VP Finance (Michael Sullivan) Employment Agreement

EXHIBIT 10.7



[LOGO OF DIGITAL ISLAND APPEARS HERE]



EMPLOYMENT AGREEMENT

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THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of May 5, 1997 by Digital Island, Inc., a California corporation and Michael Sullivan ("Employee").



In consideration of the mutual covenants and conditions contained in this Agreement, the parties agree as follows:



1. AT WILL EMPLOYMENT. The Company hereby employees Employee in the

------------------ capacity of Vice President Finance. The parties agree that employment at the Company is at will and may be terminated by either the Company or Employee at any time with or without cause and with or without notice. Employee acknowledges that Employee has no right to be employed for a specific term and no right to insist on specific grounds for termination. Employee acknowledges and agrees that the at will nature of this Agreement extends to all employment decisions and that any change in the terms and conditions of employment, including without limitation work assignments, production standards, job responsibilities, compensation and promotions, shall be at the Company's sole discretion.



2.a. COMPENSATION AND EXPENSES. Employee shall be entitled to a monthly

------------------------- salary of $10,000, payable (less required withholdings) no less frequently than twice monthly. In addition to your base salary, you will be eligible for a minimum incentive bonus of $5,000 per quarter paid quarterly based on the achievement of mutually agreed upon corporate objectives. This bonus will be guaranteed for the first quarter of employment. The Company will, in accordance with the Company's policy in effect from time to time, reimburse Employee for all approved business expenses incurred by Employee in connection with the performance of Employee's duties.



2.b. INCENTIVE STOCK OPTIONS (ISO). The Company will offer the employee

------------------------------ a qualified option to purchase 50,000 shares of Digital Island at the initial ISO price of $.40. This option will be vested over 50 months with an initial 12 month employment requirement. At the end of the first 12 months of employment, you will vest 24% and then 2% per month thereafter. In the event the Board of Directors elects to offer you the position of Chief Financial Officer, you will be entitled to receive an additional option grant of 50,000 shares with the same vesting start date as your original grant.

2.c. OTHER BENEFITS. During the Term of Employment, Employee shall be

--------------- entitled to such medical and disability coverage and such vacation, sick leave and holiday benefits, if any, as are made available to the Company's personnel, all in accordance with the Company's benefits program in effect from time to time. You will also be entitled to all future benefits awarded the executive management team.



3. COMPANY'S TRADE SECRETS: In performance of Employee's job duties as

----------------------- may be designated by the Company from time to time, Employee will be exposed to the Company's Trade Secrets. "Trade Secrets" means information or material that is commercially valuable to the Company and not generally known in the industry. This includes:



(a) any and all versions of the Company's proprietary computer software (including source code and object code), hardware, firmware and documentation;



(b) technical information concerning the Company's products and services, including product data and specifications, diagrams, flow charts, drawings, test results, know-how, processes, inventions, research projects and product development;



(c) information concerning the Company's business, including cost information, profits, sales information, accounting and unpublished financial information, business plans, markets and marketing methods, customer lists and customer information, purchasing techniques, supplier lists and supplier information and advertising strategies;



(d) information concerning the Company's employees, including their salaries, strengths, weaknesses and skills;



(e) information submitted by the Company's customers, suppliers, employees, consultants or co-venturers with the Company for study, evaluation or use; and



(f) any other information not generally known to the public which, if misused or disclosed, could reasonably be expected to adversely affect the Company's business.



4. NONDISCLOSURE OF TRADE SECRETS: Employee will keep the Company's Trade

------------------------------ Secrets (and Trade Secrets of any person or company contracting with the Company), whether or not prepared or developed by Employee, in the strictest confidence. Employee will not use or disclose such secrets to others without the Company's written consent, except when necessary to perform Employee's job. Employee agrees that any customer, publisher or other third party who provides confidential information to the Company is an intended third party beneficiary of this provision. However, Employee shall have no obligation to treat as confidential any information which:



(a) was in Employee's possession or known to Employee, without an obligation to keep it confidential, before such information was disclosed to Employee by the Company;





(b) is or becomes public knowledge through a source other than Employee and through no fault of Employee's;



(c) is or becomes lawfully available to Employee from a source other than the Company; or



(d) is disclosed pursuant to a requirement of a governmental agency or as otherwise required by any court of competent jurisdiction.



5. NO CONFLICTING OBLIGATIONS. Employee's performance of this Agreement

-------------------------- and as an employee of the Company does not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by Employee prior to Employee's employment with the Company. Employee will not disclose to the Company, or induce the Company to use, any confidential or proprietary information or material belonging to any previous employer or other person or entity. Employee is not a party to any other agreement which will interfere with Employee's full compliance with this Agreement. Employee will not enter into any agreement, whether written or oral, in conflict with the provisions of this Agreement.



6. RETURN OF MATERIALS: When Employee's employment with the Company

------------------- ends, for whatever reason, Employee will promptly deliver to the Company all originals and co ...