<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1999
REGISTRATION NO. 333-72409
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
RHYTHMS NETCONNECTIONS INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 4813 33-0747515
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>
6933 SOUTH REVERE PARKWAY
ENGLEWOOD, COLORADO 80112
(303) 476-4200
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
------------------------
CATHERINE HAPKA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RHYTHMS NETCONNECTIONS INC.
6933 SOUTH REVERE PARKWAY
ENGLEWOOD, COLORADO 80112
(303) 476-4200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------
COPIES TO:
JOHN A. DENNISTON, ESQ. MALCOLM I. ROSS, ESQ.
MARTIN C. NICHOLS, ESQ. MICHAEL S. NOVINS, ESQ.
BROBECK, PHLEGER & HARRISON LLP BAKER & MCKENZIE
550 WEST "C" STREET, SUITE 1200 805 THIRD AVENUE
SAN DIEGO, CALIFORNIA 92101 NEW YORK, NEW YORK 10022
(619) 234-1966 (212) 751-5700
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the common stock being registered. All the amounts shown are estimates,
except for the registration fee and the NASD fee.
<TABLE>
<S> <C>
Registration fee................................................ $ 45,870
Nasdaq National Market fee...................................... 70,000
NASD fee........................................................ 17,000
Blue Sky fees and expenses...................................... 5,000
Printing and engraving expenses................................. 350,000
Legal fees and expenses......................................... 500,000
Accounting fees and expenses.................................... 200,000
Transfer Agent and Registrar fees............................... 10,000
Miscellaneous expenses.......................................... 52,130
---------
Total....................................................... $1,250,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law permits indemnification
of the Registrant's officers and directors under certain conditions and subject
to certain limitations. Section 145 of the Delaware General Corporation Law also
provides that a corporation has the power to purchase and maintain insurance on
behalf of its officers and directors against any liability asserted against such
person and incurred by him or her in such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to indemnify
him or her against such liability under the provisions of Section 145 of the
Delaware General Corporation Law.
Article VII, Section 1 of the Registrant's Restated Bylaws provides that the
Registrant shall indemnify its directors and executive officers to the fullest
extent not prohibited by the Delaware General Corporation Law. The rights to
indemnity thereunder continue as to a person who has ceased to be a director,
officer, employee or agent and inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director or
executive officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding by reason of the fact that he or she is
or was a director or officer of the Registrant (or was serving at the
Registrant's request as a director or officer of another corporation) shall be
paid by the Registrant in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Registrant as authorized by the
relevant section of the Delaware General Corporation Law.
As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
Article V, Section (A) of the Registrant's Restated Certificate of Incorporation
provides that a director of the Registrant shall not be personally liable for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Registrant
or its stockholders, (ii) for acts or omissions not in good faith or acts or
omissions that involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived any improper personal benefit.
II-1
<PAGE>
The Registrant has entered into indemnification agreements with each of its
directors and executive officers. Generally, the indemnification agreements
attempt to provide the maximum protection permitted by Delaware law as it may be
amended from time to time. Moreover, the indemnification agreements provide for
certain additional indemnification. Under such additional indemnification
provisions, however, an individual will not receive indemnification for
judgments, settlements or expenses if he or she is found liable to the
Registrant (except to the extent the court determines he or she is fairly and
reasonably entitled to indemnity for expenses), for settlements not approved by
the Registrant or for settlements and expenses if the settlement is not approved
by the court. The indemnification agreements provide for the Registrant to
advance to the individual any and all reasonable expenses (including legal fees
and expenses) incurred in investigating or defending any such action, suit or
proceeding. In order to receive an advance of expenses, the individual must
submit to the Registrant copies of invoices presented to him or her for such
expenses. Also, the individual must repay such advances upon a final judicial
decision that he or she is not entitled to indemnification.
The Registrant has purchased directors' and officers' liability insurance.
The Registrant intends to enter into additional indemnification agreements with
each of its directors and executive officers to effectuate these indemnity
provisions.
The underwriting agreement (Exhibit 1.1 hereto) contains provisions by which
the underwriters have agreed to indemnify the Registrant, each person, if any,
who controls the Registrant within the meaning of Section 15 of the Securities
Act, each director of the Registrant, and each officer of the Registrant who
signs this registration statement, with respect to information furnished in
writing by or on behalf of the underwriters for use in the registration
statement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its incorporation in February 1997, the Registrant has issued and sold
unregistered securities as follows (adjusted for subsequent stock splits):
(1) An aggregate of 2,161,764 shares of common stock was issued in
private placements in February through June 1997 to Enterprise Partners in
connection with the Registrant's initial funding. The consideration received
for such shares was $901.
(2) An aggregate of 6,140,000 shares of Series A preferred stock (which
are currently convertible into 14,736,000 shares of common stock) was issued
in a private placement in July 1997 to Brentwood Venture Capital, Enterprise
Partners, Kleiner Perkins Caufield & Byers, the Sprout Group and certain
other purchasers pursuant to a Series A preferred stock Purchase Agreement.
The consideration received for such shares was $6,138,500.
(3) An aggregate of 6,350,000 shares of Series A preferred stock (which
are currently convertible into 15,240,000 shares of common stock) was issued
in a private placement in December 1997 to Brentwood Venture Capital,
Enterprise Partners, Kleiner Perkins Caufield & Byers, the Sprout Group and
certain other purchasers pursuant to a Series A preferred stock Purchase
Agreement and a Subsequent Closing Purchase Agreement. The consideration
received for such shares was $6,350,000.
(4) An aggregate of 365,094 shares of Series A preferred stock (which
are currently convertible into 876,226 shares of common stock) was issued in
a private placement in February 1998 to Catherine Hapka in connection with
the Series A preferred stock Purchase Agreement, the Subsequent Closing
Purchase Agreement and an employment agreement between the Company and Ms.
Hapka. The consideration received for such shares was $292,075.
(5) An aggregate of 4,044,943 shares of Series B preferred stock (which
are currently convertible into 9,707,863 shares of common stock) was issued
in a private placement in March 1998 to Brentwood Venture Capital,
Enterprise Partners, Kleiner Perkins Caufield & Byers, the
II-2
<PAGE>
Sprout Group and Enron Communications Group, Inc. The consideration received
for such shares was $18,000,000.
(6) In May 1998 the Registrant issued 290,000 units consisting of
13 1/2% senior discount notes due 2008 and warrants to purchase an aggregate
of 4,732,800 shares of common stock with exercise prices of $0.004 per share
to Merrill Lynch & Co. and Donaldson, Lufkin & Jenrette Securities
Corporation, as initial purchasers, for resale to qualified institutional
buyers. Merrill Lynch & Co. and Donaldson, Lufkin & Jenrette Securities
Corporation received commissions of $5,262,920 for acting as initial
purchasers in connection with this transaction.
(7) In May 1998 the Registrant issued to Sun Financial Group, Inc., now
GATX Capital Corporation, a warrant to purchase 574,380 shares of common
stock with an exercise price of $1.85 per share in connection with an
equipment lease financing.
(8) In March 1999 the Registrant issued to MCI WorldCom Venture Fund,
Inc. and to Microsoft Corporation 3,731,410 and 3,731,409 shares of Series C
preferred stock, respectively, and issued to each of them a warrant to
purchase 720,000 shares of common stock for an aggregate purchase price of
$60.0 million.
(9) From August 1997 through March 16, 1999, the Registrant granted
stock options to purchase an aggregate of 10,508,781 shares of common stock
to employees and consultants with aggregate exercise prices ranging from
$0.04 to $3.33 per share pursuant to the Registrant's stock option plan. As
of March 16, 1999, 7,017,775 shares of common stock have been issued upon
exercise of options.
No underwriters were used in connection with these sales and issuances
except for the issuance of the senior discount notes and related warrants in (6)
above. The sales and issuances of these securities except for those in (6) above
were exempt from registration under the Securities Act pursuant to Rule 701
promulgated thereunder on the basis that these securities were offered and sold
either pursuant to a written compensatory benefit plan or pursuant to written
contracts relating to consideration, as provided by Rule 701, or pursuant to
Section 4(2) thereof on the basis that the transactions did not involve a public
offering. The sales and issuance in (6) above were exempt from registration
under the Securities Act pursuant to Section 4(2) and, in connection with the
resale by the initial purchasers of the securities described in (6) above, Rule
144A thereunder.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1** Form of Purchase Agreement.
3.1** Restated Certificate of Incorporation of the Registrant, as amended.
3.2+ Form of Restated Certificate of Incorporation of the Registrant to become effective immediately prior
to the Offering.
3.3** Bylaws of the Registrant, as amended.
3.4+ Form of Restated Bylaws of the Registrant to be effective upon completion of the Offering.
4.1 Form of Certificate of common stock.
4.2* Indenture, dated as of May 5, 1998, by and between the Registrant and State Street Bank and Trust
Company of California, N.A., as trustee, including form of the Registrant's 13 1/2% Senior Discount
Notes due 2008, Series A and form of the Registrant's 13 1/2% Senior Discount Notes due 2008, Series
B.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
4.3* Warrant Agreement, dated as of May 5, 1998, by and between the Registrant and State Street Bank and
Trust Company of California, N.A.
4.4* Warrant Registration Rights Agreement, dated as of May 5, 1998, by and among the Registrant and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Donaldson, Lufkin &
Jenrette Securities Corporation.
4.5** Warrant to Purchase Shares of Common Stock, dated May 19, 1998, by and between the Registrant and Sun
Financial Group, Inc.
4.6** Common Stock Purchase Warrant, dated March 3, 1999, by and between the Registrant and MCI WorldCom
Venture Fund, Inc.
4.7** Common Stock Purchase Warrant, dated March 16, 1999, by and between the Registrant and Microsoft
Corporation.
5.1 Opinion of Brobeck, Phleger & Harrison LLP with respect to the common stock being registered.
9.1* Voting Trust Agreement, dated as of May 5, 1998, by and among Sprout Capital VII, L.P., Donaldson
Lufkin & Jenrette Securities Corporation, and First Union Trust Company, National Association, as
trustee.
9.2* Voting Trust Agreement, dated as of March 12, 1998, by and between Enron Communications Group, Inc.
and the Registrant, as trustee.
9.3* Amended and Restated Voting Agreement, dated March 12, 1998, by and among the Registrant and the
parties listed on the Schedule of Investors attached thereto as Schedule A, as amended.
9.4** Voting Trust Agreement, dated March 3, 1999, by and between MCI WorldCom Venture Fund, Inc. and the
Registrant, as trustee.
10.1* Series A Preferred Stock Purchase Agreement, dated July 3, 1997, by and among the Registrant and the
Investors listed on Schedule A thereto.
10.2* Subsequent Closing Purchase Agreement, dated December 23, 1997, by and among the Registrant and the
Investors listed on Schedule A thereto.
10.3* Series B Preferred Stock Purchase Agreement, dated March 12, 1998, by and among the Registrant and
the Investors listed on Schedule A thereto.
10.4**++ Enterprise Services Solution Agreement between Cisco Systems, Inc. and the Registrant, dated December
3, 1998
10.5** Series C Preferred Stock Purchase Agreement, dated March 3, 1999, by and among the Registrant and MCI
WorldCom Venture Fund, Inc.
10.6** Amended and Restated Investors' Rights Agreement, dated March 3, 1999, by and among the Registrant
and the Investors listed on Schedule A thereto.
10.7**++ Agreement, dated March 3, 1999, by and between the Registrant and MCI WorldCom, Inc.
10.8** Series C Preferred Stock and Warrant Purchase Agreement, dated March 16, 1999, by and among the
Registrant and Microsoft Corporation.
10.9** Amended and Restated Investors' Rights Agreement, dated March 16, 1999, by and among the Registrant
and the Investors listed on Schedule A thereto.
10.10** Distribution Agreement, dated March 16, 1999, by and among the Registrant and Microsoft Corporation.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.11* Master Lease Agreement No. 1642 and Addendum thereto, each dated November 19, 1997, and Second
Addendum thereto, dated as of May 19, 1998, between the Registrant and Sun Financial Group, Inc.
10.12** Business Lease (Single Tenant) between the Registrant and BR Venture, LLC dated September 1998.
10.13* Employment Agreement between the Registrant and Catherine M. Hapka, dated June 10, 1997.
10.14* Employment Agreement between the Registrant and Jeffrey Blumenfeld, dated August 10, 1997.
10.15* Employment Agreement between the Registrant and James A. Greenberg, dated July 14, 1997.
10.16* Employment Agreement between the Registrant and Rand A. Kennedy, dated August 22, 1997.
10.17* 1997 Stock Option/Stock Issuance Plan.
10.18+ 1999 Stock Incentive Plan.
10.19+ 1999 Stock Incentive Plan Form of Notice of Grant.
10.20+ 1999 Stock Incentive Plan Form of Stock Option Agreement.
10.21+ 1999 Stock Incentive Plan Form of Stock Issuance Agreement.
10.22+ 1999 Employee Stock Purchase Plan.
10.23* Form of Indemnification Agreement between the Registrant and each of its directors.
10.24* Form of Indemnification Agreement between the Registrant and each of its officers.
10.25* QuickStart Loan and Security Agreement, dated October 29, 1997, between the Registrant and Silicon
Valley Bank.
21.1* Subsidiaries of the Registrant.
23.1 Consent of Brobeck, Phleger & Harrison LLP (filed with Exhibit 5.1)
23.2** Consent of PricewaterhouseCoopers LLP.
24.1** Powers of Attorney.
24.2** Powers of Attorney.
27.1** Financial Data Schedule.
</TABLE>
- ------------------------
* Previously filed with the Commission as an exhibit to the registration
statement on Form S-4 (File No. 333-59393) and incorporated herein by
reference.
** Previously filed.
+ To be filed by amendment.
++ Certain confidential portions of this Exhibit were omitted by means of
redacting a portion of the text (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to
the Registrant's Application Requesting Confidential Treatment under Rule
406 under the Securities Act.
(b) Financial Statement Schedules included separately in the registration
statement.
All other schedules are omitted because they are not required, are not
applicable or the information is included in the Financial Statements or notes
thereto.
II-5
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Englewood, State of
Colorado, on the 2nd day of April 1999.
RHYTHMS NETCONNECTIONS INC.
By: /s/ SCOTT C. CHANDLER
-----------------------------------------
Scott C. Chandler
CHIEF FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ President, Chief Executive April 2, 1999
Catherine M. Hapka Officer and Director
/s/ SCOTT C. CHANDLER
- ------------------------------ Chief Financial Officer April 2, 1999
Scott C. Chandler
*
- ------------------------------ Director April 2, 1999
Kevin R. Compton
*
- ------------------------------ Director April 2, 1999
Keith B. Geeslin
*
- ------------------------------ Director April 2, 1999
Ken L. Harrison
*
- ------------------------------ Director April 2, 1999
Susan Mayer
*
- ------------------------------ Director April 2, 1999
William R. Stensrud
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ Director April 2, 1999
John L. Walecka
*
- ------------------------------ Director April 2, 1999
Edward J. Zander
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ SCOTT C. CHANDLER
-------------------------
Scott C. Chandler
ATTORNEY IN FACT
</TABLE>
II-8
<PAGE>
Number Shares
[Rhythms Swirl Logo]
-------------------------
CUSIP 762430 20 5
-------------------------
R H Y T H M S-TM-
SEE REVERSE
FOR CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
$0.001 PAR VALUE
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF $0.001 PAR VALUE COMMON STOCK OF
RHYTHMS NETCONNECTIONS INC.
transferable only on the books of the Company by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned by the Transfer
Agent and Registrar.
IN WITNESS WHEREOF, the said Company has caused this Certificate to be
executed by the facsimile signatures of its duly authorized officers and to be
sealed with the facsimile seal of the Company.
Dated:
/s/ Scott C. Chandler /s/ Catherine M. Hapka
- ------------------------------- [SEAL] ----------------------------
SECRETARY PRESIDENT and CEO
COUNTERSIGNED AND REGISTERED:
American Securities Transfer & Trust, Inc.
By:
--------------------------------
Authorized Signature
<PAGE>
RHYTHMS NETCONNECTIONS INC.
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S><C>
TEN COM -as tenants in common UNIF GIFT MIN ACT - .......Custodian.........
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of under Uniform Gifts to Minors Act
survivorship and not as tenants
in common .................................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
- --------------------------------------------------------------------------------
For Value Received, _____________________________________ hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares of the Common Stock represented by the within Certificate, and does
hereby irrevocably constitute and appoint_______________________________________
____________________________________________ attorney-in-fact to transfer the
said stock on the books of the within-named Corporation, with full power of
substitution in the premises.
Dated
----------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATSOEVER. SIGNATURE MUST BE GUARANTEED.
Signature(s) Guaranteed:
By
------------------------------
The signature(s) must be guaranteed by an eligible guarantor institution (Banks,
Stockbrokers, Savings and Loan Associations and Credit Unions with membership in
an approved signature guarantee Medallion Program), pursuant to S.E.C. Rule
17Ad-15.
<PAGE>
[LETTERHEAD]
April 2, 1999
RHYTHMS NETCONNECTIONS INC.
6933 South Revere Parkway
Englewood, Colorado 80112
Re: RHYTHMS NETCONNECTIONS INC. Registration Statement on Form S-1
for up to 10,781,250 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to RHYTHMS NETCONNECTIONS INC., a Delaware
corporation (the "Company"), in connection with the proposed issuance and sale
by the Company of up to 10,781,250 shares of the Company's Common Stock (the
"Shares"), including 1,406,250 Shares which the Underwriters have the option to
purchase to cover over-allotments, if any, pursuant to the Company's
Registration Statement on Form S-1 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act").
This opinion is being furnished in accordance with the requirements of
Item 16(a) of Form S-1 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the issuance and sale of the
Shares. Based on such review, we are of the opinion that the Shares have been
duly authorized, and if, as and when issued in accordance with the Registration
Statement and the related prospectus (as amended and supplemented through the
date of issuance) will be legally issued, fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus which is part of the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Act, the rules and
regulations of the Securities and Exchange Commission promulgated thereunder, or
Item 509 of Regulation S-K.
<PAGE>
RHYTHMS NETCONNECTIONS, INC. April 2, 1999
Page 2
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 10.4
ENTERPRISE SERVICES SOLUTION AGREEMENT
Agreement, dated December 3, 1998 (the "Agreement"), by and between Cisco
Systems, Inc., a California corporation ("Cisco"), and Rhythms NetConnections
Inc., a Delaware corporation ("Rhythms").
PREAMBLE:
Rhythms and Cisco have recently announced a long-term working relationship
in connection with Rhythms' purchase of significant telecommunications equipment
from Cisco and Rhythms' establishment of a new platform for the San Francisco,
and adjacent areas in the Bay Area, San Diego, Los Angeles, California, and
adjacent areas, Boston, Massachusetts and adjacent areas, and when operational
in calendar 1999, Austin, Texas and adjacent areas, Research Triangle Park, and
adjacent areas, and other specified United States locations (collectively, the
"Market").
After Rhythms successful demonstration of a pilot DSL program for Cisco
telecommuters in the San Diego market, Cisco has chosen Rhythms to be the
primary provider of a DSL network to Cisco's Operations/Information Services
telecommuters in the Market, and Rhythms is willing to accept such appointment
and to provide a DSL network designed to serve each of Cisco's approximately
8,000 current and projected telecommuters on the terms and conditions described
herein.
NOW, THEREFORE, in connection with the premises hereof, and the mutual
agreements, covenants, and representations and warranties set forth herein, the
parties thereto hereby agree as follows:
1. ENTERPRISE SERVICES SOLUTION.
1.1 ENTERPRISE SERVICES SOLUTION DEFINED. Rhythms Enterprise Services
Solution is an end-to-end managed and supported telework program or LAN
interconnect service for branch office connectivity, designed for Cisco
consisting of the following features: (a) Rhythms' provision of all necessary
telework service ordering, installation, billing, reporting, and support; (b)
Rhythms' implementation of seamless service functions into Cisco's ordering,
installation, billing, reporting and support services; (c) Rhythms' management
of Cisco's telework program with 24 x 7, Tier 1 support for both ingress/egress
circuits as well as appropriate customer premises equipment ("CPE"); (d)
Rhythms' provision of CPE needed for such telework program and related
installation, configuration and management of all CPE; (e) Rhythms' ownership
and management of all circuits; (f) Rhythms' provision of xDSL (i.e., IDSL
128/144K, ADSL speed range 384Kbps symmetrical to 7Mbps/1Mbps asymmetrical,
Fractional T1 at comparable ADSL speeds); (g) Rhythms' provision of DHCP
Services in the network; (h) Rhythms will supply Cisco products for respective
deployments; (i) Rhythms' provision of (***) dedicated customer service
technicians and a dedicated project management resource; and (j) a dedicated
Rhythms Account Team, which shall include Account Management, Program
Management, and Network
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Engineering team members. This team will be appropriately scaled with ESS
volume. The purpose of the Rhythms Enterprise Services Solution is to offer
Cisco's remote teleworkers a network experience comparable to that utilized by
Cisco's on-site workers who are connected directly to Cisco's existing corporate
LAN. The Rhythms Enterprise Services Solution shall be referred to in this
Agreement as the "ESS".
1.2 PRICING. Rhythms shall sell ESS at a data rate of 384 Kilobits
symmetrically to Cisco, and Cisco shall purchase ESS as so configured, at the
prices set forth in Exhibit A hereto for each access connection (the "ESS Base
Prices"). Each individual Cisco teleworker shall receive ESS for a minimum
period of 12 months. In addition, Rhythms shall sell DS3 Egress at a data rate
of 45 Mbps symmetrically (including related installation) at the prices set
forth in Exhibit A hereto. Furthermore, Rhythms shall sell Rhythms' California
LAN/National LAN service carrying Cisco's California/ National DSL user's
traffic back to Cisco headquarters in San Jose, California or any other Cisco
location in the Market with a regional connection to Rhythms at the prices set
forth in Exhibit A1 hereto. Rhythms shall provision, if required, based on
DSL/DS1 deployment mix, DS1s at a 384 Kilobit speed to such end-user teleworkers
at the prices set forth in Exhibit A2 hereto. Rhythms shall also be prepared to
provide Cisco with (i) rerouting of Cisco's Internet traffic through Rhythms
Internet Service, in each instance upon such terms and conditions and such
implementation schedules as may be mutually agreed upon by Rhythms and Cisco
during the term of this Agreement. If and upon the occurrence of Rhythms'
failure to meet during any calendar month the performance criteria set forth in
the Service Level Agreements attached hereto as Exhibit B, the Monthly Recurring
Rates that are included in the ESS Base Prices shall be adjusted for such month
by Rhythms in the percentage amounts indicated in Exhibit B corresponding to any
applicable level of Rhythms' non-performance occurring in any such calendar
month. To the extent that any non-performance discounts may be applicable to
the ESS Base Prices, (***)
(***) the month in which the Rhythms'
non-performance occurred.
1.3 ESS DEPLOYMENT. The parties mutual objective is to apply best
effort in deploying ESS to 100% of the telecommuting population of the Cisco
Operations/Information Services nationally, provided that the ESS technology is
the most practical and cost effective solution. The parties shall each use
their commercially reasonable efforts to refine, implement and fully deploy the
ESS to all Cisco teleworkers as promptly as possible. Initially, implementation
and deployment of ESS shall commence in the Market and shall serve
(***)
(***)
(***) . In recognition of, and reliance upon, the
parties mutual objectives, Rhythms shall (a) accelerate and expand its
installation and support personnel and capacity to provide Cisco with the
monthly teleworker activation rates as determined and set forth in Exhibit C
hereto (the "ESS Monthly Activation Rates"); and (b) deploy xDSL-based services
to support ESS; PROVIDED, HOWEVER, that, in the event that central office reach
or central office deployment affects the provisioning of xDSL-based services to
certain end-user teleworkers, (***)
(***) PROVIDED,
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FURTHER, HOWEVER, that the (***) shall not exceed (***) to
(***) of the cumulative deployment to date. Cisco and Rhythms shall
hold operational-level meetings (***) and executive-level meetings
(***) to review the status of ESS until successful deployment of ESS
is completed in accordance with the parties objectives.
2. INSTALLATION. If Cisco requests Rhythms to deploy any new product
for use in connection with ESS service (a "New Product"), Rhythms shall not be
required to commence any such deployment until the (***) after either
(a) Cisco's (***) (***) or (b)
Rhythms (***) (***)
(***) .
Rhythms will need to install certain equipment and software, that is
compliant with Cisco corporate Information Technology standards, into the
computer system of Cisco and/or each Cisco teleworker to connect Cisco and/or
each Cisco teleworker to the Rhythms Network. Rhythms will supply all standard
components to connect Cisco and/or each Cisco teleworker to the Rhythms Network
(all of which components will remain the sole and exclusive property of Rhythms)
and (***)
(***) . Cisco agrees that Cisco and its
teleworkers will (a) not abuse or otherwise damage the components while they are
in their possession, (b) operate the equipment according to manufacturer
specifications, and (c) return the components in good condition (except for
deterioration from normal usage) to Rhythms upon the termination of this
Agreement and/or such teleworkers' access to ESS.
In connection with the installation, testing or subsequent service relating
to your connection with ESS, it will be necessary for Rhythms personnel or its
authorized representatives (collectively, "Rhythms Installers") to insert
certain software in each computer and possibly reconfigure some aspects of such
computer system to accommodate ESS, that is compliant with Cisco corporate
Information Technology standards. It is possible that such activities might
inadvertently result in the loss of certain programming on that computer system
that could be important, and Cisco hereby agrees that it is its responsibility
to make appropriate arrangements to prepare diskettes of all such important
information prior to the installation, testing or service of ESS. Cisco, on
behalf of Cisco and each of its teleworkers, hereby agrees that neither Rhythms
nor the Rhythms Installers will be responsible in any manner for any loss of, or
damage to, any information or programming on any such computer system or any
breach or violation of any manufacturer's or other warranty relating to such
computer or any elements included in such computer system which may occur as a
result of any installation, testing or later service conducted by Rhythms or the
Rhythms Installers as requested with respect to Rhythms components or other
equipment or programming. Rhythms agrees to provide at the conclusion of the
installation an "Introductory Package", of which contents are referenced in
Appendix A hereto, relative to the ESS service.
3. USE OF SERVICES; RIGHTS TO RESTRICT, INTERRUPT OR END SERVICE OR
THIS AGREEMENT. Rhythms is providing products and services solely for the
internal business use of Cisco as an end user, and Cisco shall be solely
responsible for the content of any transmissions
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over the Rhythms Network from its premises location or any location of any Cisco
teleworker. Cisco shall, and shall cause such of its teleworkers to, use
Rhythms' services in a manner that conforms with the terms of this Agreement,
and Cisco and its teleworkers shall not (a) attempt to gain unauthorized access
to any other system or network, or (b) interfere or disrupt other End Users,
Network Operations or Network equipment of Rhythms or any of its affiliates.
Cisco and its teleworkers shall also not (1) propagate computer viruses or other
harmful code or data or (2) impersonate any person using forged headers or other
identifying information (provided, however, that the use of anonymous re-mailers
and nicknames is allowed). Cisco hereby warrants that Cisco and each of its
teleworkers will not infringe the copyright, trademark, or other intellectual
property rights of any other person or entity through the use of the Rhythms
Network or services, and that Cisco shall not, and shall cause each of its
teleworkers not to, use the Rhythms Network or services to defame, cause an
invasion of privacy or otherwise violate the rights of any person or entity, or
violate any local, state, federal, or international statute, regulation or
treaty. The transfer of certain technical data and software across national
boundaries (including the electronic transmission thereof) is regulated by the
federal government. Cisco shall not, directly or indirectly, export or
re-export (including by electronic transmission) any regulated technical data or
software without first obtaining any required export license or governmental
approval and otherwise complying with all governmental rules and regulations
applicable to that activity. If any conduct described in this first paragraph
of Section 3 shall occur, Rhythms shall promptly notify Cisco of such offending
conduct and, if Cisco shall have failed to cause such offending conduct to cease
in a manner calculated to avoid any repetition to the reasonable satisfaction of
Rhythms, Rhythms shall have the right, in addition to other available remedies,
to suspend and interrupt ESS service to the teleworker(s) or location(s) that
Rhythms shall have identified are responsible for such offending conduct.
To maintain or improve Rhythms service or the Rhythms Network, to prevent
fraud or for other business reasons, Rhythms can restrict, interrupt or modify
the ESS service, (***) (***) but, with
respect to each interruption, restriction or modification, Rhythms will promptly
seek to resolve any situation or condition that has caused an interruption in
service to the extent that the fault involves the Rhythms Network or its
equipment. Rhythms can restrict or end ESS service to Cisco and/or any Cisco
teleworkers, if Cisco: (a) carries past due balances; (b) incurs charges larger
than any required deposit;(c) makes a false statement to Rhythms or otherwise is
in violation of any material term of this Agreement; (d) interferes with
Rhythms' customer service or any other business operations; (e) becomes
insolvent or goes bankrupt; or (f) breaches any part of this Agreement, provided
however, that no restriction for interruption of ESS shall occur if Cisco
effects a cure of any such condition within (***) after receipt of notice
from Rhythms concerning such condition. Rhythms also reserves the right to
serve notice if (i) Rhythms believes that its service is being misused or used
by anyone for unlawful activity, or (ii) the use of Rhythms service in any
premises of Cisco or any Cisco teleworker adversely affects Rhythms service to
other Rhythms' customers. All products and services of Rhythms shall be
provided subject to Rhythms' business polices, practices and procedures, which
Rhythms' reserves the right to change at any time and from time to time in its
sole discretion.
4. MUTUAL WAIVERS AND LIMITATIONS OF LIABILITY. Rhythms' maximum
liability to Cisco under any theory (including but not limited to fraud,
misrepresentation, breach of contract,
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personal injury, negligence, or products liability) is limited to a refund or
rebate of charges paid or owed to Rhythms by Cisco. The maximum liability of
Cisco to Rhythms under any theory (including but not limited to fraud,
misrepresentation, breach of contract, personal injury, negligence, or
products liability) is limited to charges Cisco owes to Rhythms, any actual
damages Cisco causes to Rhythms business or property, and any damages
collected from Rhythms by a third party arising out of Cisco's or Cisco's
teleworker's use of Rhythms products or services. Neither Cisco nor Rhythms
shall be entitled under this Agreement to recover (a) punitive damages; (b)
treble, consequential, indirect or special damages (including lost profits,
or (c) attorney's fees. Rhythms and Cisco agree not to make, and to waive to
the fullest extent allowed by law, any claim for damages other than direct,
compensatory damages as limited above. Rhythms and Cisco also agree not to
make, and to waive to the fullest extent allowed by law, any claims for
equitable relief, other than to protect any patents, copyrights, trademarks,
or other trade secrets, or Proprietary Information, or to prevent abusive,
fraudulent or illegal use of Rhythms' products or service. Cisco agrees to
indemnify Rhythms for any claims by third parties against Rhythms arising out
of the use of Rhythms' products or services by Cisco or any Cisco teleworker.
Rhythms shall not be liable to Cisco for interrupted service or problems
caused by or contributed to (i) by Cisco; (ii) by any third party; (iii) by,
atmospheric conditions or other things Rhythms does not control; or (iv) by
any act of God or natural disaster. Rhythms shall not be liable for any
claim by or against Cisco arising out of or related to (i) alteration, theft
or destruction of Cisco's computer programs, information, data files,
procedures or other property, (ii) any losses or damages Cisco may suffer in
connection with the use or inability to use Rhythms products or services, or
(iii) any data, materials or other information transmitted or received by or
to Cisco or Cisco's intended recipient that are lost or improperly
intercepted via the Internet.
5. BILLING AND PAYMENT. Rhythms shall prepare and deliver to Cisco
monthly invoices which shall include applicable monthly connectivity charges and
Cisco's usage charges (if any) for the previous period (as well as any
applicable taxes, surcharges, assessments and fees and charges charged by any
federal, state, or local government, agency or authority). Cisco shall remit
full payment to Rhythms for each such invoice within (***) after Cisco's receipt
of such invoice. If, however, Cisco believes in good faith that any such
invoice is incorrect, Cisco shall (a) timely remit payment of all undisputed
portions of any such invoice, and (b) concurrently object in writing to the
disputed portion or portions of the invoice and set forth with particularity
each basis upon which Cisco believes the invoice to be inaccurate. If payment
of any invoice by Cisco occurs after the stated payment date, Cisco shall pay a
further amount to Rhythms equal to (***) per month ( (***) annually) on
balances that remain unpaid (or, if such rate exceeds the maximum interest rate
then allowed under applicable law, then such monthly interest rate shall be the
maximum interest rate then allowed under applicable law). If the parties are
unable to resolve any such disputed invoice within (***) after the date
payment of the invoice was initially due to Rhythms, such disputed amount shall
be submitted to binding arbitration as provided in Section 10.9 of this
Agreement. Cisco's payment of any invoice shall not affect Cisco's rights to
receive any adjustment to the ESS Base Prices that may be due to Cisco pursuant
to Section 1.2 hereof or under the provisions of Article 7 hereof.
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Invoices shall be sent to the following address:
Cisco Systems, Inc.
IS Billing Department
P.O. Box 641570
San Jose, CA 95164-1570
6. CONFIDENTIAL INFORMATION.
6.1 "PROPRIETARY INFORMATION" DEFINED. As used herein, the term
"Proprietary Information" shall mean information that was or will be developed,
created or discovered by or on behalf of a specific person, or which becomes or
will become known by, or was/is conveyed by a specified person to another person
with an expectation of nondisclosure. "Proprietary Information" includes, but
is not limited to, trade secrets, computer programs, ideas, techniques,
inventions (whether patentable or not), business and product development plans,
customers and other information concerning a specified person's actual or
anticipated business, research or development, and/or personnel information, or
which is received in confidence by or for a specified reason from any other
person.
6.2 NON DISCLOSURE. Each party hereto recognizes and acknowledges that
the other party hereto possesses Proprietary Information which is important to
its business and that this Agreement creates a relationship of trust and
confidence between Rhythms and Cisco with regard to Proprietary Information. At
all times, both during the term of this Agreement and after its termination,
each party hereto (including its personnel and/or subcontractors) shall (a) keep
in confidence and trust and not use or disclose any Proprietary Information of
the other party without the prior written consent of the party who is the
rightful owner of such Proprietary Information, and (b) take reasonable
protective measures to ensure such non disclosure (which measures shall be at
least the same as measures it normally takes to protect it's own Proprietary
Information); PROVIDED, HOWEVER, that such Proprietary Information may be used
by such party in the ordinary course of performing the services and complying
with its obligations under this Agreement. Each party shall require its
personnel and/or its subcontractor(s) to execute a Non-Disclosure Agreement
containing the same requirements and conditions as set forth in this Section
6.2.
6.3 EXCEPTIONS TO NON-DISCLOSURE. Notwithstanding the provisions of
Section 6.2 hereof, neither Rhythms nor Cisco shall be limited in its use or
disclosure of any Proprietary Information that Rhythms or Cisco can demonstrate:
(a) is or has become readily publicly available without restriction through no
fault of Rhythms (or its employees or agents) or Cisco (or its employees or
agents), respectively; (b) is received without restriction from a third party
lawfully in possession of such Information and such third party was under no
obligation or duty not to disclose such Information; (c) was rightfully in
possession of Rhythms or Cisco (as the case may be) without restriction prior to
its disclosure by Cisco or Rhythms, respectively; (d) was independently
developed by employees or consultants of Rhythms or Cisco (as the case may be)
without access to Proprietary Information; or (e) is required to be disclosed by
applicable law or in connection with any legal, administrative, judicial or
governmental proceeding, hearing or process (in which event, the disclosing
party shall promptly notify the other of such proposed disclosure).
Rhythms and Cisco represents and warrants to the other party hereto that
(a) performance of the terms of this Agreement will not breach any agreement to
keep in confidence Proprietary
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Information acquired by Rhythms or Cisco, respectively, in confidence or in
trust prior to the execution of this Agreement, and (b) Rhythms and Cisco,
respectively, has not entered into (and Rhythms and Cisco, respectively, agrees
not to enter into) any agreement or commitment, either written or oral, that
conflicts or might conflict with its confidentiality obligations under this
Agreement.
6.4 EQUITABLE RELIEF. The parties each acknowledge and agree that it
would be extremely difficult to measure the amount of damages arising from a
breach or threatened breach of any covenant contained in this Article 6, and
that monetary damages would be an inadequate remedy for the irrevocable harm
that would likely result from any such breach or threatened breach.
Accordingly, in such an event, the non-breaching party shall be entitled to
temporary and permanent injunctive relief (including specific performance, an
injunction and/or a temporary restraining order) in addition to other rights and
remedies (including, without damages, monetary damages provided by law).
7. FAVORED CUSTOMER PRICING. Rhythms represents and warrants to Cisco
that throughout the term of this Agreement, the (***) for services
(***) services under
(***) . In the event that, while this
Agreement is in effect, Rhythms (***)
(***) then Cisco may
(***) . If Cisco believes in good faith that Rhythms may be (***) the
terms of this Article 7, Cisco may, (***)
(***) upon (***) advanced written notice to Rhythms and
subject to the provisions of Article 6 hereof, (***) and (***) . In the
event such (***) has
occurred, Rhythms (***) and the (***) shall be used (***) shall
be calculated as of the date beginning when (***) is determined to have
first occurred, (***) will be applied in (***). Each of the parties hereto
agrees that any periodic or temporary (***) (***)
(***) shall be deemed to be excluded from the operation of this Article 7.
8. INSURANCE. During the term of this Agreement, Rhythms at its sole
cost shall carry insurance with an "A" rated company, including but not limited
to, Comprehensive General Liability, Workers Compensation Insurance and
Automobile Liability Insurance. Rhythms will provide Cisco with a Certificate
of insurance stating that the foregoing policies are in full force and effect
within thirty (30) days after the effective date of this Agreement.
9. TERM; TERMINATION.
9.1 TERM. This Agreement shall be for a one (1) year period, with an
option to renew the second year and third year. Cisco shall provide a minimum
(30) thirty day notice of its intent to exercise this option. This contract
will continue on a month-to-month
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basis, pursuant to the terms and conditions herein, until such time that notice
is received with the intent to extend or terminate this agreement.
9.2 TERMINATION.
(a) BY CISCO. Subsequent to (***) of this
agreement, Cisco shall have the right to terminate this agreement (***)
to Rhythms. Any termination cost shall be in accordance with this article 9.2.
If Rhythms shall fail to meet the ESS Monthly Activation Rate for any full
calendar month, Cisco shall be entitled to issue a written notice (the "Default
Notice") to Rhythms reporting such non-performance that occurred during the
calendar month immediately prior to the issuance of the Default Notice. Upon
receipt of the Default Notice, if Rhythms shall thereafter fail to satisfy the
ESS Monthly Activation Rate in the next subsequent full calendar month, Cisco
shall have the right to terminate this Agreement upon thirty (30) days notice to
Rhythms. In the event that an installed ESS teleworker terminates from ESS in
the first twelve months of receiving service, Rhythms will be reimbursed (***)
for that teleworker. Not withstanding the foregoing; (a) Rhythms shall be not
deemed to have failed to meet the activation rate for any month if such failure
was as a result of Cisco's lack of demand for ESS activation's during such
month, (b) Rhythms shall be not deemed to have failed to meet the activation
rate for any month if such failure was as a result of Cisco's providing
teleworkers outside the deployment schedule, timeline for Central Office
deployment and project plan.
(b) BY RHYTHMS. Rhythms shall have the right to terminate
this Agreement, upon (***) notice to Cisco, if Cisco shall have failed
to promptly satisfy its obligations under this Agreement.
(c) BY EITHER PARTY. Either party may terminate this
Agreement upon (***) written notice to the other in the event that
the other party becomes bankrupt or insolvent, or makes an assignment for
benefit of creditors, if such proceedings are not dismissed within (***)
after commencement.
(d) TERMINATION DAMAGES. In addition to the other remedies
provided herein, each party shall be responsible for all damages, including
attorneys' fees and costs, caused by reason of such defaults by the
defaulting party.
9.3 RIGHT UPON TERMINATION. Upon the expiration or earlier termination
of this Agreement, each party shall return to the other within thirty (30) days
following such expiration or termination all papers, materials, and properties
of the other, including all Proprietary Information.
9.4 NO DAMAGE FOR TERMINATION. Neither party shall have the right to
recover damages or indemnification of any nature (whether by way of lost
profits, expenditures for promotion, payment for goodwill or payments otherwise
made in connection with the business
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contemplated by this Agreement) solely as a result of the expiration or
permitted or lawful termination of this Agreement.
9.5 SURVIVAL. The termination or expiration of this Agreement shall
not affect the provisions of Articles 3, 4, 6, 9 and 10 of this Agreement, each
of which shall survive any such termination or expiration and continue in full
force and effect thereafter.
10. MISCELLANEOUS.
10.1 SUCCESSORS AND ASSIGNS. This Agreement shall not be assigned by
Rhythms or Cisco without the prior written approval of Cisco or Rhythms,
respectively, which consent shall not be unreasonably withheld; PROVIDED,
however, that either party may assign this Agreement to any successor to at
least a majority of its respective business or assets. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective permitted successors and assigns
of the parties. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
permitted successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
10.2 BUSINESS UPTURN, DOWNTURN, AND TECHNOLOGY CHANGE. If, due to a
business upturn, corporate growth or acquisition by Cisco of a new affiliated
company that significantly affects the provisioning of the Service to Cisco
and/or the overall needs of Cisco for the Service, Cisco will be able to incur
sufficient charges to substantially reduce Rhythms's or any Carrier's costs of
providing Service to Cisco, Rhythms and Cisco will cooperate in determining any
appropriate modifications to this Agreement and applicable Carrier agreements.
Such mutually agreeable modifications may include, without limitation, changes
to the minimum requirements, the Initial Term, applicable rates and charges,
price plan tiers, and or/other provisions.
If a business downturn, corporate downsizing or divestiture of Cisco or an
affiliated company significantly affects the provisioning of the Service to
Cisco and/or the overall needs of Cisco for the Service such that Cisco will be
unable, notwithstanding its reasonable efforts, to satisfy one or more
applicable minimum commitments, Rhythms, and Cisco will jointly determine
appropriate modifications to such commitments and other provisions of this
Agreement so that Cisco is able to satisfy the affected commitments. Such
modifications may include, without limitation, changes to the affected
commitments, the initial term, applicable rates and charges, and/or other
provisions. If the parties are unable to agree upon appropriate modifications
to achieve the goals of this Section, the matter will be resolved pursuant to
Section 10.9 (Arbitration).
If Cisco is unable, notwithstanding all reasonable efforts, to meet one or
more of the minimum commitments as a result of significant changes in Cisco's
use of telecommunications technology, Rhythms, any affected Carrier, and Cisco
will jointly determine appropriate modifications to the affected commitments and
other provisions of this Agreement so that Cisco is able to satisfy the affected
commitments. Such mutually agreeable modifications may include, without
limitation, changes to the affected commitments, the initial term, applicable
rates and charges, and/or other provisions. If the parties are unable to agree
upon appropriate modifications to achieve the goals of this Section, the matter
will be resolved pursuant to Section 10.9 (Arbitration).
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10.3 TECHNOLOGY OPTIMIZATION. As reasonably requested by Cisco, but no
more than semi annually during the Initial Term and all extensions thereof,
Rhythms shall, at (***) (***) review the mix and
configuration of the Service based on Cisco's expected needs during the
succeeding twelve (12) months and consider Cisco's need for additional services,
service upgrades and all changes thereto so as to optimize the efficiency and
cost-effectiveness of Cisco's use of the Service. Based on each such review,
Rhythms shall make written recommendations to Cisco that Rhythms believes will
improve the efficiency and cost-effectiveness of the Service, including bringing
to Cisco's attention any existing or planned promotional offerings of Rhythms or
other Carriers, service upgrades, or additional services that are applicable to
Cisco's use of the Service and that Rhythms believes may be of value to Cisco.
Rhythms shall also offer advice concerning the Service, and its configuration
where Rhythms believes that they do not appear to be the most technically or
economically appropriate for addressing a known business communications need.
10.4 NEW TECHNOLOGIES
10.4.1 Rhythms acknowledges Cisco's substantial interest in
state-of-the-art technologies that offer improved performance and more efficient
and cost-effective ways to meet Cisco's communications and related requirements.
Rhythms desires to offer to Cisco such advanced technologies, whether in the
form of Service or equipment upgrades or new Services (collectively, "New
Technologies") and to keep Cisco apprised of improvements to existing
technologies and of the expected and actual availability and implementation of
New Technologies by Rhythms and other Carriers.
10.4.2 Rhythms shall offer Cisco opportunities to participate in
Beta test programs for New Technologies and services and, where mutually
agreeable, shall reasonably cooperate in the testing and deployment of new or
enhanced functions, technologies or applications, including those conceived or
developed by Cisco and/or third parties working with Cisco.
10.4.3 Rhythms shall inform Cisco of Rhythms's and any Carrier's
plans for, or the existence of, any New Technologies offered by Rhythms (or by a
third party but available through Rhythms) that Rhythms believes Cisco might
wish to consider procuring. Upon Cisco's request, Rhythms shall provide (when
available ) the price, performance specifications, installation intervals,
and/or effects of any Rhythms New Technologies on Services then being purchased
by Cisco under this Agreement.
10.4.4 Upon Rhythms's and Cisco's agreement that a potential New
Technology will be provided to Cisco or to certain End Users under this
Agreement, either in addition to, or in place of, existing Services or
technologies, such New Technology shall be considered part of the Service for
all purposes under this Agreement.
10.4.5 Where (***) requests a (***) that
(***) is either (***) to provide to (***), Cisco may, at its sole option
and upon reasonable written notice to Rhythms, (***) some or all of
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(***) that is (***) to provide the (***). In such event, Cisco may
(***) in whole or in part (***) or other (***) except for (***) provided
prior to (***). Cisco shall also receive (***) of all (***)
attributable to the (***) that are (***). Rhythms and Cisco shall also
mutually agree to (***) all minimum commitments and discount tiers
(***) . If the parties are unable to reach mutual agreement within
thirty (30) days of Cisco's (***) the matter will be resolved
through arbitration under Section 10.9 of this Agreement.
10.4.6 Where (***) requests a (***) that (***) is (***) to
provide to (***) . Cisco may, at its sole option and upon reasonable written
notice to Rhythms, propose to (***) some or all of its (***) Rhythms shall
(***) for such (***). Upon (***) to (***) Cisco's and the relevant End
User's obligations with respect to Services and technologies
(***) without any (***). Cisco shall also receive (***) attributed
to (***) by the (***).
10.4.7 Before agreeing to purchase any New Technology from Rhythms,
the parties shall negotiate the terms to govern provision of the New Technology
according to the following procedures:
(a) Rhythms and Cisco shall negotiate in good faith to
develop mutually agreeable rates, specifications, and other terms and
conditions for the New Technology. If the parties are (***) for the
(***) within (***) of the commencement of such negotiations
(***) needs so require), (***) (through
(***) process or otherwise, (***) to provide the New Technology.
(b) After (***) from (***) to provide a
(***) shall have (***) for such service (***) respects
the performance specifications risk parameters, and other terms and
conditions (***) and that were (***) At Rhythms's
request after Cisco determines that Rhythms (***) the performance
specifications, risk parameters or other terms and conditions
(***) an officer of Cisco shall certify in writing
to Rhythms that the (***) Cisco shall not be required to reveal
the confidential or proprietary information (***) (***) this
Subsection, but shall apprise Rhythms (***) e.g., by indicating in
(***) the degree to which (***) from the (***) PROVIDED,
that if Rhythms agrees to (***) then Cisco may not subsequently claim
that it (***) Rhythms shall have a (***) in connection with each
New Technology to (***) (***) and (when applicable)
(***) in all material respects other aspects of (***)
Rhythms shall not have (***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
11
<PAGE>
as provided in this Subsection (***) (i) demonstrates (***)
and the ability (***) during the negotiations
preceding (***) and (ii) submitted a reasonably (***) in response
to (***).
(c) If Rhythms is not (***)
pursuant to Subsection (a) or (b), Cisco may, at its sole option, (***)
(***) . If Cisco purchases the New Technology (***) shall be (***)
to the degree that the (***) .
10.4.8 Rhythms represents that all (***) under this
Agreement have (***) by this Section.
10.5 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California without
regard to the choice of law principles thereunder.
10.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.7 HEADINGS. The titles, subtitles and other headings used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10.8 NOTICES. Unless otherwise provided, any notice, request, demand,
instruction, document or other communication required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
its receipt addressed to the party to be notified at the address or number
indicated for such party below, or at such other address or number as such party
may designate by advanced written notification to the other party delivered as
provided in this Section 10.5. All notices, requests, demands, instructions,
documents and other communications shall be deemed duly given upon the earliest
of (i) hand delivery; (ii) the first business day after sending by reputable
overnight delivery service for next-day delivery; (iii) the third business day
after sending by first class United States mail, postage prepaid; (iv) the time
of successful facsimile or e-mail transmission as evidenced by a confirmation of
successful transmission (or in the event that the time of receipt of the fax or
e-mail in the city where the fax or e-mail is received is not during regular
business hours on a business day, then at the customary hour for the opening of
business on the next business day); or (v) the date actually received by the
other party. The current addresses and numbers of the parties hereto are as
follows:
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
12
<PAGE>
Rhythms NetConnections Inc.
7337 S. Revere Parkway, Suite 100
Englewood, Colorado
Tel. No.: 303-476-4200
Fax. No.: 303-476-4201
E-Mail: [email protected]
Attention: Mr. Frederick Smith
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134
Tel. No.: 408-527-2852
Fax. No: 408-526-4841
E-Mail: [email protected]
Attention: Michael A. Rodrigues
10.7 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
10.8 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended,
either in whole or in part, only with the written consent of each of the parties
hereto. Notwithstanding any course of conduct or dealing by the parties during
the course of this Agreement, no waiver (either generally or in a particular
instance and either retroactively or prospectively) shall be deemed to have been
made by either party hereto unless expressed in writing and signed by the
waiving party. The failure of either party to insist in any one or more
instances upon strict performance of any of the terms or provisions of this
Agreement, or to exercise any election herein contained, shall not be construed
as a waiver of any prior or subsequent rights or remedies hereunder or at law.
All remedies afforded in this Agreement shall be taken and construed as in
addition to every other remedy available at law or in equity.
10.9 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be appropriately
limited in its scope and application to make it enforceable or, if any such
limitations is not possible, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
10.10 DISPUTE RESOLUTION. All claims arising out of this Agreement shall
be resolved in accordance with the then prevailing rules of the American
Arbitration Association. Any arbitration hereunder shall be conducted in the
City of San Jose, State of California, and the arbitrator's decision and award
shall be final and binding and may be entered and enforced in any court of
competent jurisdiction. Any arbitration under this Agreement shall be heard
before a panel of three arbitrators, one selected by each party and the third
(who shall preside) selected by the first two. The arbitrators shall adhere to
the terms of this Agreement and applicable legal and regulatory requirements and
limitations in evaluating the merits of the dispute and determining the
appropriate remedy (which shall not include injunctive relief). The arbitrators
shall deliver a written opinion setting forth findings of fact and the rationale
for their decision. Rhythms and Cisco hereby submit to personal jurisdiction in
San Jose, California solely for the purposes of conducting any arbitration under
this Agreement and hereby waive all objections to the venue described herein
solely for purposes of any arbitration under this Agreement.
13
<PAGE>
10.11 RELATIONSHIP OF PARTIES. In fulfilling its obligations under this
Agreement, each party shall be acting as an independent contractor. This
Agreement does not make either party the employee, agent, or legal
representative of the other. Nothing stated in this Agreement shall be
construed as constituting Cisco and Rhythms as partners or joint venture, or
creating any other type of relationship such as principal and agent, master and
servant, etc.
10.12 PUBLICITY. From and after the execution of this Agreement, Rhythms
and Cisco shall be entitled to engage in the activities and utilize the
informational programs described in Exhibit D hereto. Except as contemplated
herein or to the extent its legal, investment or financial advisors recommend
disclosure to comply with legal or financial obligations of any such party or to
fully and accurately inform its existing shareholders or note holders and/or any
prospective investors, neither party shall disclose the existence or the terms
and conditions of this Agreement to third parties (other than subcontractors
and/or consultants) without the prior written consent of the other party unless
disclosure is compelled by operation of law or by an instrumentality of the
government (including, but not limited to, any court, tribunal or administrative
agency) or as necessary to enforce its rights hereunder.
10.13 ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto,
each of which are incorporated herein and made a part of this Agreement by this
reference) constitutes the full and entire understanding and agreement between
the parties with regard to the subject matter hereof and thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RHYTHMS NETCONNECTIONS INC.
By: /s/Frederick H. Smith 12/9/98
---------------------------------------
Frederick H. Smith Date
Vice President
National Sales
CISCO SYSTEMS, INC.
By: /s/Michael A. Rodrigues 12/3/98
---------------------------------------
Michael A. Rodrigues Date
Commodity Manager
Corporate Supply Management
14
<PAGE>
Enterprise Service Solution
Custom Pricing
PART 1: Monthly Recurring Rates for ACCESS CONNECTION, (***)
YEAR 1 Committed
Client Level
FROM TO (***)
(***)
YEAR 2 Committed
Client Level
FROM TO (***)
(***)
YEAR 3 Committed
Client Level
FROM TO (***)
(***)
(***) Installation per ACCESS CONNECTION: (***)
Part 2: DS3 EGRESS PRICING
Monthly Reacurring Rate per egress connection, (***) (***)
Part 3: HUBLETT
(***)
(***)
(***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
U S LAN/CA LAN PRICING EXHIBIT A1
PRICING
Each site with the capability of sending traffic over the WAN will be charged
for the service based on the speed of that site's access into the Rhythms
network. The WAN charges are in addition to the amount the customer will pay
for their Enterprise Teleworker and LAN Interconnect solutions. The pricing for
each WAN connected capable site is as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------
NETWORK CONNECTION WAN PRICE
-----------------------------------------------------------
<S> <C>
384k DSL (***)
-----------------------------------------------------------
512k DSL (***)
-----------------------------------------------------------
768k DSL (***)
-----------------------------------------------------------
IM DSL (***)
-----------------------------------------------------------
</TABLE>
EXAMPLE 1 - ENTERPRISE TELEWORKER SOLUTION WITH WAN CAPABILITY
[DIAGRAM]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
ENTERPRISE TELEWORKER WAN MONTHLY TOTAL MONTHLY
LOCATION NETWORK CONNECTION MONTHLY PRICE PRICE PRICE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A 384k DSL (***) (***) (***)
-------------------------------------------------------------------------------------------------------------
B 512k DSL (***) (***) (***)
-------------------------------------------------------------------------------------------------------------
C 384k DSL (***) (***) (***)
-------------------------------------------------------------------------------------------------------------
D 1.544M DS1 (Egress) (***) (***) (***)
-------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------
total (***) (***) (***)
---------------------------------------------------------------------------------------------
</TABLE>
In this example, a customer is using Rhythms Enterprise Teleworker solution to
connect remote workers in San Diego (locations A and B) and San Francisco
(location C) to the San Francisco headquarters (location D). The remote
locations communicate only with the headquarters site; traffic does not flow
directly from remote location to remote location (e.g., location B to location
C). For this customer, only locations A, B, and D send traffic over the WAN and
will be charged the additional WAN pricing as shown in the table above.
Location C does not incur additional WAN charges because its traffic is solely
local in nature.
PRICE COMPARISON VS. FRAME RELAY
THE PRICING FOR OUR SAN DIEGO - SAN FRANCISCO WAN CAPABILITY IS A GREAT DEAL!
RHYTHMS' PRICE FOR A 384K CONNECTION TO THE WAN IS ONLY (***) PER MONTH - (***)
FOR EITHER LAN INTERCONNECT OR ENTERPRISE TELEWORKER AND (***) FOR WAN ACCESS -
INCLUDING CPE, NETWORK ACCESS, AND MANAGED SERVICES. TO ACCOMPLISH THE SAME
CAPABILITY USING FRAME RELAY WOULD COST A CUSTOMER APPROXIMATELY (***) PER
MONTH.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
August 3, 1998
Page 1 of 1 Proprietary & Confidential [LOGO]
Rhythms NetConnections, Inc.
<PAGE>
DS1 PRICING EXHIBIT A2
PRICING
Cisco remote access group, may elect due to distance or Central Office location,
to receive DSI as an alternative. The table below provides pricing based on the
utilization of DSI in the telecommuter population.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
DS1 @ 384K PRICE DSI@ 384K PRICE
PERCENTAGE (DSL/DS1) (MONTHLY) (INSTALL)
-------------------------------------------------------------------------
<S> <C> <C>
90/10 - 10% DS1 (***) (***)
-------------------------------------------------------------------------
75/25 - 25% DS1 (***) (***)
-------------------------------------------------------------------------
Greater than 25% DS1 (***) (***)
-------------------------------------------------------------------------
</TABLE>
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
August 3, 1998
Page 1 of 1 Proprietary & Confidential [LOGO]
Rhythms NetConnections, Inc.
<PAGE>
Exhibit B
- --------------------------------------------------------------------------------
RHYTHMS Service Level Agreements
- --------------------------------------------------------------------------------
NETWORK AVAILABILITY
RHYTHMS is committed to providing a reliable network for its customers. With
that goal, RHYTHMS's target for Network Availability is (***) per month.
RHYTHMS's Regional Network Availability is defined as:
1 - Total minutes of connection downtime in given month
---------------------------------------------------
# of minutes in month
Regional Network Availability is measured on every interface to RHYTHMS's
Regional Network (see Figure 1).
[DIAGRAM]
FIGURE 1: BOUNDARIES FOR AVAILABILITY
The availability target does not account for non-redundant Customer
Connections, natural disasters, scheduled outages on RHYTHMS's Network,
scheduled or unscheduled outages on the customer network, or end user
equipment outages. Network downtime is calculated commencing with the date
and time on which the customer opens the trouble ticket and ending upon
confirmation from RHYTHMS that the network is restored.
If RHYTHMS does not meet *** Regional Network Availability per the above
definition, RHYTHMS will credit the customer for each affected Client or
Customer Connection according to the following table:
<TABLE>
<CAPTION>
------------------------- ---------------------------------
if availability is in service credit per affected
the range Client/Customer
Connection per month is
----------------------------------------------------------
<S> <C>
(***) (***)
----------------------------------------------------------
(***) (***)
----------------------------------------------------------
(***) (***)
----------------------------------------------------------
</TABLE>
RHYTHMS will supply *** for Regional Network Availability.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Confidential Page 1
<PAGE>
Exhibit B
NETWORK DELAY
RHYTHMS is committed to providing a fast network for its customers. RHYTHMS
supports (***) for the time to transmit a (***) message from the DSL modem
interface up to, but not including, the customer egress and back. This
measurement does not include Client Connection serialization time (see
Figure 2).
[DIAGRAM]
FIGURE 2: BOUNDARIES FOR DELAY
RHYTHMS defines round trip message delay as the sum of the following:
- time from when the last bit of the outgoing message arrives at the DSL
modem until when the last bit of the message arrives at the customer egress
- time from when the last bit of the incoming message leaves the customer
egress until when the last bit of the message leaves the DSL modem
If RHYTHMS does not meet the delay objective, RHYTHMS will credit the customer
according to the following table:
<TABLE>
<CAPTION>
---------------------------------------------------------
if delay objective is service credit per affected
not met during Client/Customer Connection
per month is
---------------------------------------------------------
<S> <C>
(***) (***)
---------------------------------------------------------
(***) (***)
---------------------------------------------------------
(***) (***)
---------------------------------------------------------
(***) (***)
---------------------------------------------------------
(***) (***)
---------------------------------------------------------
</TABLE>
RHYTHMS will provide (****) for Regional Network Delay.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Confidential Page 2
<PAGE>
Exhibit B
THROUGHPUT
RHYTHMS is committed to minimizing network congestion for its customers.
RHYTHMS's target for the customer to achieve the speed of their contracted
access through the RHYTHMS's Regional Network is (***) (see Figure 3).
Throughput is defined as the ability of the network to transmit traffic at the
contracted access speed.
[DIAGRAM]
FIGURE 3: BOUNDARIES FOR THROUGHPUT
If RHYTHMS does not meet the throughput target, RHYTHMS will credit the customer
according to the following table:
<TABLE>
<CAPTION>
--------------------------------------------------------------
if delivery objective is not service credit per affected
met during Client/Customer
Connection per month is
--------------------------------------------------------------
<S> <C>
(***) (***)
--------------------------------------------------------------
(***) (***)
--------------------------------------------------------------
(***) (***)
--------------------------------------------------------------
(***) (***)
--------------------------------------------------------------
(***) (***)
--------------------------------------------------------------
</TABLE>
RHYTHMS will supply (***) for Throughput. All reporting will be reviewed in
a mutually agreed upon fashion during the term of this Agreement. Cisco will be
generating a (***) on Rhythms's performance based on statistics on network
performance which shall be provided by Rhythms.
MEAN RESPONSE TIME
RHYTHMS commits itself to providing the best customer care experience in the
telecommunications industry. To that end, RHYTHMS promises to answer the phone
(***) and a customer is on hold (***) In additions,
Rhythms will respond to customer requests for repair and other technical
problems (***)
(***) RHYTHMS promises to update the customer on expected repair time or
RHYTHMS dispatch time to resolve the problem.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Confidential Page 3
<PAGE>
Exhibit B
MEAN TIME TO RESTORE SERVICE
RHYTHMS commits itself to restoring service within certain periods of time based
on severity of problem, and whether single or multiple clients are affected.
RHYTHMS guarantees restoration of services within the following time frames:
CUSTOMER CONNECTIONS:
- mean time to repair (***) (excluding lack of access issues) -
(***) of monthly service charge credited if not repaired (***)
- mean time to repair (***) (excluding lack of access issues) -
(***) of monthly service charge credited if not repaired (***)
RHYTHMS will manage the local loop vendor (or Incumbent Local Exchange Carrier)
on behalf of the customer for any repairs or problems related to
RHYTHMS-provided Customer Connections.
ESCALATION PROCEDURES:
RHYTHMS will escalate problems involving customers and clients based on the
escalation table in Appendix A (as developed by Rhythms and mutually agreed upon
by Rhythms and Cisco). The matrix is used as a GUIDELINE in escalating network
problems within RHYTHMS. If at any time the customer feels that results and/or
progress in resolving a network trouble is unsatisfactory, escalation using the
numbers on the contact list is encouraged. Areas to be covered are as follows:
1.) (***)
2.) (***)
3.) (***)
PROVISIONING AND INSTALLATION INTERVAL
Rhythms will target that the customer is in service between (***) of the
time, of placing the order with Rhythms (excluding customer delays). A (***)
will be given on the installation if it is not completed within this
interval.
CLIENT INSTALLATION PROMISE
Monday - Friday; appointments begin at 8:00am and the last appointment will end
at 5:00pm local time. A RHYTHMS Field Service Technician (FST) will arrive
(***) of the installation time set with the customer. If RHYTHMS technician
fails to arrive within (***) Clients installation (***) The Client
should plan for the installation to take (***) to complete after the arrival
of the FST. The Customer or Client must confirm the installation date and time
by 12:00 noon the day before the installation is scheduled or the installation
will be rescheduled. The installation is completed correctly the first time as
based on a post installation performance check completed by the installation
technician. If the installation is not completed correctly a (***) credit
on the installation shall be credited.
INSIDE WIRE WARRANTY
All RHYTHMS-installed or repaired premise wiring is warranted to be free from
defects for a period of (***) from the date of work completion. RHYTHMS
may outsource inside wire installations.
SERVICE DETERMINATION, APPROVAL, AND ORDER ENTRY PROCESS
Appendix A contains the mutually agreed upon flowchart for the service
determination, approval, and order entry process.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Confidential Page 4
<PAGE>
Exhibit B
SERVICE CHANGES (UPGRADES, MOVES, DISCONNECTS)
Appendix A contains the mutually agreed upon flowchart for service changes
including upgrades, moves, and disconnects.
GENERAL TERMS
All Network Performance Parameters are based on the assumption that the customer
network is appropriately engineered (i.e., Customer Connections are within
reasonable over-subscription limits). If Rhythms determines that the customer
network is inappropriately configured, no credits will be given.
No credits will be provided for Availability, Throughput, or Network Latency
prior to successful completion of installation. The customer will automatically
be credited. Credits provided by Rhythms hereunder shall not be cumulative for
any single failure or greater than (***) for the monthly charge within any given
month and (***) for the installation charge.
No service credits will be granted to any customer for any service interruption
or other transmission problems (including, without limitation, any inability by
Rhythms to maintain (***) under its Network Availability, Network Delay,
and Throughput commitments contained in this Exhibit B) which are caused by or
contributed to (a) by Cisco, (b) by any third party (including the customer),
(c) by atmospheric or environmental conditions, (d) by any Act of God or natural
disaster, or (e) by any person who is not controlled by, or under common control
with, Rhythms. Rhythms will nevertheless use its reasonable efforts to seek a
prompt resumption of service and/or resolution of transmission problems in
circumstances where such efforts have a reasonable likelihood of achieving those
results promptly.
DEFINITION SECTION
[DIAGRAM]
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Confidential Page 5
<PAGE>
SERVICE LEVEL AGREEMENT
APPENDIX A
<TABLE>
<S> <C> <C>
1) Service Determination Process Page #1
2) Approval and Service Installation Process Page #2
3) Employee Move Process Page #3
4) Disconnect/Change Process Page #4
5) Service Installation and Escalation Process Page #5
6) Rhythms/Cisco Systems Integration Page #6
7) Cisco/Rhythms File Transaction Process Page #7
8) Customer Acceptance Questionnaire Page #8
9) Introductory Package components Page #9
</TABLE>
<PAGE>
Rhythms NetConnections
System Engineering
Richard Weborg
CISCO SERVICE DETERMINATION PROCESS
(***)
(***)
(***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
CISCO APPROVAL AND SERVICE INSTALLATION PROCESS
APPROVAL PROCESS
(***)
(***)
(***)
INSTALLATION PROCESS
(***)
(***)
(***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
CISCO EMPLOYEE MOVE PROCESS
(***)
(***)
(***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
CISCO DISCONNECT/CHANGE
PROCESSES
CISCO DISCONNECT PROCESS (SCHEDULED)
(***)
(***)
(***)
CISCO DISCONNECT PROCESS (IMMEDIATE)
(***)
(***)
(***)
CISCO CHANGE PROCESS
(***)
(***)
(***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
CISCO SERVICE INSTALLATION ESCALATION PROCESS
- --------------------------------------------------------------------------------
The following escalation levels will be used for Installation WORK ORDERS. This
will help ensure that orders are completed as outlined in the CISCO/Rhythms
service agreement. During the Installation process if a NEW ORDER is not
assigned and being worked (***) of submission then the following escalation
will occur.
- --------------------------------------------------------------------------------
- -------------------------------------- ---------------------------------
LEVEL 1
(***) (***)
- -------------------------------------- ---------------------------------
- -------------------------------------- ---------------------------------
LEVEL 2
(***) (***)
- -------------------------------------- ---------------------------------
- -------------------------------------- ---------------------------------
LEVEL 3
(***) (***)
- -------------------------------------- ---------------------------------
- -------------------------------------- ---------------------------------
LEVEL 4
(***) (***)
- -------------------------------------- ---------------------------------
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
RHYTHMS/CISCO SYSTEM INTEGRATION
A) SERVICE DETERMINATION REQUEST D) ORDER ACKNOWLEDGEMENT
(CISCO > RHYTHMS)
(***) (***)
B) APPROVAL REQUEST (RHYTHMS >CISCO) E) ORDER COMPLETED NOTIFICATION
(RHYTHMS > CISCO)
(***) (***)
C) ORDER REQUEST (CISCO>RHYTHMS) MONTHLY BILLING
(***) (***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
CISCO\RHYTHMS
PROPOSED FILE TRANSACTION PROCESS
RHYTHMS CISCO
(***)
(***)
(***)
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
CUSTOMER ACCEPTANCE QUESTIONNAIRE
We would like to verify your satisfaction with our service. Could you please
take a few moments to complete the following questions and return this with our
Installer.
1. Were you able to access your corporate site from your PC? YES / NO
2. Are you satisfied with the performance of the Link? YES / NO
3. Was the entire installation process pleasing? YES / NO
4. Do you feel that you are in a position to begin using
this service immediately? YES / NO
5. How would you rate our overall performance? 1 2 3 4 5
(1 - Great, 5 - Poor)
6. Comments:
--------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
By signing this form, I accept service and agree that it was received to my
satisfaction.
- --------------------------------------------- ------------------
NAME (Printed) Date
- ---------------------------------------------
NAME (Signature)
<PAGE>
INTRODUCTORY PACKAGE CONTENTS
1. Welcome letter
2. Overview of Rhythms/Cisco Telework Program.
3. Desktop Configuration Guide
4. Troubleshooting Guide
5. Frequently Asked Questions
<PAGE>
Enterprise Service Solution Exhibit C
Monthly Activation Rates for
Cisco Systems
<TABLE>
<CAPTION>
ESS Monthly Activation Rates
month monthly cumulative planned
deployment* deployment at deployment
end of month
<S> <C> <C> <C> <C>
1998 Dec (***) (***) (***) (***)
-----------------------------------------------------------------------------------
1999 Jan (***) (***) (***) (***)
Feb (***) (***) (***) (***)
Mar (***) (***) (***) (***)
Apr (***) (***) (***) (***)
May (***) (***) (***) (***)
Jun (***) (***) (***) (***)
Jul (***) (***) (***) (***)
Aug (***) (***) (***) (***)
Sep (***) (***) (***) (***)
Oct (***) (***) (***) (***)
Nov (***) (***) (***) (***)
Dec (***) (***) (***) (***)
-----------------------------------------------------------------------------------
2000 Jan (***) (***) (***) (***)
Feb (***) (***) (***) (***)
Mar (***) (***) (***) (***)
Apr (***) (***) (***) (***)
May (***) (***) (***) (***)
Jun (***) (***) (***) (***)
-----------------------------------------------------------------------------------
</TABLE>
* Adjustments to Monthly Activation Rates
If Rhythms shall be prevented from activating any Cisco teleworkers(s) due to
any act of God, war or other period of hostilities, labor disputes, unusual
delay in transportation, adverse weather conditions, fire, unfavorable
casualties, or other causes beyond Rhythms' reasonable control (a "Delaying
Event"), then (a) Monthly Activation Rates adversely affected by such Delaying
Events shall be reduced by the number of activation's prevented by such Delaying
Event. Not withstanding the foregoing, Rhythms shall be deemed to have failed to
meet the activation rate for any month if such failure was as a result of
Cisco's lack of demand for ESS activation's during such month.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
11/30/98 RhythmsNetConnections, Inc. Confidential
<PAGE>
Enterprise Service Solution Exhibit D
Publicity Activities for
Cisco Systems
PUBLICITY ACTIVITIES
1. Case Studies
2. Joint Appearances at Trade Shows/Symposia
3. Act as a Reference Account
4. Analyst Briefings
5. Sales Seminars/Presentations
6. Investor and Financial Filings
7. Interviews (as Needed)
8. Sales Proposals
9. Account Development
10. Promotion Collateral
11. Website features
SUBJECT TO FINAL APPROVAL BY CISCO
12/9/98
<PAGE>
EXHIBIT 10.7
AGREEMENT
This Agreement (the "Agreement") is made and entered into this 3rd day of
March, 1999, (the "Effective Date") between RHYTHMS NETCONNECTIONS, INC., a
Delaware corporation, and MCI WORLDCOM, INC., a Georgia corporation.
R E C I T A L S
MCI WORLDCOM, Inc. through its operating Affiliates and Alliance Entities
(MCI WORLDCOM, Inc. and said operating Affiliates and Alliance Entities referred
to collectively herein as "MCI WORLDCOM") provides integrated local, long
distance, and Internet voice and data communications services, including
metropolitan area, long distance and Internet network transport services (the
"Network Services").
Rhythms NetConnections, Inc., through its operating subsidiaries (Rhythms
NetConnections, Inc. and said operating subsidiaries referred to collectively
herein as "Rhythms") is a networking solutions company that provides high-speed
communications services to providers of telecommunications services and other
users. Its services include digital transmission technology deployed over
standard local copper telephone lines to enable high speed connections between
end-users and a network service provider (the "DSL Services") and other
technologies and services utilizing the unbundled network elements of the ILEC
(the "UNE Services") (DSL Services and UNE Services shall be collectively
referred to as the "Rhythms Services").
MCI WORLDCOM intends through this Agreement to, among other things,
(i) encourage Rhythms' rapid development and deployment of the DSL
Services so that such services will be available to MCI WORLDCOM
for use and marketing;
(ii) secure Rhythms as a customer for the Network Services; and
(iii) secure Rhythms for cooperation in the development of the
commercialization of voice (and other) services exploiting the DSL
Services.
Rhythms intends through this Agreement to, among other things
(i) obtain a strategic contractual relationship with MCI WORLDCOM
encouraging MCI WORLDCOM to utilize the DSL Services to permit
Rhythms to accelerate the development and deployment of the DSL
Services; and
(ii) secure MCI WORLDCOM for cooperation in the development of the
commercialization of voice (and other) services exploiting the DSL
Services.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements contained herein and of Ten Dollars cash in hand paid and other
valuable
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consideration, the receipt and sufficiency of all of which are hereby
acknowledged, MCI WORLDCOM and Rhythms agree as follows:
I. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
definitions set forth below unless otherwise indicated in this Agreement:
1.1 "Affiliate" of a Party or other entity shall mean a corporation,
partnership, joint venture or other entity directly or indirectly,
through one or more intermediaries, controlling, controlled by or under
common control with such party or other entity.
1.2 "Agreement" shall mean this Agreement and all schedules and exhibits
attached hereto.
1.3 "Alliance Entity" shall those entities listed on SCHEDULE 1.3, which may
be amended from time to time by mutual agreement.
1.4 "Confidential Information" shall mean confidential or proprietary
information (including without limitation this Agreement, technical and
business plans, specifications, drawings, computer programs, Developed
IP, network configurations, facilities deployment information,
procedures, orders for services, usage information, and customer account
data) that one party or its affiliates (Owner) may disclose to the other
party or its affiliates (Recipient) in connection with the performance of
this Agreement and is disclosed by an Owner to a Recipient in document or
other tangible form (including on magnetic tape) or by oral, visual or
other means, and which should reasonably have been understood by such
Recipient to be proprietary and confidential to such Owner, because of
legends or other markings, the circumstances of the disclosure or the
nature of the information itself.
1.5 "CMSA" shall mean Consolidated Metropolitan Statistical Area as such term
is defined in "OMB Bulletin 98-06: Revised Statistical Definitions of
Metropolitan Areas (MAs) and Guidance on Uses of MA Definitions" which is
available from the National Technical Information Service (Accession
Number PB98-146160).
1.6 "CPE" shall have the meaning given in Section 5.1.
1.7 "CSA" shall have the meaning given in Section 2.1.
1.8 "Developed IP" shall have the meaning given in Section 5.3(a).
1.9 "DSL Egress Circuit" shall mean any connection from the Rhythms Metro
Service Center to MCI WORLDCOM's point of presence in a particular CMSA
or MSA.
1.10 "DSL Ingress Circuit" shall mean any single connection from an MCI
WORLDCOM customer using DSL Services to the Rhythms Connection Point to
the Rhythms Metro Service Center for a particular CMSA or MSA.
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1.11 "DSL Services" shall have the meaning given in the Recitals and shall
include DSL Ingress Circuits and DSL Egress Circuits, as applicable.
1.12 "ILEC" shall mean an incumbent local exchange carrier, as such term is
defined in the Communications Act of 1934, as amended by the
Telecommunications Act of 1996.
1.13 "Rhythms Connection Point" shall mean Rhythms' physical collocation
within an ILEC serving wire center, or adjacent to an ILEC wire center,
or adjacent to the ILEC Digital Loop Carrier, which enables Rhythms to
order and provision unbundled network loops from the ILEC in support of
DSL Services.
1.14 "Line Commitment Period" shall have the meaning given in Section 2.4(a).
1.15 "MCI WORLDCOM shall have the meaning given in the Recitals.
1.16 "MSA" shall mean Metropolitan Statistical Area as such term is defined in
"OMB Bulletin 98-06: Revised Statistical Definitions of Metropolitan
Areas (MAs) and Guidance on Uses of MA Definitions" which is available
from the National Technical Information Service (Accession Number
PB98-146160).
1.17 "Network Services" shall have the meaning given in the Recitals.
1.18 "NSA" shall have the meaning given in Section 3.1.
1.19 "OSS" shall have the meaning given in Section 4.1.
1.20 "Purchase Commitment" shall have the meaning given in Section 2.4(a).
1.21 "Rhythms" shall have the meaning given in the Recitals.
1.22 "Rhythms Metro Service Center" shall mean the facility located in each
CMSA or MSA, as applicable, that concentrates all of the DSL traffic that
is aggregated by each Rhythms Connection Point in that particular CMSA or
MSA. MCI WORLDCOM connects to the Rhythms Metro Service Center via a DSL
Egress Circuit.
1.23 "Rhythms Services" shall have the meaning given in the Recitals.
1.24 "UNE Services" shall have the meaning given in the Recitals.
1.25 "UUNET" shall have the meaning given in Section 2.2.
II. AGREEMENT FOR DSL SERVICES
2.1 CARRIER SERVICES AGREEMENT. Simultaneously with the execution of this
Agreement, Rhythms and MCI WORLDCOM shall enter into the Carrier Services
Agreement (the "CSA") in substantially the form attached hereto as
SCHEDULE 2.1 pursuant to which
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Rhythms will provide and MCI WORLDCOM will purchase Rhythms Services.
The CSA shall provide the geographical markets to be covered and the
schedule of availability of DSL Services in each market. In the event
that agreement has not been reached as to any material terms and the CSA
is not executed simultaneously with this Agreement, the parties shall
negotiate in good faith in an effort to reach agreement and to execute
the CSA within thirty (30) days of the Effective Date of this Agreement
unless extended by mutual agreement. The parties failure to execute the
CSA within such time period may result in partial termination of this
Agreement in accordance with Section 8.2(d) of this Agreement. Moreover,
the binding effect of the CSA shall be contingent upon the execution of
the NSA and the OSS Licensing Agreement.
2.2 PREFERRED PROVIDER STATUS. Subject to the conditions and limitations
contained in Sections 2.3 and 2.4 hereof and pursuant to the CSA, Rhythms
shall have the right to provide, at those locations where Rhythms
provides DSL Services and MCI WORLDCOM does not have the capability to
provide comparable services for itself using its own network, all new
DSL Services utilized by MCI WORLDCOM excluding (***) DSL Services under
the terms of the CSA (***) . In the event
that MCI WORLDCOM is utilizing another provider of DSL Services prior to
the time that such DSL Services are available from Rhythms, MCI WORLDCOM
shall (***) (***) provided,
however, if MCI WORLDCOM (***) .
2.3. COMPETITIVE PRICE FOR DSL SERVICES. The price of DSL Services to be
paid pursuant to the CSA shall be as set forth in the CSA; provided,
however, in the event MCI WORLDCOM receives an offer, whether for new or
existing DSL Services, for comparable services (***) from another
competitive DSL provider or ILEC under better terms and conditions than
those provided under the CSA, MCI WORLDCOM shall give Rhythms written
notice of such comparable services, and all of the material terms on
which such comparable services are available to MCI WORLDCOM from the
other provider. Rhythms shall have (***) to advise MCI
WORLDCOM that it will provide the required DSL Services on the same
terms and conditions as are otherwise available to MCI WORLDCOM. If
(***) (***) provide such DSL
Services (***) , or if Rhythms
(***) (***) , then Rhythms shall
(***) (***) provide such services
and (***) shall be (***) for such services (***) . In the event
that MCI WORLDCOM (***) (***)
, when such (***) in such
(***) Within (***) (***)
, Rhythms shall (***) (***)
, in its sole discretion, may elect to (***) .
MCI WORLDCOM shall (***) (***)
. MCI WORLDCOM will (***) .
2.4. PURCHASE COMMITMENT.
(a) COMMITMENT; RAMP UP. Under the terms of the CSA, and subject to
the terms, conditions and limitations of this Section 2.4, MCI
WORLDCOM shall purchase,
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MCI WORLDCOM CONFIDENTIAL 4
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and Rhythms shall provide, a minimum of 100,000 DSL Ingress
Circuits (the "Purchase Commitment") for providing DSL Services
during the sixty (60) month line commitment period (the "Line
Commitment Period"). The Line Commitment Period shall begin on
the first day of the month after the first month during which
(i) Rhythms has 1,250 Rhythms Connection Points in commercial
service in a minimum of twenty-nine (29) CMSAs and/or MSAs and
(ii) the (***) , and shall end the last
day of the 60th month thereafter, or the date on which the
100,000th DSL Ingress Circuit is ordered by MCI WORLDCOM,
whichever date is earlier. To establish the date on which the
Line Commitment Period commences, MCI WORLDCOM and Rhythms shall
complete and sign the Commencement Date Certificate attached
hereto as SCHEDULE 2.4. In connection with the Commencement
Date Certificate, Rhythms shall provide to MCI WORLDCOM such
documentation as may be reasonably necessary to prove (i) that
1,250 Rhythms Connection Points are in commercial service in a
minimum of twenty-nine (29) CMSAs and/or MSAs and (ii) the
ordering and provisioning systems are in compliance with the CSA.
MCI WORLDCOM agrees that it will satisfy the Purchase Commitment in
accordance with the milestone dates of the Line Commitment Period
provided in SCHEDULE 2.4(a) hereto or that it will pay a penalty to
Rhythms calculated as described in SCHEDULE 2.4(a). Rhythms agrees
that the penalty provided in SCHEDULE 2.4(a) is (***) the
Purchase Commitment by the milestone dates specified in SCHEDULE
2.4(a) and that Rhythms will calculate and credit or refund
to MCI WORLDCOM overpayments of penalties as provided in SCHEDULE
2.4(a). Nothing contained hereon or in the CSA shall (***) to
have or maintain at any particular time any particular (***).
(b) CREDITS TOWARD PURCHASE COMMITMENT. In calculating whether or not
MCI WORLDCOM has satisfied the Purchase Commitment, MCI WORLDCOM
shall receive credit for
(i) (***) MCI WORLDCOM (***)
(***) the Line Commitment Period;
(ii) (***) MCI WORLDCOM (***)
(***) the Line Commitment Period;
(iii) (***) MCI WORLDCOM from (***)
in (***) in which Rhythms (***) and which (***) was offered,
in accordance with Section 2.3 of this Agreement (***) to
provide such circuits, whether (***) the Line Commitment
Period or other relevant times set forth in SCHEDULE 2.4;
(iv) (***) the Rhythms' direct sales
force in locations for which (***) and is able to (***) for
the purpose of this subsection (iii) shall mean (***) for
new (***) at new (***) for which both the (***) have made
(***); and
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(v) (***) MCI WORLDCOM pursuant to the
CSA which (***) in accordance with the
terms and conditions of the CSA.
2.5 CANCELLATION. In addition to all other requirements as to quality of
service and capacity availability contained herein or in the CSA, MCI
WORLDCOM shall be permitted to cancel its obligations under this
Article II without any liability if, within any (***) period
during the term of this Agreement Rhythms is unable to supply a minimum
of (i) (***) of the DSL Ingress Circuits ordered in accordance with the
CSA by MCI WORLDCOM or (ii) (***) of the DSL Ingress Circuits that would
have been ordered in certain offices in which DSL Service is available,
but through order pre-qualifications requested by MCI WORLDCOM in
accordance with the CSA such service is not actually available.
III. AGREEMENT FOR NETWORK SERVICES
3.1 NETWORK SERVICES AGREEMENT. Simultaneously with the execution of this
Agreement, Rhythms and MCI WORLDCOM shall enter into the Network Services
Agreement (the "NSA") in substantially the form attached hereto as
SCHEDULE 3.1 pursuant to which MCI WORLDCOM will provide and Rhythms will
purchase Network Services. The NSA shall provide the geographical
markets to be covered and the schedule of availability of Network
Services in each market. In the event that agreement has not been reached
as to any material terms and the NSA is not executed simultaneously with
this Agreement, the parties shall negotiate in good faith in an effort to
reach agreement and to execute the NSA within thirty (30) days of the
Effective Date of this Agreement unless extended by mutual agreement.
The parties failure to execute the NSA within such time period may
result in partial termination of this Agreement in accordance with
Section 8.2(d) of this Agreement. Moreover, the binding effect of the NSA
shall be contingent upon the execution of the CSA and the OSS Licensing
Agreement.
3.2 PREFERRED PROVIDER STATUS. Subject to the conditions and limitations
contained in Section 3.3, MCI WORLDCOM shall have the right to provide,
pursuant to the NSA, all of the Network Services utilized by Rhythms at
those locations where MCI WORLDCOM provides Network Services. (***)
(***) .
3.3. COMPETITIVE PRICE FOR NETWORK SERVICES. The price of Network Services
to be paid pursuant to the NSA shall be as set forth in the NSA; provided,
however, in the event Rhythms receives an offer for services comparable
to the Network Services in one or more particular markets from another
competitive service provider on better terms and conditions than those
provided in the NSA, Rhythms shall give MCI WORLDCOM written notice of
the locations and all of the material terms on which such comparable
services are available to Rhythms from other providers. MCI WORLDCOM
shall have (***) to advise Rhythms that it will provide the required
Network Services in those locations on the same terms and conditions as
are otherwise available to Rhythms. If MCI WORLDCOM (***)
(***) , or if MCI WORLDCOM (***)
(***) , then MCI WORLDCOM shall (***) provide such
services and (***) shall be (***) for such services (***)
of which MCI WORLDCOM (***) . In the event that (***)
in (***) .
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3.4. NETWORK PLANNING. MCI WORLDCOM shall designate Rhythms as a Premier
Account Customer which shall entitle Rhythms to project management
support as is more particularly described in the NSA hereto. The project
management support team assigned by MCI WORLDCOM to Rhythms' account
shall work with Rhythms on planning and design of Rhythms' local and
wide-area networks and collocations and coordinate with internal MCI
WORLDCOM organizations to facilitate deployment of Rhythms' networks for
the provisioning of DSL Services.
IV. INTEGRATION OF OPERATIONAL SUPPORT SYSTEMS
4.1 WORKING GROUP; INTEGRATION PLAN. Promptly following execution of this
Agreement, MCI WORLDCOM and Rhythms will form an OSS-integration
working group to develop and implement systems and procedures necessary
to deploy on a national basis MCI WORLDCOM DSL service utilizing the
DSL Services provided by Rhythms. At a minimum the working group will
include Rhythms technical assistance to train MCI WORLDCOM personnel in
the use of Rhythms' Operational Support Systems ("OSS"). The working
group will use reasonable efforts to jointly develop an integration
plan within thirty (30) days after the Effective Date of this Agreement
which shall include, among other things, objectives, responsibilities
and timelines.
4.2. OSS LICENSING AGREEMENT. Subject to the terms set forth in SCHEDULE 4.2,
Rhythms will license to MCI WORLDCOM, on an non-exclusive basis, software
programs, electronic interfaces and processes for, among other things,
order entry, provisioning, customer management, maintenance and repair of
DSL Services. Such licenses, (***) , shall be in
substantially the form attached hereto as SCHEDULE 4.2. In the event that
agreement has not been reached as to any material terms and the OSS
Licensing Agreement is not executed simultaneously with this Agreement,
the parties shall negotiate in good faith in an effort to reach agreement
and to execute the OSS Licensing Agreement within thirty (30) days of
the Effective Date of this Agreement unless extended by mutual agreement.
The parties failure to execute the OSS Licensing Agreement with such
time period may result in partial termination of this Agreement in
accordance with Section 8.2(d) of this Agreement. Moreover, the binding
effect of the OSS Licensing Agreement shall be contingent upon the
execution of the CSA and the NSA.
V. DEVELOPMENT AGREEMENT
5.1. NETWORK. Rhythms and MCI WORLDCOM shall use reasonable efforts to
assure network compatibility, including collaboration in the selection of
network technologies for Rhythms' and MCI WORLDCOM's network, including,
but not limited to, customer premises equipment ("CPE"), data networking
equipment, DSL platforms and technologies, voice telephony equipment,
information technology platforms and others necessary to support the
respective DSL network deployments during the term of this Agreement.
This will include, to the extent reasonably possible, selection of the
same or compatible equipment platforms and technologies. Throughout the
term of this Agreement, Rhythms and MCI WORLDCOM will cooperate to test
and deploy capabilities where use of such capabilities is necessary or
desirable to support MCI
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MCI WORLDCOM CONFIDENTIAL 7
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WORLDCOM's customers and it is technically and economically reasonable for
both parties to do so.
5.2 VOICE OVER DSL. MCI WORLDCOM and Rhythms agree to cooperate
reasonably to jointly develop access services for voice applications
utilizing DSL technology. Promptly following execution of this
Agreement, the parties shall form a Voice Services Development Group
which will include resources provided by each of the parties in areas
of project management, engineering, operational support, regulatory and
product development and implementations. This group shall
(***)
(a) develop necessary architecture, designs, performance specifications,
support systems and interfaces between the parties networks and
systems and develop equipment specifications necessary to deploy
such voice applications; and
(b) no later than September 30, 1999, jointly study and complete the
definition and specification of any services the parties agree
jointly to develop during the term of this Agreement, including
required interfaces, business plans and budgets for a pilot program
involving selected customer sites.
5.3 USE OF DEVELOPED TECHNOLOGIES.
(a) (***) will have the (***) to obtain patent or other
appropriate protections with respect to intellectual property
rights in any technologies and processes jointly developed under
the terms of this Agreement (the "Developed IP") and (***) agrees
to use reasonable efforts to (***) do so. At the time that the
parties agree that a Developed IP is entitled to proprietary
protection, (***) shall have (***) to advise (***) that it will
(***) to obtain patent or other appropriate protections with
respect to such Developed IP. If (***) that it will not obtain
such protections, or if (***) fails to provide a (***) then (***)
shall be (***) to have (***) to obtain such protection and (***)
shall thereafter be (***) to obtain patent or other appropriate
protections with respect to such Developed IP.
(b) The Developed IP will be for the exclusive use and benefit of MCI
WORLDCOM (including any customers to whom MCI WORLDCOM provides
services) and Rhythms (***) from
the date such processes or technologies become commercially
available throughout the Rhythms network; provided, however,
(***) will have the (***) the Developed IP using the (***)
in locations where (***) without any restrictions, during (***)
and without (***) for the (***) therefrom, and further provided
that Rhythms will not (***) the Developed IP in any way during
such period with (***)
(***) MCI WORLDCOM.
(c) Subject to subsection (b) above, the Developed IP will be jointly
owned by the parties and each of the parties may utilize the
Developed IP (***) the other party.
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MCI WORLDCOM CONFIDENTIAL 8
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During the term of the exclusive use, each party may utilize the
Developed IP for permitted purposes (***) the other party.
VI. OTHER INTELLECTUAL PROPERTY RIGHTS
6.1 (***) license, in form satisfactory to (***)
owned or developed patents, processes, technology or other
intellectual property (***) . The terms of
this license shall permit (***) to continue utilizing such
rights after (***) to the extent necessary to
enable (***) to continue using the Developed IP thereafter.
6.2 Except as is otherwise provided herein, each party will continue to
independently own, and the other party shall not have or acquire any
rights in, its intellectual property, including patents, trademarks, trade
secrets, proprietary processes and other forms of intellectual property
used in or necessary to providing the DSL Services or the Network Services
which are the subject of this Agreement. Any intellectual property solely
developed by a party, including pre-existing and improvements to pre-
existing intellectual property, will continue to be held by the party
already holding such intellectual property.
VII. STOCK PURCHASE AGREEMENT
7.1 PURCHASE OF PREFERRED STOCK. Simultaneously with the execution of this
Agreement, MCI WORLDCOM Investment Company, Inc. and Rhythms shall enter
into the Stock Purchase Agreement in substantially the form attached
hereto as SCHEDULE 7.1.
VIII. TERM AND TERMINATION
8.1 TERM. The term of this Agreement shall begin on the Effective Date and
shall expire on February 28, 2004, unless terminated earlier pursuant to
the provisions hereof or extended by agreement of the parties; provided,
however, Section 2.4 of this Agreement shall not terminate until the end
of the Line Commitment Period, unless terminated earlier pursuant to the
provisions hereof or extended by the written agreement of the parties.
Upon termination of the Agreement, the parties shall (***)
unless otherwise mutually agreed to by the parties. However,
it is the intention of the parties that, notwithstanding any termination
of the Agreement, the terms and conditions of the Agreement shall continue
to govern with respect to any then-existing services for so long as such
services (including any permitted renewals thereof) remain in effect.
8.2 TERMINATION.
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(a) FOR CAUSE. In the event that either party commits a material breach
of this Agreement, which breach is not cured within thirty (30) days
following written notice of breach, or in the event of a material
breach which is not capable of being cured within thirty (30) days,
or in the event of numerous breaches which collectively constitute a
material breach of this Agreement or the repeated failure to meet
obligations identified in this Agreement, then the non-breaching
party may, by giving written notice to the other party, terminate
this Agreement, in whole or in part, as of a date specified in the
notice of termination. If either party chooses to terminate this
Agreement in part, the charges payable under this Agreement will be
equitably adjusted to reflect those portions that are terminated.
(b) CHANGE IN CONTROL. In the event of a change in control of either
party, whether such control is acquired, directly or indirectly,
in a single transaction or series of related transactions, or all
or substantially all of the assets of such party are acquired by
any entity, or such party is merged with or into another entity
to form a new entity, then, at any time within six (6) months
after the last to occur of such events, the other party may
terminate this Agreement by giving at least ninety (90) days
prior written notice and designating a date upon which such
termination shall be effective. For purposes of this Agreement,
"control" and its derivatives mean with regard to this paragraph
the legal, beneficial or equitable ownership, directly or
indirectly, of fifty percent (50%) or more of the capital stock
(or other ownership interests, if not a corporation) of a party
ordinarily having voting rights.
(c) INSOLVENCY. In the event that either party
(i) files for bankruptcy,
(ii) becomes or is declared insolvent, or is the subject to any
proceedings related to its liquidation, insolvency or the
appointment of a receiver or similar officer of it,
(iii) makes an assignment for the benefit of all or substantially
all of its creditors;
(iv) enters into an agreement for the composition, extension or
readjustment of substantially all of its obligations; or
(v) has the repayment of any indebtedness in principle amount in
excess of $5,000,000 in the aggregate accelerated by its
creditors,
then the other party may, by giving written notice of termination
to the other, terminate this Agreement as of a date specified in
such notice of termination.
MCI WORLDCOM CONFIDENTIAL 10
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(d) TERMINATION FOR FAILURE TO EXECUTE THE CSA, NSA AND OSS LICENSING
AGREEMENT. If, within thirty (30) days after the Effective Date of
this Agreement, or such later time as the parties may mutually
agree, the parties have failed to execute either the CSA, the NSA,
or the OSS Licensing Agreement, then either party may, by written
notice to the other party, terminate Sections 2.2, 2.4, 2.5, and
3.2 of this Agreement, at its option without any termination
liability to either party, and neither the CSA, the NSA or the OSS
Licensing Agreement shall be binding on either party until all
three such agreements have been executed by the parties.
(e) EFFECT OF TERMINATION. Except as provided in Sections 2.1, 3.1
and 4.2 of this Agreement, each of the contracts and agreements
provided herein shall be independent of the others. Breach of
any such separate agreement shall not be treated as a breach of
this Agreement or any other agreement mentioned hereunder.
Notwithstanding the previous sentence or anything contained in
this Agreement or the NSA to the contrary, any material breach of
the NSA by Rhythms, or a breach of Article III of this Agreement
by Rhythms, shall entitle MCI WORLDCOM to terminate, without any
liability, the Purchase Commitment under Section 2.4(a) of this
Agreement. The remedies for breach of any the separate
agreements referenced herein shall be as set forth in such
separate agreements.
IX. CONFIDENTIALITY; ADVERTISING AND PUBLICITY
9.1 By virtue of this Agreement, Rhythms and MCI WORLDCOM may have access to
or exchange Confidential Information. A Recipient (as defined in Section
1.2) of such Confidential Information shall not disclose any Confidential
Information to any person or entity except (i) Affiliates (defined below)
who agree, in advance, in writing, to be bound by this Article IX, and
(ii) Recipient's employees, contractors and consultants, and Affiliates'
employees, contractors and consultants, who have a need to know and who
are bound in writing to protect the received Confidential Information
from unauthorized use or disclosure. Confidential Information shall not
otherwise be disclosed to any third party without the prior written
consent of Owner (as defined in Section 1.2). Recipient shall use
Confidential Information only for the purpose of this Agreement and shall
protect such Confidential Information from disclosure to others, using
the same degree of care used to protect its own confidential or
proprietary information of like importance, but in any case using no less
than a reasonable degree of care. For the purposes of this Article IX,
the term "Affiliate" shall mean shall mean any entity controlling,
controlled by or under common control (either directly or indirectly)
with MCI WORLDCOM or Rhythms, as applicable
9.2 Each party shall cause its Affiliates to comply with the terms of this
Article IX. A failure of any Affiliate of a party to comply with the
terms of this Article IX shall be deemed a breach of this Agreement by
such party. To the extent any Confidential Information is the information
of an Affiliate, such Affiliate shall be entitled to enforce the
confidentiality
MCI WORLDCOM CONFIDENTIAL 11
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obligations of the other party and its Affiliates as a third party
beneficiary of this Agreement.
9.3 The restrictions of this Article IX shall not apply to information that:
(i) was publicly known at the time of Owner's communication thereof to
Recipient; (ii) becomes publicly known through no fault of Recipient
subsequent to the time of Owner's communication thereof to Recipient;
(iii) was in Recipient's possession free of any obligation of confidence
at the time of Owner's communication thereof to Recipient; (iv) is
developed by Recipient independently of and without reference to any of
Owner's Confidential Information or other information that Owner
disclosed in confidence to any third party; (v) is rightfully obtained by
Recipient from third parties authorized to make such disclosure without
restriction; or (vi) is identified by Owner as no longer proprietary or
confidential.
9.4 In the event Recipient is required by law, regulation or court order to
disclose any of Owner's Confidential Information, Recipient will promptly
notify Owner in writing prior to making any such disclosure in order to
facilitate Owner seeking a protective order or other appropriate remedy
from the proper authority. Recipient agrees to cooperate with Owner in
seeking such order or other remedy. Recipient further agrees that if
Owner is not successful in precluding the requesting legal body from
requiring the disclosure of the Confidential Information, Recipient will
furnish only that portion of the Confidential Information which is
legally required and will exercise all reasonable efforts to obtain
reliable assurances that confidential treatment will be accorded the
Confidential Information.
9.5 All Confidential Information disclosed in connection with this Agreement
shall be and remain the property of Owner. All such information in
tangible form shall be returned to Owner promptly upon written request
and shall not thereafter be retained in any form by Recipient.
9.6 The parties acknowledge that Confidential Information is unique and
valuable, and that disclosure in breach of this Article IX will result in
irreparable injury to Owner for which monetary damages alone would not be
an adequate remedy. Therefore, the parties agree that in the event of a
breach or threatened breach of confidentiality, Owner shall be entitled
to specific performance and injunctive or other equitable relief as a
remedy for any such breach or anticipated breach without the necessity of
posting a bond. Any such relief shall be in addition to and not in lieu
of any appropriate relief in the way of monetary damages.
9.7 Neither party shall publish or use any advertising, sales, promotions, or
other publicity materials that use the other party's name, logo,
trademarks or service marks without the prior written approval of the
other party. Each party agrees not to issue any publicity materials,
press releases or other public statements that refer to, or describe any
aspect of, this Agreement, without the prior written approval of the other
party. Nothing in this Agreement establishes a license for either party
to use any of the other party's brands, marks or logos without the prior
written approval of the other party.
MCI WORLDCOM CONFIDENTIAL 12
<PAGE>
9.8 The provisions of this Article IX shall survive the termination or
expiration of this Agreement.
X. MISCELLANEOUS
10.1 BINDING NATURE AND ASSIGNMENT. Neither party shall have the power to
assign this Agreement, or any of its duties or obligations under this
Agreement, to any other party (whether by operation of law or otherwise),
without the prior written consent of the other party except that either
party may assign all duties, obligations and rights among its Affiliates
without approval. Any purported assignment in violation of this section
shall be null and void and shall constitute a material breach of this
Agreement. No permitted assignment shall become effective until the
assignee has agreed in writing to be bound by this Agreement and to
assume the assignor's duties and obligations under this Agreement. No
such assignment shall relieve the contracting party from its obligations
hereunder.
10.2. ENTIRE AGREEMENT; AMENDMENT. This Agreement, including any Schedules
referred to herein and attached hereto, each of which is incorporated
herein for all purposes, and any other agreements between the parties
referenced herein or executed of even date herewith, constitute the
entire agreement between the parties with respect to the subject matter
hereof and supercedes all prior agreements, whether written or oral, with
respect to the subject matter contained in this Agreement. No change,
waiver, or discharge hereof shall be valid unless in writing and signed
by an authorized representative of the party against which such change,
waiver or discharge is sought to be enforced.
10.3 COMPETITORS. Except as is otherwise provided herein, neither MCI
WORLDCOM nor Rhythms shall be prohibited from providing any of their (***)
(***) , in any market.
10.4 REGULATORY. MCI WORLDCOM and Rhythms will cooperate reasonably in state
and/or federal regulatory proceedings that may be necessary or desirable
in authorizing the provision of the Network Services and the DSL Services
as contemplated by this Agreement; provided, however, this shall not
require either party to take any particular position in any particular
regulatory proceeding except as may be determined by such party in its
sole discretion.
10.5 EXPENSES. Each party shall bear and pay all costs and expenses incurred
by it in connection with the transactions contemplated in this Agreement,
including fees and expenses of its own financial consultants, accountants
and counsel.
10.6 NOTICES. All notices and other communications which are required or
permitted hereunder shall be in writing and shall be deemed duly given
(i) when delivered by hand, (ii) one day after being given to an express
carrier with a reliable system for tracking
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
MCI WORLDCOM CONFIDENTIAL 13
<PAGE>
delivery, (iii) when sent by electronic mail to the destination specified
by the applicable party, or (iv) six (6) days after the day of mailing,
when mailed by United States mail, postage prepaid and addressed as
follows:
In the case of Rhythms:
Scott Chandler
6933 South Revere Parkway
Englewood, CO 80112-3931
Phone Number: (303)476-4238
Fax Number: (303)476-4201
E-Mail Address: [email protected]
With a copy to:
Jeff Blumenfeld, Esq.
Summer Square
1615 M Street, N.W., Suite 700
Washington, D.C. 20036
Phone Number: (202)955-6300
Fax Number: (202)955-6614
E-Mail Address: [email protected]
In the case of MCI WORLDCOM:
Susan Mayer
President
MCI WORLDCOM Venture Fund, Inc.
1801 Pennsylvania Avenue, NW
Washington, DC 20006-3606
Phone Number: (202)887-2299
Fax Number: (202)887-3226
E-Mail Address: [email protected]
With a copy to:
P. Bruce Borghardt
General Counsel - Corporate Development
MCI WORLDCOM, Inc.
10777 Sunset Office Drive, Suite 330
St. Louis, MO 63127
Phone Number: (314)909-4100
Fax Number: (314)909-4101
MCI WORLDCOM CONFIDENTIAL 14
<PAGE>
E-Mail Address: [email protected]
A party may from time to time change its address or designee for
notification purposes by giving the other prior written notice of the new
address or designee and the date upon which it become effective.
10.7 COUNTERPARTS. This Agreement may be executed in several counterparts,
all of which taken together shall constitute one single Agreement between
the parties hereto.
10.8 CAPTIONS. The article and section headings used herein are for reference
and convenience only and shall not enter into the interpretation hereof.
10.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect
to its principles of conflicts of law.
10.10 DISPUTE RESOLUTION. Without prejudice to either party's right to seek
equitable relief (including, but not limited to injunction) from a court,
any dispute arising out of or related to this Agreement which cannot be
resolved by negotiation, shall be settled by binding arbitration in
accordance with the J.A.M.S./ENDISPUTE Arbitration Rules and Procedures,
as amended by this Agreement. The costs of arbitration, including the
fees and expenses of the arbitrator, shall be shared equally by MCI
WORLDCOM and Rhythms unless the arbitration award provides otherwise.
MCI WORLDCOM and Rhythms shall each bear the cost of preparing and
presenting its case. The parties agree that this provision and the
arbitrator's authority to grant relief shall be subject to the United
States Arbitration Act, 9 U.S.C. 1-16 et seq. ("USAA"), the provisions of
this Agreement, and the ABA-AAA Code of Ethics for Arbitrators in
Commercial Disputes. The parties agree that the arbitrator shall have no
power or authority to make awards or issue orders of any kind except as
expressly permitted by this Agreement, and in no event shall the
arbitrator have the authority to make any award that provides for
punitive or exemplary damages. The arbitrator's decision shall follow
the plain meaning of the relevant documents, and shall be final and
binding. The award may be confirmed and enforced in any court of
competent jurisdiction. All post-award proceedings shall be governed by
the USAA.
10.11 RELATIONSHIP OF PARTIES. Each of the parties in furnishing the
respective services hereunder is acting as an independent contractor.
Neither party is an agent of the other party and neither party has any
authority to represent the other party as to any matters, except as
expressly authorized in this Agreement.
10.12 SEVERABILITY. In the event that any provision of this Agreement
conflicts with the law under which this Agreement is to be construed or
if any such provision is held invalid by an arbitrator or a court with
jurisdiction over the parties, such provision shall be deemed to be
restated to reflect as nearly as possible the original intention of the
parties in
MCI WORLDCOM CONFIDENTIAL 15
<PAGE>
accordance with applicable law. The remainder to this Agreement shall
remain in full force and effect.
10.13 WAIVER OF DEFAULT; CUMULATIVE REMEDIES. A delay or omission by either
party hereto to exercise any right or power under this Agreement shall
not be construed to be a waiver thereof. A waiver by either of the
parties hereto of any of the covenants to be performed by the other or
any breach thereof shall not be construed to be a waiver of any
succeeding breach thereof or of any other covenant herein contained. All
remedies provided for in this Agreement shall be cumulative and in
addition to and not in lieu of any other remedies available to either
party at law, in equity or otherwise.
10.14 SURVIVAL. Any provision of this Agreement which contemplates performance
or observance subsequent to any termination or expiration of this
Agreement shall survive any termination or expiration of this Agreement
and continue in full force and effect.
10.15 THIRD PARTY BENEFICIARIES. This Agreement is entered into solely
between, and may be enforced only by, MCI WORLDCOM and Rhythms; and this
Agreement shall not be deemed to create in third parties, including
supplier and customers of a party, or to create any obligations of a
party to any such third parties.
10.16 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY OR ANY THIRD PARTY FOR ANY INCIDENTAL, INDIRECT,
CONSEQUENTIAL, PUNITIVE, EXEMPLARY, OR SPECIAL DAMAGES EVEN IF A PARTY IS
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.17 NON-SOLICITATION OF EMPLOYEES. Commencing on the Effective Date of this
Agreement and continuing for a period of (***) thereafter,
neither party shall solicit for employment any person then employed by
the other party or any of its subsidiaries with whom such party had
contact or who became known to such party in connection with the other;
provided, however, that the foregoing provision shall not prevent
employing any such person who contacts a party on his or her own
initiative and, provided further, that nothing contained herein shall
preclude general solicitations of employment, through advertisements,
placement agencies or otherwise, not directed specifically to any such
employees of the other party or any of its subsidiaries.
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
MCI WORLDCOM CONFIDENTIAL 16
<PAGE>
IN WITNESS WHEREOF, MCI WORLDCOM and Rhythms have each caused this
Agreement to be signed and delivered by its duly authorized officer, all as of
the date first set forth above.
MCI WORLDCOM, INC.
BY: /s/ Susan Mayer
------------------------------------
Name
SVP
------------------------------------
Title
3.3.99
------------------------------------
Date
RHYTHMS NETCONNECTIONS, INC.
BY: /s/ Scott C. Chandler
------------------------------------
Name
CFO
------------------------------------
Title
3 - 3 - 99
------------------------------------
Date
MCI WORLDCOM CONFIDENTIAL 17
<PAGE>
SCHEDULE 1.3
ALLIANCE ENTITIES
Avantel, S.A. (Mexico)
Embratel (Brazil)
Stentor (Canada)
Telefonica de Espana, S.A. (Spain)
Portugal Telecom (Portugal)
Telefonica Pan Americana MCI, B.V.
MCI WORLDCOM CONFIDENTIAL 18
<PAGE>
SCHEDULE 2.1
CARRIER SERVICES AGREEMENT
MCI WORLDCOM CONFIDENTIAL 19
<PAGE>
SCHEDULE 2.4
COMMENCEMENT DATE CERTIFICATE
THIS COMMENCEMENT DATE CERTIFICATE is made and entered into this ____ day
of ________________, ______, between Rhythms NetConnections, Inc. ("Rhythms")
and MCI WORLDCOM, Inc. ("MCI WORLDCOM").
WHEREAS, Rhythms and MCI WORLDCOM entered into an Agreement dated March
______, 1999, whereby, among other things, Rhythms agreed to provide and MCI
WORLDCOM agreed to purchase certain DSL Services.
NOW, THEREFORE, pursuant to Section 2.4(a) of the Agreement, Rhythms and
MCI WORLDCOM agree as follows:
1. The date on which Rhythms has 1,250 Rhythms Connection Points in
commercial service in twenty-nine (29) CMSAs and/or MSAs and the ordering
and provisioning systems are in compliance with the Carrier Services
Agreement is _____________________.
2. The date on which the Line Commitment Period commences is the date set
forth above in Section 1 of this Commencement Date Certificate.
IN WITNESS WHEREOF, Rhythms and MCI WORLDCOM have each caused this
Commencement Date Certificate to be signed and delivered as of the date first
above written.
RHYTHMS NETCONNECTIONS, INC. MCI WORLDCOM, INC.
By: By:
------------------------- -------------------------
Name: Name:
------------------------ ------------------------
Title: Title:
----------------------- -----------------------
MCI WORLDCOM CONFIDENTIAL 20
<PAGE>
SCHEDULE 2.4(a)
PURCHASE COMMITMENT AND
LINE COMMITMENT PERIOD
The following schedule outlines the MCI WORLDCOM Purchase Commitment and
penalty rate in the event MCI WORLDCOM does not meet the Purchase Commitment
at various dates during the 60 month Line Commitment Period. At the indicated
date (A), (***) (B) (***)
(C) (***) (D). The assumed (***)
would be set at the (***) . In the event MCI WORLDCOM achieves
the DSL Ingress Circuit minimum at any of the following Milestone Dates,
Rhythms will (***) (***) . In addition, Rhythms
may (***) .
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Milestone Date DSL Ingress Circuit Assumed (***) (***) Percentage
(Months)(1) Order Commitment (***) Term
(A) (B) (C) (D)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(***) (***) (***) (***)%
- -------------------------------------------------------------------------------------------------------------
(***) (***) (***) (***)%
- -------------------------------------------------------------------------------------------------------------
(***) (***) (***) (***)%
- -------------------------------------------------------------------------------------------------------------
60 100,000 (***) (***)%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
MCI WORLDCOM would have an additional (***) after the 60 month
Milestone Date to order additional DSL Ingress Circuits to meet the Purchase
Commitment.
EXAMPLE: Assume (***) . Assume (***)
(***) .
Assume (***) achieved (***)
(***) .
Assume (***)
(***) .
(***) Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
(1) Date on which Rhythms has 1,250 Rhythms Connection Points are available
for service in 29 CMSAs and/or MSAs and ordering and provisioning systems are in
compliance with the CSA as such date is certified by the parties in
Schedule 2.4.
MCI WORLDCOM CONFIDENTIAL 21
<PAGE>
SCHEDULE 3.1
NETWORK SERVICES AGREEMENT
MCI WORLDCOM CONFIDENTIAL 22
<PAGE>
SCHEDULE 4.2
OSS LICENSING AGREEMENT
MCI WORLDCOM CONFIDENTIAL 23
<PAGE>
SCHEDULE 7.1
STOCK PURCHASE AGREEMENT
(See Exhibit 10.5 to the Registration Statement on Form S-1)
MCI WORLDCOM CONFIDENTIAL 24
