EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") is effective as of December
__, 2001 (the "EFFECTIVE DATE"), by and between Rhythms NetConnections Inc., a
Delaware corporation with offices at 0000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxx 00000 (the "COMPANY"), and [FILL IN EMPLOYEE NAME] ("EMPLOYEE"). Each
of the Company and Employee are sometimes referred to herein as a "PARTY," and
the two of them, together, are collectively referred to herein as the "PARTIES".
RECITALS
WHEREAS, on December 3, 2001, the Company closed the transactions
contemplated in that certain Asset Purchase Agreement, dated as of September 24,
2001, by and among the Company, Rhythms Links, Inc. Rhythms Links Inc. -
Virginia, Rhythms Leasing Inc. and MCI WorldCom Network Services, Inc.; and
WHEREAS, on December ___, 2001, the Company adopted and approved the
Company's 2002 Retention Plan, a copy of which is attached as Exhibit as EXHIBIT
A hereto (the "2002 RETENTION PLAN"); and
WHEREAS, the Company desires Employee to remain in the employ of the
Company, and Employee desires to remain in the employ of the Company, from the
Effective Date through June 30, 2002, to assist in the disposition of the
Company's remaining assets, the resolution of the Company's remaining
liabilities and the ultimate dissolution and liquidation of the Company; and
WHEREAS, as an inducement to Employee to remain in the employ of the
Company to continue to perform all of Employee's duties, responsibilities and
obligations of his/her employment, as set forth herein, the Company has agreed
to enter into this Agreement with Employee, and Employee, in turn, has agreed to
continue in the employ of the Company by entering into this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be bound
hereby, agree as follows:
1. EMPLOYMENT. The Company hereby agrees to continue to employ Employee,
and Employee hereby agrees to continue in the employ of the Company, upon the
terms and subject to the conditions set forth in this Agreement for the
Employment Period (as defined in Section 4(a)). This Agreement supercedes any
and all prior agreements (written or oral) between Employee and the Company or
the Company's predecessors in interest with respect to Employee's employment or
any matters related thereto, and any such prior agreements shall be void and of
no further force and effect as of the Effective Date; PROVIDED, HOWEVER, that
notwithstanding anything herein to the contrary, the Company shall remain
obligated to [(a) MAKE ALL PAYMENTS NOW DUE AND OWING TO EMPLOYEE OR THAT
HEREAFTER BECOME DUE AND OWING
TO EMPLOYEE PURSUANT TO THE COMPANY'S 2001 KEY EMPLOYEE RETENTION PROGRAM IN
ACCORDANCE WITH AND SUBJECT TO ALL OF THE TERMS AND CONDITIONS OF SUCH PROGRAM;
AND (b)] "cash out" on January 2, 2002, all of Employee's PTO (as defined below)
accrued through and including December 31, 2001.
2. POSITION AND DUTIES.
a. During the Employment Period (as defined in Section 4(a) below),
Employee shall be employed by the Company and shall report directly to, shall be
subject to the direct supervision,and shall perform such functions on behalf of
the Company and its Subsidiaries pursuant to the instructions [FILL IN THE TITLE
OF THE DIRECT SUPERVISOR].
b. Employee shall devote (i) his/her best efforts and (ii) his/her
full time and attention to the business and affairs of the Company and its
Subsidiaries (collectively referred to herein as "RHYTHMS") and the performance
of his/her duties. Employee shall perform his/her duties and responsibilities to
the best of his/her abilities in a timely, diligent, trustworthy, businesslike
and efficient manner.
3. BASE SALARY; RETENTION BONUS; AND SEVERANCE.
a. BASE SALARY. During the Employment Period, Employee's base salary
shall be $____________, on an annualized basis ("BASE SALARY"), payable in
accordance with the Company's standard and customary payroll practices.
Employee's Base Salary shall be subject to review and adjustment as determined
by the Board of Directors of the Company (the "BOARD"), acting in its sole and
absolute discretion.
b. RETENTION BONUS. Employee shall be entitled to participate, and
is hereby designated a Participant, in the 2002 Retention Plan.
x. XXXXXXXXX. The Company's Severance Policy (the "SEVERANCE
POLICY," a copy of which is attached hereto as EXHIBIT B) shall remain in full
force and effect throughout the Employment Period, Employee shall be deemed to
be an "Employee (other than an Officer)" for all purposes under the Severance
Policy and Employee shall be entitled to be paid severance in accordance with
the terms and conditions of the Severance Policy. For purposes of the Severance
Policy, expiration of this Agreement shall be deemed to be a termination of
Employee's employment on an Involuntary No Fault basis.
4. EMPLOYMENT PERIOD. The term of this Agreement shall commence as of the
Effective Date and shall terminate on the earliest to occur of (i) the date of
Employee's termination of employment with the Company for any reason under
Section 7 below, (ii) the termination of Employee's employment by the Company
under Section 7 below or (iii) June 30, 2002 (the "EMPLOYMENT PERIOD"). All
compensation and other benefits shall cease to accrue upon termination of the
Employment Period, and in accordance with Section 7 below.
5. BENEFITS AND OTHER MATTERS.
a. INSURANCE. The Company will provide retirement, employee health
and welfare, and fringe benefit plans to Employee no less favorable than those
generally made available to the Company's employees. Employee will be fully
vested for all purposes under all such plans, other than any tax-qualified
Company retirement plans.
b. PAID TIME OFF. Employee will be entitled to 80 hours of paid time
off ("PTO") between January 2, 2002, and June 30, 2002, all of which will be
fully vested as of January 1, 2002. Upon expiration of this Agreement or
termination of Employee's employment for any reason, Employee will be entitled
to receive payment (at the then applicable hourly rate, which shall be equal to
annual Base Salary divided by 2,080 hours) for any accrued but unused PTO
through the date of termination. PTO will cease to accrue on Employee's date of
termination.
c. REIMBURSEMENT OF EXPENSES. The Company will reimburse Employee
for all reasonable out-of-pocket expenses actually incurred by Employee (in
accordance with the Company's expense reimbursement policies, as amended from
time to time) in connection with performing his/her obligations hereunder upon
receipt from Employee of standard documentation supporting such expenses.
6. CONFIDENTIAL INFORMATION. Employee acknowledges that the information,
observations and data obtained by him or her while employed by the Company and
its Subsidiaries concerning the business or affairs of the Company and its
Subsidiaries that are not generally available to the public other than as a
result of a breach of this Agreement by Employee ("CONFIDENTIAL INFORMATION")
are the property of Rhythms. Employee agrees that he shall not disclose to any
unauthorized person or use for his/her own account any Confidential Information
without the prior written consent of the Company unless, and in such case only
to the extent that, such matters become generally known to and available for use
by the public other than as a result of Employee's acts or omissions to act.
Notwithstanding the foregoing, in the event Employee becomes legally compelled
to disclose Confidential Information pursuant to judicial or administrative
subpoena or process or other legal obligation, Employee may make such disclosure
only to the extent required, in the opinion of counsel for Employee, to comply
with such subpoena, process or other obligation. Employee shall, as promptly as
possible and in any event prior to the making of such disclosure, notify the
Company of any such subpoena, process or obligation and shall cooperate with the
Company in seeking a protective order or other means of protecting the
confidentiality of the Confidential Information.
7. TERMINATION. The Company may terminate Employee's employment at any
time, with or without Cause (as defined below), subject to the provisions
hereof. Employee may terminate his/her employment at any time, with or without
Good Reason (as defined below), subject to the provisions hereof.
a. EXPIRATION OF THE EMPLOYMENT PERIOD ON JUNE 30, 2002. If this
Agreement expires on June 30, 2002 (without having expired or been terminated
prior to that date) and Employee is in the employ of the Company on June 30,
2002, Employee shall be entitled to receive, on June 30, 2002, (A) the Second
Retention Payment (as defined in, and payable under, the 2002 Retention Plan),
(B) the amount of any accrued but unpaid Base Salary, accrued but unused PTO and
all other accrued but unpaid employee benefits to which Employee is entitled
through the date of termination, (C) severance pursuant to Section 3.c. above
plus (D) unreimbursed expenses properly incurred through the date of termination
b. TERMINATION BY THE COMPANY WITH CAUSE OR TERMINATION BY EMPLOYEE
WITHOUT GOOD REASON PRIOR TO JUNE 30, 2002. If, prior to June 30, 2002, (i) the
Company terminates the employment of Employee with Cause or (ii) the Employee
terminates his/her employment without Good Reason, Employee shall be entitled to
receive (A) the amount of any accrued but unpaid Base Salary, accrued but unpaid
PTO and all other accrued but unpaid employee benefits to which Employee is
entitled through the date of termination plus (B) unreimbursed expenses properly
incurred through the date of termination. If Employee's employment with the
Company is terminated pursuant to this Section 7.b., Employee agrees to return
to the Company, within 5 business days of the date of his/her termination, the
First Retention Payment (as defined in the 2002 Retention Plan), and
acknowledges that he/she forever and irrevocably forfeits all right, title and
interest in and to the First Retention Payment and the Second Retention Payment
(each as defined in the 2002 Retention Plan).
c. TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EMPLOYEE FOR GOOD
REASON PRIOR TO JUNE 30, 2002. If, prior to June 30, 2002, (i) the Company
terminates the employment of Employee without Cause or (ii) Employee terminates
his/her employment for Good Reason, Employee shall be entitled to receive (A)
all remaining amounts payable to Employee under the 2002 Retention Plan, (B) the
amount of any accrued but unpaid Base Salary, accrued but unpaid PTO and all
other accrued but unpaid employee benefits to which Employee is entitled through
the date of termination, (C) severance pursuant to Section 3.c. above plus (D)
unreimbursed expenses properly incurred through the date of termination.
d. DEFINED TERMS.
i. "CAUSE" shall be limited to the following: (A) deliberate
dishonesty or willful misconduct in the performance of Employee's
responsibilities resulting in a material adverse effect on the Company's
business, financial condition or operational results; or (B) Employee's
substantial failure to satisfactorily perform your reasonably assigned duties to
the Company after receiving written notice thereof detailing the alleged
failures and the expiration of a reasonable cure period not to be less than 10
business days, without such failure(s) being substantially remedied by Employee,
(C) an act or acts on Employee's part constituting a felony under the laws of
the United States or any state thereof or crime involving moral turpitude. A
determination that Cause exists shall be made by the Board, acting reasonably
and in good faith, which determination shall be final and binding on all
Parties.
ii. "GOOD REASON" shall mean termination at the election of
Employee based on (A) or (B) below (provided that Employee gives written notice
of his/her intention to terminate employment within 30 days of the date on which
the event described in (A) or (B) occurs and that the Company shall have 30 days
from the receipt of such notice to cure any such defects) or by reason of the
occurrence of an event described in (C) below:
(A) Without Employee's express written consent, the
assignment of Employee to a position functionally below, on the Company's
organizational chart, his or her position of _________________ material
diminution in Employee's duties as ________________, except in connection with
the termination of his/her employment by the Company with Cause, normal
retirement, death or disability of Employee (see clause (C) below) or
termination by the Employee without Good Reason;
(B) (1) any reduction by the Company in Employee's Base
Salary or Retention Bonus (as defined in the 2002 Retention Plan) amount or (2)
any requirement that Employee return to the Company any previously received Base
Salary or Retention Bonus (as defined in the 2002 Retention Plan) amount; or
(C) Employee dies or becomes mentally or physically
disabled for such period of time and under circumstances which entitle Employee
to receive disability benefits under the terms of the Company's long-term
disability insurance policy then maintained by the Company.
iii. "SUBSIDIARY" of an entity shall mean any corporation,
limited liability company, limited partnership or other business organization of
which the securities having a majority of the normal voting power in electing
the board of directors, board of managers, general partner or similar governing
body of such entity are, at the time of determination, owned by such entity
directly or indirectly through one or more Subsidiaries.
8. [Reserved.]
9. MISCELLANEOUS.
a. SURVIVAL. Sections 3, 4, 5, 6 and 7 hereof shall survive and
continue in full force and effect in accordance with their terms notwithstanding
any termination of the Employment Period.
b. ENTIRE AGREEMENT. Subject to Section 1 above, this Agreement and
those documents expressly referred to herein embody the complete agreement and
understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
c. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF COLORADO, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF COLORADO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF COLORADO.
d. ARBITRATION. The Parties hereto agree to submit any dispute
hereunder to binding arbitration. Arbitration shall be conducted in Denver,
Colorado, under the commercial rules of the American Arbitration Association
("AAA") by a panel of three arbitrators. The aforementioned arbitrators shall be
chosen as follows: The Company and Employee shall each designate one arbitrator
from a list of acceptable and qualified arbitrators which will be provided by
the AAA. The two arbitrators so designated shall then choose the panel's third
arbitrator who shall be an attorney-at-law and who shall serve as the Chairman
of the panel; provided that if either Party fails to designate an arbitrator
within 10 days of receipt of AAA's list or if the two arbitrators are unable to
agree on the appointment of the third arbitrator within 10 days of the later of
the date of their respective appointments, such arbitrator shall be designated
by AAA. If any arbitrator resigns or is unable to continue serving as such, the
successor to such arbitrator shall be appointed by the Party who appointed such
arbitrator or by the remaining arbitrators if they appointed such arbitrator, or
by the AAA, as the case may be. A stenographic record of the arbitration must be
maintained, the panel, including the successor arbitrator, may rely on such
record and no rehearing shall be required. Each of the Parties shall pay the
fees and expenses of the arbitrator appointed by it and each shall pay one-half
of the fees and expenses of the third arbitrator and any other expenses of the
arbitration, unless the arbitrators determine that the losing Party shall bear
the cost of the arbitration. The decision of the arbitrators with respect to any
issues subject to arbitration shall be final and binding on the Parties and may
be entered into any court of competent jurisdiction by either Party, or
application may be made to such court for judicial confirmation of the award and
order of enforcement, as the case may be. The demand for arbitration shall be
made within a reasonable time after the claim, dispute or other matter in
question has arisen. Notwithstanding the foregoing, it is hereby agreed that no
arbitration panel shall have any power to (a) add to, alter or modify the terms
and conditions of this Agreement, (b) decide any issue which does not arise from
the interpretation or application of the provisions of this Agreement or (c)
award any punitive damages under this Agreement.
e. SEVERABILITY. The Company and Employee agree that the agreements
and provisions contained in this Agreement are severable and divisible, that
each such agreement and provision does not depend upon any other provision or
agreement for its enforceability, and that each such agreement and provision set
forth herein constitutes an enforceable obligation between the Parties.
Consequently, the Parties agree that neither the invalidity nor the
unenforceability of any provision of this Agreement shall affect the other
provisions, and this Agreement shall remain in full force and effect and be
construed in all respects as if such invalid or unenforceable provision were
omitted.
f. [Reserved]
g. WAIVER, MODIFICATION. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Employee and the Company or such officer
as may be specifically designated by the Board. No waiver by either Party hereto
at any time of any breach by the other Party of, or compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions of this Agreement at the same or any prior
or subsequent time.
h. SUCCESSORS; BINDING AGREEMENT. Employee hereby consents and
agrees that the Company may require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company or any division of the Company to
expressly assume and agree in writing to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place or, in the event the Company remains in
existence, the Company may continue to employ the Employee under the terms
hereof. Except in accordance with the foregoing sentence, this Agreement may not
be assigned by the Company. This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors, estate,
trustees, administrators, successors, heirs, distributees, devisees and
legatees. This Agreement is personal to Employee and neither this Agreement nor
any rights hereunder may be assigned by the Employee.
i. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
j. HEADINGS. The inclusion of headings in this Agreement is for
convenience of reference only and shall not affect the construction or
interpretation hereof.
k. WITHHOLDING TAXES. Notwithstanding anything herein to the
contrary, all amounts payable to Employee under this Agreement shall be subject
to withholding by the Company for federal, state, local and other withholding
taxes, as well as for the portion of the cost of such employee benefits elected
by Employee for which Employee is responsible for paying (such as, Employee's
portion of any life or health, dental or other insurance premiums, etc.). In
addition, the Company shall have the right to offset against any amounts payable
to Employee hereunder all amounts, if any owed, by Employee to the Company.
l. ENFORCEMENT. If either Party is required to arbitrate or seek
judicial enforcement of his/her or its rights under this Agreement, the Party
prevailing in such proceeding shall be entitled to be reimbursed by the other
for all reasonable attorneys' fees and expenses.
m. VALID AND BINDING. The Company represents that it has all
requisite power and authority to execute and deliver, and to perform its
obligations under, this Agreement, and that this Agreement is valid, binding and
enforceable against the Company in accordance with its terms.
n. NOTICES. All notices or other communications in connection with
the Agreement shall be in writing and may be given by personal delivery or
mailed, certified mail, return receipt requested, postage prepaid or delivered
by a nationally recognized overnight courier to the Parties at the addresses set
forth below (or at such other address as the Company or Employee may specify in
a notice to the Employee or Company, as the case may be):
If to the Company:
Rhythms NetConnections Inc.
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Fax No.: 303/000-0000
Attention: President or Chief Operating Officer
with a copy to:
Xxxxxxxxxx Xxxxx & Xxxxxx, P.C.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Fax No: 303/000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
If to Employee:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
[THE REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement
as of the Effective Date.
RHYTHMS NETCONNECTIONS INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
[EMPLOYEE]
-------------------------------------
EXHIBIT A
2002 RETENTION PROGRAM
See attached.
RHYTHMS NETCONNECTIONS INC.
2002 RETENTION PLAN
Employee shall be entitled to participate in this 2002 Retention Plan (this
"PLAN") (each of the participants in the Plan are "PARTICIPANTS").
Participant shall be entitled to receive a retention bonus ("RETENTION
BONUS") in the amount set forth opposite his or her name on SCHEDULE I attached
hereto at the times, in such Installments (as defined below) and subject to the
terms and conditions set forth in this Plan.
The aggregate amount of each Participant's Retention Bonus shall be set
forth opposite such Participant's name on SCHEDULE I attached hereto.
Subject to the immediately following paragraph, each Participant's
Retention Bonus, to the extent earned (as described below), shall be paid to
such Participant in two installments. The first installment, in the amount of
25% of the Participant's Retention Bonus (the "FIRST RETENTION PAYMENT"), shall
be paid to the Participant, to the extent earned (as described below), in cash
on January 2, 2002. The second installment, in the amount of the remaining 75%
of the Participant's Retention Bonus (the "SECOND RETENTION PAYMENT"), shall be
paid to the Participant, to the extent earned (as described below), in cash on
June 30, 2002. Each of the First Retention Payment and the Second Retention
Payment are sometimes individually referred to herein as an "INSTALLMENT," and
both of them, together, are sometimes collectively referred to herein as the
"INSTALLMENTS."
In order to be entitled to receive the First Retention Payment of his or
her Retention Bonus, a Participant must be employed by the Company on January 1,
2002. In order to be entitled to receive the Second Retention Payment of his or
her Retention Bonus, a Participant must be employed by the Company on June 30,
2002. Notwithstanding anything herein to the contrary, a Participant shall be
entitled to receive all unpaid Installments of his or her Retention Bonus
(determined as of the "TERMINATION DATE" (as defined below) of such Employee's
employment with the Company) if such Participant's employment with the Company
is terminated, prior to June 30, 2002, by reason of the occurrence of an
"INVOLUNTARY NO FAULT" event (as defined below).
Notwithstanding anything herein to the contrary, if a Participant receives
the First Retention Payment of his or her Retention Bonus and then such
Participant's Employment with the Company is terminated, after January 1, 2002,
and prior to June 30, 2002, for any reason other than the occurrence of an
"INVOLUNTARY NO FAULT" event (as defined below), then the Participant shall be
required to return the full amount of his or her First Retention Payment to the
Company promptly following the Participant's Termination Date ("REFUND AMOUNT").
Each Participant hereby agrees and authorizes the Company to deduct from any and
all amounts due and owing from the Company to the Participant (i.e., base
salary, bonus, paid time off, expense reimbursements, etc.) an aggregate amount
equal to such Refund Amount. In the event that the amounts owed to the
Participant are insufficient to return to the Company the full Refund Amount,
then the Participant shall be personally liable to the Company for the
shortfall.
The Company reserves the right, in its sole and absolute discretion, to
increase the Retention Bonus of selected Participants or groups of Participants
(over and above the amount shown on SCHEDULE I hereto for such Participants or
groups of Participants) at any time and from time to time; provided, however,
that nothing herein shall (a) entitle any Employee to receive any such increased
Retention
Bonus or (b) require the Company to treat similarly situated Participants
similarly under this Plan or otherwise.
In addition to the rights described in the preceding paragraph, the Company
reserves the right, in its sole and absolute discretion, to change, modify or
amend the terms of this Plan at any time, including, but not limited to,
changing the amount of the Retention Bonuses shown on SCHEDULE I hereto,
changing the number of Installments and/or the timing of the payment of such
Installments, adding additional Participants to SCHEDULE I hereto and/or
terminating this Plan, in its entirety; provided, however, that any change,
modification or amendment to this Plan shall not adversely affect any
Participant in the Plan who is a Participant on the last "BUSINESS DAY" (as
defined below) immediately preceding the effective date of such change,
modification or amendment, without such Participant's prior written consent.
Nothing in this Plan shall confer upon any Participant any right to
continue in the employ of the Company for any period of specific duration or
otherwise interfere with or otherwise restrict in any way the rights of the
Company or the Participant, which rights are hereby expressly reserved by each,
to terminate such Participant's service at any time for any reason, with or
without cause.
Any benefits provided to Participants under this Plan are in addition to,
and not in lieu of, any other benefits provided to Participants under the
Participants' employment agreements with the Company (if any), the Company's
Paid Time Off and Family and Medical Leave Policy and/or any other employee
benefit plan, policy or arrangement in effect for employees at any time and from
time to time.
----------------------------------------------------------
DEFINED TERMS:
1. "BUSINESS DAY" means any day other than a Saturday, Sunday or state or
federal holiday in the State of Colorado.
2 "INVOLUNTARY NO FAULT" events means termination of a Participant's
employment by the Company or by the Participant for any reason other than a
termination of Participant's employment (a) by the Company with "Cause," as
defined in the Participant's employment agreement, or (b) by the
Participant "without Good Reason," as defined in the Participant's
employment agreement.
3. "TERMINATION DATE" means the date that a Participant's employment with the
Company terminates for payroll purposes
SCHEDULE I
TO THE 2002 RETENTION PLAN
RETENTION BONUS
--------------------------------------------------------------------------
PARTICIPANT RETENTION BONUS FIRST RETENTION PAYMENT SECOND RETENTION PAYMENT
----------- --------------- ----------------------- ------------------------
EXHIBIT B
SEVERANCE POLICY
See attached.
SEVERANCE POLICY
RHYTHMS NETCONNECTIONS INC.
An EMPLOYEE whose EMPLOYMENT with the COMPANY is terminated by the Company,
on an INVOLUNTARY NO FAULT basis, shall be entitled to receive the following
SEVERANCE BENEFITS:
1. In lieu of notice, an Employee shall be entitled to two weeks of BASE
COMPENSATION payable in accordance with the Company's normal and customary
payroll practices.
2. In addition to the Base Compensation described in 1. above, upon
executing and delivering a GENERAL RELEASE to the Company, Employees shall be
entitled to receive SEVERANCE. The amount of Severance shall be as follows:
a. Employees (other than OFFICERS) who have been employed with the
Company for twenty four (24) full calendar months or less (starting with the
DATE OF HIRE, as reflected in the Company's records) as of the Termination Date
shall be entitled to receive two (2) weeks of Base Compensation.
b. Employees (other than Officers) who have been employed with the
Company for more than twenty four (24) full calendar months (starting with the
Date of Hire, as reflected in the Company's records) as of the Termination Date
shall be entitled to receive four (4) weeks of Base Compensation.
c. Officers (other than EXECUTIVE OFFICERS) shall be entitled to
receive eleven (11) weeks of Base Compensation, regardless of their length of
Employment with the Company.
d. Executive Officers shall be entitled to receive fifty (50) weeks
of Base Compensation, regardless of their length of Employment with the Company.
3. In addition to the Base Compensation and Severance payments described
in 1. and 2. above, each Employee whose Employment with the Company is
terminated by the Company shall be entitled to be paid (a) the accrued balance
in the Employee's account under the Company's PTO PLAN as of the Termination
Date, (b) the cash balance in the Employee's "book account" under the Company's
ESPP as of the Termination Date, (c) the balance in the Employee's account under
the Company's 401K PLAN as of the Termination Date, if the Employee properly
elects to rollover such balance to another plan or to receive a distribution of
such balance, and (d) accrued and unpaid Base Compensation, if any, owed as of
the Termination Date, in all cases in accordance with the terms and conditions
set forth in the PTO Plan, ESPP, 401K Plan, or as shown in the Company's payroll
records, as the case may be.
4. Notwithstanding anything herein to the contrary, (a) if an Employee's
offer letter from, or
employment agreement with, the Company provides for
severance benefits that are more favorable to the Employee than the Severance
Benefits described in this Severance Policy, the terms of the Employee's offer
letter or
employment agreement, as the case may be, shall govern, and (b) if the
Severance Benefits described in this Severance Policy are more favorable to the
Employee than the severance benefits provided for in an Employee's offer letter
from, or
employment agreement with, the Company, the terms
of this Severance Policy shall govern.
5. The Company reserves the right, in its sole and absolute discretion,
to pay or agree to pay to selected Employees or groups of Employees EXCESS
BENEFITS in connection with the termination of their Employment; provided,
however, that nothing herein shall (a) entitle any Employee to receive any
Excess Benefits or (b) require the Company to treat similarly situated Employees
similarly under this Severance Policy or otherwise. Past examples of such
discretionary additional payments include reimbursement for COBRA benefits for
affected Employees with current and potentially disabling medical conditions and
additional severance amounts to compensate for partially completed bonus
periods.
6. The Company reserves the right, in its sole and absolute discretion,
to change, modify or amend the terms of this Severance Policy at any time,
including, but not limited to, terminating this Severance Policy, in its
entirety; provided, however, that any change, modification or amendment to this
Severance Policy shall only apply to those Employees whose Termination Date
occurs after the effective date of such change, modification or amendment.
7. Nothing in this Severance Policy shall confer upon any Employee any
right to continue in the employ of the Company for any period of specific
duration or otherwise interfere with or otherwise restrict in any way the rights
of the Company or the Employee, which rights are hereby expressly reserved by
each, to terminate such Employee's service at any time for any reason, with or
without cause.
----------------------------------------------------------------
DEFINED TERMS:
1. BASE COMPENSATION means (a) base salary for exempt bonused Employees,
(b) regularly scheduled hours, not to exceed forty hours (40) hours, of
compensation at the base rate for non-exempt Employees and (c) regular draw,
plus 70% of target commission, for commissioned Employees, as shown on the
Company's books and records as of the Employee's Termination Date.
2. COMPANY means Rhythms NetConnections Inc.
3. DATE OF HIRE means the date first worked by a new Employee, as
reflected in the Company's payroll records.
4. EMPLOYEE means any full-time or part-time (as so treated in the
Company's payroll records) employee of the Company or any of the Company's
wholly-owned corporate subsidiaries.
5. EMPLOYMENT means employment as an Employee for payroll purposes, and
shall not include independent contractors, consultants, directors, partners or
other third-party relationships that are not considered "employment" for payroll
purposes.
6. ESPP means the Company's 1999 Employee Stock Purchase Plan, as
amended.
7. EXCESS BENEFITS means any and all severance benefits paid, or agreed
to be paid, by the Company to an Employee in excess of the Severance payable
under this Severance Policy.
8. EXECUTIVE OFFICERS means Executive Vice Presidents, Senior Vice
Presidents, the President, the Chief Information Officer, the Chief Financial
Officer, Chief Legal Counsel and the Chief Executive Officer.
9. 401K PLAN means the Company's 401K Plan, as described in the Company's
Plan Summary Booklet - Rhythms NetConnections Inc. 401K Savings Plan.
10. GENERAL RELEASE means the Company's standard form of employee general
release, in effect as of the Employee's termination Date, or such other form of
general release as mutually agreed to by the Company and the Employee.
11. INVOLUNTARY NO FAULT basis means termination of the Employee's
Employment by the Company as a result of (a) elimination of the Employee's
position by the Company, (b) a reduction in force by the Company or (c) a
downsizing of department(s) by the Company.
12. OFFICERS means all Vice Presidents, including Area and Regional Vice
Presidents, Executive Officers and any other persons legally designated as
officers of the Company.
13. PTO PLAN means the Company's Paid Time Off (PTO) Plan, as described in
the Employee Policies Section of the Company's Intranet "The Beat."
14. SEVERANCE means the benefits described in Section 2. Of this Severance
Policy.
15. SEVERANCE BENEFITS means all of the benefits provided in this
Severance Policy.
16. TERMINATION DATE means the date that an Employee's employment with the
Company terminates for payroll purposes.
