exv10w31



 





EXHIBIT
10.31









April 11, 2007




Steven D. Fitz

920 Madonna Way

Los Altos, CA 94024




Dear Steve:




          On behalf of Isilon Systems, Inc., (the “Company”), I am pleased to offer you the
position of Senior Vice President, Worldwide Sales, with the Company. Speaking for myself, as well
as the other members of the Company’s management team, we are all very impressed with your
credentials and we look forward to your future success in this position. The terms of your
position with the Company are as set forth below.




1. Position and Location




          You are being offered the position of Senior Vice President, Worldwide Sales. You will report
directly to me and subject to fulfillment of any condition imposed by this letter agreement, you
will begin this new position on April 30, 2007 (the “Start Date”). It is the Company’s intention
that you will work out of the Company’s office in Sunnyvale, California, although you may be
transferred to Seattle at the Company’s discretion.




2. Proof of Right to Work




          This offer of employment is contingent upon you presenting, in accordance with applicable law,
verification of your identity and your legal right to work in the United States. In the event that
you do not possess, or are unable to obtain authorization to accept employment in the United
States, our offer of employment is withdrawn.




3. No Conflicts.




          It is the policy of Isilon that employees neither disclose nor use any confidential
information from prior employment while employed by Isilon. Although you have not provided copies
of all agreements with your prior employer EMC Corporation (“EMC”), it is the Company’s
understanding that any such agreements will not prevent you from performing the duties of your
position.




							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com






 









 











4. ***




5. References





	 	•	 	This offer is contingent upon successful references and background check.





6. Compensation





	 	•	 	Base Salary: You will be paid $225,000 on an annual basis. Your salary will
be payable every two weeks pursuant to the Company’s regular payroll policy and will be
subject to applicable withholding taxes. Your base salary may be increased in the future,
but will not be decreased, by the Company.
	 
	 	•	 	Bonus: You are eligible for a quarterly bonus of $31,250 ($125,000 total
annual bonus potential or higher with Company performance above plan) upon successful
achievement of MBOs and Company goals. The bonus is split equally between achievement of
MBOs and certain revenue/EBIT goals, as determined by the Compensation Committee of the
Board of Directors (the “Compensation Committee”).
	 
	 	•	 	Commission Plan: You will be eligible for commissions based on Isilon’s global
sales revenue. The 2007 plan calls for *** of total revenue, with *** of revenue
contribution in Q2, *** in Q3, and *** of revenue in Q4. Target annual commission is
$125,000 at plan, plus upside above target as noted below:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	% Increase over	 	 
	Annual Revenue	 	% of Target	 	Commission %	 	Commission $	 	Target	 	Total Compensation*
	***
	 	 	100	%	 	 	*	**	 	$	125,000	 	 	 	 	 	 	$	475,000	 
	***
	 	 	110	%	 	 	*	**	 	$	300,000	 	 	 	*	**	 	$	650,000	 
	***
	 	 	125	%	 	 	*	**	 	$	450,000	 	 	 	*	**	 	$	800,000	 
	***
	 	 	150	%	 	 	*	**	 	$	650,000	 	 	 	*	**	 	$	1,000,000	 








 




			
	*	 	plus potential bonus upside for Company performance above plan





7. Stock Options





	 	•	 	Initial Option Grant. Following the commencement of your employment, the
Company will recommend that the Compensation Committee grant you a nonstatutory stock
option to purchase 360,000 shares of the Company’s Common Stock. The exercise price will
be the market closing price (or the closing bid, if no sales are reported) of the Company’s
Common Stock on The NASDAQ Global Market on the date of the grant, which will be on the
first new hire stock option approval date following your Start Date, unless such date falls
within a quarterly trading blackout period, in which case the date of grant will be the
first day the Company’s trading window opens following that quarterly blackout period. The
option may be exercised in accordance with the following vesting schedule: 25% of the shares will vest on the





							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com






 









 












twelve (12) month anniversary of your Start Date and 1/12th
of the remaining
shares will vest quarterly thereafter, such that the option will be fully vested and
exercisable on the four-year anniversary of your Start Date. Vesting will, of course,
depend on your continued employment with the Company. The option will be a nonstatutory
stock option and will be subject to the terms of the Company’s 2006 Equity Incentive Plan
(the “2006 Plan”) and Notice of Grant of Stock Option, each of which is attached hereto.




	 	•	 	Subsequent Option Grants. At the discretion of the Company’s Board of Directors
(or its designated committee), you may be eligible to receive additional grants of stock
options or purchase rights from time to time in the future, on such terms and subject to
such conditions as the Compensation Committee shall determine as of the date of such grant.





8. Benefits





	 	•	 	Insurance Benefits. The Company will provide you with standard medical and
dental insurance benefits according to Company policy. Benefits will commence the first of
the month following your first day of full-time employment with the company.
	 
	 	•	 	Vacation. You will be entitled to vacation according to Company policy.
	 
	 	•	 	Indemnification. The Company currently indemnifies all officers and directors
to the maximum extent permitted by law, and you will enter into the Company’s standard form
of Indemnification Agreement giving you such protection. Pursuant to the Indemnification
Agreement, the Company will agree to advance any expenses for which indemnification is
available to the extent allowed by applicable law. You shall be covered by all directors
and officers insurance policies in place during your employment, providing protection at
least comparable to present coverage.





9. Relocation Benefits. If the Company requests that you relocate to Seattle, the Company will
provide the following:





	 	•	 	House hunting trip for up to 4 days for you and your family (includes airfare,
hotel, rental car, meals in accordance with Isilon’s travel policy);
	 
	 	•	 	Household move to include goods/cars and storage for up to 60 days;
	 
	 	•	 	Temporary housing for up to 60 days. Temporary housing beyond 60 days will be
by mutual agreement; and
	 
	 	•	 	Closing costs in connection with the sale of your current residence in
California and the purchase of a primary residence in the Seattle area will be reimbursed
up to $200,000.





          The following elements of your compensation package will be contingent upon your relocation
date:




							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com






 









 












	 	•	 	Upon the date of the relocation (the “Relocation Date”) with your family to
Seattle, if requested by the Company, the Company will recommend that the Compensation
Committee grant you a nonstatutory stock option to purchase 40,000 shares of the Company’s
Common Stock (the “Relocation Grant”). The exercise price for this Relocation Grant will
be the market closing price (or the closing bid, if no sales are reported) of the Company’s
Common Stock on The NASDAQ Global Market on the date of the grant, which will be on the
first new hire stock option approval date following the Relocation Date, unless such date
falls within a quarterly trading blackout period, in which case the date of grant will be
the first day the Company’s trading window opens following that quarterly blackout period.
The Relocation Grant (if provided) will vest in accordance with the following schedule:
25% of the shares will vest on the twelve (12) month anniversary of the Relocation Date and
1/12th of the remaining shares will vest quarterly thereafter, such that the
Relocation Grant will be fully vested and exercisable on the four-year anniversary of the
Relocation Date. For purposes of this clause, the Relocation Date shall be understood to
mean the later of the dates on which (a) you have closed on the purchase of a primary
residence in the Seattle area; and (b) your immediate family members are all permanently
living in the Seattle area.50% of your quarterly MBO payout will accrue but not be paid
unless and until you have relocated to Seattle, to occur no later than July 1, 2008,
provided that the Company has requested such relocation. If the Company does not request
such relocation prior to April 15, 2008, any accrued MBO payments will be made to you on or
before May 15, 2008.





10. Severance Benefits.





	 	•	 	General. In the event of termination of your employment under any
circumstances you will not be entitled to any benefits (other than those you are due under
applicable law) except as set forth in this Section.






	 	•	 	Termination. If the Company terminates your employment for any reason other
than for Cause (as defined below), or you resign your position with the Company for Good
Reason (as defined below), subject to your signing and not revoking a release of claims
substantially similar to a form attached hereto as Exhibit A, you will be entitled to
receive an immediate lump-sum payment in an amount equal to your then current base salary
or $225,000 on an annualized basis, whichever is higher. Furthermore, you shall be entitled
to receive reimbursement of COBRA premiums for a period of six (6) months (the “Severance
Period”). To the extent that you obtain health benefits from another employer or pursuant
to a consulting relationship during the Severance Period, if applicable, reimbursement of
COBRA premiums will cease to the extent that you ceased to make COBRA payments because of
such health benefits. You agree that you will notify the Company of your obtaining
employment or a consulting agreement, and the relevant terms thereof, during the Severance
Period. You will not be entitled to any additional payments, salary, bonus or benefits in
the event of termination for Cause.






	 	•	 	Section 409A. Notwithstanding anything to the contrary in this letter
agreement, any cash severance payments otherwise due to you pursuant to the foregoing
paragraph or otherwise on or within the six-month period following your termination will
accrue





							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com











 









 

















during such six-month period and will become payable in a lump sum payment on the date six
(6) months and one (1) day following the date of your termination, provided, that such cash
severance payments will be paid earlier, at the times and on the terms set forth in the
applicable provisions of the foregoing paragraph, if the Company reasonably determines that
the imposition of additional tax under Section 409A of the Internal Revenue Code of 1986, as
amended, will not apply to an earlier payment of such cash severance payments. In addition,
this letter agreement will be deemed amended to the extent necessary to avoid imposition of
any additional tax or income recognition prior to actual payment to you under Code Section
409A and any temporary or final Treasury Regulations and guidance promulgated thereunder and
the parties agree to cooperate with each other and to take reasonably necessary steps in
this regard.




	 	•	 	“Cause” for termination will exist if you are terminated for any of the
following conduct that has caused or is reasonably expected to result in material injury to
the Company: (i) your willful failure substantially to perform your duties or
responsibilities to the Company or deliberate violation of a Company policy; (ii) your
commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct;
(iii) unauthorized use or disclosure by you of any proprietary information or trade secrets
of the Company or any other party to whom you owe an obligation of nondisclosure as a
result of your relationship with the Company; or (iv) your willful breach of any of your
obligations under any written agreement or covenant with the Company.






	 	•	 	“Good Reason” is defined as (1) any action by the Company or any successor that
results in a diminution of your position, authority, duties, responsibilities, compensation
or benefits without your written consent, (2) any failure by the Company or any successor
to comply with any provision of this letter agreement, (3) the Company’s or any successor’s
requiring you to be based at any office or location more than 30 miles from your office
location; provided however, that a future relocation to Seattle shall not constitute Good
Reason, or (4) any failure by a successor to the Company to assume the Company’s material
obligations under this letter agreement.






	 	•	 	Conditions. Any payments made will be subject to applicable tax withholding,
and your receipt of such payments shall be subject to your executing the Company’s (or it’s
successors) standard form release of claims releasing the Company and it’s successor(s)
from claims relating to your employment relationship and termination of that relationship.





11. Change of Control.




          Generally, any stock options granted to you will be subject to the terms set forth in the
attached 2006 Plan.




							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com







 









 













          Notwithstanding the foregoing, upon a Change in Control (as defined in the 2006 Plan), the
Initial Option Grant and the Relocation Grant (if provided) shall immediately vest and become
exercisable as to twenty-five percent (25%) of the Shares that are unvested under each option as of
the date of the Change in Control. Additionally, in the event the Company terminates your status
as a Service Provider (as defined in the 2006 Plan) without Cause (as defined in the 2006 Plan) or
you resign your position with the Company for Good Reason (as defined above), within twelve (12)
months after the consummation of a Change in Control, the Initial Option Grant and the Relocation
Grant (if provided) shall immediately vest and become exercisable as to an additional twenty-five
percent (25%) of the Shares that are unvested under each option as of the date of termination shall
immediately vest and become exercisable.




12. Proprietary Information and Inventions Agreement




          Your acceptance of this offer and commencement of employment with the Company is contingent
upon the execution, and delivery to an officer of the Company, of the Company’s Proprietary
Information and Invention Assignment Agreement, a copy of which is enclosed for your review and
execution (the “Assignment Agreement”), prior to or on your Start Date.




13. At-Will Employment




          Your employment with the Company will be on an “at will” basis, meaning that either you or the
Company may terminate your employment at any time for any reason or no reason, without further
obligation or liability.




14. Acceptance




          We are all delighted to be able to extend you this offer and look forward to working with you.
To indicate your acceptance of the Company’s offer, please sign and date this letter in the space
provided below and return it to me, along with a signed and dated copy of the Assignment Agreement
by 3:00 p.m. (PDT) on Thursday, April 12, 2007.




          This letter, together with the Assignment Agreement, set forth the terms of your employment
with the Company and supersedes any prior representations or agreements, whether written or oral.
This letter shall be interpreted and enforced in accordance with the laws of the State of
Washington without regard to conflicts of law principles. This letter may not be modified or
amended except by a written agreement, signed by the Company and by you.




							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com






 









 











	 	 	 	 	 
	 	Very truly yours,





ISILON SYSTEMS, INC.

 	 
	 	By:  	
/s/ Steve Goldman	 
	 	 	Steve Goldman 	 
	 	 	CEO and President 	 
	 



ACCEPTED AND AGREED:




Steven D. Fitz



	 	 	 
	
/s/ Steven D. Fitz	 
	Signature 	 
	 	 
	
April 12, 2007	 
	Date	 







			
	Enclosures:	 	Proprietary Information and Invention Assignment Agreement

2006 Stock Incentive Plan

Exhibit A — Sample Separation Agreement





							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com