RHYTHMS NET CONNECTIONS INC
S-8, 2000-01-14
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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<PAGE>

        As filed with the Securities and Exchange Commission on January 14, 2000
                                          Registration No. 333-_________________
================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   -----------
                                    FORM S-8
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

                                   -----------

                          RHYTHMS NETCONNECTIONS, INC.
             (Exact name of registrant as specified in its charter)

               DELAWARE                                 33-0747515
     (State or other jurisdiction            (IRS Employer Identification No.)
   of incorporation or organization)

                            6933 SOUTH REVERE PARKWAY
                            ENGLEWOOD, COLORADO 80112
               (Address of principal executive offices) (Zip Code)

                                   -----------

                          OPTION GRANT TO MR. STRINGER
                            (Full title of the Plans)

                                   -----------
                                CATHERINE M. HAPKA
                      CHAIRMAN AND CHIEF EXECUTIVE OFFICER
                           RHYTHMS NETCONNECTIONS INC.
                            6933 SOUTH REVERE PARKWAY
                            ENGLEWOOD, COLORADO 80112
                     (Name and address of agent for service)
                                 (303) 476-4200
          (Telephone number, including area code, of agent for service)

                                   -----------

                         CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
                                                            Proposed             Proposed
Title of Securities to be           Amount to be        Maximum Offering     Maximum Aggregate        Amount of
Registered                          Registered(1)      Price per Share(2)    Offering Price(2)    Registration Fee
- -------------------------------    ----------------   --------------------  ------------------   ------------------
<S>                                <C>                <C>                   <C>                  <C>
OPTION GRANT TO MR. STRINGER
- ------------------------------
Common Stock, $0.001 par value        70,252 shares           $14.23             $999,685.96             $277.92

OPTION GRANTS TO CERTAIN
     INDIVIDUALS(3)
- ------------------------------
Common Stock, $0.001 par value       319,000 shares           $16.00           $5,104,000.00           $1,347.46
                                     --------------                                                    ---------
Aggregate Registration Fee           389,252 shares                                                    $1,611.38
                                     --------------                                                    ---------
                                     --------------                                                    ---------
====================================================================================================================
</TABLE>
(1)  This Registration Statement shall also cover any additional shares of
     Registrant's Common Stock which become issuable with respect to the
     securities registered hereunder by reason of any stock dividend, stock
     split, recapitalization or other similar transaction effected without the
     Registrant's receipt of consideration which results in an increase in the
     number of the Registrant's outstanding shares of Common Stock.

(2)  Calculated solely for purposes of this offering under Rule 457(h) of the
     Securities Act of 1933, as amended, on the basis of the exercise price of
     the listed option granted.

(3)  The options were granted pursuant to written compensation agreements to
     the following individuals in the Registrant's service:  Harper Thorpe,
     Carol Manning, Karen Breen, Stephen C. Francis, Kurt Wieneke, David
     Ochsner, Donald B. Roberts, Tiffany A. Vasilik, Jillian J. Roberts,
     Randy L. Gilbert, Kurt M. Bozarth, Richard M. Fiorella, James D. Cone,
     Matthew S. Jebbia, Daniel R. Ryan, June Summers, Torre Mckiver, Richard
     J. Schell, Wallie G. Lacks, Todd E. Swisher, David J. Proch and David M.
     Stam.

<PAGE>

                                     PART II

               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3.  INCORPORATION OF DOCUMENTS BY REFERENCE

                  Rhythms NetConnections, Inc. (the "Registrant") hereby
incorporates by reference into this Registration Statement the following
documents previously filed with the Securities and Exchange Commission (the
"Commission"):

         (a)      The Registrant's Annual Report on Form 10-K for the fiscal
                  year ended December 31, 1998 filed with the Commission on
                  March 31, 1999.

         (b)      The Registrant's Quarterly Reports on Form 10-Q for the fiscal
                  quarters ended March 31, 1999; June 30, 1999; and September
                  30, 1999, filed May 17, 1999; August 11, 1999 (as amended by
                  Forms 10-Q/A filed September 3, 1999 and October 8, 1999); and
                  November 15, 1999, respectively.

         (c)      The Registrant's Registration Statement on Form 8-A filed with
                  the Commission on April 1, 1999, including any amendments or
                  reports filed for the purpose of updating such description, in
                  which there is described the terms, rights and provisions
                  applicable to the Registrant's Common Stock.

         (d)      The Registrant's Registration Statement on Form 8-A filed with
                  the Commission on April 8, 1999, including any amendments or
                  reports filed for the purpose of updating such description, in
                  which there is described the terms, rights and provisions
                  applicable to the Registrant's Preferred Stock Purchase
                  Rights.

                  All reports and definitive proxy or information statements
filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), after the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
de-registers all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Registration Statement to the extent that a statement contained herein or in
any subsequently filed document which also is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Registration Statement.

ITEM 4.  DESCRIPTION OF SECURITIES

                  Not Applicable.

ITEM 5  INTERESTS OF NAMED EXPERTS AND COUNSEL

                  Not Applicable.

ITEM 6.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

                  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.

                                        II-1

<PAGE>

                  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 indemnify 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.

                  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 Registrant has an insurance policy covering the
directors and officers of the Registrant with respect to certain liabilities,
including liabilities arising under the Securities Act or otherwise.

ITEM 7.  EXEMPTION FROM REGISTRATION CLAIMED

                  Not Applicable.

ITEM 8.  EXHIBITS

<TABLE>
<CAPTION>

    Exhibit Number       Exhibit
    --------------       -------
    <S>                  <C>
         4               Instruments Defining the Rights of Stockholders.
                         Reference is made to Registrant's Registration
                         Statements on Form 8-A, together with the amendments
                         and exhibits thereto, which are incorporated herein by
                         reference pursuant to Items 3(c) and 3(d).
</TABLE>
                                      II-2

<PAGE>

<TABLE>

        <S>              <C>
         5               Opinion and Consent of Brobeck, Phleger & Harrison LLP.
        23.1             Consent of PricewaterhouseCoopers LLP, Independent Accountants.
        23.2             Consent of Brobeck, Phleger & Harrison LLP is contained
                         in Exhibit 5.
        24               Power of Attorney.  Reference is made to the Signature
                         Page of this Registration Statement.
        99.1             Notice of Grant of Stock Option to Mr. Stringer.
        99.2             Stock Option Agreement between the Registrant and
                         Mr. Stringer.
        99.3             Form of Notice of Grant of Stock Option to Certain
                         Individuals.
        99.4             Form of Stock Option Agreement between the
                         Registrant and Certain Individuals.

</TABLE>

ITEM 9.  UNDERTAKINGS

               A.   The undersigned Registrant hereby undertakes: (1) to
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, as
amended (the "1933 Act"), (ii) to reflect in the prospectus any facts or
events arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
this Registration Statement and (iii) to include any material information
with respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii)
shall not apply if the information required to be included in a
post-effective amendment by those clauses is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934
Act that are incorporated by reference into this Registration Statement; (2)
that for the purpose of determining any liability under the 1933 Act each
such post-effective amendment 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; and (3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the Option Grant made to Mr. Stringer and the Option Grants
to Certain Individuals.

               B.   The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference into this Registration Statement
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.

               C.   Insofar as indemnification for liabilities arising under
the 1933 Act may be permitted to directors, officers or controlling persons
of the Registrant pursuant to the indemnification provisions summarized in
Item 6 or otherwise, the Registrant has been advised that, in the opinion of
the Commission, such indemnification is against public policy as expressed in
the 1933 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 1933 Act and will be governed by the final adjudication of
such issue.

                                       II-3

<PAGE>


                                   SIGNATURES

                  Pursuant to the requirements of the Securities Act of 1933,
as amended, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-8, and 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 this 13th day of January, 2000.

                               RHYTHMS NETCONNECTIONS, INC.

                               By: /s/ CATHERINE M. HAPKA
                                  -------------------------------------------
                                  Catherine M. Hapka
                                  Chief Executive Officer

                             POWER OF ATTORNEY

                  KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Catherine M. Hapka and Scott
C. Chandler, and each of them, as such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such person and in such person's name, place and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as such person might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes, may lawfully
do or cause to be done by virtue thereof.

                  Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed below by the
following persons on behalf of the Registrant and in the capacities and on
the dates indicated:

<TABLE>
<CAPTION>

                 SIGNATURE                                         TITLE                               DATE
- ---------------------------------------------    ------------------------------------------  ------------------------
<S>                                              <C>                                         <C>

 /s/ Catherine M. Hapka                          Chairman of the Board and Chief Executive      January 13, 2000
- ---------------------------------------------    Officer (Principal Executive Officer)
Catherine M. Hapka



 /s/ Scott C. Chandler                           Chief Financial Officer (Principal             January 13, 2000
- ---------------------------------------------    Financial and Accounting Officer)
Scott C. Chandler



 /s/ Kevin R. Compton                            Director and President                         January 13, 2000
- ---------------------------------------------
Kevin R. Compton



 /s/ Keith B. Geeslin                            Director                                       January 13, 2000
- ---------------------------------------------
Keith B. Geeslin



 /s/ Susan Mayer                                 Director                                       January 13, 2000
- ---------------------------------------------
Susan Mayer
</TABLE>



<PAGE>

<TABLE>
<CAPTION>

                 SIGNATURE                                         TITLE                               DATE
- ---------------------------------------------    ------------------------------------------  ------------------------
<S>                                              <C>                                         <C>



 /s/ William R. Stensrud                         Director                                       January 13, 2000
- ---------------------------------------------
William R. Stensrud




 /s/ John L. Walecka                             Director                                       January 13, 2000
- ---------------------------------------------
John L. Walecka




 /s/ Edward J. Zander                            Director                                       January 13, 2000
- ---------------------------------------------
Edward J. Zander
</TABLE>










<PAGE>










                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    EXHIBITS

                                       TO

                                    FORM S-8

                                      UNDER

                             SECURITIES ACT OF 1933

                          RHYTHMS NETCONNECTIONS, INC.


<PAGE>


                                  EXHIBIT INDEX
<TABLE>
<CAPTION>

    Exhibit Number       Exhibit
    --------------       -------
    <S>                  <C>
         4               Instruments Defining the Rights of Stockholders.
                         Reference is made to Registrant's Registration
                         Statements on Form 8-A, together with the amendments
                         and exhibits thereto, which are incorporated herein by
                         reference pursuant to Items 3(c) and 3(d).
         5               Opinion and Consent of Brobeck, Phleger & Harrison LLP.
        23.1             Consent of PricewaterhouseCoopers LLP, Independent Accountants.
        23.2             Consent of Brobeck, Phleger & Harrison LLP is contained
                         in Exhibit 5.
        24               Power of Attorney. Reference is made to the Signature
                         Page of this Registration Statement.
        99.1             Notice of Grant of Stock Option to Mr. Stringer.
        99.2             Stock Option Agreement between the Registrant and
                         Mr. Stringer.
        99.3             Form of Notice of Grant of Stock Option to Certain
                         Individuals.
        99.4             Form of Stock Option Agreement between the
                         Registrant and Certain Individuals.

</TABLE>













<PAGE>

                                    EXHIBIT 5

             OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP

                               January 13, 2000

Rhythms NetConnections Inc.
6933 South Revere Parkway
Englewood, Colorado  80112

                  Re:      Rhythms NetConnections Inc. - Registration Statement
                           for Offering of 389,252 Shares of Common Stock

Dear Ladies and Gentlemen:

                  We have acted as counsel to Rhythms NetConnections Inc., a
Delaware corporation (the "Company"), in connection with the registration on
Form S-8 (the "Registration Statement") under the Securities Act of 1933, as
amended, of (i) 70,252 shares of common stock (the "Shares") subject to the
stock option granted to Steve Stringer (the "Stringer Shares"), the Company's
President and Chief Operations Officer, on June 10, 1999 (the "Stringer
Option") and (ii) an additional 319,000 shares of the Company's common stock
(the "Option Shares") issuable pursuant to stock options granted to certain
individuals in the Company's service pursuant to their written compensation
agreements with the Company (the "Non-Plan Options"). Hereafter, the Stringer
Shares and the Option Shares will be referred to as the "Shares".

                  This opinion is being furnished in accordance with the
requirements of Item 8 of Form S-8 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 grant of the
Option. Based on such review, we are of the opinion that if, as and when the
Shares are issued and sold (and the consideration therefor received) pursuant to
the provisions of the option agreement evidencing the Option and in accordance
with the Registration Statement, such Shares will be duly authorized, legally
issued, fully paid and nonassessable.

                  We consent to the filing of this opinion letter as Exhibit 5
to the Registration Statement.

                  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, the Stringer Option, the Non-Plan Options or the Shares.

                                   Very truly yours,

                                   /s/ Brobeck, Phleger & Harrison LLP

                                   BROBECK, PHLEGER & HARRISON LLP



<PAGE>

                                  EXHIBIT 23.1

                       CONSENT OF INDEPENDENT ACCOUNTANTS


We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated March 4, 1999, except for the last
paragraph of Note 11 as to which the date is March 19, 1999 relating to the
financial statements, which appears in Rhythms NetConnections, Inc., Annual
Report on Form 10-K for the year ended December 31, 1998. We also consent to
the reference to us under the heading "Experts" in such Registration
Statement.

                                              /s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Denver, Colorado

January 12, 2000


<PAGE>

                                  EXHIBIT 99.1

                          RHYTHMS NETCONNECTIONS, INC.
                         NOTICE OF GRANT OF STOCK OPTION

                  Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of Rhythms NetConnections,
Inc. (the "Corporation"):

                  OPTIONEE:  Steve Stringer

                  GRANT DATE:  June 10, 1999

                  VESTING COMMENCEMENT DATE:  June 10, 1999

                  EXERCISE PRICE:  $14.23  per share

                  NUMBER OF OPTION SHARES:  70,252 shares

                  EXPIRATION DATE:  June 9, 2009

                  TYPE OF OPTION:   Non-Statutory Stock Option

                  EXERCISE SCHEDULE: The Option shall become exercisable for the
                  Option Shares in a series of twenty-four (24) successive equal
                  monthly installments upon Optionee's completion of each month
                  of Service over the twenty-four (24) month period measured
                  from the Vesting Commencement Date. In no event shall the
                  Option become exercisable for any additional Option Shares
                  after Optionee's cessation of Service.

                  Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the Stock Option Agreement
attached hereto as EXHIBIT A. Optionee further agrees to be bound by the
terms of the Option as set forth in the Stock Option Agreement.

                  EMPLOYMENT AT WILL. Nothing in this Notice or in the
attached Stock Option Agreement shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any
time for any reason, with or without cause.

                  DEFINITIONS. All capitalized terms in this Notice shall
have the meaning assigned to them in this Notice or in the attached Stock
Option Agreement.

DATED: JUNE 10,  1999

                                      RHYTHMS NETCONNECTIONS INC.

                                      By:
                                         -----------------------------------

                                      Title:
                                            --------------------------------

                                      ____OPTIONEE

ATTACHMENT
EXHIBIT A - STOCK OPTION AGREEMENT    Address:
                                              ------------------------------

                                      --------------------------------------

<PAGE>


                                  EXHIBIT 99.2

                           RHYTHMS NETCONNECTIONS INC.
                             STOCK OPTION AGREEMENT

RECITALS

                           A.       Optionee is to render valuable services
to the Corporation (or a Parent or Subsidiary), and this Agreement is
executed pursuant to, and is intended to carry out the purposes of, the
Corporation's grant of an option to Optionee.

                           C.       All capitalized terms in this Agreement
shall have the meaning assigned to them in the attached Appendix.

                  NOW, THEREFORE, it is hereby agreed as follows:

I.       GRANT OF OPTION. THE CORPORATION HEREBY GRANTS TO OPTIONEE, AS OF THE
         GRANT DATE, AN OPTION TO PURCHASE UP TO THE NUMBER OF OPTION SHARES
         SPECIFIED IN THE GRANT NOTICE. THE OPTION SHARES SHALL BE PURCHASABLE
         FROM TIME TO TIME DURING THE OPTION TERM SPECIFIED IN PARAGRAPH 2 AT
         THE EXERCISE PRICE.

II.      OPTION TERM. THIS OPTION SHALL HAVE A MAXIMUM TERM OF TEN (10) YEARS
         MEASURED FROM THE GRANT DATE AND SHALL ACCORDINGLY EXPIRE AT THE CLOSE
         OF BUSINESS ON THE EXPIRATION DATE, UNLESS SOONER TERMINATED IN
         ACCORDANCE WITH PARAGRAPH 5 OR 6.

III.     LIMITED TRANSFERABILITY.

         A.    This option shall be neither transferable nor assignable by
                    Optionee other than by will or by the laws of descent and
                    distribution following Optionee's death and may be
                    exercised, during Optionee's lifetime, only by Optionee.
                    However, Optionee may designate one or more persons as the
                    beneficiary or beneficiaries of this option, and this option
                    shall, in accordance with such designation, automatically be
                    transferred to such beneficiary or beneficiaries upon the
                    Optionee's death while holding such option. Such beneficiary
                    or beneficiaries shall take the transferred option subject
                    to all the terms and conditions of this Agreement, including
                    (without limitation) the limited time period during which
                    this option may, pursuant to Paragraph 5, be exercised
                    following Optionee's death.

          B.   This option may, in connection with the Optionee's estate plan,
                    be assigned in whole or in part during Optionee's lifetime
                    to one or more members of Optionee's immediate family or to
                    a trust established for the exclusive benefit of one or more
                    such family members. The assigned portion shall be
                    exercisable only by the person or persons who acquire a
                    proprietary interest in the option pursuant to such
                    assignment. The terms applicable to the assigned portion
                    shall be the same as those in effect for this option
                    immediately prior to such assignment.

IV.      DATES OF EXERCISE. THIS OPTION SHALL BECOME EXERCISABLE FOR THE OPTION
         SHARES IN ONE OR MORE INSTALLMENTS AS SPECIFIED IN THE GRANT NOTICE. AS
         THE OPTION BECOMES EXERCISABLE FOR SUCH INSTALLMENTS, THOSE
         INSTALLMENTS SHALL ACCUMULATE, AND THE OPTION SHALL REMAIN EXERCISABLE
         FOR THE ACCUMULATED INSTALLMENTS UNTIL THE EXPIRATION DATE OR SOONER
         TERMINATION OF THE OPTION TERM UNDER PARAGRAPH 5 OR 6.

<PAGE>

V.       CESSATION OF SERVICE. THE OPTION TERM SPECIFIED IN PARAGRAPH 2 SHALL
         TERMINATE (AND THIS OPTION SHALL CEASE TO BE OUTSTANDING) PRIOR TO THE
         EXPIRATION DATE SHOULD ANY OF THE FOLLOWING PROVISIONS BECOME
         APPLICABLE:

         A.   Should Optionee cease to remain in Service for any reason (other
                    than death, Permanent Disability or Misconduct) while
                    holding this option, then Optionee shall have a period of
                    three (3) months (commencing with the date of such cessation
                    of Service) during which to exercise this option, but in no
                    event shall this option be exercisable at any time after the
                    Expiration Date.

         B.   Should Optionee die while holding this option, then the personal
                    representative of Optionee's estate or the person or persons
                    to whom the option is transferred pursuant to Optionee's
                    will or in accordance with the laws of inheritance shall
                    have the right to exercise this option. However, if Optionee
                    has designated one or more beneficiaries of this option,
                    then those persons shall have the exclusive right to
                    exercise this option following Optionee's death. Any such
                    right to exercise this option shall lapse, and this option
                    shall cease to be outstanding, upon the EARLIER of (i) the
                    expiration of the twelve (12)-month period measured from the
                    date of Optionee's death or (ii) the Expiration Date.

         C.   Should Optionee cease Service by reason of Permanent Disability
                    while holding this option, then Optionee shall have a period
                    of twelve (12) months (commencing with the date of such
                    cessation of Service) during which to exercise this option.
                    In no event shall this option be exercisable at any time
                    after the Expiration Date.

         D.   During the limited period of post-Service exercisability, this
                    option may not be exercised in the aggregate for more than
                    the number of Option Shares for which the option is
                    exercisable at the time of Optionee's cessation of Service.
                    Upon the expiration of such limited exercise period or (if
                    earlier) upon the Expiration Date, this option shall
                    terminate and cease to be outstanding for any exercisable
                    Option Shares for which the option has not been exercised.
                    However, this option shall, immediately upon Optionee's
                    cessation of Service for any reason, terminate and cease to
                    be outstanding with respect to any Option Shares for which
                    this option is not otherwise at that time exercisable.

         E.   Should Optionee's Service be terminated for Misconduct while this
                    option is outstanding, then this option shall terminate
                    immediately and cease to remain outstanding.

         VI.      SPECIAL ACCELERATION OF OPTION.

         A.   This option, to the extent outstanding at the time of a Corporate
                    Transaction but not otherwise fully exercisable, shall
                    automatically accelerate so that this option shall,
                    immediately prior to the effective date of such Corporate
                    Transaction, become exercisable for all of the Option Shares
                    at the time subject to this option and may be exercised for
                    any or all of those Option Shares as fully vested shares of
                    Common Stock. No such acceleration of this option shall
                    occur, however, if and to the extent: (i) this option is, in
                    connection with the Corporate Transaction, to be assumed by
                    the successor corporation (or parent thereof) or (ii) this
                    option is to be replaced with a cash incentive program of
                    the successor corporation which preserves the spread
                    existing at the time of the Corporate Transaction on the
                    Option Shares for which this option is not otherwise at that
                    time exercisable (the excess of the Fair Market Value of
                    those Option Shares over the aggregate Exercise Price
                    payable for such shares) and provides for subsequent payout
                    in accordance with the same option exercise/vesting schedule
                    set forth in the Grant Notice.

         B.   Immediately following the Corporate Transaction, this option
                    shall terminate and cease to be outstanding, except to the
                    extent assumed by the successor corporation (or parent
                    thereof) in connection with the Corporate Transaction.

                                       5

<PAGE>

         C.   If this option is assumed in connection with a Corporate
                    Transaction, then this option shall be appropriately
                    adjusted, immediately after such Corporate Transaction, to
                    apply to the number and class of securities which would have
                    been issuable to Optionee in consummation of such Corporate
                    Transaction had the option been exercised immediately prior
                    to such Corporate Transaction, and appropriate adjustments
                    shall also be made to the Exercise Price, PROVIDED the
                    aggregate Exercise Price shall remain the same. To the
                    extent the actual holders of the Corporation's outstanding
                    Common Stock receive cash consideration for their Common
                    Stock in consummation of the Corporate Transaction, the
                    successor corporation (if any) may, in connection with the
                    assumption of this option, substitute one or more shares of
                    its own common stock with a fair market value equivalent to
                    the cash consideration paid per share of Common Stock in
                    such Corporate Transaction.

         D.   This Agreement shall not in any way affect the right of the
                    Corporation to adjust, reclassify, reorganize or otherwise
                    change its capital or business structure or to merge,
                    consolidate, dissolve, liquidate or sell or transfer all or
                    any part of its business or assets.

VII.     ADJUSTMENT IN OPTION SHARES. SHOULD ANY CHANGE BE MADE TO THE COMMON
         STOCK BY REASON OF ANY STOCK SPLIT, STOCK DIVIDEND, RECAPITALIZATION,
         COMBINATION OF SHARES, EXCHANGE OF SHARES OR OTHER CHANGE AFFECTING THE
         OUTSTANDING COMMON STOCK AS A CLASS WITHOUT THE CORPORATION'S RECEIPT
         OF CONSIDERATION, APPROPRIATE ADJUSTMENTS SHALL BE MADE TO (I) THE
         TOTAL NUMBER AND/OR CLASS OF SECURITIES SUBJECT TO THIS OPTION AND (II)
         THE EXERCISE PRICE IN ORDER TO REFLECT SUCH CHANGE AND THEREBY PRECLUDE
         A DILUTION OR ENLARGEMENT OF BENEFITS HEREUNDER.

VIII.    STOCKHOLDER RIGHTS. THE HOLDER OF THIS OPTION SHALL NOT HAVE ANY
         STOCKHOLDER RIGHTS WITH RESPECT TO THE OPTION SHARES UNTIL SUCH PERSON
         SHALL HAVE EXERCISED THE OPTION, PAID THE EXERCISE PRICE AND BECOME A
         HOLDER OF RECORD OF THE PURCHASED SHARES.

IX.      MANNER OF EXERCISING OPTION.

         A.   In order to exercise this option with respect to all or any part
                    of the Option Shares for which this option is at the time
                    exercisable, Optionee (or any other person or persons
                    exercising the option) must take the following actions:

                    1.   Execute and deliver to the Corporation a Notice of
                              Exercise for the Option Shares for which the
                              option is exercised.

                    2.   Pay the aggregate Exercise Price for the purchased
                              shares in one or more of the following forms:

                              a.   cash or check made payable to the
                                   Corporation;

                              b.   shares of Common Stock held by Optionee (or
                                   any other person or persons exercising the
                                   option) for the requisite period necessary to
                                   avoid a charge to the Corporation's earnings
                                   for financial reporting purposes and valued
                                   at Fair Market Value on the Exercise Date; or

                              c.   through a special sale and remittance
                                   procedure pursuant to which Optionee (or any
                                   other person or persons exercising the
                                   option) shall concurrently provide
                                   irrevocable instructions (i) to a
                                   Corporation-designated brokerage firm to
                                   effect the immediate sale of the purchased
                                   shares and remit to the Corporation, out of
                                   the sale proceeds available on the settlement
                                   date, sufficient funds to cover the aggregate
                                   Exercise Price payable for the purchased
                                   shares plus all applicable Federal, state and
                                   local income and employment taxes required to
                                   be withheld by the Corporation by reason of
                                   such exercise and (ii) to the Corporation to

                                       6

<PAGE>

                                   deliver the certificates for the purchased
                                   shares directly to such brokerage firm in
                                   order to complete the sale.

                           Except to the extent the sale and remittance
                  procedure is utilized in connection with the option exercise,
                  payment of the Exercise Price must accompany the Notice of
                  Exercise delivered to the Corporation in connection with the
                  option exercise.

                  3.   Furnish to the Corporation appropriate documentation
                           that the person or persons exercising the option (if
                           other than Optionee) have the right to exercise this
                           option.

                  4.   Make appropriate arrangements with the Corporation
                           (or Parent or Subsidiary employing or retaining
                           Optionee) for the satisfaction of all Federal, state
                           and local income and employment tax withholding
                           requirements applicable to the option exercise.

          B.   As soon as practical after the Exercise Date, the Corporation
                  shall issue to or on behalf of Optionee (or any other person
                  or persons exercising this option) a certificate for the
                  purchased Option Shares, with the appropriate legends affixed
                  thereto.

          C.   In no event may this option be exercised for any fractional
                  shares.

X.       COMPLIANCE WITH LAWS AND REGULATIONS.

         A.    The exercise of this option and the issuance of the Option
                  Shares upon such exercise shall be subject to compliance by
                  the Corporation and Optionee with all applicable requirements
                  of law relating thereto and with all applicable regulations of
                  any stock exchange (or the Nasdaq National Market, if
                  applicable) on which the Common Stock may be listed for
                  trading at the time of such exercise and issuance.

          B.   The inability of the Corporation to obtain approval from any
                  regulatory body having authority deemed by the Corporation to
                  be necessary to the lawful issuance and sale of any Common
                  Stock pursuant to this option shall relieve the Corporation of
                  any liability with respect to the non-issuance or sale of the
                  Common Stock as to which such approval shall not have been
                  obtained. The Corporation, however, shall use its best efforts
                  to obtain all such approvals.

XI.      SUCCESSORS AND ASSIGNS. EXCEPT TO THE EXTENT OTHERWISE PROVIDED IN
         PARAGRAPHS 3 AND 6, THE PROVISIONS OF THIS AGREEMENT SHALL INURE TO THE
         BENEFIT OF, AND BE BINDING UPON, THE CORPORATION AND ITS SUCCESSORS AND
         ASSIGNS AND OPTIONEE, OPTIONEE'S ASSIGNS, THE LEGAL REPRESENTATIVES,
         HEIRS AND LEGATEES OF OPTIONEE'S ESTATE AND ANY BENEFICIARIES OF THIS
         OPTION DESIGNATED BY OPTIONEE.

XII.     NOTICES. ANY NOTICE REQUIRED TO BE GIVEN OR DELIVERED TO THE
         CORPORATION UNDER THE TERMS OF THIS AGREEMENT SHALL BE IN WRITING AND
         ADDRESSED TO THE CORPORATION AT ITS PRINCIPAL CORPORATE OFFICES. ANY
         NOTICE REQUIRED TO BE GIVEN OR DELIVERED TO OPTIONEE SHALL BE IN
         WRITING AND ADDRESSED TO OPTIONEE AT THE ADDRESS INDICATED BELOW
         OPTIONEE'S SIGNATURE LINE ON THE GRANT NOTICE. ALL NOTICES SHALL BE
         DEEMED EFFECTIVE UPON PERSONAL DELIVERY OR UPON DEPOSIT IN THE U.S.
         MAIL, POSTAGE PREPAID AND PROPERLY ADDRESSED TO THE PARTY TO BE
         NOTIFIED.

XIII.    GOVERNING LAW. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS
         AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA
         WITHOUT RESORT TO THAT STATE'S CONFLICT-OF-LAWS RULES.

                                       7

<PAGE>


                                    EXHIBIT I
                               NOTICE OF EXERCISE

                  I hereby notify Rhythms NetConnections, Inc. (the
"Corporation") that I elect to purchase ________ shares of the Corporation's
Common Stock (the "Purchased Shares") at the option exercise price of $ 14.23
per share (the "Exercise Price") pursuant to that certain option (the
"Option") granted to me on June 10, 1999.

                  Concurrently with the delivery of this Exercise Notice to
the Corporation, I shall hereby pay to the Corporation the Exercise Price for
the Purchased Shares in accordance with the provisions of my agreement with
the Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a
condition for exercise. Alternatively, I may utilize the special
broker-dealer sale and remittance procedure specified in my agreement to
effect payment of the Exercise Price.

__________________________,  ________
Date

                                         _______________________________________
                                         Optionee

                                         Address: _____________________________

                                         _______________________________________

Print name in exact manner it is to
appear on the stock certificate:         _______________________________________

Address to which certificate is to be
sent, if different from address above:   _______________________________________

                                         _______________________________________

Social Security Number:                  _______________________________________


<PAGE>


                                    APPENDIX

                  The following definitions shall be in effect under the
Agreement:

                 (i)    AGREEMENT shall mean this Stock Option Agreement.

                (ii)    BOARD shall mean the Corporation's Board of Directors.

               (iii)    COMMON STOCK shall mean shares of the Corporation's
                         common stock.

                (iv)    CODE shall mean the Internal Revenue Code of 1986, as
                         amended.

                 (v)    CORPORATE TRANSACTION shall mean either of the following
                         stockholder-approved transactions to which the
                         Corporation is a party:

                         (a) a merger or consolidation in which securities
                             possessing more than fifty percent (50%) of the
                             total combined voting power of the Corporation's
                             outstanding securities are transferred to a person
                             or persons different from the persons holding those
                             securities immediately prior to such transaction,
                             or

                         (b) the sale, transfer or other disposition of all or
                             substantially all of the Corporation's assets in
                             complete liquidation or dissolution of the
                             Corporation.

                 (vi)   CORPORATION shall mean Rhythms NetConnections Inc., a
                         Delaware corporation, and any successor corporation to
                         all or substantially all of the assets or voting stock
                         of Rhythms NetConnections Inc.

                (vii)   EMPLOYEE shall mean an individual who is in the employ
                         of the Corporation (or any Parent or Subsidiary),
                         subject to the control and direction of the employer
                         entity as to both the work to be performed and the
                         manner and method of performance.

               (viii)   EXERCISE DATE shall mean the date on which the option
                         shall have been exercised in accordance with
                         Paragraph 9 of the Agreement.

                 (ix)   EXERCISE PRICE shall mean the exercise price per Option
                         Share as specified in the Grant Notice.

                  (x)   EXPIRATION DATE shall mean the date on which the option
                         expires as specified in the Grant Notice.

                 (xi)   FAIR MARKET VALUE per share of Common Stock on any
                         relevant date shall be determined in accordance with
                         the following provisions:

<PAGE>

                         (a) If the Common Stock is at the time traded on the
                             Nasdaq National Market, then the Fair Market Value
                             shall be deemed equal to the closing selling price
                             per share of Common Stock on the date in question,
                             as the price is reported by the National
                             Association of Securities Dealers on the Nasdaq
                             National Market. If there is no closing selling
                             price for the Common Stock on the date in question,
                             then the Fair Market Value shall be the closing
                             selling price on the last preceding date for which
                             such quotation exists, or

                         (b) If the Common Stock is at the time listed on any
                             Stock Exchange, then the Fair Market Value shall be
                             deemed equal to the closing selling price per share
                             of Common Stock on the date in question on the
                             Stock Exchange determined by the Board to be the
                             primary market for the Common Stock, as such price
                             is officially quoted in the composite tape of
                             transactions on such exchange. If there is no
                             closing selling price for the Common Stock on the
                             date in question, then the Fair Market Value shall
                             be the closing selling price on the last preceding
                             date for which such quotation exists.

                (xii)   GRANT DATE shall mean the date of grant of the option as
                         specified in the Grant Notice.

               (xiii)   GRANT NOTICE shall mean the Notice of Grant of Stock
                         Option accompanying the Agreement, pursuant to which
                         Optionee has been informed of the basic terms of the
                         option evidenced hereby.

                (xiv)   MISCONDUCT shall mean the commission of any act of
                         fraud, embezzlement or dishonesty by Optionee, any
                         unauthorized use or disclosure by Optionee of
                         confidential information or trade secrets of the
                         Corporation (or any Parent or Subsidiary), or any other
                         intentional misconduct by Optionee adversely affecting
                         the business or affairs of the Corporation (or any
                         Parent or Subsidiary) in a material manner. The
                         foregoing definition shall not be deemed to be
                         inclusive of all the acts or omissions which the
                         Corporation (or any Parent or Subsidiary) may
                         consider as grounds for the dismissal or discharge
                         of Optionee or any other individual in the Service
                         of the Corporation (or any Parent or Subsidiary).

                  (xv)  NOTICE OF EXERCISE shall mean the notice of exercise in
                         the form attached hereto as Exhibit I.

                 (xvi)  OPTION SHARES shall mean the number of shares of Common
                         Stock subject to the option as specified in the Grant
                         Notice.

                (xvii)  OPTIONEE shall mean the person to whom the option is
                         granted as specified in the Grant Notice.

               (xviii)  PARENT shall mean any corporation (other than the
                         Corporation) in an unbroken chain of corporations
                         ending with the Corporation, provided each
                         corporation in the unbroken chain (other than
                         the Corporation) owns, at the time of the
                         determination, stock possessing fifty percent
                         (50%) or more of the total combined voting power
                         of all classes of stock in one of the other
                         corporations in such chain.

<PAGE>

                 (xix)  PERMANENT DISABILITY shall mean the inability of
                         Optionee to engage in any substantial gainful activity
                         by reason of any medically determinable physical or
                         mental impairment which is expected to result in death
                         or has lasted or can be expected to last for a
                         continuous period of twelve (12) months or more.

                  (xx)  SERVICE shall mean the Optionee's performance of
                         services for the Corporation (or any Parent or
                         Subsidiary) in the capacity of an Employee, a
                         non-employee member of the board of directors or a
                         consultant or independent advisor.

                 (xxi)  STOCK EXCHANGE shall mean the American Stock Exchange
                         or the New York Stock Exchange.

                  SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.






<PAGE>

                                                                    EXHIBIT 99.3

                                                                  NON-PLAN GRANT

                           RHYTHMS NETCONNECTIONS INC.
                         NOTICE OF GRANT OF STOCK OPTION
                         --------------------------------

                  Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of Rhythms NetConnections Inc.
(the "Corporation"):

                  OPTIONEE:
                             ------------------------------------------

                  GRANT DATE:    December     , 1999
                                          ----

                  VESTING COMMENCEMENT DATE:                     , 1999
                                                -----------------

                  EXERCISE PRICE:  $16.00  per share

                  NUMBER OF OPTION SHARES:            shares of Common Stock
                                             --------

                  EXPIRATION DATE:  December     , 2009
                                             ----
                  TYPE OF OPTION:   Non-Statutory Stock Option

                  EXERCISE SCHEDULE: The Option shall become exercisable for
                  twenty-five percent (25%) of the Option Shares upon Optionee's
                  completion of one (1) year of Service measured from the
                  Vesting Commencement Date and shall become exercisable for the
                  balance of the Option Shares in a series of thirty-six (36)
                  successive equal monthly installments upon Optionee's
                  completion of each additional month of Service over the
                  thirty-six (36) month period measured from the first
                  anniversary of the Vesting Commencement Date. In no event
                  shall the Option become exercisable for any additional Option
                  Shares after Optionee's cessation of Service.

                  Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the Stock Option Agreement
attached hereto as EXHIBIT A. Optionee further agrees to be bound by the terms
of the Option as set forth in the Stock Option Agreement.

                  EMPLOYMENT AT WILL. Nothing in this Notice or in the attached
Stock Option Agreement shall confer upon Optionee any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for any
reason, with or without cause.


<PAGE>


                  DEFINITIONS. All capitalized terms in this Notice shall have
the meaning assigned to them in this Notice or in the attached Stock Option
Agreement.

                  OPTIONEE HEREBY ACKNOWLEDGES AND AGREES THAT THIS OPTION IS
GRANTED IN FULL AND COMPLETE CANCELLATION OF THE OUTSTANDING OPTION PREVIOUSLY
GRANTED TO OPTIONEE UNDER THE CORPORATION'S 199 STOCK INCENTIVE PLAN ON
_________________, 1999 FOR THE SAME NUMBER OF OPTION SHARES AT THE SAME $16.00
PER SHARE EXERCISE PRICE. THAT EARLIER-GRANTED OPTION HAS BEEN DETERMINED TO
HAVE BEEN INVALIDLY ISSUED UNDER THE PLAN AND IS HEREBY CANCELLED IN ITS
ENTIRETY AND RENDERED NULL AND VOID, AND OPTIONEE HEREBY AGREES AND ACKNOWLEDGES
THAT OPTIONEE HAS NO FURTHER RIGHTS TO ACQUIRE ANY SHARES OF THE CORPORATION'S
COMMON STOCK UNDER THAT EARLIER-GRANTED INVALID OPTION.

DATED:  DECEMBER     ,  1999
                 ----
                                   RHYTHMS NETCONNECTIONS INC.

                                   By:
                                      ---------------------------
                                   Title:
                                         ------------------------

                                   ------------------------------
                                              OPTIONEE

                                   Address:
                                           ----------------------

                                   ------------------------------




ATTACHMENT
- ----------
EXHIBIT A - STOCK OPTION AGREEMENT

                                       2

<PAGE>


                                    EXHIBIT A
                                    ---------

                             STOCK OPTION AGREEMENT
                             ----------------------

<PAGE>

                                                                    EXHIBIT 99.4

                                                                 NON-PLAN OPTION

                           RHYTHMS NETCONNECTIONS INC.
                             STOCK OPTION AGREEMENT
                           ---------------------------

RECITALS
- --------

                  A. Optionee is to render valuable services to the Corporation
(or a Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Corporation's grant of an option to
Optionee.

                  C. All capitalized terms in this Agreement shall have the
meaning assigned to them in the attached Appendix.

                  NOW, THEREFORE, it is hereby agreed as follows:

                  1. GRANT OF OPTION. The Corporation hereby grants to Optionee,
as of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
This option is a Non-Statutory Option under the Federal tax laws.

                  2. OPTION TERM. This option shall have a maximum term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the Expiration Date, unless sooner terminated in accordance
with Paragraph 5 or 6.

                  3. LIMITED TRANSFERABILITY.

                         (a) This option shall be neither transferable nor
assignable by Optionee other than by will or by the laws of inheritance
following Optionee's death and may be exercised, during Optionee's lifetime,
only by Optionee. However, Optionee may designate one or more persons as the
beneficiary or beneficiaries of this option, and this option shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding such
option. Such beneficiary or beneficiaries shall take the transferred option
subject to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which this option may, pursuant to
Paragraph 5, be exercised following Optionee's death.

                         (b) This option may, in connection with the Optionee's
estate plan, be assigned in whole or in part during Optionee's lifetime to one
or more members of Optionee's immediate family or to a trust established for the
exclusive benefit of one or more such family members. The assigned portion shall
be exercisable only by the person or persons who acquire a proprietary interest
in the option pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment.


<PAGE>


                  4. DATES OF EXERCISE. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant Notice.
As the option becomes exercisable for such installments, those installments
shall accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

                  5. CESSATION OF SERVICE. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:

                         (a) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while holding this
option, then Optionee shall have a period of three (3) months (commencing with
the date of such cessation of Service) during which to exercise this option, but
in no event shall this option be exercisable at any time after the Expiration
Date.

                         (b) Should Optionee die while holding this option, then
the personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or in accordance with
the laws of inheritance shall have the right to exercise this option. However,
if Optionee has designated one or more beneficiaries of this option, then those
persons shall have the exclusive right to exercise this option following
Optionee's death. Any such right to exercise this option shall lapse, and this
option shall cease to be outstanding, upon the EARLIER of (i) the expiration of
the twelve (12)-month period measured from the date of Optionee's death or (ii)
the Expiration Date.

                         (c) Should Optionee cease Service by reason of
Permanent Disability while holding this option, then Optionee shall have a
period of twelve (12) months (commencing with the date of such cessation of
Service) during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.

                         (d) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more than
the number of Option Shares for which the option is exercisable at the time of
Optionee's cessation of Service. Upon the expiration of such limited exercise
period or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding for any exercisable Option Shares for which the option
has not been exercised. However, this option shall, immediately upon Optionee's
cessation of Service for any reason, terminate and cease to be outstanding with
respect to any Option Shares for which this option is not otherwise at that time
exercisable.

                         (e) Should Optionee's Service be terminated for
Misconduct or otherwise engage in Misconduct while this option is outstanding,
then this option shall terminate immediately and cease to remain outstanding.


                                       2
<PAGE>


                  6. SPECIAL ACCELERATION OF OPTION.

                         (a) This option, to the extent outstanding at the time
of a Corporate Transaction but not otherwise fully exercisable, shall
automatically accelerate so that this option shall, immediately prior to the
effective date of such Corporate Transaction, become exercisable for all of the
Option Shares at the time subject to this option and may be exercised for any or
all of those Option Shares as fully vested shares of Common Stock. No such
acceleration of this option shall occur, however, if and to the extent: (i) this
option is, in connection with the Corporate Transaction, to be assumed by the
successor corporation (or parent thereof) or (ii) this option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing at the time of the Corporate Transaction on the Option Shares
for which this option is not otherwise at that time exercisable (the excess of
the Fair Market Value of those Option Shares over the aggregate Exercise Price
payable for such shares) and provides for subsequent payout in accordance with
the same option exercise/vesting schedule set forth in the Grant Notice.

                         (b) Immediately following the Corporate Transaction,
this option shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof) in connection with the
Corporate Transaction.

                         (c) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such
Corporate Transaction, and appropriate adjustments shall also be made to the
Exercise Price, PROVIDED the aggregate Exercise Price shall remain the same. To
the extent the actual holders of the Corporation's outstanding Common Stock
receive cash consideration for their Common Stock in consummation of the
Corporate Transaction, the successor corporation (if any) may, in connection
with the assumption of this option, substitute one or more shares of its own
common stock with a fair market value equivalent to the cash consideration paid
per share of Common Stock in such Corporate Transaction.

                         (d) This Agreement shall not in any way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.

                  7. ADJUSTMENT IN OPTION SHARES. Should any change be made to
the Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.


                                       3
<PAGE>


                  8. STOCKHOLDER RIGHTS. The holder of this option shall not
have any stockholder rights with respect to the Option Shares until such person
shall have exercised the option, paid the Exercise Price and become a holder of
record of the purchased shares.

                  9. MANNER OF EXERCISING OPTION.

                    (a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

                         (i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.

                         (ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:

                              (A) cash or check made payable to the Corporation;

                              (B) shares of Common Stock held by Optionee (or
          any other person or persons exercising the option) for the requisite
          period necessary to avoid a charge to the Corporation's earnings for
          financial reporting purposes and valued at Fair Market Value on the
          Exercise Date; or

                              (C) through a special sale and remittance
          procedure pursuant to which Optionee (or any other person or persons
          exercising the option) shall concurrently provide irrevocable
          instructions (i) to a Corporation-designated brokerage firm to effect
          the immediate sale of the purchased shares and remit to the
          Corporation, out of the sale proceeds available on the settlement
          date, sufficient funds to cover the aggregate Exercise Price payable
          for the purchased shares plus all applicable Federal, state and local
          income and employment taxes required to be withheld by the Corporation
          by reason of such exercise and (ii) to the Corporation to deliver the
          certificates for the purchased shares directly to such brokerage firm
          in order to complete the sale.

                    Except to the extent the sale and remittance procedure is
          utilized in connection with the option exercise, payment of the
          Exercise Price must accompany the Notice of Exercise delivered to the
          Corporation in connection with the option exercise.


                                       4
<PAGE>


                              (iii) Furnish to the Corporation appropriate
          documentation that the person or persons exercising the option (if
          other than Optionee) have the right to exercise this option.

                              (iv) Make appropriate arrangements with the
          Corporation (or Parent or Subsidiary employing or retaining Optionee)
          for the satisfaction of all Federal, state and local income and
          employment tax withholding requirements applicable to the option
          exercise.

                         (b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.

                         (c) In no event may this option be exercised for any
fractional shares.

                    10. COMPLIANCE WITH LAWS AND REGULATIONS.

                         (a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.

                         (b) The inability of the Corporation to obtain approval
from any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to this
option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.

                    11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns, the legal representatives, heirs and
legatees of Optionee's estate and any beneficiaries of this option designated by
Optionee.

                    12. NOTICES. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation at its principal corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below Optionee's signature line on the
Grant Notice. All notices shall be deemed effective upon personal delivery or
upon deposit in the U.S. mail, postage prepaid and properly addressed to the
party to be notified.

                    13. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.


                                       5
<PAGE>


                                    EXHIBIT I
                               NOTICE OF EXERCISE

                    I hereby notify Rhythms NetConnections Inc. (the
"Corporation") that I elect to purchase _______ shares of the Corporation's
Common Stock (the "Purchased Shares") at the option exercise price of $16.00 per
share (the "Exercise Price") pursuant to that certain option (the "Option")
granted to me on December ______, 1999.

                  Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.

                   ,
- ------------------- --------
Date

                                             -----------------------------------
                                             Optionee


                                             Address:
                                                      --------------------------

Print name in exact manner it is to          -----------------------------------
appear on the stock certificate:
                                             -----------------------------------

Address to which certificate is to
be sent, if different from address
above:
                                             -----------------------------------

                                             -----------------------------------
Social Security Number:
                                             -----------------------------------


<PAGE>


                                    APPENDIX
                                    --------


     The following definitions shall be in effect under the Agreement:

     A.   AGREEMENT shall mean this Stock Option Agreement.

     B.   BOARD shall mean the Corporation's Board of Directors.

     C.   COMMON STOCK shall mean shares of the Corporation's common stock.

     D.   CODE shall mean the Internal Revenue Code of 1986, as amended.

     E.   CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

               (i) a merger or consolidation in which securities possessing more
          than fifty percent (50%) of the total combined voting power of the
          Corporation's outstanding securities are transferred to a person or
          persons different from the persons holding those securities
          immediately prior to such transaction, or

               (ii) the sale, transfer or other disposition of all or
          substantially all of the Corporation's assets in complete liquidation
          or dissolution of the Corporation.

     F.   CORPORATION shall mean Rhythms NetConnections Inc., a Delaware
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of Rhythms NetConnections Inc.

     G.   EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

     H.   EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.

     I.   EXERCISE PRICE shall mean the exercise price per Option Share as
specified in the Grant Notice.

     J.   EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.

     K.   FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:


                                       A-1
<PAGE>


                              (i) If the Common Stock is at the time traded on
          the Nasdaq National Market, then the Fair Market Value shall be deemed
          equal to the closing selling price per share of Common Stock on the
          date in question, as the price is reported by the National Association
          of Securities Dealers on the Nasdaq National Market. If there is no
          closing selling price for the Common Stock on the date in question,
          then the Fair Market Value shall be the closing selling price on the
          last preceding date for which such quotation exists, or

                              (ii) If the Common Stock is at the time listed on
          any Stock Exchange, then the Fair Market Value shall be deemed equal
          to the closing selling price per share of Common Stock on the date in
          question on the Stock Exchange determined by the Board to be the
          primary market for the Common Stock, as such price is officially
          quoted in the composite tape of transactions on such exchange. If
          there is no closing selling price for the Common Stock on the date in
          question, then the Fair Market Value shall be the closing selling
          price on the last preceding date for which such quotation exists.

     L.   GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.

     M.   GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

     N.   MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive of
all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).

     O.   NON-STATUTORY OPTION shall mean a stock option which does not qualify
as an incentive stock option under Section 422 of the Code.


     P.   NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.

     Q.   OPTION SHARES shall mean the number of shares of Common Stock subject
to the option as specified in the Grant Notice.

     R.   OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.


                                      A-2
<PAGE>


     S.   PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

     T.   PERMANENT DISABILITY shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.

     U.   SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.

     V.   STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.

     W.   SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.


                                      A-3


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