Employment Agreement - Digital Island Inc. and Michael Sullivan
[LOGO OF DIGITAL ISLAND APPEARS HERE]
EMPLOYMENT AGREEMENT
--------------------
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.
<PAGE>
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;
2
<PAGE>
(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 copies of all documents, records, software programs, media and
other materials containing any of the Company's Trade Secrets. Employee will
also return to the Company all equipment, files, software programs and other
personal property belonging to the Company or to any of its customers.
7. CONFIDENTIALITY OBLIGATION SURVIVES EMPLOYMENT: Employee's obligation
----------------------------------------------
to maintain the confidentiality and security of the Company's Trade Secrets
continues even after Employee's employment with the Company ends and continues
for so long as such material remains a Trade Secret.
8. COMPUTER PROGRAMS ARE WORKS MADE FOR HIRE: Company may ask, as part
-----------------------------------------
of Employee's job duties, Employee to create, or contribute to the creation of,
computer programs, audiovisual works, documentation, artwork and other
copyrightable works (collectively called "Work Product"). Employee agrees that
any and all Work Product shall be "works made for hire" and that the Company
shall own all the copyright rights in such works. Employee retains no rights to
use the Work Product or the Developments and agrees not to challenge the
validity of the ownership by the Company of the Work Product or the
Developments. IF AND TO THE EXTENT ANY SUCH MATERIAL DOES NOT SATISFY THE LEGAL
REQUIREMENTS TO CONSTITUTE A WORK MADE FOR HIRE, EMPLOYEE HEREBY ASSIGNS ALL
RIGHT, TITLE AND INTERESTS TO ALL EMPLOYEE'S COPYRIGHT AND OTHER INTELLECTUAL
PROPERTY RIGHTS IN THE WORK PRODUCT TO THE COMPANY.
9. DISCLOSURE OF DEVELOPMENTS: While Employee is employed by the
--------------------------
Company, Employee will promptly inform the Company of the full details of all
Employee's works of
3
<PAGE>
authorship, new or useful art, inventions, discoveries, findings, improvements,
designs, innovations and ideas (collectively called "Developments"), whether or
not the Developments are patentable, copyrightable or otherwise protectable,
that Employee conceives, completes or reduces to practice (whether individually
or in collaboration with others) and which:
(a) relate to the Company's present or prospective business, or
actual or demonstrably anticipated research and development; or
(b) result from any work Employee does using any equipment,
facilities, materials, Trade Secrets or personnel of the Company; or
(c) result from or are suggested by any work that Employee may do for
the Company.
10. ASSIGNMENT OF DEVELOPMENTS: Employee hereby assigns to the Company or
--------------------------
the Company's designee, Employee's entire fight, title and interest in all of
the following, that Employee conceives or make (whether alone or with others)
while employed by the Company:
(a) all Developments;
(b) all copyrights, Trade Secrets, trademarks and mask work rights in
Developments; and
(c) all patent applications filed and patents granted on any
Developments, including those in foreign countries.
11. WAIVER OF RIGHTS. In the event Employee has any fight in and to the
----------------
Work Product or Developments that cannot be assigned to the Company, Employee
hereby unconditionally and irrevocably (a) waives the enforcement of all such
fights, and all claims and causes of action of any kind with respect to any of
the foregoing against the Company, its distributors and customers, whether now
known or hereafter to become known, and (b) agrees, at the request and expense
of the Company and its respective successors and assigns, to consent to, and to
join in, any action to enforce such fights or to procure a waiver of such rights
from the holders of such fights.
12. LICENSE. In the event Employee has any fights in and to the Work
-------
Product or the Developments that cannot be assigned to the Company and cannot be
waived, Employee hereby grants to the Company, and its respective successors and
assigns, an exclusive, worldwide, royalty-free license during the term of the
fights to reproduce, distribute, modify, publicly perform and publicly display,
with the fight to sublicense and assign such fights in and to the Work Product
or the Developments including, without limitation, the fight to use in any way
whatsoever the Work Product or the Developments. Each of Company's clients,
customers and business partners is an intended third party beneficiary of this
provision and may independently enforce Employee's obligations hereunder.
4
<PAGE>
13. EXECUTION OF DOCUMENTS: Both while employed by the Company and
----------------------
afterwards, Employee agrees to execute and aid in the preparation of any papers
that the Company may consider necessary or helpful to obtain or maintain any
patents, copyrights, trademarks or other proprietary rights at the Company's
expense.
14. APPOINTMENT OF ATTORNEY-IN-FACT. In the event that the Company is
-------------------------------
unable for any reason whatsoever to secure Employee's signature to any lawful
and necessary document required to apply for or execute any patent, copyright or
other applications with respect to any of the Work Product or the Developments
(including improvements, renewals, extensions, continuations, divisions or
continuations in part hereof), Employee hereby irrevocably appoints the Company
and its duly authorized officers and agents as Employee's agents and attorneys-
in-fact to execute and file any such application and to do all other lawfully
permitted acts to further the prosecution and issuance of patents, copyrights or
other rights thereon with the same legal force and effect as if executed by
Employee.
15. CONFLICT OF INTEREST: During Employee's employment by the Company,
--------------------
Employee will not engage in any business activity competitive with the Company's
business activities.
16. NONINTERFERENCE WITH COMPANY EMPLOYEES: While employed by the Company,
--------------------------------------
Employee will not:
(a) induce, or attempt to induce, any Company employee to quit the
Company's employ;
(b) recruit or hire away any Company employee; or
(c) hire or engage any Company employee or former employee whose
employment with the Company ended less than six months before the date of such
hiring or engagement.
17. ENFORCEMENT: Employee agrees that in the event of a breach or
-----------
threatened breach of this Agreement, money damages would be an inadequate remedy
and extremely difficult to measure. Employee agrees, therefore, that the Company
shall be entitled to an injunction to restrain Employee from such breach or
threatened breach. Nothing in this Agreement shall be construed as preventing
the Company from pursuing any remedy at law or in equity for any breach or
threatened breach.
18. ASSIGNMENT. This Agreement may be assigned by the Company. Employee
----------
may not assign or delegate Employee's duties under this Agreement without the
Company's prior written approval. This Agreement shall be binding upon
Employee's heirs, successors, and permitted assignees.
19. GOVERNING LAW: This Agreement is made and shall be construed and
-------------
enforced in accordance with the laws of the State of California.
5
<PAGE>
20. ARBITRATION: In the event of any dispute in connection with this
-----------
Agreement, the Parties agree to resolve the dispute by binding arbitration in
San Francisco, California, under the Commercial Arbitration Rules of the
American Arbitration Association ("AAA"), with a single arbitrator familiar with
software development disputes appointed by the AAA. In the event of any dispute,
the prevailing party shall be entitled to its reasonable attorneys' fees and
costs from the other party, whether or not the matter is litigated or arbitrated
to a final judgment or award.
21. CHOICE OF FORUM. The parties hereby submit to the jurisdiction of, and
---------------
waive any venue objections against, the United States District Court for the
Northern District of California and the Superior and Municipal Courts of the
State of California, San Francisco County, in any litigation arising out of this
Agreement.
22. SEVERABILITY: If any provision of this Agreement is determined to be
------------
invalid or unenforceable, the remainder shall be unaffected and shall be
enforceable against both the Company and Employee.
23. ENTIRE AGREEMENT: This Agreement supersedes and replaces all prior
----------------
agreements or understandings, oral or written, between the Company and Employee,
except for any prior confidentiality agreements.
24. MODIFICATION: This Agreement may not be modified except by a writing
------------
signed both by the Company and Employee.
25. EMPLOYEE REVIEW AND RECEIPT OF AGREEMENT. Employee acknowledges that
----------------------------------------
Employee has carefully read and considered all provisions of this Agreement and
agrees that all of the restrictions set forth herein are fair and reasonably
required to protect the Company's interests. Employee acknowledges that Employee
has received a copy of this Agreement as signed by Employee.
26. NOTICE PURSUANT TO STATE LAW: Employee acknowledges that Employee has
----------------------------
been notified of its fights, if any, under California Labor Code Section 2870,
"Employment Agreements Assignment of Rights," and that Employee has had a full
and fair opportunity to read the provisions of Section 2870, a copy of which is
attached hereto as Exhibit A. Employee understands that this Agreement does not
---------
apply to any invention that qualifies fully under the provisions of Section
2870. This section shall serve as written notice to Employee as required by
California Labor Code Section 2872.
6
<PAGE>
27. PRIOR DEVELOPMENTS: As a matter of record, Employee has identified all
------------------
prior developments ("Prior Developments") that have been conceived or reduced to
practice or learned by Employee, alone or jointly with others, before Employee's
employment with the Company, which Employee desires to remove from the operation
of this Agreement. The Prior Developments are listed on attached Exhibit B.
---------
Employee represents and warrants that this list is complete. If there is no such
list, Employee represents that it has made no such Prior Developments at the
time of signing this Agreement.
Michael Sullivan
/s/ Michael J. Sullivan
---------------------------
Date: 6/30/97 Employee's Signature
------------------
Michael Sullivan
---------------------------
Typed or Printed Name
DIGITAL ISLAND, INC,:
/s/ [SIGNATURE ILLEGIBLE]^^
---------------------------
Date:___________________ Signature
___________________________
Typed or Printed Name
CEO
---------------------------
Title
7
<PAGE>
EXHIBIT A
California Labor Code Section 2870 provides as follows:
(a) Any provision in an employment agreement that provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information except for those inventions
that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer or
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
<PAGE>
EXHIBIT B
PRIOR DEVELOPMENTS
------------------
[LIST OF ALL PRIOR DEVELOPMENTS; IF BLANK WRITE "NONE"]