UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA In re COVAD SECURITIES LITIGATION, This Document Relates To: ALL ACTIONS. Master File No. C-00-3891-PJH CLASS ACTION NOTICE OF PENDENCY AND SETTLEMENT OF CLASS ACTION AND SETTLEMENT HEARING TO: ALL PERSONS WHO PURCHASED OR OTHERWISE ACQUIRED THE COMMON STOCK OR 6% CONVERTIBLE SENIOR NOTES OF COVAD COMMUNICATIONS GROUP ( COVAD ) DURING THE PERIOD APRIL 19, 2000 THROUGH MAY 24, 2001 THIS NOTICE MAY AFFECT YOUR RIGHTS. YOU ARE URGED TO READ IT CAREFULLY. IF YOU PURCHASED OR OTHERWISE ACQUIRED COVAD COMMON STOCK OR 6% CONVERTIBLE SENIOR NOTES DURING THE PERIOD APRIL 19, 2000 THROUGH MAY 24, 2001, INCLUSIVE (THE CLASS PERIOD ), YOU MAY BE A MEMBER OF THE CLASS AND MAY BE ENTITLED TO SHARE IN THE PROCEEDS OF THE SETTLEMENT DESCRIBED IN THIS NOTICE (THE SETTLEMENT ). This Notice is given pursuant to Rule 23 of the Federal Rules of Civil Procedure and pursuant to an Order of the United States District Court for the Northern District of California (the District Court ). The purpose of this Notice is to inform you of the pendency of this Litigation as a class action and of a Settlement of the class action pursuant to a Stipulation of Settlement dated as of August 10, 2001, filed with the District Court. The Settlement creates a fund in the amount of $16.5 million in cash and will include any interest that accrues on the fund prior to distribution as well as 6,495,844 shares of Covad common stock subject to certain terms and conditions. The stock is to be issued exempt from the registration requirements pursuant to 3(a)(10) of the Securities Act of 1933 and/or 1145 of the United States Bankruptcy Code. Based on Lead Plaintiffs estimate of the number of securities entitled to participate in the Settlement, the current price of Covad stock, and the anticipated number of claims to be submitted by Class members the average distribution per security would be approximately $0.27 before deduction of court-approved fees and expenses. However, your actual recovery from this fund will depend on a number of variables including the number, amount and type of securities you purchased or otherwise acquired and the timing of your purchases or acquisitions, and sales, if any. Plaintiffs and Defendants do not agree on the average amount of damages per security that would be recoverable if Lead Plaintiffs were to have prevailed on each claim alleged under the Securities Exchange Act of 1934. The issues on which the Parties disagree include (1) the appropriate economic model for determining the amount by which Covad Securities were allegedly artificially inflated (if at all) during the Class Period; (2) the amount by which Covad Securities were allegedly artificially inflated (if at all) during the Class Period; (3) the effect of various market forces influencing the trading price of Covad Securities at various times during the Class Period; (4) the extent to which external factors, such as general market conditions, influenced the trading price of Covad Securities at various times during the Class Period; (5) the extent to which the various matters that Lead Plaintiffs alleged were materially false or misleading influenced (if at all) the trading price of Covad Securities at various times during the Class Period; (6) the extent to which the various allegedly adverse material facts that Lead Plaintiffs alleged were omitted influenced (if at all) the trading price of Covad Securities at various times during the Class Period; and (7) whether the statements made or facts allegedly omitted were material or otherwise actionable under the federal securities laws. Lead Plaintiffs believe that the proposed Settlement is a good recovery and is in the best interests of the Class. Because of the risks associated with continuing to litigate and proceeding to trial, there was a danger that Plaintiffs would not have prevailed on any of their claims, in which case the Class would receive nothing. Moreover, on August 15, 2001, Covad filed a petition for bankruptcy in the Bankruptcy Court of the United States District Court for the District of Delaware. The Bankruptcy Court confirmed a Plan of Reorganization by order dated December 13, 2001. Lead Plaintiffs also faced the possibility that all or many of the claims in this case could have been dismissed. In addition, the amount of damages recoverable by the Class was and is challenged by Defendants. Recoverable damages are limited to losses caused by conduct actionable under applicable securities laws and, had the Litigation gone to trial, Defendants intended to prove that all or most of the losses of Class members were caused by non-actionable market industry or general economic factors. Defendants would also assert that throughout the Class Period they fully and adequately disclosed Covad s financial condition and all uncertainties and risks associated with Covad s business. Representative Plaintiffs Counsel have not received any payment for their services in conducting this Litigation on behalf of Plaintiffs and the members of the Class, nor have they been reimbursed for their out-of-pocket expenditures. If the Settlement is approved by the District Court, counsel for the Plaintiffs will apply to the District Court for attorneys fees of 25% of the settlement proceeds plus

reimbursement of out-of-pocket expenses not to exceed $300,000 to be paid from the settlement proceeds. The four Lead Plaintiffs may also seek reimbursement for the time expended and expense incurred by each of them in serving as Lead Plaintiff. If sought the amounts will not exceed $5,000 for each. If the amount requested by counsel is approved by the District Court, the average cost per security would be $0.07. This Notice is not an expression of any opinion by the District Court about the merits of any of the claims or defenses asserted by any party in this Litigation or the fairness or adequacy of the proposed Settlement. For further information regarding this Settlement you may contact: Rick Nelson, Milberg Weiss Bershad Hynes & Lerach LLP, 401 B Street, Suite 1700, San Diego, California 92101, Telephone: (619) 231-1058. Please do not call any representative of Covad. I. NOTICE OF HEARING ON PROPOSED SETTLEMENT A hearing (the Settlement Hearing ) will be held on December 18, 2002, at 9:00 a.m. (or at any such adjourned time or times as the District Court may without further notice direct) (the Hearing Date ), before the Honorable Phyllis J. Hamilton, in the United States Courthouse, 450 Golden Gate Avenue, San Francisco, California, to determine whether the proposed Settlement of this class action (the Litigation ) between Lead Plaintiffs, individually and on behalf of the Settlement Class described below, and Defendants Covad, Robert E. Knowling Jr., Mark H. Perry, Timothy Laehy, Joseph Devich and Dhruv Khanna (hereinafter referred to collectively as the Defendants ), for the consideration described above is fair, reasonable and adequate and should be approved by the District Court. The District Court has certified a class composed of purchasers or acquirers of Covad Securities between April 19, 2000 and May 24, 2001, excluding Defendants and certain related persons or entities. Pursuant to that certification, the Settlement Class consists of the named Plaintiffs and all persons or entities who purchased or otherwise acquired Covad Securities at any time during the period April 19, 2000 through May 24, 2001, inclusive, on the open market or in connection with Covad s acquisition of Blue Star Communications Group (the Class Period ). Excluded from the Class are the Defendants named in the complaint, members of the immediate families of the individual defendants, any entity in which any Defendant has a controlling interest, and any of the legal representatives, heirs, successors, or assigns of the Defendants. Further excluded from the Settlement Class are those persons who submit valid and timely requests for exclusion from the Settlement Class pursuant to the terms of this Notice. II. THE LITIGATION On and after October 20, 2000, the following class actions were filed in the United States District Court for the Northern District of California (the Court ): 1. Pincay Investments Co., et al. v. Covad Communications Group, Inc., et al., C-00-3981-MEJ 2. Taylor v. Covad Communications Group, Inc., et al., C-00-3989-SC 3. Albert, et al. v. Covad Communications Group, Inc., et al., C-00-3906-EDL 4. Pond Equities v. Covad Communications Group, Inc., et al., C-00-3907-JL 5. Joseph v. Covad Communications Group, Inc., et al., C-00-3927-MEJ 6. Schneier v. Covad Communications Group, Inc., et al., C-00-3953-JL 7. Frey v. Covad Communications Group, Inc., et al., C-00-3988-JL 8. Bender v. Covad Communications Group, Inc., et al., C-00-21120-PVT 9. Taylor v. Covad Communications Group, Inc., et al., C-00-21133-EAI 10. Cruz, et al. v. Covad Communications Group, Inc., et al., C-00-4204-MJJ 11. Carbo v. Covad Communications Group, Inc., et al., CV-00-4237-MJJ 12. Weiss v. Covad Communications Group, Inc., et al., C-00-4293-BZ 13. Dan v. Covad Communications Group, Inc., et al., C-00-21190-EAI 14. Abood v. Covad Communications Group, Inc., et al., C-00-4391-EAI 15. Glassman v. Covad Communications Group, Inc., et al., C-00-21203-EAI 16. Levine v. Covad Communications Group, Inc., et al., C-00-21207-JW 17. Thomas v. Covad Communications Group, Inc., et al., C-00-4506-JL These actions were subsequently consolidated on January 22, 2001 (the Litigation ). The Litigation names as defendants Covad Communications Group, Inc. ( Covad or the Company ), Robert E. Knowling, Jr., Mark H. Perry, Timothy Laehy, Joseph Devich 2

and Dhruv Khanna. The Consolidated Complaint for Violation of the Federal Securities Laws, filed June 22, 2001 (the Complaint ) alleges violations of 10(b) and 20(a) of the Securities Exchange Act of 1934 (the Exchange Act ) and Rule 10b-5 promulgated thereunder on behalf of a class of persons who purchased or otherwise acquired Covad securities during the Class Period. On January 21, 2001, the Creedon Capital LDC, Cheyne Fund, LP, DC Capital Partners, LP, and Gregory Gill were appointed Lead Plaintiffs and their choice of Milberg Weiss Bershad Hynes & Lerach LLP, Cauley Geller Bowman & Coates, LLP and Schiffrin & Barroway, LLP to act as Lead Plaintiffs Counsel was approved. In June and July 2001, the parties participated in several mediation sessions before Retired United States District Judge Charles A. Legge, which, on August 10, 2001, resulted in an agreement in principle to settle the litigation. On August 15, 2001, Covad filed a petition for bankruptcy in the United States District Court for the District of Delaware (the Bankruptcy Court ). On December 13, 2001, the Bankruptcy Court approved Covad s First Amended Plan of Reorganization, including the allocation of the amounts to be contributed to the settlement of this action by Defendants and their insurance carriers. III. DEFENDANTS STATEMENT AND DENIALS OF WRONGDOING AND LIABILITY Defendants have denied and continue to deny each and all of the claims and contentions alleged by the Lead Plaintiffs in the Litigation. Nonetheless, Defendants have concluded that it is in their best interests that the Litigation be settled on the terms and conditions set forth in the Stipulation. Defendants have reached this conclusion after (1) analyzing the factual and legal issues in the Litigation; (2) determining that further conduct of the Litigation would be protracted and expensive, including potential litigation not only through trial, but also through any appeals that might be taken; and (3) considering the substantial benefits to Defendants and Covad s shareholders of a final resolution of the Litigation, including avoiding further expenses, disposing of burdensome and protracted litigation, and permitting Defendants to conduct their business unhampered by the distractions of continued litigation. IV. CLAIMS OF THE LEAD PLAINTIFFS AND BENEFITS OF SETTLEMENT The Lead Plaintiffs and Plaintiffs Settlement Counsel have concluded that it is in the best interests of the Lead Plaintiffs and Settlement Class Members that the Litigation be settled on the terms and conditions set forth in the Stipulation. The Lead Plaintiffs and Plaintiffs Settlement Counsel have reached this conclusion after considering the risks and uncertainties of prevailing on the claims at the pleading stage, summary judgment or trial due to the defenses that have been or could be asserted by Defendants. These include, among other things, whether Lead Plaintiffs have met the requirements for pleading a claim; whether Defendants ever issued any false or misleading statements; whether any statements, if false or misleading, were material; whether any Defendant acted with scienter; and whether the Lead Plaintiffs or any Settlement Class Member suffered any loss as a result of any alleged action or statement by any of the Defendants. Further considerations supporting the decision to enter into the Settlement described herein were the expense and length of continued proceedings necessary to prosecute the Litigation against Defendants through trial and through appeals and the substantial benefits the Settlement confers upon the Lead Plaintiffs and the Settlement Class. V. THE SETTLEMENT A settlement has been reached in this Litigation between the Plaintiffs and the Defendants which is embodied in a Stipulation of Settlement (the Stipulation ) dated August 10, 2001, on file with the Court. The following description of the proposed Settlement of the Litigation is only a summary, and reference is made to the text of the Stipulation on file with the Court for a full statement of its provisions. The Defendants have paid into an escrow account, pursuant to the terms of the Stipulation, cash in the amount of $16.5 million (the Settlement Fund ) which has been and will continue to earn interest for the benefit of the Settlement Class. The Settlement Fund also includes 6,495,844 shares of Covad common stock (the Settlement Stock ) to be issued pursuant to 3(a)(10) of the Securities Act of 1933, as amended and/or 1145 of the United States Bankruptcy Code. The Net Settlement Fund is the balance of the Settlement Fund after deduction of Representative Plaintiffs attorneys fees and reimbursement of their expenses, and the costs in connection with sending this Notice, administering the Settlement Fund and the payment of taxes on the income earned by the Settlement Fund, as and if permitted by the Court. The balance of the Settlement Fund will be distributed to Settlement Class Members who have submitted valid, timely Proof of Claim forms (the Authorized Claimants ) in accordance with the Plan of Allocation described below. If the proposed Settlement is approved by the Court, the Court will enter a Judgment which will dismiss the Litigation against the Defendants with prejudice, and bar and permanently enjoin the Representative Plaintiffs and each Settlement Class Member, whether or not such Settlement Class Member has submitted a Proof of Claim, from prosecuting the Released Claims (defined below) against the Released Parties (defined below), and any such Settlement Class Member shall be conclusively deemed to have released any and all such Released Claims against the Released Parties. The Court shall retain jurisdiction over implementation of the Settlement, disposition of the Settlement Fund, hearing and determining Representative Plaintiffs applications for attorneys fees, costs, interest, expenses (including fees and costs of experts and/or consultants), and enforcing and administering the Stipulation, including any releases executed in connection therewith. Related Parties means each of any Defendants past, present or future directors, officers, employees, partnerships and partners, principals, agents (except securities brokers and dealers), controlling shareholders, any entity in which any Defendant and/or any 3

member(s) of that Defendant s immediate family has or have a controlling interest, attorneys, accountants, auditors, investment bankers, underwriters (except as to Laddering Claims, as provided in 1.16 of the Stipulation), advisors, personal or legal representatives, analysts, associates, insurers, co-insurers and reinsurers, predecessors, successors, parents, subsidiaries, divisions, assigns, joint ventures and joint venturers, spouses, heirs, executors, administrators, related or affiliated entities, any members of an Individual Defendant s immediate family, or any trust of which any Defendant is the settlor or which is for the benefit of any Individual Defendant and/or member(s) of his family. Released Claims means the Released Class Claims and Unknown Claims as defined herein. Released Claims does not mean and shall not include any and all claims against any Persons other than the Released Persons, and does not include Laddering Claims (defined in the Stipulation as related claims by several alleged purchasers of Covad s common stock brought under the Securities Act of 1933 and/or the Securities and Exchange Act of 1934, in the actions specifically referred to immediately below, challenging certain practices allegedly used by certain underwriters of public offerings, including the alleged failure by some of the underwriters of Covad s offerings to disclose the arrangements purportedly made with certain investors) or any other allegedly illegal practices asserted or to be asserted against any Person (whether or not a Released Person) in Ginsberg v. Covad Communications Group, Inc., et al., No. 01-CV-7433(SAS); Korsinsky v. Covad Communications Group, Inc., et al., No. 01-CV-5834(SAS); Garfinkel v. Covad Communications Group, Inc., et al., No. 01-CV-5968(SAS); Rosenberg v. Covad Communications Group, Inc., et al., No. 01-CV-6130-SAS); Dubin v. Covad Communications Group, Inc., et al., No. 01-CV-6324-SAS); Harmon v. Covad Communications Group, Inc., et al., No. 01-CV-6337(SAS); Houser v. Covad Communications Group, Inc., et al., No. 01-CV- 6487(SAS); and Bone v. Covad Communications Group, Inc., et al., No. 01-CV-6601(SAS) (all of which are pending in the United States District Court for the Southern District of New York) on behalf of purported classes of plaintiffs who acquired Covad common stock pursuant to the following offerings effective on the following dates: January 21, 1999; June 17, 1999; and November 3, 1999. Released Class Claims means any and all claims, actions, demands, rights, liabilities, suits, and causes of action of every nature and description whatsoever, known or unknown, that were asserted or that could or might have been asserted in any pleading or amended pleading by the Lead Plaintiffs, by the Lead Plaintiffs on behalf of the Class, or by any of the other Settlement Class Members against Released Persons, based upon, arising from, or in any way related to both the purchase or acquisition of Covad Securities by the Lead Plaintiffs or the other Settlement Class Members during the Class Period and the facts, transactions, events, occurrences, disclosures, statements, acts or omissions or failures to act which were or could have been alleged in the Litigation; or any claim that the Defendants or their Related Parties improperly defended or settled the Litigation and/or the Released Claims. Released Class Claims does not mean and shall not include Laddering Claims. Released Persons means each and all of the Defendants and their respective Related Parties. Released Persons shall include Covad s investment bankers and/or underwriters, except as to Laddering Claims. Unknown Claims means any Released Class Claims which the Representative Plaintiffs or any other Settlement Class Member do not know or suspect to exist in their favor at the time of the release of the Released Persons which, if known by them, might have affected their Settlement with and release of the Released Persons, or might have affected their decision not to object to the Settlement. With respect to any and all Released Class Claims against the Released Persons, the Parties stipulate and agree that, upon the Effective Date, the Representative Plaintiffs shall expressly waive and relinquish, and the other Settlement Class Members shall be deemed to have, and by operation of the Judgment shall have, expressly waived and relinquished, to the fullest extent permitted by law, the provisions, rights, and benefits conferred by 1542 of the California Civil Code, which provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor and by any law of any state or territory of the United States, or principle of common law, or of international or foreign law, which is similar, comparable or equivalent to 1542 of the California Civil Code. The Representative Plaintiffs and the other Settlement Class Members may hereafter discover facts in addition to or different from those which he, she or it now knows or believes to be true with respect to the Released Class Claims, but hereby stipulate and agree that upon the Effective Date, the Representative Plaintiffs fully, finally and forever settle and release, and each other Settlement Class Member shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever settled and released any and all Released Class Claims against the Released Persons, known or unknown, suspected or unsuspected, contingent or non-contingent, whether or not concealed or hidden, which now exist, or heretofore have existed, upon any theory of law or equity now existing or coming into existence in the future, including, but not limited to, conduct which is negligent, intentional, with or without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or existence of such different or additional facts. The Settling Parties acknowledge that the foregoing waiver was bargained for and a key element of the Settlement. VI. THE PLAN OF ALLOCATION The Net Settlement Fund shall be distributed to Settlement Class Members who submit valid, timely Proof of Claim forms under the Plan of Allocation. The Plan of Allocation provides that you will be eligible to participate in the distribution of the Settlement Fund only if you have a net loss on all transactions in Covad common stock or 6% Convertible Senior Notes during the Class Period. The Plan of Allocation was arrived at by Plaintiffs Settlement Counsel, with the assistance of their damages consultant, considering the relative merits of the claims asserted and the likely damages that could have been recovered if the Class was successful in establishing liability at trial. 4

To the extent there are sufficient funds in the Net Settlement Fund, each Authorized Claimant will receive an amount equal to the Authorized Claimant s claim, as defined below. If, however, the amount in the Net Settlement Fund is not sufficient to permit payment of the total claim of each Authorized Claimant, then each Authorized Claimant shall be paid the percentage that each Authorized Claimant s claim bears to the total of the claims of all Authorized Claimants. Payment in this manner shall be deemed conclusive against all Authorized Claimants. A claim will be calculated as follows: COMMON STOCK 1. For shares of Covad common stock that were purchased or acquired from April 19, 2000 through October 17, 2000, including shares acquired by BlueStar shareholders on September 22, 2000, and: (a) sold on or before October 17, 2000, the claim per share is $0; (b) sold on October 18, 2000 through November 14, 2000, the claim per share is the difference between $8.59 per share and the sales price per share, not to exceed $4.44 per share; (c) sold on November 15, 2000 through May 24, 2001 the claim per share is $4.44; (d) retained at the close of trading on May 24, 2001, the claim per share is $4.69. 2. For shares of Covad common stock that were purchased or acquired from October 18, 2000 through November 14, 2000, and: (a) sold on October 18, 2000 through November 14, 2000, the claim per share is $0; (b) sold on November 15, 2000 through May 24, 2001, the claim per share is the purchase price per share less $4.16 per share, not to exceed $1.22 per share; (c) retained at the close of trading on May 24, 2001, the claim per share is the purchase price per share less $3.91 per share, not to exceed $1.47 per share. 3. For shares of Covad common stock that were purchased or acquired from November 15, 2000 through May 24, 2001, and: (a) sold on or before May 24, 2001, the claim per share is $0; (b) retained at the close of trading on May 24, 2001, the claim per share is $0.25. 6% CONVERTIBLE SENIOR NOTES DUE 2005 4. For the 6% Convertible Senior Notes due 2005 purchased from September 25, 2000 through May 24, 2001, and: (a) sold on or before May 24, 2001, the claim per $1,000 Note is the lesser of: (i) the purchase price per $1,000 Note less the sales price per $1,000 Note; or (ii) the purchase price per $1,000 Note less $190; (b) retained at the close of trading on May 24, 2001, the claim per $1,000 Note is the purchase price per $1,000 Note less $190. The date of purchase or sale is the contract or trade date as distinguished from the settlement date. For Settlement Class Members who made multiple purchases or multiple sales during the Class Period, the earliest subsequent sale shall be matched with the earliest purchase and chronologically thereafter for purposes of the claim calculations. For Class Members who made multiple purchases or multiple sales during the Class Period, the first-in, first-out (FIFO) method will be applied to both purchases and sales for purposes of calculating a claim. Under the FIFO method, sales during the Class Period will be matched in chronological order, first against securities held at the beginning of the Class Period, and then against securities purchased during the Class Period. The Court has reserved jurisdiction to allow, disallow or adjust the claim of any Settlement Class Member on equitable grounds. Representative Plaintiffs Counsel ( Class Counsel ), acting on behalf of the Settlement Class and subject to the supervision of the District Court, shall be responsible for the administration and calculation of the claims and shall oversee the distribution of the Net Settlement Fund to Settlement Class Members. Any controversies that may arise concerning the distribution of the Net Settlement Fund, including the allowance or disallowance of claims and the amounts thereof, which are not resolved between Class Counsel and any Claimant, shall be presented to the Court for resolution. Any Settlement Class Member who fails to file a valid and timely Proof of Claim and Release in the manner and with the information required shall be barred from participating in the distribution of the Net Settlement Fund, but otherwise shall be bound by all of the terms of the Stipulation, including any release and the provisions of any orders and judgments made or entered pursuant to the Stipulation. VII. THE RIGHTS OF SETTLEMENT CLASS MEMBERS If you are a Settlement Class Member, you have the following options: 5

YOU MAY FILE A PROOF OF CLAIM. If you choose this option you will remain a Settlement Class Member, you will share in the proceeds of the proposed Settlement if your claim is timely and valid and if the proposed Settlement is finally approved by the Court, and you will be bound by the Judgment and release described above. Each Settlement Class Member who desires to assert a claim for payment from the Net Settlement Fund must submit a completed and signed Proof of Claim, a copy of which is enclosed with this Notice, supported by the documents described in the Proof of Claim. The Proof of Claim must be submitted as described below to: Covad Securities Litigation c/o Gilardi & Co. LLC P.O. Box 5100 Larkspur, CA 94977-5100 ALL PROOFS OF CLAIM MUST BE POSTMARKED OR OTHERWISE SUBMITTED BY FEBRUARY 4, 2003. Any Settlement Class Member who fails to submit a valid and timely Proof of Claim will not receive any portion of the Net Settlement Fund, but will be bound by all terms of the Settlement and of any Final Judgment or other order entered in this Litigation if the Settlement is approved (unless such person previously has validly and properly requested exclusion from the Settlement Class). A Proof of Claim and Release will be deemed to have been submitted when mailed, if a postmark is indicated on the envelope and it was mailed first class, postage prepaid, and addressed as indicated above. Proof of Claim forms otherwise submitted will be deemed to be submitted at the time they are actually received at the address designated above. Submission of a Proof of Claim and Release is not a waiver of certain rights with respect to the Settlement, including the right to object to the Settlement, the distribution of the Net Settlement Fund or Plaintiffs Settlement Counsel s request for attorneys fees or reimbursement of expenses. If you submit a Proof of Claim, Plaintiffs Settlement Counsel is entitled to make inquiry to ensure that you are a Settlement Class Member or are entitled to a portion of the Net Settlement Fund and to confirm the amount of your claim. By submitting a Proof of Claim, you are agreeing that the District Court has jurisdiction with respect to your claim. YOU MAY REQUEST TO BE EXCLUDED. If you do not wish to be included in the Settlement Class and you do not wish to participate in the proposed Settlement described in this Notice, you may request to be excluded from the Settlement Class. VIII. PROCEDURE FOR EXCLUSION Any Settlement Class Member may exclude himself, herself or itself from the Settlement Class by mailing on or before December 4, 2002, a statement to Covad Securities Litigation, c/o Gilardi & Co., P.O. Box 5100, Larkspur, CA 94977-5100, of his, her or its desire to be excluded from the Settlement Class in the Covad Securities Litigation, and stating the number of shares of Covad Securities purchased and sold during the Class Period, the dates of purchases and/or sales and the prices paid or received for each purchase or sale. All persons who exclude themselves from the Settlement Class will not participate in or receive any portion of the Net Settlement Fund described above, nor will they be bound by the terms of the Settlement, or any Final Judgment in this Litigation, including any release of claims against Defendants; but they may pursue their own individual remedies, if any. No request for exclusion will be considered valid unless all of the information described above is included in any such request. If you do not request to be excluded from the Settlement Class you will be bound by any and all determinations or judgments in the Litigation, whether favorable or unfavorable to the Settlement Class including, without limitation, any Final Judgment. YOU MAY DO NOTHING AT ALL. If you choose this option, you will not share in the proceeds of the Settlement, but you will be bound by any Judgment entered by the Court. IX. SETTLEMENT HEARING The purpose of the Settlement Hearing scheduled for December 18, 2002, will be to determine whether the proposed Settlement of this Litigation as set forth in the Stipulation of Settlement, dated as of August 10, 2001, is fair, reasonable and adequate and, thus, whether the Settlement should be approved by the Court, and the Litigation dismissed in its entirety as to the Defendants, with prejudice as against Settlement Class Members. The District Court will also consider at the Settlement Hearing the request of counsel for the Representative Plaintiffs and the Settlement Class for an award of attorneys fees and reimbursement of expenses. Class Counsel will apply to the District Court for an award of attorneys fees and for the reimbursement of expenses for the services they rendered in this Litigation. Class Counsel intend to seek attorneys fees of twenty-five percent (25%) of the Settlement Fund plus their out-of-pocket expenses not to exceed $300,000. Any attorneys fees and expenses that the District Court awards will be paid out of the Settlement Fund. The four Lead Plaintiffs may seek reimbursement for their time and expenses up to $5,000 each, incurred in serving as Lead Plaintiffs. Any Settlement Class Member who has not requested exclusion from the Settlement Class may appear in person or through counsel at the hearing described above and be heard as to why the proposed Settlement of the Litigation, the Plan of Allocation for the distribution of the Net Settlement Fund, and the application by Class Counsel for an award of fees and expenses should or should not be approved as fair, reasonable and adequate, or why a Final Judgment dismissing the Litigation against Defendants with prejudice 6

should or should not be entered herein; provided, however, that no Settlement Class Member shall be heard or be entitled to object to the approval of the terms and conditions of the proposed Settlement, the distribution of the funds, or the application by Class Counsel for an award of fees and expenses, unless that person has filed a written notice of objection, including the grounds for objection, with the District Court and has served by hand or first-class mail the written objection and copies of any supporting papers and briefs upon each of the following such that they are received on or before December 4, 2002: Keith F. Park Steven E. Cauley Andrew L. Barroway MILBERG WEISS BERSHAD CAULEY, GELLER, BOWMAN SCHIFFRIN & BARROWAY, LLP HYNES & LERACH LLP & COATES, LLP Three Bala Plaza East, Suite 400 401 B Street, Suite 1700 11311 Arcade Drive, Suite 200 Bala Cynwyd, PA 19004 San Diego, CA 92101 Little Rock, AR 72212 Counsel for Plaintiffs Jordan Eth, Esq. MORRISON & FOERSTER, LLP 425 Market Street San Francisco, CA 94105-2482 Counsel for Defendants Any such papers served must include the number of Covad Securities the objector purchased and sold during the Class Period, and the dates of such purchase(s) and sale(s). Unless otherwise ordered by the Court, any Settlement Class Member who does not make his or her objection or opposition in the manner provided shall be deemed to have waived all objections and opposition to the fairness, reasonableness and adequacy of the proposed Settlement, the Plan of Allocation and the request of Class Counsel for attorneys fees, costs and expenses. X. NOTICE TO BANKS, BROKERS AND OTHER NOMINEES Pursuant to an order of the District Court, each bank, brokerage firm and other nominee who purchased Covad Securities during the Class Period for a beneficial owner is requested within ten days to forward to such persons a copy of this Notice and a copy of the Proof of Claim form enclosed herewith. Additional copies may be obtained, without charge, by written request to Covad Securities Litigation, c/o Gilardi & Co., at the address listed below. Alternatively, nominees may provide the names and addresses of persons for whom they purchased Covad Securities during the Class Period to Covad Securities Litigation, c/o Gilardi & Co. who, in turn, will mail the notices and Proof of Claim forms. The Settlement Fund will reimburse all such nominees for reasonable administrative costs incurred in providing the Notice and Proof of Claim forms to beneficial owners, upon submission of appropriate documentation. XI. EXAMINATION OF PAPERS AND INQUIRIES The foregoing is only a summary of the Litigation and the proposed Settlement, and does not purport to be comprehensive. For a more detailed statement of the matters involved in the above Litigation and the proposed Settlement, you may refer to the pleadings, the Stipulation of Settlement and other papers filed in the above Litigation, which may be inspected at the Office of the Clerk of the District Court during normal business hours of each business day. All inquiries by Settlement Class Members should be directed in the first instance to Covad Securities Litigation, c/o Gilardi & Co., P.O. Box 5100, Larkspur, CA 94977-5100: Keith F. Park, Milberg Weiss Bershad Hynes & Lerach LLP, 401 B Street, Suite 1700, San Diego, CA 92101; Steven E. Cauley, Cauley Geller, Bowman & Coates, LLP, 11311 Arcade Drive, Suite 200, Little Rock, AR 72212; Andrew L. Barroway, Schiffrin & Barroway, LLP, Three Bala Plaza East, Suite 400, Bala Cynwyd, Pa 19004. INQUIRIES SHOULD NOT BE DIRECTED TO THE CLERK OF THE COURT OR TO THE JUDGE. DATED: October 25, 2002 BY ORDER OF THE COURT UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 7