EXHIBIT 99.2
FORM OF RHYTHMS NETCONNECTIONS INC. STOCK AWARD AGREEMENT
RHYTHMS NETCONNECTIONS INC.
STOCK AWARD AGREEMENT
THIS STOCK AWARD AGREEMENT (this "AGREEMENT") is made and entered into this
_____ day of _________________, by and between Rhythms NetConnections Inc., a
Delaware corporation, and _________________, the recipient of a Stock Award
("GRANTEE") under the Corporation's 2000 Stock Award Plan (the "PLAN").
Capitalized terms used in this Agreement and not otherwise defined have the
meanings given to them in the Plan and in the APPENDIX of defined terms attached
to the Plan.
A. PURCHASE OF SHARES
1. PURCHASE. The Corporation hereby grants to the Grantee the right
to purchase up to shares of Common Stock (the "STOCK AWARD SHARES") pursuant to
the provisions of the Plan and this Agreement at the purchase price of $0 per
share.
2. ASSIGNMENT SEPARATE FROM CERTIFICATE. Concurrently with the
delivery of this Agreement to the Corporation, the Grantee shall deliver to the
Corporation a duly-executed blank Assignment Separate from Certificate (in the
form attached hereto as EXHIBIT I) with respect to the Stock Award shares.
3. STOCKHOLDER RIGHTS. Until such time as the Grantee forfeits his
rights to receive any unvested Stock Award shares, the Grantee (or any successor
in interest) shall have all the rights of a stockholder (including voting,
dividend and liquidation rights) with respect to such unvested Stock Award
shares, subject, however, to the Vesting Schedule, as defined below. From and
after the date of cessation of Service, the Grantee shall forfeit any and all
rights in and to any Stock Award shares that are unvested as of the date of
cessation.
4. ESCROW. The Corporation shall have the right to hold each Stock
Award Share in escrow until such share has vested in accordance with the Vesting
Schedule.
5. COMPLIANCE WITH LAW. Under no circumstances shall shares of
Common Stock or other assets be issued or delivered to the Grantee pursuant to
the provisions of this Agreement unless, in the opinion of counsel for the
Corporation or its successors, there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is at the time listed for trading and all
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.
B. TRANSFER RESTRICTIONS
1. RESTRICTIONS ON TRANSFER OF UNVESTED STOCK AWARD SHARES. The
Grantee shall not transfer, assign, encumber or otherwise dispose of any of the
Grantee's unvested Stock Award shares.
2. RESTRICTIVE LEGEND. The stock certificate for the Stock Award
shares shall be endorsed with the following restrictive legend:
"The shares represented by this certificate are unvested and subject
to certain repurchase rights granted to the Corporation and
accordingly may not be sold, assigned, transferred, encumbered, or in
any manner disposed of except in conformity with the terms of a
written agreement dated ____________, ______ between the Corporation
and the registered holder of the shares (or the predecessor in
interest to the shares). A copy of such agreement is maintained at the
Corporation's principal corporate offices."
C. VESTING SCHEDULE
1. VESTING SCHEDULE. The Stock Award shares shall vest and be earned
by the Grantee according to the following vesting schedule ("VESTING SCHEDULE"):
- [EMPLOYEES HIRED PRIOR TO MAY 5, 2000 IN THE MONTHS OF MAY, JUNE,
JULY, AUGUST OR SEPTEMBER OF ANY YEAR PRIOR TO 2000: (a) fifty percent
(50%) of the your Stock Award shares shall vest on September 15, 2000,
and (b) the remaining fifty percent (50%) of your Stock Award shares
shall vest on September 15, 2001.]
ALTERNATIVELY
- [ALL OTHER EMPLOYEES: (a) fifty percent (50%) of your Stock Award
shares shall vest on the 15th day of your first Anniversary Month, as
defined below, occurring after the date of grant of your Stock Award
and (b) the remaining fifty percent (50%) of your Stock Award shares
shall vest on the 15th day of your second Anniversary Month after the
date of grant of your Stock Award.]
The term "ANNIVERSARY MONTH" means the same month each year as the
month in which your employment commenced (or commences) with the Corporation, as
shown in the Corporation's records.
2. RECAPITALIZATION. Any new, substituted or additional securities
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the Stock
Award shares shall be immediately subject to the Vesting Schedule and any escrow
requirements hereunder, but only to the extent the Stock Award shares are at the
time covered by such Vesting Schedule and/or escrow requirements. Appropriate
adjustments to reflect such distribution shall be made to the number and/or
class of securities subject to this Agreement in order to reflect the effect of
any such Recapitalization upon the Corporation's capital structure.
3. CORPORATE TRANSACTIONS/CHANGE OF CONTROL. All of the Grantee's
unvested Stock Award shares shall immediately vest, in full, in the event of any
Corporate Transaction or Change of Control, except to the extent such
accelerated vesting is otherwise expressly precluded herein.
D. SPECIAL TAX ELECTION
1. SECTION 83(b) ELECTION. Under Code Section 83, the excess of the
fair market value of the Stock Award shares on the date any forfeiture
restrictions applicable to such shares lapse
over the Purchase Price paid for such shares will be reportable as ordinary
income on the lapse date. For this purpose, the term "forfeiture restrictions"
includes the Vesting Schedule. The Grantee may elect under Code Section 83(b) to
be taxed at the time the Stock Award shares are acquired, rather than when and
as such Stock Award shares cease to be subject to such forfeiture restrictions.
Such election must be filed with the Internal Revenue Service within thirty (30)
days after the date of this Agreement. THE FORM FOR MAKING THIS ELECTION IS
ATTACHED AS EXHIBIT II HERETO. THE GRANTEE UNDERSTANDS AND ACKNOWLEDGES THAT
FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL
RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS
LAPSE.
2. FILING RESPONSIBILITY. THE GRANTEE ACKNOWLEDGES THAT IT IS THE
GRANTEE'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF THE GRANTEE REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF. EACH GRANTEE IS
URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES
AND ADVISABILITY OF MAKING A CODE SECTION 83(b) ELECTION.
E. GENERAL PROVISIONS
1. AT WILL EMPLOYMENT. Nothing in this Agreement or in the Plan
shall confer upon the Grantee any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Corporation (or any Parent or Subsidiary employing or retaining the
Grantee) or of the Grantee, which rights are hereby expressly reserved by each,
to terminate the Grantee's Service at any time for any reason, with or without
cause.
2. NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this Section
E. to all other parties to this Agreement.
3. NO WAIVER. The failure of the Corporation in any instance to
exercise any rights afforded to it hereunder shall not constitute a waiver of
any such rights or any other rights that may subsequently arise under this
Agreement or any other agreement between the Corporation and the Grantee. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
4. CANCELLATION OF SHARES. If the Grantee forfeits any Stock Award
shares for any reason, then from and after the date of such forfeiture, the
Grantee shall no longer have any rights as a holder of, or in and to any of,
such forfeited shares. Such forfeited shares shall revert to the Corporation in
accordance with the applicable provisions hereof, and the Corporation shall be
deemed the owner and holder of such shares, whether or not the certificates
therefor have been delivered back to the Corporation as required by this
Agreement.
5. GRANTEE UNDERTAKING. The Grantee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either the Grantee or the Stock Award
shares pursuant to the provisions of this Agreement.
6. AGREEMENT IS ENTIRE CONTRACT. This Agreement and the Notice of
Stock Award, dated of even date herewith with respect to the Stock Award
referenced herein (the "NOTICE OF STOCK AWARD") together, constitute the entire
contract between the parties hereto with regard to the subject matter hereof.
This Agreement and the Notice of Stock Award are made pursuant to the provisions
of the Plan and shall in all respects be construed in conformity with the terms
of the Plan. In the event of a conflict between the terms of the Plan and the
terms of this Agreement, the Notice of Stock Award and/or the Plan, the Plan
shall govern. All of the terms and conditions of the Notice of Stock Award and
the Plan are incorporated herein by reference.
7. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Colorado without resort to that
State's conflict-of-laws rules.
8. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
9. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon the Grantee, the Grantee's assigns and the legal
representatives, heirs and legatees of the Grantee's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
10. TAX WITHHOLDING. The Corporation's obligation to deliver Stock
Award shares to a Grantee upon the vesting of such shares under the Plan shall
be subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements. The Grantee shall have the right to
use shares of Common Stock in satisfaction of all or part of the Withholding
Taxes to which the Grantee may become subject in connection with the vesting of
their shares. If Grantee elects to pay withholding taxes with shares, then
Grantee shall elect one of the two payment mechanisms set forth in Article VII
of the Plan and shall timely notify the Corporation, in writing, of such
election.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first indicated above.
RHYTHMS NETCONNECTIONS INC.
By:
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Title:
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Address:
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GRANTEE
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Signature
Address:
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SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of the Grantee has read and hereby approves the foregoing
Agreement. In consideration of the Corporation's granting the Grantee the right
to acquire the Stock Award shares in accordance with the terms of such
Agreement, the undersigned hereby agrees to be irrevocably bound by all the
terms of such Agreement and the Plan, including (without limitation) the
forfeiture of any Stock Award shares that are not vested at the time of the
Grantee's termination of Service.
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GRANTEE'S SPOUSE
Address:
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EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________ hereby sell(s), assign(s) and
transfer(s) unto Rhythms NetConnections Inc. (the "Corporation"),
______________ shares of the Common Stock of the Corporation standing in his
or her name on the books of the Corporation represented by Certificate No.
______________ herewith and do(es) hereby irrevocably constitute and appoint
______________________________ Attorney to transfer the said stock on the
books of the Corporation with full power of substitution in the premises.
Dated: _________________, _____.
Signature
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INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enforce the forfeiture rights
with respect to all Stock Award shares that are not vested at the time of your
termination of Service, should that occur, without requiring additional
signatures on the part of the Grantee at the time of termination.
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is _________
shares of the common stock of Rhythms NetConnections Inc.
(3) The property was issued on _________________, _________.
(4) The taxable year in which the election is being made is the calendar year
_________.
(5) The property is subject to a vesting schedule pursuant to which the
taxpayer will forfeit the shares if he or she does not remain in the employ
of the issuer through certain scheduled vesting dates over an approximately
two-year period.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $__________ per share.
(7) The amount paid for such property is $0 per share.
(8) A copy of this statement was furnished to Rhythms NetConnections Inc. for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on ________________________, _______.
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Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with
which taxpayer files his or her Federal income tax returns and must be made
within thirty (30) days after the execution date of the Stock Issuance
Agreement. This filing should be made by registered or certified mail, return
receipt requested. The Grantee must retain two (2) copies of the completed form
for filing with his or her Federal and state tax returns for the current tax
year and an additional copy for his or her records.
