EXHIBIT 99.4
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement (the "Option Agreement") by
and between Rhythms NetConnections Inc. (the "Corporation") and _______________
_____________________ ("Optionee") evidencing the stock option (the "Option")
granted this day to Optionee under the terms of the Corporation's 1999 Stock
Incentive Plan, and such provisions are effective immediately. All capitalized
terms in this Addendum, to the extent not otherwise defined herein, shall have
the meanings assigned to them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION/CHANGE IN CONTROL
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed in accordance with Paragraph 6 of the Option
Agreement, the Option shall not accelerate upon the occurrence of that
Corporate Transaction, and the Option shall accordingly continue, over
Optionee's period of Service after the Corporate Transaction, to become
exercisable for the Option Shares in one or more installments in accordance
with the provisions of the Option Agreement. However, immediately upon an
Involuntary Termination of Optionee's Service within eighteen (18) months
following such Corporate Transaction, the assumed Option, to the extent
outstanding at the time but not otherwise fully exercisable, shall
automatically accelerate so that the Option shall become immediately
exercisable for all the Option Shares at the time subject to the Option and
may be exercised for any or all of those Option Shares as fully vested shares.
2. The Option shall not accelerate upon the occurrence of a
Change in Control, and the Option shall, over Optionee's period of Service
following such Change in Control, continue to become exercisable for the
Option Shares in one or more installments in accordance with the provisions
of the Option Agreement. However, immediately upon an Involuntary
Termination of Optionee's Service within eighteen (18) months following the
Change in Control, the Option, to the extent outstanding at the time but not
otherwise fully exercisable, shall automatically accelerate so that the
Option shall become immediately exercisable for all the Option Shares at the
time subject to the Option and may be exercised for any or all of those
Option Shares as fully vested shares.
3. The Option as accelerated pursuant to this Addendum shall
remain so exercisable until the EARLIER of (i) the Expiration Date or (ii)
the expiration of the one (1)-year period measured from the date of the
Optionee's Involuntary Termination.
4. For purposes of this Addendum the following definitions shall
be in effect:
(i) An INVOLUNTARY TERMINATION shall mean the
termination of Optionee's Service by reason of:
(A) Optionee's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or
(B) Optionee's voluntary resignation following
(A) a change in Optionee's position with the Corporation (or Parent or
Subsidiary employing Optionee) which materially reduces Optionee's
duties and responsibilities or the level of management to which
Optionee reports, (B) a reduction in Optionee's level of compensation
(including base salary, fringe benefits and target bonus under any
corporate performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of Optionee's place of
employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected by the Corporation without
Optionee's consent.
(ii) A CHANGE IN CONTROL shall be deemed to occur in
the event of a change in ownership or control of the Corporation
effected through either of the following transactions:
(A) the acquisition, directly or indirectly, by
any person or related group of persons (other than the Corporation or
a person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934, as amended) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders, or
(B) a change in the composition of the Board over
a period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (i) have been Board members continuously since
the beginning of such period or (ii) have been elected or nominated
for election as Board members during such period by at least a
majority of the Board members described in clause (i) who were still
in office at the time the Board approved such election or nomination.
5. The provisions of Paragraph 1 of this Addendum shall govern the
period for which the Option is to remain exercisable following the Involuntary
Termination of Optionee's Service within eighteen (18) months after the
Corporate Transaction or Change in Control and shall supersede any provisions to
the contrary in Paragraph 5 of the Option Agreement.
IN WITNESS WHEREOF, Rhythms NetConnections Inc. has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.
RHYTHMS NETCONNECTIONS INC.
By:
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Title:
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EFFECTIVE DATE:
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