Form Of Summary Letter Of Option Exchange Program

EXHIBIT 99.1


DIGITAL ISLAND, INC.


April 11, 2000


The purpose of this letter is to inform you of the new equity incentive program which the Compensation Committee of the Board of Directors has authorized as a special vehicle to retain the services of management level individuals essential to the Company's future financial success. The new program will provide you and other selected individuals with the opportunity to replace your outstanding underwater options with a restricted share grant in which you will vest in a series of installments over your period of continued employment with the Company. This program is in lieu of the retention option grant program contemporaneously being initiated for employees below the level of vice president. No employees are eligible for both programs.


Participation in the new program is entirely voluntary, and you may elect to keep your outstanding options rather than to exchange those options for the new restricted share grant. Basically, the new program will work as summarized below. Additional information concerning the program may also be found in the attached Question and Answer Summary.


SUMMARY OF OPTION EXCHANGE PROGRAM


* You may elect at any time on or before the close of business on April 23, 2001 to exchange one or more of your outstanding unexercised option grants (whether vested or unvested) with an exercise price per share in excess of $8.00 for a restricted share grant. Attached Schedule I lists each of your
---------- current stock option grants with exercise prices in excess of $8.00 per share. Your election can be made on an individual grant by grant basis, but you cannot elect to replace only part of a particular grant. Once made, your election will be irrevocable.


* The number of shares subject to each restricted share grant will be dependent upon the exercise price of the stock option grant which that restricted share grant replaces. The ratio at which option shares will be converted into restricted share grants will be determined in accordance with the following table:


Number of Option Shares
Exercise Price Per Share Cancelled Per Restricted Share
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Less than $10.00 1.5 Option Shares
$10.00 to $26.00 3 Option Shares
$27.00 to $50.00 6 Option Shares
Over $50.00 10 Option Shares


Accordingly, if you were to elect to exchange (i) an option covering 15,000 shares of the Company's common stock with an exercise price of $8.25 per share and (ii) an option


covering 24,000 shares with an exercise price of $17.188 per share, you would receive a restricted share grant of 10,000 shares in cancellation of your first option and a restricted share grant of 8,000 shares for your second option. The exact number of shares which would be issuable to you as a restricted share grant for each of your outstanding options is set forth on attached Schedule I.
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* As a condition to participation in the program, you must elect to replace all stock options granted to you after October 10, 2000. The retention of any post-October 10, 2000 option grants by a participant would have an adverse impact upon the Company's financial statements by reason of the recent changes in the accounting treatment applicable to repriced options.


* Each option which you elect to have replaced will be cancelled on April 23, 2001, and you will cease to have any further right or entitlement to purchase shares of the Company's common stock under that cancelled option. The shares subject to each of your cancelled options will be returned to the share reserve under the Company's 1999 Stock Incentive Plan and will be used to fund the shares of common stock which are to be issued to you pursuant to your restricted share grant as well as the option grants being made under the concurrent program.


* At the time you submit your election form indicating the option grants you wish to exchange for restricted share grants, you must ...