Customers shall
     have a nonexclusive, nontransferable, limited license to use such Covad
     Licensed Software only and to the extent required to permit delivery and
     use of the Covad Products. SBC and SBC Customers shall in no event be
     entitled to claim title to or any ownership interest in any Licensed
     Software (or any derivations or improvements thereto), and SBC and SBC
     Customers shall execute any documentation reasonably required by Covad to
     document Covad's or its licensor(s)' existing and continued ownership of
     Licensed Software.

     9.1.1 RESTRICTIONS. SBC agrees that it shall not, and shall not permit its
          customers, to:

          9.1.1.1 Copy the Covad Licensed Software, except as allowed and
               permitted by Covad's express written consent.

          9.1.1.2 Reverse engineer, decompile or disassemble the Covad Licensed
               Software.

          9.1.1.3 Sell, lease, license or sublicense the Covad Licensed
               Software, except that SBC may sublicense the Covad Licensed
               Software to SBC Customers on a non-exclusive, non-transferable
               basis.

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          9.1.1.4 Create, write or develop any derivative software or any other
               software program based on the Covad Licensed Software or any
               Proprietary Information of Covad.

9.2  CONFLICT WITH THE NETWORK AND PRODUCT PLANNING AGREEMENT.

     To the extent that anything in this ARTICLE IX is inconsistent with the
     Intellectual Property provision of the Network and Product Planning
     Agreement, the Network and Product Planning Agreement shall control.

                                   ARTICLE X

                    CONFIDENTIAL AND PROPRIETARY INFORMATION

10.1 GENERAL.

     Each Party shall hold in confidence and withhold from third parties (other
     than as permitted below) any and all Proprietary Information received
     pursuant to this Agreement and shall use such Proprietary Information only
     to fulfill its obligations or enforce its rights hereunder and for no other
     purposes unless the disclosing Party shall otherwise agree in writing.

10.2 OBLIGATION TO PROTECT PROPRIETARY INFORMATION.

     Each Party shall use commercially reasonable efforts to safeguard any
     Proprietary Information received pursuant to this Agreement from theft,
     loss or disclosure to others, and to limit access to Proprietary
     Information to those officers, directors, and employees within the
     receiving Party's organization, and subcontractors, consultants, investors,
     advisors, attorneys, service providers, business partners and others who
     reasonably require access in order to accomplish the aforesaid purposes.
     Proprietary Information shall be protected hereunder only if it is
     identified as proprietary when provided. The receiving Party shall not be
     liable for unauthorized use or disclosure of any such Proprietary
     Information if it can establish that the same: (i) is or becomes public
     knowledge or part of the knowledge or literature within the
     telecommunications industry without breach of this Agreement by the
     receiving Party; (ii) is known to the receiving Party without restriction
     as to further disclosure when received; (iii) is independently developed by
     the receiving Party as demonstrated by written records; or (iv) is or
     becomes known to the receiving Party from a third party who had a lawful
     right to disclose it without breach of its contractual obligations.
     Specific Proprietary Information shall not be deemed to be available to the
     public or in the possession of the receiving Party merely because it is
     embraced by more general information so available or in the receiving
     Party's possession.

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10.3 JUDICIAL OR ADMINISTRATIVE PROCEEDINGS.

     Should the receiving Party be faced with judicial or administrative
     governmental action to disclose Proprietary Information received hereunder,
     said receiving Party shall use commercially reasonable efforts to notify
     the originating Party in sufficient time to permit the disclosing Party to
     intervene in response to such action.

10.4 LOSS OR UNAUTHORIZED USE.

     The receiving Party agrees promptly to notify the disclosing Party of the
     loss or unauthorized use or disclosure of any Proprietary Information.

10.5 PROPRIETARY INFORMATION EXCHANGE AGREEMENTS.

     Each Party shall ensure that all subcontractors providing Proprietary
     Information to such Party in connection with this Agreement shall enter
     into a "Proprietary Information Exchange Agreement" or a substantially
     similar agreement that provides that such Proprietary Information may be
     disclosed and used by the Parties for the purposes provided in this ARTICLE
     X, subject to providing appropriate assurances of confidentiality, but
     without requiring further permission from or notice to such subcontractor.

10.6 NONDISCLOSURE AGREEMENTS.

     Each Party shall have any third party, person or entity to whom it provides
     the Proprietary Information of the other Party agree in writing to be bound
     to protect such Proprietary Information on the same conditions as set forth
     in this Agreement.

10.7 TERMINATION.

     Upon termination of this Agreement for any reason, the Parties shall cease
     use of all Proprietary Information furnished by the other Party and shall,
     at the direction of the furnishing Party, return or destroy all such
     Proprietary Information, together with all copies made hereof, except to
     the extent that the receiving Party retains a license to use such
     Proprietary Information. Upon request, the receiving Party shall send the
     other Party a destruction certificate.

10.8 IRREPARABLE INJURY BY DISCLOSURE TO COMPETITORS.

     Specifically, but without limiting the foregoing, each Party agrees and
     acknowledges that the disclosure by a Party of any Proprietary Information
     to any competitor of a Party could cause irreparable harm to such Party,
     and agrees not to make such a disclosure. Each Party shall have the right
     to enforce the provision of this Section by injunctive relief, including
     specific performance.

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     Personnel of one Party or its Affiliates present at the premises of the
     other Party or its Affiliates shall refrain from obtaining access to
     information that is proprietary to the customers of such other Party or its
     Affiliates. Such personnel shall comply with the other Party's or its
     Affiliates' reasonable measures established to restrict such access.

10.9 SURVIVAL OF NONDISCLOSURE OBLIGATIONS.

     The nondisclosure obligations set forth in this ARTICLE X shall survive the
     termination of this Agreement for two years.

                                   ARTICLE XI

                               REGULATORY FILINGS

11.1 REGULATORY SUBMISSIONS.

     In the event that either Party reasonably concludes that it is necessary or
     advisable to file this Agreement with a Governmental Entity or that a
     Governmental Entity is required to approve or review this Agreement or the
     arrangement between the Parties, the other Party shall cooperate fully in
     the preparation and filing of any regulatory filings which may be necessary
     or appropriate, including, without limitation, providing such information
     as may reasonably be necessary or which is requested by the Governmental
     Entity. Where a Party reasonably believes that information to be filed with
     a Governmental Authority is Proprietary Information, the Parties shall
     cooperate to obtain such confidential treatment from the Governmental
     Authority as may reasonably be secured.

11.2 MODIFICATION OR AMENDMENT OF THIS AGREEMENT.

     In the event a Governmental Entity with jurisdiction over a Party or both
     Parties or over this Agreement determines that one or more provisions of
     this Agreement are unlawful, contrary to public policy or otherwise
     unenforceable, the Parties will negotiate in good faith to amend the
     Agreement in order to comply with any such applicable regulatory
     requirements or policies while preserving the business objectives of both
     Parties. Either Party may, without the consent of the other Party, appeal
     or seek reconsideration of any decision or order which holds one or more
     provisions of this Agreement unlawful, contrary to public policy or
     otherwise unenforceable, but such appeal or request for reconsideration
     shall not affect the obligations of the Parties under this Section to
     negotiate in good faith, unless a stay of the decision or order is obtained
     and the terms and conditions of the stay are acceptable to both Parties. In
     such event, the obligations of the Parties to negotiate under this Section
     shall attach at such time as the stay is lifted

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<PAGE>

     and the adverse order or decision is reinstated or become effective or the
     stay is modified in a manner which a Party reasonably finds unsatisfactory.

                                  ARTICLE XII

                                INDEMNIFICATION

12.1 GENERAL.

     Each Party (the "Indemnifying Party") shall defend, indemnify and hold
     harmless the other Parties, including any of its Affiliates, officers,
     directors, shareholders, employees and agents (the "Indemnified Party"),
     from and against any and all claims, damages, losses, liabilities
     whatsoever, including reasonable legal fees and any damages, arising out
     of, caused by, related to or based upon a claim (a) by a third party for
     physical property damage, personal injury, or wrongful death, whether
     sounding in tort or contract, claim of defamation, invasion of privacy or
     similar claim based on any act or omission of the other Party, its
     employees, agents or contractors in connection with this Agreement, or (b)
     that the Indemnifying Party's products or services infringe or violate any
     copyright, trade secret, trademark or service mark, United States patent or
     other property right of a third party, or (c) that the claimant was
     "slammed" or "crammed," as those terms are understood in the industry.

12.2 NOTICE.

     The Indemnified Party shall promptly notify the Indemnifying Party in
     writing of any claim that the Indemnified Party reasonably considers
     subject to the indemnity, giving a description in reasonable detail of the
     relevant facts on which the claim is based. The Indemnified Party shall
     provide the Indemnifying Party with all reasonable assistance in
     investigating, defending, and pursuing such claim at the indemnifying
     Party's expense. The Indemnifying Party shall not be required to indemnify
     the Indemnified Party for any settlement entered into without its consent
     except to the extent set forth in Section 12.4 of this Agreement.

12.3 ASSUMPTION OF DEFENSE OF CLAIM.

     The Indemnifying Party shall assume the defense of any such claim or any
     litigation resulting from such claim and shall have absolute control over
     the litigation, including, but not limited to, the selection of counsel,
     the legal strategy with respect to the claim, and the settlement of such
     claim, either before or after litigation has commenced. Notwithstanding the
     preceding sentence, (a) if there is a reasonable probability that a claim
     may materially and adversely affect the Indemnified Party, other than as a
     result of monetary damages or monetary payment, the Indemnified Party shall
     have the right, at its own expense, to participate in the defense of such
     claim, and (b) to the extent any defense

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<PAGE>

     applicable to the Indemnified Party shall involve a conflict of interest
     (other than the requirement of indemnification) with the Indemnifying
     Party, the Indemnified Party shall have the right to control such defense
     at the expense of the Indemnifying Party.

12.4 RIGHT OF INDEMNIFIED PARTY TO UNDERTAKE DEFENSE.

     If, within a reasonable period of time after notice of any claim, the
     Indemnifying Party fails to defend such claim, the Indemnified Party shall
     have the right to undertake the defense, or compromise or settle such claim
     on behalf of and for the account and at the risk of the Indemnifying Party,
     subject to the right of the Indemnifying Party to assume the defense of
     such claim at any time prior to settlement, compromise or final
     determination of the claim, except to the extent set forth in the last
     sentence of Section 12.3 of this Agreement.

12.5 CLAIM OF INFRINGEMENT.

     In the case of a claim of infringement of any Intellectual Property right,
     where a court of competent jurisdiction finds such infringement, the
     Indemnifying Party shall, at its option and expense, use all reasonable
     efforts either (a) to procure for the Indemnified Party the right to
     continue to use the product, service or other item as provided for herein,
     (b) to modify the infringing product, service or other item so that it is
     noninfringing, without materially altering its performance or function, or
     (c) to replace the infringing product, service or other item with a
     substantially equivalent noninfringing item.

                                  ARTICLE XIII

                         REPRESENTATIONS AND WARRANTIES

Each Party hereby represents and warrants to the other Party as follows:

13.1 ORGANIZATION, STANDING AND AUTHORITY.

     The Party is a corporation duly organized, validly existing and in good
     standing under the laws of the jurisdiction where it is incorporated, that
     it has all requisite corporate power and authority to enter into this
     Agreement and to consummate the transactions contemplated herein, that all
     corporate acts and other proceedings required to be taken to authorize the
     execution, delivery and performance hereof and the consummation of the
     transactions contemplated herein have been duly and properly taken, and
     that this Agreement has been duly executed and delivered by it and
     constitutes the legal, valid and binding obligation of the Party,
     enforceable against it in accordance with its terms.

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<PAGE>

13.2 NO VIOLATION.

     The execution and delivery by the Party of this Agreement and the
     consummation of the transactions contemplated hereby and compliance with
     the terms hereof will not (a) conflict with or result in any violation of
     any provision of the articles of incorporation or by-laws, or the
     comparable organizational documents of the Party, (b) conflict with, result
     in a violation or breach of, or constitute a default, or give rise to any
     right of termination, revocation, cancellation, or acceleration, under, any
     material contract, concession or permit issued to Party, except for any
     such conflict, violation, breach, default or right which is not reasonably
     likely to have a material adverse effect on the ability of the Party to
     consummate the material transactions contemplated by this Agreement, (c)
     conflict with or result in a violation of any judgment, order, decree,
     writ, injunction, statute, law, ordinance, concession, permit, rule or
     regulation applicable to the Party or to the property or assets of the
     Party, except for any such conflict or violation which is not reasonably
     likely to have such a material adverse effect, or (d) violate any existing
     contractual arrangement to which the Party is a party or give rise to a
     claim against any other Party for inducing a breach of contract or
     interfering with contractual or other rights, or similar claim.

13.3 CONSENTS AND APPROVALS.

     No consent, approval, license, permit, order or authorization of,
     registration, declaration or filing with, or notice to, any Governmental
     Entity is required to be obtained or made by or with respect to the Party
     in connection with the execution and delivery of this Agreement or the
     consummation of the transactions contemplated hereby. The Party has or will
     obtain all necessary consents, approvals, authorizations and permits
     necessary to perform fully hereunder.

13.4 CALEA.

     Any equipment, facilities or services provided pursuant to this Agreement
     complies or will comply with CALEA.

                                  ARTICLE XIV

                            LIMITATION OF LIABILITY

14.1 LIMITED RESPONSIBILITY.

     Each Party shall be responsible only for services and facilities which are
     provided by that Party, its Affiliates, authorized agents, subcontractors,
     or others retained by such persons, and no Party shall bear any
     responsibility for the services and facilities provided by the other Party,
     the other Party's Affiliates, agents,

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<PAGE>

     subcontractors, or other persons retained by such persons. No Party shall
     be liable for any act or omission of another telecommunications carrier
     (other than an Affiliate) providing a portion of a service, unless such
     telecommunications carrier is an authorized agent, subcontractor or other
     person retained by the Party providing such service.

14.2 LIMITATION OF DAMAGES.

     The Parties will not be liable to each other for any indirect, incidental
     consequential, reliance, or special damages suffered by third parties
     (including without limitation damages for harm to business, lost revenues,
     lost savings, or lost profits suffered by such other parties), regardless
     of the form of action, whether in contract, warranty, strict liability, or
     tort, including without limitation negligence of any kind whether active or
     passive, and regardless of whether the Parties knew of the possibility that
     such damages could result. The Parties hereby release each other and their
     respective Affiliates, officers, directors, employees, and agents from any
     such claim. Nothing contained in this Section will limit one Party's
     liability to another Party for bodily injury, death, or damage to tangible
     real or tangible personal property proximately caused by a Party's
     negligent act or omission or that of their respective agents,
     subcontractors or employees, nor will anything contained in this Section
     limit the Parties indemnification obligations under ARTICLE XII of this
     Agreement.

14.3 WARRANTY DISCLAIMER

     EXCEPT AS PROVIDED IN THE SLAs, THE COVAD PRODUCTS AND ALL OTHER PRODUCTS
     AND SERVICES PROVIDED BY COVAD HEREUNDER ARE PROVIDED ON AN "AS IS" BASIS,
     AND SBC's AND ITS CUSTOMERS' USE THEREOF IS AT THEIR OWN RISK. COVAD DOES
     NOT MAKE, AND HEREBY DISCLAIMS, ANY AND ALL OTHER EXPRESS AND IMPLIED
     WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY,
     FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE, AND ANY
     WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE.
     EXCEPT AS PROVIDED IN THE SLA, COVAD DOES NOT WARRANT THAT THE COVAD
     PRODUCTS WILL PERFORM AT A PARTICULAR SPEED, OR WILL BE UNINTERRUPTED,
     ERROR-FREE, OR COMPLETELY SECURE.

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<PAGE>

                                   ARTICLE XV

                             INTELLECTUAL PROPERTY

15.1 RETENTION OF INTELLECTUAL PROPERTY RIGHTS.

     Except as otherwise specifically provided in this Agreement, no Party shall
     be deemed to have offered or granted to any other Party any rights or
     licenses under any present or future Intellectual Property disclosed or
     arising pursuant to this Agreement.

15.2 ALLOCATION OF INTELLECTUAL PROPERTY RIGHTS.

     The right of the Parties to any Intellectual Property that may be created
     in connection with or as a result of the product or service jointly
     developed by the Parties or otherwise developed pursuant to this Agreement
     shall be allocated in connection with the decision of the Parties to
     develop the product or service. In the absence of such a decision, all
     Intellectual Property Rights developed in connection with the joint
     development of a product or service shall be owned by the Party which
     initially proposed the product or service in the form of a marketing
     service description or similar document.

     15.2.1 The Party owning Intellectual Property created in the performance of
          a jointly developed product or service shall grant the other Parties a
          royalty-free, worldwide, nonexclusive license during the term of this
          Agreement to use, reproduce, adapt, distribute, perform, display and
          otherwise practice all such Intellectual Property for their business
          purposes, including the right to authorize third parties to do the
          foregoing for the other Party's business purposes.

     15.2.2 The Party owning Intellectual Property created in the performance of
          a jointly developed product or service shall grant the other Parties a
          perpetual, royalty-free, worldwide, nonexclusive license effective
          upon the termination or expiration of this Agreement to use,
          reproduce, adapt, distribute, perform, display, and otherwise practice
          all such Intellectual Property as may be reasonably necessary to
          permit the other Parties to continue pursuing their business in
          substantially the manner that business was pursued prior to any
          termination or expiration of this Agreement, including the right to
          authorize third parties to do the foregoing for the purpose of so
          continuing the other Party's business.

15.3 SECURING PATENT RIGHTS.

     The Party owning Intellectual Property created in the performance of a
     product or service shall have the first right to file patent applications
     and obtain and maintain patents covering inventions made in the development
     or implementation of the

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<PAGE>

     product or service. In the event that such Party does not file patent
     applications covering such patentable or potentially patentable inventions
     promptly after receiving a written request from either of the other
     Parties, the Party making the request shall have the right, at its option
     and its cost, to file such patent applications and obtain and maintain
     patents covering such inventions. In such case, (a) such first Party shall
     assign to the requesting Party all its right, title and interest in the
     relevant invention and any resulting patents and cooperate with the
     requesting Party in filing such patent applications and obtaining such
     patents, and (b) the requesting Party shall grant such first Party a
     perpetual, royalty-free, worldwide, nonexclusive license to make, use,
     offer for sale, sell, import and otherwise practice such invention for its
     business purposes, including the right to authorize third parties to do the
     foregoing for such first Party's business purposes.

15.4 BRANDED PRODUCTS AND SERVICES.

     Notwithstanding the foregoing, (a) to the extent that the development of a
     product or service results in the creation of unique, novel or original
     branding for an SBC-branded product or service, SBC shall own the
     Intellectual Property relating to such branding and shall be permitted to
     establish distribution limitations for such branded product or service, and
     (b) to the extent that the development of a product or service results in
     the creation of unique, novel or original branding for a Covad-branded
     product or service, Covad shall own the Intellectual Property relating to
     such branding and shall be permitted to establish distribution limitations
     for such branded product or service. To the extent the branded product or
     service of one Party may be distributed by the other Party, the Party which
     owns the Intellectual Property shall set the royalty payment to be paid.

15.5 ASSIGNMENT DOCUMENTS.

     Each Party shall sign and deliver any assignment documents, patent
     applications or other documents reasonably requested by another Party to
     effectuate the provisions of this ARTICLE XV or the provisions of a scope
     of work document concerning Intellectual Property.

15.6 LICENSE TO USE COVAD MARKS.

     15.6.1 Covad hereby grants to SBC, during the Term of this Agreement, a
          license giving SBC the non-transferable right and authorization to use
          all trademarks, services marks, and any other intellectual property
          associated with the Covad Products identified in Addendum 1 and any
          New Products Covad shall offer (collectively "Covad Marks"). SBC shall
          use such Covad Marks in connection with offering, marketing and
          selling the Covad Products and any services related thereto, and in
          connection with the branding of the Covad Products as set forth in
          Section 3.2.6 of this Agreement, for so long as this Agreement remains
          in effect. SBC acknowledges Covad's title to such Covad Marks and the
          validity of the

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          registration of Covad as the proprietor in the Register of Trademarks
          or Service Marks. SBC shall not claim any ownership or similar right
          to the Covad Marks by reason of its use thereof pursuant to this
          Agreement, and any rights which SBC should otherwise acquire in or to
          the Covad Marks shall be deemed for the account and benefit of Covad.

     15.6.2 SBC shall use its best endeavors to preserve the value and validity
          of the Covad Marks and in particular will:

          (a)  Endeavor to create, promote, and retain goodwill in the business
               of selling the goods and services included under the Covad Marks.

          (b)  Give any information as to its use of the Covad Marks which Covad
               may require and otherwise render any assistance to Covad in
               maintaining the Covad Marks duly registered, except that Covad
               shall pay all renewal fees for its Trademarks or Service Marks.

          (c)  Use the Covad Marks correctly, spelled as registered and not as a
               verb or in the plural.

          (d)  Refrain from using the Covad Marks unaccompanied by words
               describing the nature of the goods and services to which they
               relate unless the Covad Marks in question are capitalized or
               otherwise distinguished from the surrounding and adjacent text.

     15.6.3 In the event that the Covad Marks are to be used with another
          trademark or service mark or in relation to goods and services under
          the control of SBC, SBC shall use its best efforts to have both
          trademarks or service marks represented equally legibly, equally
          prominently, and of the same size as each other but nevertheless
          separated from the other so that each mark appears to be a mark in its
          own right distinct from the other mark.

     15.6.4 Each Party agrees not to use in its business any other trademark
          which is similar to or so nearly resembles the other Party's
          trademarks or service marks or any of them as to be likely to cause
          deception or confusion.

15.7 NO INFRINGEMENT.

     Covad represents and warrants that its intellectual property and the Covad
     Marks do not infringe upon any third party copyright, trademark, patent,
     trade secret or other third party right and, to the best of Covad's
     knowledge, any of the aforementioned items not created by it, but
     nevertheless used by it, shall also conform to the foregoing warranty.

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                                  ARTICLE XVI

                                APPLICABLE TAXES

16.1 PAYMENT OF TAXES.

     Except as otherwise provided herein, each Party shall be fully responsible
     for the payment of all taxes required by law to be paid by that Party. SBC
     and Covad agree that Covad will be responsible for paying all existing or
     future federal, state or local taxes imposed on the receipt of payments
     made by SBC to Covad under this Agreement.

16.2 ASSESSMENTS

     SBC is solely responsible for calculating and remitting any and all taxes,
     fees and assessments, imposed directly on SBC's acquisition and resale of
     Covad Products under this Agreement and billed directly to SBC
     (collectively, "SBC Assessments"). Such SBC Assessments may be made by any
     governmental, quasi-governmental agency or regulatory body and Covad shall
     not be directly or indirectly responsible in any way for SBC's remitting
     such SBC Assessments. Covad is solely responsible for calculating and
     remitting any and all taxes, fees and assessments imposed directly on
     Covad's provision of materials or services under this Agreement and billed
     directly to Covad (collectively, "Covad Assessments"). Such Covad
     Assessments may be made by any governmental, quasi-governmental agency or
     regulatory body and SBC shall not be directly or indirectly responsible in
     any way for Covad's remitting such Covad Assessments.

16.3 REIMBURSEMENT OF TAXES ON COVAD PRODUCTS

     SBC shall pay to Covad all federal excise or state or local sales or use
     taxes and fees which Covad is expressly required or permitted by ordinance,
     statute, regulation or administrative pronouncement to collect from SBC
     which are associated with SBC's acquisition of Covad Products under this
     Agreement. All such taxes and fees shall be stated as separate items on a
     timely invoice that shall comply with the requirements of state law and
     shall indicate the jurisdiction imposing the tax. Installation and other
     non-taxable charges, if any, must be separately stated. SBC shall not be
     obligated to pay any amount otherwise collectable under this Section that
     is invoiced more than ninety (90) days after the date of the transaction
     giving rise to such tax or fee.

16.4 CERTIFICATE OF EXEMPTION.

     Alternatively, SBC shall provide Covad with a certificate evidencing SBC's
     exemption from payment of, or liability for the above taxes or fees. For
     example, to the extent SBC claims that its acquisition of materials or
     services qualifies for a purchase or sale for resale sales tax exemption,
     SBC shall furnish Covad with a

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     resale tax exemption certificate as authorized or required by the
     jurisdiction providing said exemption. If applicable law exempts the
     purchase from a sales tax but does not also provide an exemption procedure
     then Covad will not collect such sales tax if SBC furnishes Covad a letter
     from a Director or higher level executive describing the exemption and
     identifying the applicable statute, regulation, or other law of the
     jurisdiction that both allows such exemption and does not require an
     exemption certificate.

16.5 TAX INDEMNIFICATION BY COVAD.

     Covad agrees to pay, and to hold SBC harmless from and against, any
     penalty, interest, additional tax, or other charge that may be levied or
     assessed as a result of the delay or failure of Covad, for any reason, to
     pay any tax or file any tax return or information required by law, rule or
     regulation or by this Agreement to be paid or filed by Covad. Covad agrees
     to pay and to hold SBC harmless from and against any penalty or sanction
     assessed as a result of Covad doing business with any country subject to
     U.S. trade restrictions.

16.6 SCHEDULE OF TAXES.

     Following the issuance of an order of materials or supplies under this
     Agreement, Covad shall within 20 days, (but in no event later than two
     weeks before delivery of the product under the purchase order) present SBC
     a schedule of the taxes and fees it proposes to collect from SBC under
     Section 16.3. Upon SBC's request, the Parties shall consult with respect to
     the basis and rates upon which Covad shall pay any taxes or fees for which
     SBC is obligated to reimburse Covad under this Agreement. If SBC determines
     that in its opinion any such taxes or fees are not payable or should be
     paid on a basis less than the full price or at rates less than the full tax
     or fee rate, Covad shall make payment in accordance with such
     determinations and SBC shall be responsible for such determination.
     Notwithstanding the foregoing, nothing in this paragraph shall require
     Covad to provide SBC with a schedule of USF fees.

16.7 AUDITS.

     If any taxing authority advises Covad that it intends to audit Covad with
     respect to any taxes for which SBC is obligated to reimburse Covad under
     this Agreement, Covad shall: (1) promptly so notify SBC, (2) afford SBC an
     opportunity to participate on an equal basis with Covad in such audit with
     respect to such taxes and (3) keep SBC fully informed as to the progress of
     such audit. Each Party shall bear its own expenses with respect to any such
     audit, and the responsibility for any additional tax, penalty or interest
     resulting from such audit shall be determined in accordance with the
     applicable provisions of this Section. Notwithstanding the above, Covad
     shall have the right, but not the obligation to take control of an issue in
     such audit with respect to taxes that SBC is obligated to

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     reimburse Covad. In that event, SBC shall be obligated to pay Covad the
     amount of tax, interest and penalties that it reasonably believes that it
     owes, calculated through the date that Covad takes control of the issue in
     dispute, and Covad shall assume the obligation to pay all additional tax,
     interest and penalties, and any further costs incurred in continuing to
     pursue the issue. Covad's failure to comply with the notification
     requirements of this section shall relieve SBC of its responsibility to
     reimburse Covad for taxes, interest, and penalties if Covad's failure
     prejudiced SBC's ability to contest the taxes, interest, or penalties.

16.8 COLLECTION.

     In circumstances where collection is sought by a governmental authority for
     a greater amount of taxes or fees than that so determined by SBC, Covad
     shall promptly notify SBC. If SBC desires to contest such collection, SBC
     shall promptly notify Covad. Covad shall cooperate with SBC in contesting
     such determination, but SBC shall be responsible for, and shall reimburse
     Covad for any fee, tax, interest, or penalty in excess of its
     determination. If SBC, Covad, or a governmental authority determines that
     SBC has reimbursed Covad for taxes or fees in excess of the amount that SBC
     is obligated to reimburse Covad, SBC and Covad shall consult to determine
     the appropriate method of recovery of such excess reimbursements. Covad
     shall credit any excess reimbursements against tax reimbursements or other
     payments due from SBC if and to the extent, Covad can make corresponding
     adjustments to its payments to the relevant tax authority. At SBC's
     request, Covad shall timely file any claims for refund and any other
     documents required to recover any other excess reimbursements, and shall
     promptly remit to SBC all such refunds and interest received.

16.9 COOPERATION.

     SBC and Covad agree that they will reasonably cooperate with each other
     with respect to any tax planning to minimize taxes, and with respect to any
     tax audit, tax controversy, tax refund matter, claim, action, or similar
     proceeding by a taxing authority or other governmental agency. The degree
     of cooperation contemplated by this section is to enable any tax inquiry or
     controversy to be resolved expeditiously and includes, but is not limited
     to, assisting with responses to audit inquiries and producing documents and
     information.

                                  ARTICLE XVII

                             INDEPENDENT CONTRACTOR

17.1 COVAD WARRANTY OF INDEPENDENT CONTRACTOR STATUS.

     Covad warrants to SBC as follows:

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     17.1.1 Covad is engaged in an independent business and will perform all
          obligations under this Agreement as an independent contractor and not
          as the agent or employee of SBC, except as expressly provided in
          Section 3.2.7;

     17.1.2 Covad's personnel performing Services shall be considered solely the
          employee personnel of Covad and not employees or agents of SBC, except
          as expressly provided in Section 3.2.7;

     17.1.3 Covad has and retains the right to exercise full control of and
          supervision over the performance of the Services and full control over
          the employment, direction, assignment, compensation, and discharge of
          all personnel performing the Services;

     17.1.4 Covad is solely responsible for all matters relating to
          compensation, including payment of premium pay for overtime, of all
          Covad's personnel who perform Services. Covad will pay all employee
          compensation and related taxes and benefits from its own accounts,
          without regard to any dispute concerning SBC's liability for payment
          to Covad under any invoice related to any Service performed by Covad;

     17.1.5 Covad is solely responsible for all matters relating to compliance
          with all employer obligations to withhold employee taxes, pay employee
          and employer taxes, and file payroll tax returns and information
          returns under local, state, and federal income tax laws, unemployment
          compensation insurance and state disability insurance tax laws, and
          social security and Medicare tax laws, and all other payroll tax laws
          or similar laws (all collectively hereinafter referred to as "payroll
          tax obligations") with respect to all Covad personnel providing
          Services. If any federal, state, or local authority including but not
          limited to taxing authority may claim that SBC or any subsidiary of
          SBC is or may be liable for any payroll, payroll tax, or benefit plan
          obligations, including the payment of interest or penalties, with
          respect to any such Covad personnel, then Covad shall:

          (a)  cooperate fully in SBC's defense of such claim;

          (b)  disclose its income tax returns, payroll tax returns, information
               returns and transmittals, and associated payment deposits
               records, canceled checks and instruments, and other such
               documents reasonably necessary to enable SBC to perfect its
               defense of such claims, subject to appropriate protections for
               information deemed confidential by Covad;

          (c)  execute and deliver such powers of attorney or other consents as
               may be necessary to enable SBC to obtain copies of such

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<PAGE>

               returns and other documents from the taxing and other authorities
               that are appropriate or helpful in order to prove compliance with
               tax and other legal requirements; and

          (d)  indemnify and hold SBC harmless from any reasonable cost or
               expense, and any taxes as well as any interest or penalties;

     17.1.6 Covad is and will respond as the employer of all Covad personnel,
          exclusive of SBC, for purposes of any federal, state, or local taxes,
          benefits and unemployment insurance law. Covad will indemnify and hold
          SBC harmless from any claim that SBC's reserve account should be taxed
          to provide unemployment compensation to any Covad personnel or former
          Covad personnel based upon Services provided to SBC under this
          Agreement;

     17.1.7 If any Covad personnel makes a claim for employee benefits under any
          SBC employee benefit plan or for workers' compensation against SBC,
          then Covad will indemnify and hold harmless SBC from any such claim,
          including any and all costs an expenses, including interest and
          penalties; Covad's employee benefit plans and self-employed benefit
          plans will credit Covad's personnel with all time worked on SBC
          assignments and all compensation earned on SBC assignments for plan
          participation purposes, vesting purposes, and benefit accrual
          purposes, on the same basis as Covad credits time worked on other
          assignments; and Covad will be responsible for its own acts and those
          of Covad's personnel during the performance of Covad's obligations
          under this Agreement.

     17.1.8 Each Party and each Party's contractors shall be solely responsible
          for the withholding or payment of all applicable federal, state and
          local income taxes, social security taxes and other payroll taxes with
          respect to its employees, as well as any taxes, contributions or other
          obligations imposed by applicable state unemployment or workers'
          compensation acts or other legal requirements applicable to the
          employees or the employer-employee relationship. Each Party has sole
          authority and responsibility to hire, fire and otherwise control its
          employees.

                                 ARTICLE XVIII

                          COVAD'S USE OF SBC SERVICES

18.1 SBC AS PREFERRED PROVIDER.

     Covad agrees that in those cities where SBC provides Telecommunications
     Services, including local and long distance voice, data, wireless and ISP
     service,

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     Covad will grant SBC the right of first refusal to provide all of such
     service requirements that Covad obtains from third parties (which shall not
     include Affiliates), provided that SBC's price is no higher than other
     offers for reasonably equivalent services, that the terms, conditions,
     functionalities and quality of service, when considered as a whole, are
     reasonably equivalent to competitive options available to Covad, and that
     SBC can deliver such services in a timely fashion. Nothing in this Section
     18.1 shall require Covad to cancel or to breach an existing agreement for
     such services, or to refrain from entering into any agreement which is
     being negotiated as of the date hereof. SBC will initiate the right of
     first refusal process by having its sales representative contact the Covad
     representative designated by Covad within thirty (30) days of the Effective
     Date.

                                  ARTICLE XIX

           MINORITY, WOMEN AND DISABLED VETERANS BUSINESS ENTERPRISES

19.1 COVAD'S COMMITMENT.

     Covad commits to good faith efforts to develop procedures and policies for
     the participation of M/WBE and DVBE firms as defined in Section 19.2 and to
     develop a participation plan with identified participation levels by these
     firms. Covad commits to institute procedures for tracking, validating and
     reporting such efforts to SBC.

19.2 DEFINITIONS.

     19.2.1 MBE/WBE.

          (a)  For purchases under this Agreement by Pacific Bell, Pacific Bell
               Directory, Pacific Bell Mobile Services, Pacific Bell Information
               Services, Pacific Bell Communications, and any other entity
               operating principally in California (collectively "California
               Affiliates"), Minority and Women Business Enterprises (MBEs/WBEs)
               are defined as businesses which satisfy the requirements of
               paragraph (c) below and are certified as MBEs/WBEs by the
               California Public Utilities Commission Clearinghouse
               ("CPUC-certified").

          (b)  For purchases under this Agreement by any entity that is not a
               California Affiliate, MBEs/WBEs are defined as businesses which
               satisfy the requirements of paragraph (c) below and are either
               CPUC-certified or are certified as MBEs/WBEs by a certifying
               agency recognized by SBC.

          (c)  MBEs/WBEs must be at least fifty one percent (51%) owned by a
               minority individual or group or by one or more women (for
               publicly-held

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               businesses, at least fifty one percent (51)% of the stock must be
               owned by one or more of those individuals), and the MBEs/WBEs'
               management and daily business operations must be controlled by
               one or more of those individuals, and these individuals must be
               either U.S. citizens or legal aliens with permanent residence
               status. For the purpose of this definition, minority group
               members include male or female Asian Americans, Black Americans,
               Filipino Americans, Hispanic Americans, Native Americans (i.e.,
               American Indians, Eskimos, Aleuts and Native Hawaiians),
               Polynesian Americans, and multi-ethnic (i.e., any combination of
               MBEs and WBEs where no one specific group has a fifty one percent
               (51)% ownership and control of the business, but when aggregated,
               the ownership and control combination meets or exceeds the fifty
               one percent (51%) rule). "Control" in this context means
               exercising the power to make policy decisions. "Operate" in this
               context means actively involved in the day-to-day management of
               the business and not merely acting as officers or directors.

     19.2.2 DVBE.

          (a)  For purchases under this Agreement by California Affiliates,
               Disabled Veteran Business Enterprises (DVBEs) are defined as
               business concerns that satisfy the requirements of paragraph (e)
               below and are certified as DVBEs by the California State Office
               of Small and Minority Business (OSMB). The DVBE must be a
               resident of the State of California, and must satisfy the
               requirements of Section 19.2.2(c) below.

          (b)  For purchases under this Agreement by any entity that is not a
               California Affiliate, DVBEs are defined as any business concern
               that satisfies the requirements of paragraph (c) below and is
               either a defined DVBE for purchases by California Affiliates, or
               is certified as a DVBE by a certifying agency recognized by SBC.

          (c)  The DVBE must be (1) a sole proprietorship at least fifty-one
               percent (51%) owned by one or more disabled veterans; or (2) a
               publicly-owned business in which at least fifty-one percent (51%)
               of the stock is owned by one or more disabled veterans; or (3) a
               subsidiary which is wholly owned by a parent corporation, but
               only if at least fifty-one percent (51%) of the voting stock of
               the parent corporation is owned by one or more disabled veterans;
               or (4) a joint venture in which at least fifty-one percent (51%)
               of the joint venture's management and control and earnings are
               held by one or more disabled veterans. In each case, the
               management and control of the daily business operations must be
               by one or more disabled veterans. A disabled veteran is a veteran
               of the military, naval or air service of the United States with a
               service-connected disability. "Management and control" in this
               context means exercising the power to

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               make policy decisions and actively involved in the day-to-day
               management of the business and not merely acting as officers or
               directors.

                                   ARTICLE XX

                                   COVENANTS

20.1 PUBLICITY.

     The Parties agree to cooperate in the preparation and dissemination of
     publicity concerning this Agreement. No Party shall make a public
     announcement about this Agreement or the Parties' discussions related to
     any aspect of it, without the consent of the other Parties, which consent
     shall not be unreasonably refused, delayed, or conditioned. Any Party may
     at any time make announcements which are required by applicable law,
     regulatory bodies, or stock exchange or stock association rules, so long as
     the Party so required to make the announcement notifies in advance the
     other Parties of such requirement and promptly discusses with the other
     Parties in good faith the wording of any such announcement.

20.2 THIRD PARTY WARRANTIES.

     Each Party shall enforce any rights, warranties, licenses, terms and
     conditions and other benefits accruing to it under each of its agreements
     with third parties participating in or providing equipment, software or
     other services used in connection with the provision of services under this
     Agreement wherever and whenever such Party's failure to enforce any such
     rights, warranties, licenses, terms, conditions and other benefits could
     materially impair its ability to provide such services in accordance with
     the terms and conditions of the Agreement.

20.3 UNAUTHORIZED WARRANTIES.

     SBC shall not make any warranty or representation with respect to the Covad
     Products inconsistent with or in addition to any warranty or representation
     stated in writing by Covad.

20.4 COOPERATION.

     Each Party shall use its respective commercially reasonable efforts to
     perform all actions or refrain from performing any action, in either case
     as reasonably requested by another Party, in connection with the
     performance of the activities contemplated by this Agreement.

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                                  ARTICLE XXI

                                    GENERAL

21.1 AMERICANS WITH DISABILITIES ACT.

     The Parties agree to coordinate any activities taken collectively which may
     be subject to the requirements of the Americans with Disabilities Act (42
     U.S.C. Section 12101) and with the network disclosure rules adopted by the
     FCC in proceedings to implement that Act or any amendments to that Act.

21.2 AMENDMENT.

     No amendment of this Agreement shall be valid or binding on the Parties
     unless such amendment shall be in writing and duly executed by an
     authorized representative of each Party.

21.3 ASSIGNMENT.

     No Party may assign or delegate any of its rights or obligations under this
     Agreement, except to an Affiliate, without the consent of the other Party.

21.4 ATTACHMENTS.

     Any attachments to this Agreement are incorporated into the Agreement and
     governed by the terms hereof.

21.5 COOPERATION.

     Each Party shall use its respective commercially reasonable efforts to
     perform all actions or refrain from performing any action, in either case
     as reasonably requested by another Party, in connection with the
     performance of the activities contemplated by this Agreement.

21.6 COSTS, EXPENSES AND ATTORNEYS' FEES.

     Except as otherwise specifically agreed in writing in the Operating
     Agreements or otherwise, each Party shall be responsible for its own
     expenses arising under this Agreement, including the preparation of this
     Agreement.

21.7 DISPUTE RESOLUTION.

     All disputes and disagreements between the Parties that can not be resolved
     by mutual agreement regarding or relating to this Agreement (including, but
     not limited to, the interpretation or construction of this agreement,
     performance and implementation concerns, and any potential claims, causes
     of action, lawsuits, arbitration or related disputes), including
     Attachments to this Agreement, shall be

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<PAGE>

     resolved in accordance with the Dispute Resolution Agreement entered into
     by SBC and Covad of concurrent date herewith.

21.8 ENTIRE AGREEMENT; FURTHER AGREEMENTS.

     The Operating Agreements constitute the entire agreement and understanding
     of the Parties hereto with respect to the subject matter contained therein.

21.9 ENVIRONMENTAL HAZARD.

     Each Party shall be solely responsible at its own expense for the proper
     handling, storage, transport, treatment, disposal and use of all hazardous
     substances by such Party and its contractors and agents. For purposes of
     the Operating Agreements, hazardous substances includes those substances
     (a) included within the definition of hazardous substance, hazardous waste,
     hazardous material, toxic substance, solid waste or pollutant or
     contaminant under any applicable law or (b) listed by any Government Entity
     as a hazardous substance.

21.10 EXECUTION.

     This Agreement may be executed in counterparts each of which copies shall
     be deemed an original.

21.11 FORCE MAJEURE.

     21.11.1 Neither Party shall be liable for any delay or failure in
          performance of any part of this Agreement from any cause beyond its
          control and without its fault or negligence including, without
          limitation, acts of nature, acts of civil or military authority,
          government regulations, embargoes, epidemics, terrorist acts, riots,
          insurrections, fires, explosions, earthquakes, nuclear accidents,
          floods, work stoppages, equipment failure, cable cuts, power
          blackouts, volcanic action, other major environmental disturbances or
          unusually severe weather conditions. In such event, the Party affected
          shall, upon giving prompt notice to the other Party, be excused from
          such performance on a day-to-day basis to the extent of such
          interference (and the other Party shall likewise be excused from
          performance of its obligations on a day-to-day basis to the extent
          such Party's obligations are related to the performance so interfered
          with). The affected Party shall use its best efforts to avoid or
          remove the cause of nonperformance and both Parties shall proceed to
          perform with dispatch once the causes are removed or cease.

     21.11.2 Notwithstanding the previous subsection, no delay or other failure
          to perform shall be excused pursuant to this Section (i) by the acts
          or omissions of a Party's subcontractors, material men, suppliers or
          other

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          third persons providing products or services to such Party, unless
          such acts or omissions are themselves the product of a force majeure
          condition, and (ii) unless such delay or failure and the consequences
          thereof are beyond the reasonable control and without the fault or
          negligence of the Party claiming excusable delay or other failure to
          perform.

21.12 GOOD FAITH PERFORMANCE.

     Each Party shall act in good faith in its performance under this Agreement
     and, in each case in which a Party's consent or agreement is required or
     requested hereunder, such Party shall not unreasonably withhold or delay
     such consent or agreement.

21.13 GOVERNING LAW.

     This Agreement shall be construed in accordance with and governed by the
     laws of the State of Delaware without regard to choice of law provisions.

21.14 INSURANCE.

     At all times during the term of this Agreement or any Operating Agreement,
     each Party shall keep and maintain in force at its own expense all
     insurance required by applicable law, including, but not limited to,
     workers' compensation insurance, and general liability insurance (primary
     or umbrella) in the amount of ten million dollars ($10,000,000.00) for
     personal injury or death, property damage, and automobile liability with
     coverage for bodily injury and property damage. Upon request by any other
     Party, a Party shall provide to the other Party evidence of such insurance
     (which may be provided through a program of self-insurance).

21.15 JOINT WORK PRODUCT.

     This Agreement is the joint work product of the Parties and has been
     negotiated by the Parties and their respective counsel and shall be fairly
     interpreted in accordance with its terms. In the event of any ambiguities,
     no inferences shall be drawn against either Party.

21.16 LABOR RELATIONS.

     Each Party shall be responsible for labor relations with its own employees.
     Each Party agrees to notify the other Party as soon as practicable whenever
     such Party has knowledge that a labor dispute concerning its employees is
     delaying or threatens to delay such Party's timely performance of its
     obligations under this Agreement and shall minimize impairment of service
     to the other Party (by using its management personnel to perform work or by
     other means) to the extent permitted by Applicable Law.

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21.17 NO SOLICITATION.

     During the term of this Agreement and for a period of twelve (12) months
     thereafter, no Party or its Affiliates shall, directly or indirectly, for
     itself or on behalf of any other Person, induce or attempt to induce any
     employee of the other Parties or their Affiliates engaged in activities
     related to the Operating Agreements to leave his or her employment.
     However, general employment advertisements in media of general or industry
     specific circulation shall be permissible, and a Party that hires an
     employee of another Party or its Affiliate due to his or her response to
     such advertisement(s) shall not be in breach hereunder.

21.18 NO WAIVER.

     The failure of any Party to insist upon or enforce strict performance by
     any other Party of any provision of this Agreement or to exercise any right
     under this Agreement shall not be construed as a waiver or relinquishment
     to any extent of such Party's right to assert or rely upon any such
     provision or right in that or any other instance; rather, the same shall be
     and remain in full force and effect.

21.19 NONEXCLUSIVE DEALINGS.

     This Agreement does not prevent either Party from providing or purchasing
     services to or from any other person.

21.20 NOTICES.

     Any notice, request, instruction or other document to be given hereunder by
     any Party to any other Party under any section of this Agreement shall be
     in writing and shall be deemed given upon receipt if delivered personally
     or by telex or facsimile, the next day if by express mail or three days
     after being sent by registered or certified mail, return receipt requested,
     postage prepaid to the following addresses (or at such other address for a
     Party as shall be specified by like notice provided that such notice shall
     be effective only after receipt thereof):

     If to SBC:                         Dave Gallemore
                                        EVP - SBC Strategic
                                              Marketing/Planning
                                        SBC Communications Inc.
                                        175 East Houston Street
                                        San Antonio, TX 78205
                                        Fax:    210-351-5034
                                        Voice:  210-351-5030

                                       47

<PAGE>

     With a copy (which shall           Michael A. Meyer
     not constitute notice) to:         General Attorney
                                        SBC Communications Inc.
                                        175 East Houston Street
                                        San Antonio, TX 78205
                                        Fax:    210-351-3488
                                        Voice:  210-351-2165

     If to Covad:                       Terry J. Moya
                                        EVP-External affairs
                                        Covad Communications
                                        8400 East Crescent Parkway
                                        Suite 200
                                        Greenwood Village, CO 80111
                                        Fax:    720.528.7561
                                        Voice:  303.785.2050

     With a copy (which shall           Dhruv Khanna
     not constitute notice) to:         General Counsel
                                        Covad Communications
                                        4250 Burton Drive
                                        Santa Clara, CA 95054
                                        Fax:    (408) 987-1111
                                        Voice:  (408) 987-1102

                                        Christopher Goodpastor
                                        Assistant General Counsel
                                        Covad Communications
                                        9600 Great Hills Trail
                                        Ste. 150W
                                        Austin, TX 78759
                                        Fax:    (512) 502-1777
                                        Voice:  (512) 502-1713

21.21 RELATIONSHIP OF PARTIES; INDEPENDENT CONTRACTOR.

     Each Party shall perform services hereunder as an independent contractor
     and nothing in this Agreement shall be construed as creating any other
     relationship between the Parties. The relationship established by this
     Agreement or any other Operating Agreement shall not render any Party an
     affiliate of any other Party (or of any of their Affiliates) nor be
     construed to create a partnership, joint venture, or any other form of
     legal entity, nor establish any fiduciary relationship among the

                                       48

<PAGE>

     Parties or any affiliate of any Party. The provision of the services
     described in this Agreement does not establish any joint undertaking, joint
     venture, pooling arrangement, partnership, agency, fiduciary relationship
     or formal business organization of any kind. No Party shall act as or hold
     itself out as agent for the other Party or create or attempt to create
     liabilities for any other Party, except to the extent expressly set forth
     in this Agreement.

21.22 RULES OF CONSTRUCTION.

     For purposes of this Agreement, except as otherwise expressly provided or
     unless the context otherwise requires, (a) words used in this Agreement,
     regardless of the gender and number specifically used, shall be deemed and
     construed to include any other gender and any other number as the context
     requires; (b) as used in this Agreement, the word "including" is not
     limiting, and the word "or" is not exclusive; (c) except as specifically
     otherwise provided in this Agreement in a particular instance, a reference
     to a Section, Schedule, Attachment, Appendix, Addendum or Exhibit is a
     reference to a Section of this Agreement or a Schedule, Attachment,
     Appendix, Addendum or Exhibit hereto, and the terms "this Agreement,"
     "hereof," "herein," and other like terms refer to this Agreement as a
     whole, including the Schedules, Attachments, Appendices, Addenda and
     Exhibits to this Agreement, and not solely to any particular part of this
     Agreement; (d) the descriptive headings in this Agreement are inserted for
     convenience of reference only and are not intended to be part of or to
     affect the meaning or interpretation of this Agreement; (e) this Agreement
     shall be construed to refer to the provision of services in the United
     States of America; and (f) as used in this Agreement, unless otherwise
     specifically noted herein, the word "day" or "days" means a calendar day or
     days, respectively, including weekends and holidays.

21.23 SEVERABILITY.

     In case any one or more of the provisions contained in this Agreement or
     any other Operating Agreement shall for any reason be held to be invalid,
     illegal or unenforceable in any respect by a court or other authority of
     competent jurisdiction, such invalidity, illegality or unenforceability
     shall not affect any other provision hereof and the affected Operating
     Agreement shall be construed as if such invalid, illegal or unenforceable
     provision had never been contained herein and, in lieu of each such
     illegal, invalid or unenforceable provision, there shall be added
     automatically as a part of the affecting Operating Agreement a provision as
     similar in terms to such illegal, invalid or unenforceable provision as may
     be possible and be legal, valid and enforceable, it being the intent of the
     Parties to maintain the benefit of the bargain for all Parties.

21.24 THIRD PARTY WARRANTIES.

     Each Party shall enforce any rights, warranties, licenses, terms and
     conditions and other benefits accruing to it under each of its agreements
     with third parties

                                       49

<PAGE>

     participating in or providing equipment, software or other services used in
     connection with the provision of services under the Operating Agreements
     wherever and whenever such Party's failure to enforce any such rights,
     warranties, licenses, terms, conditions and other benefits could materially
     impair its ability to provide such services in accordance with the terms
     and conditions of the Operating Agreements.

21.25 THIRD PARTY BENEFICIARIES; DISCLAIMER OF AGENCY.

     This Agreement is for the sole benefit of the Parties and their permitted,
     and nothing herein expressed or implied shall create or be construed to
     create any third-party beneficiary rights hereunder, other than to
     permitted assigns. Except for provisions herein expressly authorizing a
     Party to act for another, nothing in this Agreement shall constitute a
     Party as a legal representative or agent of the other Party, nor shall a
     Party have the right or authority to assume, create or incur any liability
     or any obligation of any kind, express or implied, against or in the name
     or on behalf of the other Party unless otherwise expressly permitted by
     such other Party. Except as otherwise expressly provided in this Agreement,
     no Party undertakes to perform any obligation of the other Party, whether
     regulatory or contractual, or to assume any responsibility for the
     management of the other Party's business. Nothing contained in this
     Agreement shall be deemed or construed by the Parties or any third party to
     create the relationship of principal and agent or of partnerships or joint
     venture.

21.26 USE OF CONTRACTORS AND AGENTS.

     Each Party shall be fully responsible for the actions and conduct of their
     contractors, subcontractors, consultants, agents and others employed to
     undertake or perform any act or function under this Agreement as if the
     Party undertook or performed the act or function through its directors,
     officers and employees.

                        [signatures follow on next page]

                                       50

<PAGE>

     IN WITNESS WHEREOF, the Parties have caused this Resale and Marketing
Agreement to be executed by their respective authorized representatives as of
the date first written above.

COVAD COMMUNICATIONS                           SBC COMMUNICATIONS INC.
GROUP, INC.

By: /s/ Terry Moya                             By: /s/ James D. Gallemore
   ------------------------------                 ------------------------------
Name: Terry Moya                               Name: James D. Gallemore
     ----------------------------                   ----------------------------
Title: Executive Vice President                Title:
      ---------------------------                    ---------------------------

                                       51AMENDED AND RESTATED
                       STOCK INCENTIVE PLAN

1.  GENERAL PROVISIONS.

1.1  Purpose.

The eConnect Stock Incentive Plan ("Plan") is intended to
allow designated officers, employees, and certain non-employees
(all of whom are sometimes collectively referred to herein as
"Employees") of eConnect, a Nevada corporation ("eConnect") and
its Subsidiaries (as that term is defined below) which it may have
from time to time (eConnect and such Subsidiaries are referred to
herein as the "Company") to receive certain options ("Stock
Options") to purchase eConnect's common stock, one tenth of one
cent ($0.001) par value ("Common Stock"), and to receive grants of
Common Stock  subject to certain restrictions ("Awards").  As used
in this Plan, the term "Subsidiary" shall mean each corporation
which is a "subsidiary corporation" of eConnect within the meaning
of Section 424(f) of the Internal Revenue Code of 1986, as amended
(the "Code").  The purpose of this Plan is to provide Employees
with equity-based compensation incentives to make significant and
extraordinary contributions to the long-term performance and
growth of the Company, and to attract and retain Employees of
exceptional ability.

1.2  Administration.

1.2.1  The Plan shall be administered by the Compensation
Committee (the "Committee") of, or appointed by, the Board of
Directors of eConnect (the "Board").  The Committee shall select
one of its members as Chairman and shall act by vote of a majority
of a quorum, or by unanimous written consent.  A majority of its
members shall constitute a quorum.  The Committee shall be
governed by the provisions of eConnect's Bylaws and of Nevada law
applicable to the Board, except as otherwise provided herein or
determined by the Board.

1.2.2  The Committee shall have full and complete authority,
in its discretion, but subject to the express provisions of the
Plan:  to approve the Employees nominated by the management of the
Company to be granted Awards or Stock Options; to determine the
number of Awards or Stock Options to be granted to an Employee; to
determine the time or times at which Awards or Stock Options shall
be granted; to establish the terms and conditions upon which
Awards or Stock Options may be exercised; to remove or adjust any
restrictions and conditions upon Awards or Stock Options; to
specify, at the time of grant, provisions relating to
exercisability of Stock Options and to accelerate or otherwise
modify the exercisability of any Stock Options; and to adopt such
rules and regulations and to make all other determinations deemed
necessary or desirable for the administration of the Plan.  All
interpretations and constructions of the Plan by the Committee,
and all of its actions hereunder, shall be binding and conclusive
on all persons for all purposes.

1.2.3  The Company hereby agrees to indemnify and hold
harmless each Committee member and each employee of the Company,
and the estate and heirs of such Committee member or employee,
against all claims, liabilities, expenses, penalties, damages or
other pecuniary losses, including legal fees, which such Committee
member or employee, his or her estate or heirs may suffer as a
result of his or her responsibilities, obligations or duties in
connection with the Plan, to the extent that insurance, if any,
does not cover the payment of such items.  No member of the
Committee or the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any
Award or Stock Option granted pursuant to the Plan.

1.3  Eligibility and Participation.

Employees eligible under the Plan shall be approved by the
Committee from those Employees who, in the opinion of the
management of the Company, are in positions which enable them to
make significant and extraordinary contributions to the long-term
performance and growth of the Company.  In selecting Employees to
whom Stock Options or Awards may be granted, consideration shall
be given to factors such as employment position, duties and
responsibilities, ability, productivity, length of service,
morale, interest in the Company and recommendations of super-
visors.

1.4  Shares Subject to the Plan.

The maximum number of shares of Common Stock that may be
issued pursuant to the Plan shall be Five Million (5,000,000)
subject to adjustment pursuant to the provisions of paragraph 4.1.
If shares of Common Stock awarded or issued under the Plan are
reacquired by the Company due to a forfeiture or for any other
reason, such shares shall be cancelled and thereafter shall again
be available for purposes of the Plan.  If a Stock Option expires,
terminates or is cancelled for any reason without having been
exercised in full, the shares of Common Stock not purchased
thereunder shall again be available for purposes of the Plan.

2.  PROVISIONS RELATING TO STOCK OPTIONS.

2.1  Grants of Stock Options.

The Committee may grant Stock Options in such amounts, at
such times, and to such Employees nominated by the management of
the Company as the Committee, in its discretion, may determine.
Stock Options granted under the Plan shall constitute "incentive
stock options" within the meaning of Section 422 of the Code, if
so designated by the Committee on the date of grant.  The
Committee shall also have the discretion to grant Stock Options
which do not constitute incentive stock options, and any such
Stock Options shall be designated non-statutory stock options by
the Committee on the date of grant.  The aggregate fair market
value (determined as of the time an incentive stock option is
granted) of the Common Stock with respect to which incentive stock
options are exercisable for the first time by any Employee during
any one calendar year (under all plans of the Company and any
parent or subsidiary of the Company) may not exceed the maximum
amount permitted under Section 422 of the Code (currently one
hundred thousand dollars ($100,000.00)).  Non-statutory stock
options shall not be subject to the limitations relating to incen-
tive stock options contained in the preceding sentence.  Each
Stock Option shall be evidenced by a written agreement (the
"Option Agreement") in a form approved by the Committee, which
shall be executed on behalf of the Company and by the Employee to
whom the Stock Option is granted, and which shall be subject to
the terms and conditions of this Plan.  In the discretion of the
Committee, Stock Options may include provisions (which need not be
uniform), authorized by the Committee in its discretion, that
accelerate an Employee's rights to exercise Stock Options
following a "Change in Control," as such term is defined in
paragraph 3.1 hereof.  The holder of a Stock Option shall not be
entitled to the privileges of stock ownership as to any shares of
Common Stock not actually issued to such holder.

2.2  Purchase Price.

The purchase price (the "Exercise Price") of shares of Common
Stock subject to each non-statutory Stock Option ("Option Shares")
shall equal forty cents ($0.40) per share for those Stock Options
exercised on or before December 31, 2000; thereafter the exercise
price shall be twenty-five percent (25%) of the fair market value
of the Common Stock on the date of the exercise.  The Exercise
Price of incentive Stock Options shall be the fair market value of
the options on the date of the grant thereof.  For an employee
holding stock possessing more than ten percent (10%) percent of
the total combined voting power of all classes of stock of the
Company, the Exercise Price of an incentive Stock Option shall be
at least one hundred ten percent (110%) of the fair market value
of the Common Stock and such option.

2.3  Option Period.

The Stock Option period (the "Term") shall commence on the
date of grant of the incentive Stock Option and shall be ten (10)
years or such shorter period as is determined by the Committee;
the Term for an incentive Stock Option granted to an employee
holding stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company
shall be five (5) years from the date such option is granted.
The Term for Non-statutory Stock Options shall be whatever
period, if any, is set by the Board.  Each Stock Option shall
provide that it is exercisable over its term in such periodic
installments as the Committee in its sole discretion may deter-
mine.  Such provisions need not be uniform.  Notwithstanding the
foregoing, but subject to the provisions of paragraphs 1.2.2 and
2.1, Stock Options granted to Employees who are subject to the
reporting requirements of Section 16(a) of the Exchange Act
("Section 16 Reporting Persons") shall not be exercisable until at
least six (6) months and one day from the date the Stock Option is
granted.

2.4  Exercise of Options.

2.4.1  Each Stock Option may be exercised in whole or in part
(but not as to fractional shares) by delivering it for surrender
or endorsement to the Company, attention of the Corporate
Secretary, at the principal office of the Company, together with
payment of the Exercise Price and an executed Notice and Agreement
of Exercise in the form prescribed by paragraph 2.4.2.  Payment
may be made (i) in cash, (ii) by cashier's or certified check,
(iii) by surrender of previously owned shares of the Company's
Common Stock valued pursuant to paragraph 2.2 (if the Committee
authorizes payment in stock in its discretion), (iv) by
withholding from the Option Shares which would otherwise be
issuable upon the exercise of the Stock Option that number of
Option Shares equal to the exercise price of the Stock Option, if
such withholding is authorized by the Committee in its discretion,
(v) in the discretion of the Committee, by the delivery to the
Company of the optionee's promissory note secured by the Option
Shares, bearing interest at a rate sufficient to prevent the
imputation of interest under Sections 483 or 1274 of the Code, and
having such other terms and conditions as may be satisfactory to
the Committee, or (vi) cashless exercise program as established by
eConnect.  A maximum of twenty-five percent (25%) of the Stock
Option shall be exercisable in any one calendar year.

2.4.2  Exercise of each Stock Option is conditioned upon the
agreement of the Employee to the terms and conditions of this Plan
and of such Stock Option as evidenced by the Employee's execution
and delivery of a Notice and Agreement of Exercise in a form to be
determined by the Committee in its discretion.  Such Notice and
Agreement of Exercise shall set forth the agreement of the
Employee that:  (a) no Option Shares will be sold or otherwise
distributed in violation of the Securities Act of 1933 (the
"Securities Act") or any other applicable federal or state
securities laws, (b) each Option Share certificate may be im-
printed with legends reflecting any applicable federal and state
securities law restrictions and conditions, (c) the Company may
comply with said securities law restrictions and issue "stop
transfer" instructions to its Transfer Agent and Registrar without
liability, (d) if the Employee is a Section 16 Reporting Person,
the Employee will furnish to the Company a copy of each Form 4 or
Form 5 filed by said Employee and will timely file all reports
required under federal securities laws, and (e) the Employee will
report all sales of Option Shares to the Company in writing on a
form prescribed by the Company.

2.4.3  No Stock Option shall be exercisable unless and until
any applicable registration or qualification requirements of
federal and state securities laws, and all other legal require-
ments, have been fully complied with.  The Company will use
reasonable efforts to maintain the effectiveness of a Registration
Statement under the Securities Act for the issuance of Stock
Options and shares acquired thereunder, but there may be times
when no such Registration Statement will be currently effective.
The exercise of Stock Options may be temporarily suspended without
liability to the Company during times when no such Registration
Statement is currently effective, or during times when, in the
reasonable opinion of the Committee, such suspension is necessary
to preclude violation of any requirements of applicable law or
regulatory bodies having jurisdiction over the Company.  If any
Stock Option would expire for any reason except the end of its
term during such a suspension, then if exercise of such Stock
Option is duly tendered before its expiration, such Stock Option
shall be exercisable and exercised (unless the attempted exercise
is withdrawn) as of the first day after the end of such
suspension.  The Company shall have no obligation to file any
Registration Statement covering resales of Option Shares.

2.5  Restrictions on Transfer.

Each Stock Option granted under this Plan shall be
transferable only by will or the laws of descent and distribution.
 No interest of any Employee under the Plan shall be subject to
attachment, execution, garnishment, sequestration, the laws of
bankruptcy or any other legal or equitable process.  Each Stock
Option granted under this Plan shall be exercisable during an
Employee's lifetime only by such Employee or by such Employee's
legal representative.

3.  PROVISIONS RELATING TO AWARDS.

3.1  Grant of Awards.

Subject to the provisions of the Plan, the Committee shall
have full and complete authority, in its discretion, but subject
to the express provisions of this Plan, to (i) grant Awards pur-
suant to the Plan, (ii) determine the number of shares of Common
Stock subject to each Award ("Award Shares"), (iii) determine the
terms and conditions (which need not be identical) of each Award,
including the consideration (if any) to be paid by the Employee
for such Common Stock, which may, in the Committee's discretion,
consist of the delivery of the Employee's promissory note meeting
the requirements of paragraph 2.4.1, (iv) establish and modify
performance criteria for Awards, and (v) make all of the
determinations necessary or advisable with respect to Awards under
the Plan.  Each award under the Plan shall consist of a grant of
shares of Common Stock subject to a restriction period (after
which the restrictions shall lapse), which shall be a period
commencing on the date the award is granted and ending on such
date as the Committee shall determine (the "Restriction Period").
The Committee may provide for the lapse of restrictions in
installments, for acceleration of the lapse of restrictions upon
the satisfaction of such performance or other criteria or upon the
occurrence of such events as the Committee shall determine.

3.2  Incentive Agreements.

Each Award granted under the Plan shall be evidenced by a
written agreement (an "Incentive Agreement") in a form approved by
the Committee and executed by the Company and the Employee to whom
the Award is granted.  Each Incentive Agreement shall be subject
to the terms and conditions of the Plan and other such terms and
conditions as the Committee may specify.

3.3  Waiver of Restrictions.

The Committee may modify or amend any Award under the Plan or
waive any restrictions or conditions applicable to such Awards;
provided, however, that the Committee may not undertake any such
modifications, amendments or waivers if the effect thereof
materially increases the benefits to any Employee, or adversely
affects the rights of any Employee without his or her consent.

3.4  Terms and Conditions of Awards.

3.4.1  Upon receipt of an Award of shares of Common Stock
under the Plan, even during the Restriction Period, an Employee
shall be the holder of record of the shares and shall have all the
rights of a shareholder with respect to such shares, subject to
the terms and conditions of the Plan and the Award.

3.4.2  Except as otherwise provided in this paragraph 3.4, no
shares of Common Stock received pursuant to the Plan shall be
sold, exchanged, transferred, pledged, hypothecated or otherwise
disposed of during the Restriction Period applicable to such
shares.  Any purported disposition of such Common Stock in
violation of this paragraph 3.4.2 shall be null and void.

3.4.3  The Committee may require under such terms and
conditions as it deems appropriate or desirable that (i) the
certificates for Common Stock delivered under the Plan are to be
held in custody by the Company or a person or institution
designated by the Company until the Restriction Period expires,
(ii) such certificates shall bear a legend referring to the
restrictions on the Common Stock pursuant to the Plan, and (iii)
the Employee shall have delivered to the Company a stock power
endorsed in blank relating to the Common Stock.

4.  MISCELLANEOUS PROVISIONS.

4.1  Adjustments Upon Change in Capitalization.

4.1.1  The number and class of shares subject to each out-
standing Stock Option, the Exercise Price thereof (but not the
total price), the maximum number of Stock Options that may be
granted under the Plan, the minimum number of shares as to which a
Stock Option may be exercised at any one time, and the number and
class of shares subject to each outstanding Award, shall
be proportionately adjusted in the event of any increase or
decrease in the number of the issued shares of Common Stock which
results from a split-up or consolidation of shares, payment of a
stock dividend or dividends exceeding a total of five percent (5%)
for which the record dates occur in any one fiscal year, a
recapitalization (other than the conversion of convertible securi-
ties according to their terms), a combination of shares or other
like capital adjustment, so that (i) upon exercise of the Stock
Option, the Employee shall receive the number and class of shares
such Employee would have received had such Employee been the
holder of the number of shares of Common Stock for which the Stock
Option is being exercised upon the date of such change or increase
or decrease in the number of issued shares of the Company, and
(ii) upon the lapse of restrictions of the Award Shares, the
Employee shall receive the number and class of shares such
Employee would have received if the restrictions on the Award
Shares had lapsed on the date of such change or increase or
decrease in the number of issued shares of the Company.

4.1.2  Upon a reorganization, merger or consolidation of the
Company with one or more corporations as a result of which  is not
the surviving corporation or in which eConnect survives as a
wholly-owned subsidiary of another corporation, or upon a sale of
all or substantially all of the property of the Company to another
corporation, or any dividend or distribution to shareholders of
more than ten percent (10%) of the Company's assets, adequate
adjustment or other provisions shall be made by the Company or
other party to such transaction so that there shall remain and/or
be substituted for the Option Shares and Award Shares provided for
herein, the shares, securities or assets which would have been
issuable or payable in respect of or in exchange for such Option
Shares and Award Shares then remaining, as if the Employee had
been the owner of such shares as of the applicable date.  Any
securities so substituted shall be subject to similar successive
adjustments.

4.2  Withholding Taxes.

The Company shall have the right at the time of exercise of
any Stock Option, the grant of an Award, or the lapse of
restrictions on Award Shares, to make adequate provision for any
federal, state, local or foreign taxes which it believes are or
may be required by law to be withheld with respect to such
exercise ("Tax Liability"), to ensure the payment of any such Tax
Liability.  The Company may provide for the payment of any Tax
Liability by any of the following means or a combination of such
means, as determined by the Committee in its sole and absolute
discretion in the particular case:  (i) by requiring the Employee
to tender a cash payment to the Company, (ii) by withholding from
the Employee's salary, (iii) by withholding from the Option Shares
which would otherwise be issuable upon exercise of the Stock
Option, or from the Award Shares on their grant or date of lapse
of restrictions, that number of Option Shares or Award Shares
having an aggregate fair market value (determined in the manner
prescribed by paragraph 2.2) as of the date the withholding tax
obligation arises in an amount which is equal to the Employee's
Tax Liability or (iv) by any other method deemed appropriate by
the Committee.  Satisfaction of the Tax Liability of a Section 16
Reporting Person may be made by the method of payment specified in
clause (iii) above only if the following two conditions are
satisfied:

(a)  the withholding of Option Shares or Award Shares and
the exercise of the related Stock Option occur at least six months
and one day following the date of grant of such Stock Option or
Award; and

(b)  the withholding of Option Shares or Award Shares is
made either (i) pursuant to an irrevocable election ("Withholding
Election") made by such Employee at least six months in advance of
the withholding of Options Shares or Award Shares, or (ii) on a
day within a ten (10) day "window period" beginning on the third
business day following the date of release of the Company's
quarterly or annual summary statement of sales and earnings.

Anything herein to the contrary notwithstanding, a Withholding
Election may be disapproved by the Committee at any time.

4.3  Relationship to Other Employee Benefit Plans.

Stock Options and Awards granted hereunder shall not be
deemed to be salary or other compensation to any Employee for
purposes of any pension, thrift, profit-sharing, stock purchase or
any other employee benefit plan now maintained or hereafter
adopted by the Company.

4.4  Amendments and Termination.

The Board of Directors may at any time suspend, amend or
terminate this Plan.  No amendment, except as provided in
paragraph 2.8, or modification of this Plan may be adopted, except
subject to stockholder approval, which would: (a) materially
increase the benefits accruing to Employees under this Plan, (b)
materially increase the number of securities which may be issued
under this Plan (except for adjustments pursuant to paragraph 4.1
hereof), or (c) materially modify the requirements as to
eligibility for participation in the Plan.

4.5  Successors in Interest.

The provisions of this Plan and the actions of the Committee
shall be binding upon all heirs, successors and assigns of the
Company and of Employees.

4.6  Other Documents.

All documents prepared, executed or delivered in connection
with this Plan (including, without limitation, Option Agreements
and Incentive Agreements) shall be, in substance and form, as
established and modified by the Committee; provided, however, that
all such documents shall be subject in every respect to the
provisions of this Plan, and in the event of any conflict between
the terms of any such document and this Plan, the provisions of
this Plan shall prevail.

4.7  No Obligation to Continue Employment.

This Plan and grants hereunder shall not impose any
obligation on the Company to continue to employ any Employee.
Moreover, no provision of this Plan or any document executed or
delivered pursuant to this Plan shall be deemed modified in any
way by any employment contract between an Employee (or other
employee) and the Company.

4.8  Misconduct of an Employee.

Notwithstanding any other provision of this Plan, if an
Employee commits fraud or dishonesty toward the Company or wrong-
fully uses or discloses any trade secret, confidential data or
other information proprietary to the Company, or intentionally
takes any other action materially inimical to the best interests
of the Company, as determined by the Committee, in its sole and
absolute discretion, such Employee shall forfeit all rights and
benefits under this Plan.

4.9  Term of Plan.

This Plan was adopted by the Board effective September 1,
2000.  No Stock Options or Awards may be granted under this Plan
after September 1, 2010.

4.10  Governing Law.

This Plan shall be construed in accordance with, and governed
by, the laws of the State of Nevada.

4.11  Shareholder Approval.

No Stock Option shall be exercisable, or Award granted,
unless and until the Directors of the Company have approved this
Plan and all other legal requirements have been fully complied
with.  In addition, no incentive Stock Option shall be granted
until approved by a majority of the issued and outstanding Common
Stock of the eConnect.

4.12  Assumption Agreements.

The Company will require each successor, (direct or indirect,
whether by purchase, merger, consolidation or otherwise), to all
or substantially all of the business or assets of the Company,
prior to the consummation of each such transaction, to assume and
agree to perform the terms and provisions remaining to be
performed by the Company under each Incentive Agreement and Stock
Option and to preserve the benefits to the Employees thereunder.
Such assumption and agreement shall be set forth in a written
agreement in form and substance satisfactory to the Committee (an
"Assumption Agreement"), and shall include such adjustments, if
any, in the application of the provisions of the Incentive
Agreements and Stock Options and such additional provisions, if
any, as the Committee shall require and approve, in order to
preserve such benefits to the Employees.  Without limiting the
generality of the foregoing, the Committee may require an
Assumption Agreement to include satisfactory undertakings by a
successor:

(a)  to provide liquidity to the Employees at the end of the
Restriction Period applicable to Common Stock awarded to them
under the Plan, or on the exercise of Stock Options;

(b)  if the succession occurs before the expiration of any
period specified in the Incentive Agreements for satisfaction of
performance criteria applicable to the Common Stock awarded
thereunder, to refrain from interfering with the Company's ability
to satisfy such performance criteria or to agree to modify such
performance criteria and/or waive any criteria that cannot be
satisfied as a result of the succession;

(c)  to require any future successor to enter into an
Assumption Agreement; and

(d)  to take or refrain from taking such other actions as
the Committee may require and approve, in its discretion.

The Committee referred to in this paragraph 4.12 is the Committee
appointed by a Board of Directors in office prior to the
succession then under consideration.

4.13  Compliance With Rule 16b-3.

Transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3.  To the extent that any
provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted
by law and deemed advisable by the Committee.

IN WITNESS WHEREOF, this Plan has been executed as of the 1st day
of September, 2000.

eConnect

By: /s/  Thomas S. Hughes
Thomas S. Hughes, President

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