EMPLOYMENT AGREEMENT
                             --------------------

          EMPLOYMENT AGREEMENT made as of the 20th day of May, 1998 by and
between DIGITAL ISLAND, a California corporation (the "Corporation"), and Ruann
Ernst ("Executive").

          WHEREAS, the Corporation and Executive wish to enter into a formal
employment contract which will govern the terms and conditions applicable to
Executive's employment with the Corporation and will provide certain severance
benefits for Executive in the event her employment should be involuntarily
terminated.

          NOW, THEREFORE, the parties hereto agree as follows:

       PART ONE-- TERMS AND CONDITIONS OF EMPLOYMENT

          1.  DUTIES AND RESPONSIBILITIES.
              --------------------------- 

          A.  Executive shall serve as the Chief Executive Officer of the
Corporation and shall in such capacity report directly to the Corporation's
Board of Directors (the "Board"). As Chief Executive Officer, Executive shall
have primary responsibility for the formulation, implementation and execution of
strategic policies relating to the Corporation's business operations, financial
objectives and market growth and shall accordingly have overall responsibility
for the formulation of the business plan for each fiscal year to be submitted
for Board approval. Executive shall be appointed to the Board of the Directors
(the "Board") at the time she commences service as President and Chief Executive
Officer, and her membership on the Board shall continue during the period of
this Agreement while the Corporation remains privately held. Once the
Corporation is publicly held, the Corporation shall use its best efforts to
maintain Executive on the Board throughout the remainder of her period of
employment with the Corporation as Chief Executive Officer by taking all action
necessary to nominate Executive for election to the Board at each shareholders
meeting held during her period of service as Chief Executive Officer at which
Board members are to be elected.

          B.  Executive hereby agrees to remain in such executive capacity
during the employment period specified in Paragraph 2 and to perform in good
faith and to the best of her ability all services which may be required of
Executive hereunder and to be available to render services at all reasonable
times and places in accordance with such reasonable directions and requests made
by the Corporation acting by majority vote of the Board.

          C.  Executive shall, during the term hereof, devote her full time,
ability, energy and skill to the performance of her duties and responsibilities
hereunder. Executive shall be based at the Corporation's principal offices in
the San Francisco/Bay Area, California, but Executive shall be required to
travel to other geographic locations in connection with the performance of her
executive duties hereunder.

<PAGE>
 
          2.  PERIOD OF EMPLOYMENT. Executive's employment with the Corporation
              ---------------------                                            
shall be governed by the provisions of this Agreement for the period commencing
June 1, 1998 and continuing until this Agreement is terminated in accordance
with the provisions of Paragraph 10. The period during which Executive's
employment continues in effect shall be hereafter referred to as the "Employment
Period."

          3.  CASH COMPENSATION.
              ----------------- 

          A.  Executive shall be paid a base salary at the annual rate of not
less than One Hundred Fifty Thousand Dollars ($150,000.00). Such rate shall be
subject to annual review by the Board and may be increased at the Board's
discretion. Base salary shall be paid at periodic intervals in accordance with
the Corporation's payroll practices for salaried employees.

          B.  For each fiscal year of the Corporation during the Employment
Period, beginning with the 1999 fiscal year commencing October 1, 1998,
Executive shall be entitled to incentive compensation in an amount not less than
forty percent (40%) of her base salary which is to become payable upon the
Corporation's achievement of the financial objectives and performance milestones
mutually agreed upon by the Board and Executive for each such year. For the
period June 1, 1998 to September 30, 1998, the target bonus shall be Twenty
Thousand Dollars ($20,000.00) to become payable upon the Corporation's
achievement of the financial milestones mutually agreed upon by the Board and
Executive.

          C.  The Corporation shall deduct and withhold from the compensation
payable to Executive hereunder any and all applicable Federal, State and local
income and employment withholding taxes and any other amounts required to be
deducted or withheld by the Corporation under applicable statutes, regulations,
ordinances or orders governing or requiring the withholding or deduction of
amounts otherwise payable as compensation or wages to employees.

          4.   EQUITY COMPENSATION
               -------------------

          A.  Effective immediately upon Executive' s commencement of employment
on or before June 1, 1999, Executive shall be granted two separate stock options
to acquire shares of the Corporation's common stock (the "Common Stock"). The
first option will cover 635,327 shares of Common Stock (representing four
percent (4%) of the Corporation's currently outstanding equity securities on a
fully-diluted basis), and the second option will cover 158,832 shares of Common
Stock (representing an additional one percent (1%) of the Corporation's
currently outstanding equity securities on a fully-diluted basis). Each option
will have an exercise price per share of $1.50, the current fair market value
per share of Common Stock as determined by the Board.

                                       2.
<PAGE>
 
     B.   The first option will be an incentive stock option for 333,333 shares
and a non-statutory option for the balance of the shares. The second option will
be a non-statutory option for all 158,832 shares. Each option will have a term
of ten (10) years, subject to earlier termination upon Executive's termination
of employment with the Corporation.

     C.   The incentive stock option will be immediately exercisable for 66,666
shares and will become exercisable for the remaining shares in a series of four
(4) successive equal annual installments on the first trading day in January in
each of the 1999 through 2002 calendar years. Each of the non-statutory options
will be immediately exercisable for all the option shares. All shares purchased
under the incentive stock and non-statutory options and unvested at the time of
Executive's termination of employment with the Corporation will be subject to
repurchase by the Corporation at the exercise price paid per share. Executive
shall vest in the shares subject to the four percent (4%) option (both the
incentive stock option and non-statutory stock option components) in a series of
fifty (50) successive equal monthly installments upon her completion of each of
her first fifty (50) months of employment with the Corporation. Executive shall
vest in the shares subject to the one percent (1%) option in a series of fifty
(50) successive equal monthly installments upon her completion of each month of
employment over the fifty (50)-month period beginning one year after the grant
date of such option. Except as otherwise provided in Paragraphs 4.D and 11, no
additional shares will vest after Executive's termination of employment with the
Corporation.

          D.  In the event of a Change in Control, all of the shares subject to
your two stock options will immediately vest, unless the acquiring entity
assumes those options. Should those options be assumed, then the shares subject
to those options will vest on accelerated basis in accordance with the following
terms:

               -  Should there occur an Involuntary Termination of
     Executive's employment with the Corporation (or the successor
     entity) within eighteen (18) months after the effective date of
     the Change in Control, then all the option shares shall
     immediately vest at that time.

               -  Should Executive voluntarily resign from employment
     (other than in connection with an event which constitutes grounds
     for an Involuntary Termination) within six (6) months after the
     effective date of the Change in Control, then Executive shall
     immediately vest in the lesser of (i) fifty percent (50%) of the
                             ------
     total number of shares for which the two options were granted or
     (ii) the total number of unvested shares at the time subject to
     the two options.

          D.  For purposes of this Agreement, the following definitions shall be
in effect'

          CHANGE IN CONTROL shall mean any of the following transactions
          -----------------                                             
effecting a change in ownership or control of the Corporation:

                                       3.
<PAGE>
 
               (i)    a merger, consolidation or reorganization
     approved by the Corporation's stockholders, unless securities
                                                 ------
     representing more than fifty percent (50%) of the total combined
     voting power of the voting securities of the successor
     corporation are immediately thereafter beneficially owned,
     directly or indirectly and in substantially the same proportion,
     by the persons who beneficially owned the Corporation's
     outstanding voting securities immediately prior to such
     transaction, or

               (ii)   any stockholder-approved transfer or other
     disposition of all or substantially all of the Corporation's
     assets, or

               (iii)  the acquisition, directly or indirectly by any
     person or related group of persons (other than the Corporation or
     a person that directly or indirectly controls, is controlled by,
     or is under common control with, the Corporation), of beneficial
     ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
     securities possessing more than fifty percent (50%) of the total
     combined voting power of the Corporation's outstanding securities
     pursuant to a tender or exchange offer made directly to the
     Corporation's stockholders.

          In no event, however, shall a Change in Control be deemed to occur in
connection with any public offering of the Common Stock.

          INVOLUNTARY TERMINATION shall mean (i) the involuntary termination of
          -----------------------                                              
Executive's employment with the Corporation other than a termination for Cause
or (ii) Executive's voluntary resignation within ninety (90) days following (A)
a material reduction in the scope of her duties and responsibilities or the
level of management to which she reports, (B) a reduction in her level of base
salary or (C) a relocation of her principal place of employment by more than
fifty (50) miles. Involuntary Termination shall not include the termination of
Executive's employment by reason of death or Disability.

          CAUSE shall have the meaning assigned to such term in Paragraph 10.C
          -----                                                               
of this Agreement.

          5.  EXPENSE REIMBURSEMENT. In addition to the compensation specified
              ----------------------                                          
in Paragraph 3, Executive shall be entitled, in accordance with the
reimbursement policies in effect from time to time, to receive reimbursement
from the Corporation for all business expenses incurred by Executive in the
performance of her duties hereunder, provided Executive furnishes the
                                     ---------                       
Corporation with vouchers, receipts and other details of such. expenses in the
form required by the Corporation sufficient to substantiate a deduction for such
business expenses under all applicable roles and regulations of federal and
state taxing authorities.

                                       4.
<PAGE>
 
          D.  FRINGE BENEFITS.
              --------------- 

          A.  Executive shall, throughout the Employment Period, be eligible to
participate in all group term life insurance plans, group health plans,
accidental death and dismemberment plans and short-term disability programs and
other executive perquisites which are made available to the Corporation's
executives and for which Executive qualifies.

          B.  Executive shall accrue paid vacation benefits during the
Employment Period at the rate of one (1) week per calendar quarter and may take
her accrued vacation at such times as are mutually convenient to Executive and
the Corporation.

          6.  DEATH OR DISABILITY.  Upon Executive's death or Disability during
              -------------------                                             
the Employment Period, the employment relationship created pursuant to this
Agreement shall immediately terminate, and no further compensation shall become
payable to Executive pursuant to Paragraph 3. In connection with such
termination, the Corporation shall only be required to pay Executive or her
estate (i) any unpaid base salary earned under Paragraph 3 for services rendered
through the date of her death or Disability, (ii) the dollar value of all
accrued and unused vacation benefits based upon Executive's most recent level of
base salary and (iii) any incentive compensation which becomes due and payable
for the calendar year of the Executive's death or Disability, pro-rated in
amount on the basis of the portion of that year completed prior to Executive's
death or Disability. No additional shares purchased or purchasable under the
stock options granted to Executive pursuant to Paragraph 4 shall vest following
the termination of the employment relationship by reason of Executive's death or
Disability. However, should Executive die within the first six (6) months of the
Employment Period after having purchased at least One Hundred Thousand (100,000)
shares of Common Stock pursuant to her stock options under Paragraph 4, then a
portion of those shares shall immediately vest upon her death. The portion which
shall so vest shall be equal to One Hundred Thousand (100,000) shares less
Twelve Thousand Seven Hundred and Eight (12,708) shares for each full calendar
month of employment completed by Executive during the Employment Period.

              For purposes of this Paragraph 6, Disability shall mean the
Executive's inability, by reason of any physical or mental injury or illness, to
substantially perform the services required of her hereunder for a period in
excess of one hundred eighty (180) consecutive days. In such event, Executive
shall be deemed to have terminated employment by reason of Disability on the
last day of such one hundred eighty (180)-day period.

          7.  RESTRICTIVE COVENANTS. During the Employment Period'
              ---------------------                              

                    (i) Executive shall devote Executive's full time
     and energy solely and exclusively to the performance of
     Executive's duties described herein, except during periods of
     illness or vacation periods.

                                       5.
<PAGE>
 
                    (ii)    Executive shall not directly or indirectly
     provide services to or through any person, firm or other entity
     except the Corporation, unless otherwise authorized by the Board
     in writing. However, Executive may continue to serve during the
     Employment Period as a non-employee member of the board of
     directors of any companies for which she so serves on the
     effective date of this Agreement and may join the board of
     directors of other companies in the future with the Board's
     consent.

                    (iii)   Executive shall not render any services of
     any kind or character for Executive's own account or for any
     other person, firm or entity without first obtaining the
     Corporation's written consent.

          However, Executive shall have the right to perform such incidental
services as are necessary in connection with (a) Executive's private passive
investments, but only if Executive is not obligated or required to (and shall
not in fact) devote any managerial efforts which interfere with the services
required to be performed by her hereunder, or (b) Executive's charitable or
community activities, or participation in trade or professional organizations,
but only if such incidental services do not interfere with the performance of
Executive's services hereunder.

          8.  NON-COMPETITION. During any period for which Executive is
              ----------------                                         
receiving payments from the Corporation, either pursuant to Paragraph 3 of this
Part One or Paragraph 11 of Part Two of this Agreement, Executive shall not
directly or indirectly:

                    (i)     own, manage, operate, join, control or
     participate in the ownership, management, operation or control
     of, or be employed by or connected in any manner with, any
     enterprise which is engaged in any business competitive with or
     similar to that of the Corporation; provided, however, that such
                                         --------
     restriction shall not apply to any passive investment
     representing an interest of less than two percent (2%) of an
     outstanding class of publicly-traded securities of any
     corporation or other enterprise which is not, at the time of such
     investment, engaged in a business competitive with the
     Corporation's business; or

                    (ii)    encourage or solicit any of the
     Corporation's employees to leave the Corporation's employ for any
     reason or interfere in any other manner with employment
     relationships at the time existing between the Corporation and
     its employees; or

                    (iii)   solicit any client of the Corporation,
     induce any ofthe Corporation's clients to terminate its existing
     business relationship with the Corporation or interfere in any
     other manner with any existing business relationship between the
     Corporation and any client or other third party.

                                       6.
<PAGE>
 
               Executive hereby acknowledges that monetary damages may not be
sufficient to compensate the Corporation for any economic loss which may be
incurred by reason of her breach of the foregoing restrictive covenants.
Accordingly, in the event of any such breach, the Corporation shall, in addition
to the termination of this Agreement and any remedies available to the
Corporation at law, be entitled to obtain equitable relief in the form of an
injunction precluding Executive from continuing such breach.

          9.   PROPRIETARY INFORMATION.
               ----------------------- 

          A.   Executive hereby acknowledges that the Corporation may, from time
to time during the Employment Period, disclose to Executive confidential
information pertaining to the Corporation's business and affairs, technology,
research and development projects and client base, including (without
limitation) financial information concerning clients and prospective business
opportunities. All information and data, whether or not in writing, of a private
or confidential nature concerning the business, technology or financial affairs
of the Corporation and its clients (collectively, "Proprietary Information") is
and shall remain the sole and exclusive property of the Corporation. By way of
illustration, but not limitation, Proprietary Information shall include all
trade secrets, research and development projects, financial records, business
plans, personnel data, computer programs and client lists and accounts relating
to the business operations, technology or financial affairs of the Corporation,
other similar items indicating the source of the Corporation's revenue, all
information pertaining to the salaries, duties and performance ratings of the
Corporation's employees and all financial information relating to the
Corporation's clients and their proposed or contemplated business transactions.

          B.   Executive shall not, at any time during or after such Employment
Period, disclose to any third party or directly or indirectly make use of any
such Proprietary Information, other than in connection with the Corporation's
business and affairs.

          C.   All files, letters, memoranda, reports, records, data or other
written, reproduced or other tangible manifestations of the Proprietary
Information, whether created by Executive or others, to which the Executive has
access during the Employment Period shall be used by Executive only in the
performance of her duties hereunder. All such materials (whether written,
printed or otherwise reproduced or recorded) shall be returned by Executive to
the Corporation immediately upon the termination of the Employment Period or
upon any earlier request by the Corporation, without Executive retaining any
copies, notes or excerpts thereof.

          D.   Executive's obligation not to disclose or use Proprietary
Information shall also extend to any and all information, records, trade
secrets, data and other tangible property of the Corporation clients or any
other third parties who may .have disclosed or entrusted the same to the
Corporation or Executive in connection with the Corporation's business
operations.

                                       7.
<PAGE>
 
          E.   Executive's obligations under this Paragraph 9 shall continue in
effect after the termination of her employment with the Corporation, whatever
the reason or reasons for such termination, and the Corporation shall have the
right to communicate with any future or prospective employer of Executive
concerning Executive's continuing obligations under this Paragraph 9.

          10.  TERMINATION OF EMPLOYMENT.
               ------------------------- 

          A.   The Corporation, acting by majority vote of the Board, may
terminate Executive's employment under this Agreement at any time for any
reason, with or without cause, by giving at least sixty (60) days prior written
notice of such termination to the Executive. However, such sixty (60)-day notice
requirement shall not apply to the termination of Executive's employment for
Cause under Paragraph C below. If such termination notice is given to Executive,
the Corporation may, if it so desires, immediately relieve Executive of some or
all of her duties.

          B.   Executive may terminate her employment under this Agreement at
anytime by giving the Corporation at least sixty (60) days prior written notice
of such termination.

          C.   The Corporation, acting by majority vote of the Board, may at any
time, upon written notice, terminate the Executive's employment with the
Corporation hereunder for Cause. Such termination shall be effective Immediately
upon such notice. For purposes of this Agreement, termination for Cause shall
mean the termination of the Executive's employment for any of the following
reasons: (i) Executive's conviction of a felony or her embezzlement of the
Corporation's funds, (ii) a material breach by Executive of one or more of her
obligations under Paragraph 7, 8 or 9 of this Agreement, (iii) any intentional
misconduct by Executive which has a materially adverse effect upon the
Corporation's business or reputation, (iv) Executive's material dereliction of
the major duties, functions and responsibilities of her executive position after
written warning from the Corporation or (v) a material breach by Executive of
any of Executive's fiduciary obligations as an officer of the Corporation.
However, prior to any termination of Executive's employment for a Cause event
defined in clauses (ii) through (v), the Corporation shall give written notice
to Executive of the actions or omissions deemed to constitute the Cause event,
and Executive shall have a period of thirty (30) days in which to cure the
specified default in her performance.

          D.   Upon the termination of Executive's employment for any reason
during the Employment Period, Executive shall be paid all salary and unused
vacation earned through the date of such termination. The following provisions
shall govern the treatment of Executive's outstanding stock options and unvested
shares upon her termination of employment:

                                       8.
<PAGE>
 
               -  If Executive' s employment is terminated for Cause
     or should Executive voluntarily resign from employment (other
     than in connection with an event which constitutes grounds for an
     Involuntary Termination), then all vesting in Executive's
     outstanding stock options and unvested shares shall cease at the
     time of such termination.

               -  If there is an Involuntarily Termination of
     Executive's employment, then the provisions of Paragraph 12 of
     this Agreement shall be controlling.

               -  Executive shall not have more than a three (3)-month
     period (twelve (12)-months in the event of death or disability)
     following the termination of her employment for any reason in
     which to exercise any outstanding options for the Corporation's
     common stock which are vested and exercisable at the time of such
     termination of employment.

                         PART TWO -- SEVERANCE BENEFITS

          11.  BENEFIT ENTITLEMENT. Executive shall be entitled to receive
               --------------------                                       
the severance benefits specified in Paragraph 12 in the event of an
Involuntarily Termination (as such term is defined in Paragraph 4.D) during the
Employment Period. Under no circumstances shall any severance benefits be
payable pursuant to this Part Two if Executive's employment is terminated for
Cause (as such term is defined in Paragraph 10.C).

          12.  NATURE OF SEVERANCE BENEFITS. The severance benefits payable
               -----------------------------                               
to Executive under this Part Two shall consist of the following:

               (a)  Salary Continuation. Executive shall receive salary 
                    --------------------    
continuation payments, at the monthly rate of base salary in effect for her
under Paragraph 3 at the time of her Involuntary Termination, for a period of
six (6) months. Such salary continuation payments shall be made at semi-monthly
intervals on the 15th and last day of each calendar month and shall be subject
to all applicable withholding requirements as set forth in Paragraph 3.D.

               (b)  Incentive Compensation. Executive shall be entitled to fifty
                    -----------------------                                     
percent (50%) of the dollar amount of any incentive compensation which would
have actually become payable to her on the basis of the Corporation's financial
performance for the fiscal year in which such Involuntary Termination occurs,
had she continued in employ through the end of that fiscal year. Payment shall
be made within ninety (90) days after the close of such fiscal year.

               (c)  Health Care Coverage. Continued health care coverage under
                    --------------------- 
the Corporation's medical plan shall be provided, without charge, to Executive
and her eligible dependents upon her election to receive such continued health
care coverage under Internal Revenue Code Section 4980B ("COBRA"). Such
Corporation-paid coverage shall continue until

                                       9.
<PAGE>
 
the earlier of (i) the expiration of the six (6)-month period measured from the
    --------                                                                   
effective date of her Involuntary Termination or (ii) the first date on which
Executive is covered under another employer's health benefit program without
exclusion for any pre-existing medical condition. Any additional health care
coverage to which Executive and her dependents may be entitled under COBRA
following the period of such Corporation-paid coverage shall be at Executive's
sole cost and expense.

               (d) Partial Option Acceleration. The vesting schedules in 
                   ---------------------------- 
effect under Paragraph 4.C for the shares of Common Stock purchased or
purchasable under the stock options granted to Executive under Paragraph 4 will
be accelerated by six (6) months. Executive shall have until the earlier of (i)
                                                                 -------
the expiration of the option term or (ii) the end of the three (3)-month period
following the date of such Involuntary Termination in which to exercise her
options for any or all of those vested option shares.

          The benefits provided Executive under Paragraph 10 or Paragraph 11
are the only severance benefits to which Executive is entitled upon the
termination of her employment with the Corporation, and no other benefits shall
be provided to Executive by the Corporation pursuant to any other severance plan
or program of the Corporation.

          13.  CESSATION OF SEVERANCE BENEFITS.  In the event Executive breaches
               -------------------------------                         
any of her obligations under Paragraph 7, 8 or 9 of this Agreement, no further
severance benefits under this Part Two shall become due and payable to her

          14.  DEATH.  Should Executive die before she receives the full amount
               -------                                                  
of salary continuation payments to which she may become entitled under Part Two
of this Agreement, then the balance of such payments shall be made, on the due
dates hereunder had Executive survived, to the executors or administrators of
her estate.

                     PART THREE - MISCELLANEOUS PROVISIONS

          15.  SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
               ----------------------                                        
inure to the benefit of, and shall be binding upon, the Corporation, its
successors and assigns, and the Executive, the personal representative of her
estate and her heirs and legatees.

          16.  GENERAL CREDITOR STATUS. The benefits to which Executive may
               -----------------------                                     
become entitled under Part Two of this Agreement shall be paid, when due, from
the Corporation's general assets, and no trust fund, escrow arrangement or other
segregated account shall be established as a funding vehicle for such payments.
Accordingly, Executive's right (or the right of the executors or administrators
of Executive's estate) to receive such benefits shall at all times be that of a
general creditor of the Corporation and shall have no priority over the claims
of other general creditors.

                                      10.
<PAGE>
 
          17.  NOTICES.
               ------- 

          A.   Any and all notices, demands or other communications required or
desired to be given hereunder by any party shall be in writing and shall be
validly given or made to another party if served either personally or if
deposited in the United States mail, certified or registered, postage prepaid,
return receipt requested. If such notice, demand or other communication shall be
served personally, service shall be conclusively deemed made at the time of such
personal service. If such notice, demand or other communication is given by
mail, such notice shall be conclusively deemed given forty-eight (48) hours
after the deposit thereof in the United States mail addressed to the party to
whom such notice, demand or other communication is to be given as hereinafter
set forth.


     To the Corporation:                Digital Island
                                        353 Sacramento Street
                                        Suite 1520
                                        San Francisco, California 94111
                                        Attention' Marcello Gumucio
 
     To Executive:                      Ruann Ernst
                                        28525 Matadero Creek Lane
                                        Los Altos Hills, CA 94022


          B.   Any party hereto may change its address for the purpose of
receiving notices, demands and other communications as herein provided by a
written notice given in the manner aforesaid to the other party hereto.

          18.  GOVERNING DOCUMENT. This Agreement constitutes the entire
               -------------------                                      
agreement and understanding of the Corporation and Executive with respect to the
terms and conditions of Executive's employment with the Corporation and the
payment of severance benefits and supersedes all prior and contemporaneous
written or verbal agreements and understandings between Executive and the
Corporation relating to such subject matter. This Agreement may only be amended
by written instrument signed by Executive and an authorized officer of the
Corporation. Any and all prior agreements, understandings or representations
relating to the Executive's employment with the Corporation are hereby
terminated and cancelled in their entirety and are of no further force or
effect.

          19.  GOVERNING LAW. The provisions of this letter agreement will be
               --------------                                                
construed and interpreted under the laws of the State of California applicable
to agreements executed and to be wholly performed within the State of
California. If any provision of this Agreement as applied to any party or to any
circumstance should be adjudged by a court of competent jurisdiction to be void
or unenforceable for any reason, the invalidity of that provision shall in no
way affect (to the maximum extent permissible by law) the application of such
provision under circumstances different from those adjudicated by the court, the
application of any other provision of this Agreement, or the enforceability or
invalidity of this Agreement as a whole.

                                      11.
<PAGE>
 
Should any provision of this Agreement become or be deemed invalid, illegal or
unenforceable in any jurisdiction by reason of the scope, extent or duration of
its coverage, then such provision shall be deemed amended to the extent
necessary to conform to applicable law so as to be valid and enforceable or, if
such provision cannot be so amended without materially altering the intention of
the parties, then such provision will be stricken and the remainder of this
Agreement shall continue in full force and effect.

          20.  REMEDIES. All rights and remedies provided pursuant to this
               ---------                                                  
Agreement or by law shall be cumulative, and no such right or remedy shall be
exclusive of any other. A party may pursue any one or more rights or remedies
hereunder or may seek damages or specific performance in the event of another
party's breach hereunder or may pursue any other remedy by law or equity,
whether or not stated in this Agreement.

          21.  ARBITRATION. Any and all disputes between Executive and the
               ------------                                               
Corporation which arise out of Executive's employment under the terms of this
Agreement shall be resolved through final and binding arbitration. This shall
include, without limitation, disputes relating to this Agreement, Executive's
employment by the Corporation or the termination thereof, claims for breach of
contract or breach of the covenant of good faith and fair dealing, and any
claims of discrimination or other claims under Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act, the Americans With
Disabilities Act, the California Fair Employment and Housing Act, or any other
federal, state or local law or regulation now in existence or hereinafter
enacted and as amended from time to time concerning in any way the subject of
Executive's employment with the Corporation or its termination. The only claims
not covered by this Agreement are claims for benefits under the workers'
---                                                                    
compensation or unemployment insurance laws, which will be resolved pursuant to
those laws. Binding arbitration will be conducted in San Francisco, California
in accordance with the rules and regulations of the American Arbitration
Association. Each party will split the cost of the arbitration filing and
hearing fees, and the cost of the arbitrator; each side will bear its own
attorneys' fees, that is, the arbitrator will not have authority to award
attorneys' fees unless a statutory section at issue in the dispute authorizes
                ------                                                      
the award of attorneys' fees to the prevailing party, in which case the
arbitrator has authority to make such award as permitted by the statute in
question. Executive understands and agrees that the arbitration shall be instead
of any civil litigation and that this means that she is waiving her right to a
jury trial as to such claims. The parties further understand and agree that the
arbitrator's decision shall be final and binding to the fullest extent permitted
by law and enforceable by any court having jurisdiction thereof.

          23.  COUNTERPARTS. This Agreement may be executed in more than one
               -------------                                                
counterpart, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.

                            SIGNATURES ON NEXT PAGE

                                      12.
<PAGE>
 
          IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day and year written above.

                                   DIGITAL ISLAND


                            By:    /s/ [SIGNATURE ILLEGIBLE]^^
                                   ------------------------------------

                            Title: Chairman
                                   ------------------------------------

                                   /s/ Ruann F. Ernst
                                   ------------------------------------
                                   RUANN ERNST, EXECUTIVE

                                      13.

Source: OneCLE Business Contracts.