ex10_31.htm


    Ex
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in the United States, our offer of employment is withdrawn.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.
Indemnity Agreement

       

       

      ***, the
Company is willing to assist you with certain legal expenses as described below,
as well as reimburse you for a defined amount of actual economic loss
***.

       

      4(a).
Indemnification.
Subject to Section 4(b) below, the Company agrees to indemnify, defend and
hold harmless you, up to a collective, maximum amount of $700,000, against any
and all (i) attorneys’ fees,  (ii) related legal expenses, and (iii)
economic losses ***, in each case as actually and reasonably incurred by you in
connection with any threatened or pending action, suit or proceeding, whether
civil, administrative or investigative, ***, to which you are, were or at any
time become a party at any time while in the employ of the Company, or are
threatened to be made a party, by reason of the fact that you are, were or at
any time become an employee of the Company.

       

      4(b). Limitations on
Indemnification.  The Company shall not be obligated to
indemnify you pursuant to Section 4(a) above:

       

      
        	
                (i)  

              	
                In
      respect to any material misrepresentation by you concerning the subject
      matter of this letter;

              


      

       

      
        	
                (ii)  

              	
                In
      respect to your material breach or material non-fulfillment of any
      agreement or covenant contained in this letter and/or any other agreement
      entered into between the Company and
you;

              


      

       

      
        	
                (iii)  

              	
                In
      respect to any breach or non-fulfillment of any agreement or covenant by
      you to ***; or

              


      

       

      
        	
                (iv)  

              	
                On
      account of an action or omission by you which constitutes willful
      misconduct or is knowingly fraudulent or deliberately
      dishonest.

              


      

      


      


      4(c). Continuation of
Indemnification.  The Company’s obligations under
paragraph 4(a) above shall be effective only with regard to *** that occur
during the period you are an employee of the Company.

      


      4(d). Notification and Defense of
Claim.  You agree to promptly notify the Company of notice of
any threatened or actual commencement of any action, suit or proceeding that is
or may be the subject of an indemnification claim hereunder.  With
respect to any such action, suit or proceeding:

       

      (i) The
Company will be entitled to participate therein at its own expense;

       

       

      (ii)
Except as otherwise provided below, to the extent that it may wish, the Company
may elect, at its sole option, to assume your defense in any such action, suit
or proceeding.  You agree to fully cooperate with the Company in
connection with the defense of any claim against you, as well as the Company,
and make available to the Company such assistance and materials as may be
reasonably requested by the Company.  After notice from the Company to
you of its election to assume the defense thereof, the Company will not be
liable to you for any legal or other expenses subsequently incurred by you in
connection with the defense thereof other than as otherwise provided
below.  You shall have the right to employ counsel in such action,
suit or proceeding but the fees and expenses of such counsel incurred after
notice from the Company of its assumption of the defense shall be at the expense
of you unless (i) the employment of counsel by you has been authorized in
advance by the Company, (ii) the Company shall have reasonably concluded
that there may be a conflict of interest between the Company and you in the
conduct of the defense of such action, or (iii) the Company shall not in
fact have employed counsel to assume the defense of such action, in each of
which cases the reasonable fees and expenses of your counsel shall be borne by
the Company.  Any counsel selected pursuant to 4(b)(i)-(iii) above
must be reasonably satisfactory to the Company.

       

      (iii) The
Company shall not be liable to indemnify you under this Agreement for any
judgment on the merits or amounts paid in settlement of any action or claim
against you beyond the $700,000 limit set forth in this letter.  The
Company may settle any action or claim in which it is defending you in such
manner as the Company may reasonably determine; provided, however, that the
Company may not settle any action or claim in any manner that would impose any
penalty or limitation on you without your written consent.  Neither
the Company nor you will unreasonably withhold our consent to any proposed
settlement that may impose a penalty or limitation on you.

       

      4(e). Repayment of
Expenses.  You shall reimburse the Company upon demand for all
reasonable expenses paid by the Company in defending any civil action, suit or
proceeding against you in the event and only to the extent that (i) you are
awarded damages in connection with any counterclaim filed by you or on your
behalf; (ii) it shall be finally determined that you are not entitled to be
indemnified by the Company for such expenses under this Agreement; or
(iii) you are awarded legal expenses as a part of a judgment in your favor
as the defendant in any action, suit or proceeding in which the Company paid for
the defense.

       

      4(f). No Assurance Regarding Outcome of
Proceeding.  The Company makes no representation or other
assurance regarding the outcome of any action or proceeding in which the Company
may defend your interests in accordance with the terms of this
letter.

       

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

          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      

       

      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:

              


      

       

      


      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        	
                                                                Annual
      Revenue

                                                              	
                                                                %
      of Target

                                                              	
                                                                Commission
      %

                                                              	
                                                                Commission
      $

                                                              	
                                                                %
      Increase over 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
      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.

              


      

       

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

          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

       

      
        	
                ●  

              	
                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.

              


      

       

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

          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      

       

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

       

      
        	
                ●  

              	
                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.  Furthemore, 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.

              


      

       

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

          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      

       

      
        	
                ●  

              	
                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 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.

              


      

       

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

          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      

       

      11.
Change of Control.

       

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

       

      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