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