Document:

EXHIBIT 10.10

                                                               (WORKING CAPITAL)

                                 PROMISSORY NOTE

$80,000.00                                                    RICHMOND, VIRGINIA
                                                                    JULY 1, 2000

FOR VALUE RECEIVED,  Apple Suites Management,  Inc., a Virginia corporation (the
"Maker"),  hereby  makes an  UNCONDITIONAL  PROMISE TO PAY TO THE ORDER OF APPLE
SUITES,  INC., a Virginia  corporation  (the  "Holder"),  in lawful money of the
United  States of  America,  the  principal  sum of Eighty  Thousand  and 00/100
Dollars  ($80,000.00),  together with interest  thereon,  in accordance with the
following terms:

1.   INTEREST.

     Interest shall accrue on the unpaid principal balance at the annual rate of
nine  percent  (9%) (the  "Note  Rate").  With  respect to  amortized  payments,
interest at the Note Rate shall be based on a 360-day year and a uniform  period
of 30 days per month.  If there is an Event of Default (as defined  below),  the
annual rate of interest shall  increase to twelve  percent  (12%),  and shall be
compounded  monthly (the "Default  Rate").  The  computation  of interest at the
Default Rate shall be based on the actual number of days elapsed.

2.   PAYMENTS.

     (a) The debt  represented  by this Note shall be paid in one hundred twenty
(120) consecutive monthly installments.  The amount of each installment shall be
$1,013.41, consisting of principal and interest on an amortized basis.

     (b)  Installments  shall be due and payable on the first day of each month,
beginning with August 1, 2000. The due date for each installment shall be deemed
a "Payment  Date." The entire balance of principal and interest shall be due and
payable in full on July 1, 2010.

     (c) The Maker is entitled to prepay the principal  balance under this Note,
in whole or in part, on one or more occasion(s), without premium or penalty.

     (d) The Holder  shall have the right to allocate  all  payments  under this
Note in accordance with the following priority: (1) first, to accrued but unpaid
interest; and (2) second, to unpaid principal.

3.   PAYMENT ADDRESS AND METHOD.

     The  Holder  shall have the right,  which may be  exercised  on one or more
occasion(s)  in the sole  discretion of the Holder,  to require the Maker to use
any address for the  delivery of payment and any  reasonable  method of payment,
including  but not  limited to  cashier's  check or wire  transfer.  For present
purposes,  the Holder  hereby  requires the Maker to use a single check for each
installment payment, and to use the mailing address shown below for the delivery
of all payments:

<PAGE>

                                    Apple Suites, Inc.
                                    Attn:  Stanley J. Olander, Jr., Secretary
                                    9 North Third Street
                                    Richmond, VA  23219

4.   SECURITY AND COLLATERAL.

     The Holder and the Maker  acknowledge  and agree that no security  interest
has been granted in any property or collateral in connection with this Note.

5.   PURPOSE.

     The Maker has leased an extended-stay hotel in Boulder, Colorado. The Maker
has  received  funds  from the Holder for the  satisfaction  of various  working
capital  requirements  for such  hotel.  This  Note  serves as  evidence  of the
indebtedness of the Maker to the Holder,  and provides for the repayment of such
indebtedness to the Holder.

6.   EVENTS OF DEFAULT.

     (a)   Each of the following events shall  constitute  an "Event of Default"
under this Note:

          (1) the Maker's failure to pay to the Holder, within a grace period of
     five (5) calendar days after any Payment Date,  the full amount due on such
     Payment Date;

          (2) the acceleration of any payment  obligation of the Maker under any
     other  promissory  note, debt  instrument or other financial  instrument or
     agreement that now exists or may exist in the future;

          (3) the  commencement  of any  proceeding  to  appoint  any  receiver,
     trustee,  custodian,  liquidator, or similar official for the Maker, or the
     final appointment of any of the foregoing;

          (4) the attachment, levy, seizure or garnishment,  whether in whole or
     in part, of any wages,  funds,  financial accounts or other property of the
     Maker;

          (5) the entry of any  judgment  against the Maker that  exceeds,  when
     combined  with its other unpaid  judgments,  ten percent  (10%) of the then
     unpaid principal balance under this Note;

          (6) the general inability of the Maker to pay its debts as they become
     due;

          (7) the filing or commencement,  by the creditors of the Maker, of any
     Insolvency  Action (as defined  below) that is not dismissed  within thirty
     (30) calendar days after the original date of filing or commencement;

          (8) the approval or voluntary filing of any Insolvency  Action, or the
     approval or consummation  of any plan to make a general  assignment for the
     benefit of creditors, by the Maker;

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          (9) the approval of any plan, or the  execution of any contract,  that
     causes or is intended  to cause any of the  following  with  respect to the
     Maker:  (A) its  dissolution;  (B) the  liquidation of its assets;  (C) the
     termination of its corporate existence,  whether by merger or otherwise; or
     (D) the sale or transfer of all, or substantially all, of its assets;

          (10) any  event  that  causes  or will  cause  the  Maker to cease its
     business or  operations  for a period of more than thirty (30)  consecutive
     calendar days; or

          (11)  any  event  that  terminates  or will  terminate  the  business,
     operations or legal existence of the Maker.

     (b) For purposes of this Note, the term "Insolvency  Action" shall mean any
case or proceeding, or petition relating thereto, that arises under any state or
Federal  laws  relating to  bankruptcy  or  insolvency,  whether now existing or
subsequently enacted, and that seeks reorganization, liquidation or other relief
with respect to the debts, assets or businesses of the Maker.

7.   REMEDIES.

     (a) If an Event  of  Default  occurs,  all  unpaid  principal  and  accrued
interest  under  this Note shall  become  immediately  due and  payable in full,
without any action whatsoever by the Holder.

     (b) The Maker shall pay all costs,  including but not limited to reasonable
legal fees and expenses, whether arising in connection with an Insolvency Action
or  otherwise,  that may be  incurred  by the Holder to enforce  this Note or to
collect the amounts due under this Note  ("Enforcement  Costs").  The Holder, in
its sole  discretion,  shall  have  the  right  to  treat  Enforcement  Costs as
additional interest under this Note.

8.   TRANSFER AND ASSIGNMENT.

     (a) The Holder shall have the right to transfer this Note and to assign any
rights or remedies  under this Note.  Such right may be exercised in whole or in
part, on one or more  occasion(s),  in the sole  discretion  of the Holder.  The
obligations of the Maker under this Note shall not be altered or affected in any
way by any such transfer or assignment by the Holder.

     (b) The Maker shall be  absolutely  prohibited  from  assigning  any of its
obligations under this Note without the prior written consent of the Holder. The
Holder shall be entitled to withhold such consent in its sole discretion for any
reason or no reason.  Any attempted  assignment in violation of such prohibition
shall be ineffective and void.

     (c) The  Holder and the Maker  acknowledge  and agree that this Note (1) is
evidence of commercial debt financing; and (2) is not an investment contract, is
not designed to raise capital,  is not part of any plan of  distribution  and is
not related to any offering of securities.

9.   WAIVERS.

     (a) The  Holder  shall not be deemed to have  waived  any of its  rights or
remedies  under this Note  unless the  Holder  delivers a written  notice to the
Maker that  states the nature and scope of such  waiver.  Without  limiting  the
foregoing, no waiver of the Holder's rights or

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<PAGE>

remedies  shall be deemed to exist  solely  because the  Holder,  on one or more
occasion(s),  may have:  (1) waived  certain  rights or  remedies;  (2)  elected
certain  rights or remedies in lieu of others;  (3)  delayed in  exercising  any
rights or  remedies;  (4)  extended  any Payment  Dates under this Note;  or (5)
refrained from requiring the Maker to act in strict compliance with this Note.

     (b) The Maker,  to the maximum  extent  permitted by law,  hereby  grants a
complete, irrevocable and unconditional waiver of each of the following: (1) the
right to require presentment,  demand,  dishonor,  protest or any notices of any
kind or nature from the Holder in  connection  with this Note;  (2) the right to
assert any statute of limitations as a defense to the  enforcement of this Note;
(3) any claim that seeks to restrain,  enjoin, prohibit, delay or interfere with
any  transfer  of this Note by the Holder,  or any  assignment  of the  Holder's
rights or remedies  under this Note; (4) any claim that a transfer or assignment
by the Holder with respect to this Note has altered or affected the  obligations
of the Maker in any way; and (5) any claim that the Holder has waived its rights
or  remedies  under this Note in a manner  other than the  manner  described  in
subsection (a) immediately above.

10.  GENERAL.

     (a) Time is of the essence with respect to this Note and each Payment Date.
Except as expressly set forth in this Note,  or in a written  waiver that may be
granted by the Holder,  there are no grace periods and no extensions of time for
payment with respect to this Note,  and no grace periods or extensions  shall be
implied.

     (b) This Note shall be interpreted and enforced in accordance with the laws
of the Commonwealth of Virginia,  without regard to any choice of law provisions
or principles thereof to the contrary.

     (c)  All  provisions  in  this  Note  are  severable  and  each  valid  and
enforceable  provision shall remain in full force and effect,  regardless of any
official or formal  determination  that declares certain provisions of this Note
to be invalid or unenforceable.

     (d) Captions and  headings are used in this Note for  convenience  only and
shall not  affect the  interpretation  of this  Note.  Terms  such as  "hereof,"
"hereby,"  "hereto,"  "herein" and "hereunder"  shall be deemed to refer to this
Note as a whole, rather than to any particular provision of this Note.

     (e) All terms  and  conditions  of this Note  shall be  binding  upon,  and
enforceable  against,  the  Holder and the  Maker,  and all of their  respective
assignees and successors in title or interest.

                                 APPLE SUITES MANAGEMENT, INC.,
                                 a Virginia corporation

                                 By: /s/  Glade M. Knight
                                    ---------------------------
                                    Glade M. Knight, President

                                       4<PAGE>

                                                                     EXHIBIT 4.1

                         REGISTRATION RIGHTS AGREEMENT

          REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of January
18, 2000 by and among Digital Island, Inc., a Delaware corporation (the
"Company") and the stockholders of Live On Line, Inc. set forth on the signature
page hereto (collectively, the "Holders").

                                   RECITALS:

          On the date hereof, pursuant to the terms of an Agreement and Plan of
Merger, dated as of January 18, 2000 (the "Merger Agreement") among the Company,
Live On Line, Inc., LOL Acquisition Corp. and the Holders, the Company has
agreed to acquire the outstanding securities of Live On Line, Inc. pursuant to a
statutory merger of LOL Acquisition Corp. with and into Live on Line, Inc. (the
"Merger") in which each outstanding share of capital stock of Live On Line, Inc.
will be exchanged for shares of Common Stock, $.001 par value per share, of the
Company (the "Common Stock") and certain cash consideration in accordance with
the Merger Agreement. The Common Stock received in the Merger by the Holders in
exchange for their shares of capital stock of Live On Line, Inc. on the date
hereof and any Related Registrable Securities (as defined herein) are
collectively referred to herein as the "Registrable Securities".

          In that connection, the Company has agreed that the Holders shall have
certain rights to the registration of Registrable Securities under the
Securities Act of 1933, as amended (the "Securities Act"), subject to Section
7.8 of the Merger Agreement. These rights are set forth in this Agreement.

          The parties therefore agree as follows:

          1.   Effective Date. This Agreement shall become effective on the date
               --------------
hereof.

          2.   Registration Under Securities Act, Etc.
               --------------------------------------

               2.1.  Registration.
                     ------------

                     2.1.1.   Registration Statement. The Company agrees to file
                              ----------------------
with the Commission a registration statement on Form S-3 (the "Registration
Statement") covering the Registrable Securities on or before July 17, 2000
(giving due regard to, among other things, the other provisions of this
Agreement which affect the timing of such filing) or, if the Company is not
permitted to use Form S-3 at such date, as soon as practicable after the Company
becomes eligible to use Form S-3, and will use its reasonable best efforts to
cause the Registration Statement to be declared effective as soon as practicable
thereafter to permit the resale of the Registrable Securities.

                    2.1.2.    Expenses. The Company will pay all Registration
                              --------
Expenses in connection with any registration pursuant to this Section 2.1.

                    2.1.3.    Delays in Registration. The Company may delay the
                              ----------------------
filing of a registration statement for up to 90 days if:
<PAGE>

                              (a)  there is material undisclosed information
concerning the Company or any subsidiary of the Company which has not been
disclosed for business reasons; or

                              (b)  the Company is about to commence an offering
of securities of the Company or any subsidiary of the Company and the investment
banker for the Company shall advise the Company in writing (with a copy to the
Holders) that, in its reasonable opinion, the offering contemplated by the
Company would be adversely affected by the sale of Registrable Securities by the
Holders.

provided, however, that the Company shall only be entitled to delay the filing
--------  -------
of a registration statement pursuant to this Section 2.1.3 once during any 180-
day period.

                      2.1.4.  Suspension of Registration. The Company may
                              --------------------------
suspend the effectiveness of any registration statement, or, without suspending
such effectiveness, instruct the Holders that no sales of Registrable Securities
included in such registration statement may be made if, in the Company's
reasonable judgment, the Company would be required to disclose any material
actions taken or proposed to be taken by the Company, which disclosure would
have a material adverse effect on the Company or on such actions (a "Suspension
Period") by providing the Holders with written notice of such Suspension Period
and the reasons therefor. The Company shall use its reasonable efforts to
provide such notice a reasonable number of days prior to the commencement of a
Suspension Period, provided that in any event the Company shall provide such
notice no later than the commencement of such Suspension Period. The Suspension
Period shall not exceed 90 days. In addition, the Company shall not be required
to keep any registration statement effective, or may without suspending such
effectiveness instruct the Holders included in such registration statement not
to sell such Registrable Securities, during any period during which the Company
is instructed, directed, ordered or otherwise requested by any governmental
agency or self-regulatory organization to stop or suspend such trading or sales
("Supplemental Suspension Period"). The Company shall give prompt written notice
to the Holders of the termination of any Suspension Period or Supplemental
Suspension Period.

               2.2.   Registration Procedures.
                      -----------------------

                      2.2.1.  Procedures. If and whenever the Company is
                              ----------
required to use reasonable efforts in good faith to effect the registration of
any Registrable Securities under the Securities Act as provided in Section 2.1,
the Company will as promptly as practicable under the circumstances:

                               (a)  prepare and file with the Commission the
requisite registration statement on Form S-3 to effect such registration and
thereafter use reasonable efforts in good faith to cause such registration
statement to become effective, provided that the Company may discontinue any
registration of Registrable Securities or not file a registration statement with
the Commission under the circumstances specified in Sections 2.1.3 and 2.1.4, at
any time prior to the filing or effective date of the registration statement
relating thereto, as the case may be;

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<PAGE>

                              (b)  prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement for a period of the later of (i) six months or such earlier time as
all of such securities have been disposed of in accordance with the intended
methods of disposition by the Holders set forth in such registration statement,
subject to any Suspension Period or Supplemental Suspension Period which will
suspend any remaining portion of such six month period until termination of such
Suspension Period or Supplemental Suspension Period or (ii) such time as all
shares of Registrable Securities of the Holders can be sold in any single three-
month period under Rule 144 under the Securities Act without any restriction;

                              (c)  promptly furnish to the Holders such number
of conformed copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number of
copies of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other prospectus
filed in accordance with Rule 424 under the Securities Act, in conformity with
the requirements of the Securities Act, and such other documents, as the Holders
may reasonably request;

                              (d)  use reasonable efforts in good faith to
register or qualify all Registrable Securities under such other securities or
blue sky laws of such jurisdictions as the Holders shall reasonably request, to
keep such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action which may be
reasonably necessary or advisable to enable the Holders to consummate the
disposition in such jurisdictions of its securities covered by such registration
statement, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this Section 2.2.1(d) be
obligated to be so qualified or to consent to general service of process or to
the imposition of taxes on, or measured by, all or any part of the income of the
Company, in any such jurisdiction;

                              (e)  use reasonable efforts in good faith to cause
all Registrable Securities covered by such registration statement to be
registered with or approved by such other federal or state governmental agencies
or authorities as may be necessary to enable the Holders to consummate the
disposition of such Registrable Securities;

                              (f)  immediately notify the Holders, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, and at the request of the Holders promptly prepare and furnish to the
Holders a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the Holders
of such securities, such prospectus shall not include an untrue statement

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<PAGE>

of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing;

                              (g)  furnish to the Holders at least two business
days prior to the filing thereof a copy of any amendment or supplement to such
registration statement or prospectus and not file any thereof to which the
Holders shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;

                              (h)  otherwise use reasonable efforts in good
faith to comply with all applicable rules and regulations of the Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least 12 months, but not more than
18 months, beginning with the first full calendar month after the effective date
of such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act;

                              (i)  provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement;

                              (j)  use its best efforts to list all Registrable
Securities covered by such registration statement on the principal securities
exchange on which Registrable Securities of the type covered by such
registration statement are then listed;

                              (k)  notify Holders as to the filing of the
registration statement and of all amendments or supplements thereto filed prior
to the effective date of said registration statement;

                              (l)  notify Holders promptly after the Company
shall receive notice thereof of the time when said registration statement became
effective or when any amendment or supplement to any prospectus forming a part
of said registration statement has been filed;

                              (m)  notify Holders promptly of any request by the
Commission for the amendment or supplementation of such registration statement
or prospectus or for additional information; and

                              (n)  advise Holders promptly after the Company
shall receive notice or obtain knowledge thereof of the issuance of any stop
order by the Commission suspending the effectiveness of any such registration
statement or amendment thereto or the initiation or threatening of any
proceeding for that purpose, and promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal promptly if such stop
order should be Issued.

                      2.2.2.  Furnish Information. The Company may require the
                              -------------------
Holders to furnish the Company, and the Holders shall so furnish, such
information regarding the Holders and the distribution of the Registrable
Securities as the Company may from time to time

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<PAGE>

reasonably request in writing and as shall be required by law or by the
Commission in connection therewith.

                    2.2.3.  Discontinuance. The Holders agree that upon receipt
                            --------------
by them of any notice from the Company of the happening of any event of the kind
described in Section 2.2.1(f) or of any Suspension Period or Supplemental
Suspension Period pursuant to Section 2.1.4, the Holders will forthwith
discontinue the Holders' disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until the
Holders' receipt, as the case may be, of the copies of the supplemented or
amended prospectus contemplated by Section 2.2.1(f) or notice of the termination
of such Suspension Period or Supplemental Suspension Period. If so directed by
the Company, the Holders will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in the Holders' possession of
the prospectus relating to such Registrable Securities current at the time of
receipt of such notice of an event described in Section 2.2.1(f).

              2.3.  Preparation; Reasonable Investigation. In connection with
                    -------------------------------------
the preparation and filing of the Registration Statement under the Securities
Act pursuant to this Agreement, the Company will give the Holders and their
respective counsel and accountants, the opportunity to consult with the Company
with respect to the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, will give each of them such access to its books and records,
and such opportunities to discuss the business of the Company with its officers
and the independent public accountants who have certified its financial
statements as shall be necessary, to conduct a reasonable investigation within
the meaning of the Securities Act.

              2.4.  Indemnification.
                    ---------------

                    2.4.1.  Indemnification by the Company. In connection with
                            ------------------------------
any registration of any securities of the Company under the Securities Act
pursuant to Section 2.1, the Company will, and hereby does, indemnify and hold
harmless, each Holder against any losses, claims, damages or liabilities to
which such Holder may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities are registered under the Securities Act, and preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading, and the Company will reimburse each of the Holders for any legal or
any other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by or on behalf of

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<PAGE>

the Holders specifically stating that it is for use in the preparation thereof;
and provided further, however, that the Company shall not be liable to any of
the Holders, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such Holder's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus and
copies of such final prospectus were delivered to the Holders prior to the
written confirmation of the sale of Registrable Securities to such Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Holders and shall survive the transfer
of such securities by the Holders.

                    2.4.2.  Indemnification by the Holders. The Company may
                            ------------------------------
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 2.1, that the Company shall
have received an undertaking satisfactory to it from the Holders holding such
Registrable Securities, to indemnify and hold harmless (in the same manner and
to the same extent as set forth in Section 2.4.1) the Company, each director of
the Company, each officer of the Company and each other Person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act, with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by the
Holders for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by the Holders.

                    2.4.3.  Contribution. If for any reason the foregoing
                            ------------
indemnity is unavailable under either Section 2.4.1 or 2.4.2, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (a) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other, or (b)if the allocation provided by subdivision (a) above is
not permitted by applicable law or provides a lesser sum to the indemnified
party than is appropriate to reflect not only the relative benefits received by
the indemnifying party on the one hand and the indemnified party on the other
but also the relative fault of the indemnifying party and the indemnified party
as well as any other relevant equitable considerations, then in such proportion
as is appropriate to reflect the relative fault of the indemnifying party and
the indemnified party as well as any other equitable considerations.
Notwithstanding the foregoing, neither party shall be required to contribute any
amount in excess of the amount the indemnifying party would have been required
to pay to an indemnified party if the indemnity under this Section 2.4 was
available. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.

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<PAGE>

                    2.4.4.  Notices of Claims, etc. Promptly after receipt by an
                            -----------------------
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.4,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of an indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.4, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation.

                    2.4.5.  Other Indemnification. Indemnification or
                            ---------------------
contribution similar to that specified in the preceding subdivisions of this
Section 2.4 (with appropriate modifications) shall be given by the Company and
the Holders with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act.

                    2.4.6.  Indemnification Payments. The indemnification or
                            ------------------------
contribution required by this Section 2.4 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.

          3.   Definitions. As used herein, unless the context otherwise
               -----------
requires, the following terms have the following respective meanings:

          Commission: The Securities and Exchange Commission or any other
          ----------
federal agency at the time administering the Securities Act.

          Exchange Act: The Securities Exchange Act of 1934, or any similar
          ------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. Reference to a particular section of
the Securities Exchange Act of 1934 shall include a reference to the comparable
section, if any, of any similar federal statute.

          Person: A corporation, an association, a partnership, an organization,
          ------
a business, an individual, a governmental or political subdivision thereof or a
governmental agency.

                                       7
<PAGE>

          Registration Expenses: All expenses incurred by the Company in
          ---------------------
complying with Section 2, including, without limitation, all registration and
filing fees, printing expenses, expenses of complying with securities or blue
sky laws (including fees and disbursements of counsel for the Company, but
excluding fees and disbursements of counsel representing the Holders), all fees
and disbursements of counsel for the Company and any accountants' fees and
expenses incident to or required by any such registration.

          Related Registrable Securities: means, with respect to any shares of
          ------------------------------
Common Stock held by the Holder on the date hereof, any securities of the
Company or any other Person issued or issuable with respect to any such shares
of Common Stock, by way of a dividend or stock split or other distribution on
shares of Common Stock or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.

          Securities Act: The Securities Act of 1933, or any similar federal
          --------------
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time. References to a particular section of the
Securities Act of 1933 shall include a reference to the comparable section, if
any, of any such similar federal statute.

          Supplemental Suspension Period: As defined in Section 2.1.4.
          ------------------------------

          Suspension Period: As defined in Section 2.1.4.
          -----------------

          Trading Day: Any day on which trading takes place on the principal
          -----------
national securities exchange on which the Common Stock is then listed or
admitted to trading, or, if the Common Stock is not then listed or admitted to
trading on a national securities exchange, any day on which trading takes place
on the over-the-counter market and prices reflecting such trading are published
by NASDAQ.

          4.   Amendments and Waivers. This Agreement may be amended and the
               ----------------------
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Holders
holding a majority of the Registrable Securities. The Holders shall be bound by
any consent authorized by this Section 4, whether or not such Registrable
Securities shall have been marked to indicate such consent.

          5.   Nominees for Beneficial Owners. If any Registrable Securities are
               ------------------------------
held by a nominee for the beneficial owner thereof, the beneficial owner thereof
may, at its election, be treated as the holder of such Registrable Securities
for purposes of any request or other action by any holder or holders of
Registrable Securities pursuant to this Agreement or any determination of any
number or percentage of shares of Registrable Securities held by any holder or
holders of Registrable Securities contemplated by this Agreement provided that
the Company receives notice of such election from the beneficial owner and
assurances reasonably satisfactory to the Company of such owner's beneficial
ownership of such Registrable Securities (which may, in the Company's
discretion, consist of a written acknowledgment of such beneficial ownership
from the nominee).

          6.   Notices. All communications provided for hereunder shall be in
               -------
writing and sent by first-class mail and (a) if addressed to the Company, at 45
Fremont Street, Suite

                                       8
<PAGE>

1200, San Francisco, CA 94104, Attention: President, with a copy to Brobeck,
Phleger & Harrison LLP, 1633 Broadway, 47th Floor, New York, New York, 10019,
Attention: Eric Simonson, or at such other address, or to the attention of such
other officer, as the Company shall have furnished in writing to the Holders, or
(b) if to any of the Holders, to such address of such Holder as shall be shown
on the record books of the Company.

          7.   Assignment. This Agreement shall be binding upon and inure to the
               ----------
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns, including, without limitation and without the
need for an express assignment, holders of Registrable Securities who received
the Registrable Securities on or promptly after the Effective Date (as defined
in the Merger Agreement) directly from the Company's exchange agent as a
designee of one or more Holders. This Agreement may not be assigned by the
Company without prior written consent of the holders of a majority in interest
of the Registrable Securities outstanding at the time such consent is requested.

          8.   Descriptive Headings. The descriptive headings of the several
               --------------------
sections and paragraphs of this Agreement are inserted or reference only and
shall not limit or otherwise affect the meaning hereof.

          9.   Governing Law. This Agreement shall be construed and enforced in
               -------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York, without regard to conflicts of law principles thereof.

          10.  Counterparts. This Agreement may be executed simultaneously in
               ------------
any number of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.

                                       9
<PAGE>

          IN WITNESS WHEREOF, the parties have duly executed this Agreement, all
as of the date first written above.

                                        DIGITAL ISLAND, INC.

                                        By:  /s/ Leo S. Spiegel
                                             ----------------------------------
                                             Name: Leo S. Spiegel
                                             Title: President

                                        SELLERS:

                                        /s/ Adam Cohen
                                        ---------------------------------------
                                        Adam Cohen

                                        /s/ Michael J. Fiorentino
                                        ---------------------------------------
                                        Michael J. Fiorentino

                                        /s/ Debra LaChance
                                        ---------------------------------------
                                        Debra LaChance

                                        /s/ Alan Schatten
                                        ---------------------------------------
                                        Alan Schatten

                                        /s/ Victor Starsia
                                        ---------------------------------------
                                        Victor Starsia

                                        /s/ Jennifer Sultan
                                        ---------------------------------------
                                        Jennifer Sultan

                                       10

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