(7)

Consists of 413,765 shares of common stock and options to purchase 1,700,000 shares of common stock that are vested and exercisable. Includes 22,160233,254 shares of common stock held by Mr. Gionesi’s spouse, 15,534Eugene Eidenberg, as trustee of the Eugene Eidenberg Trust dated 12/19/85, 135,554 shares of common stock held by trustsEugene Eidenberg, as trustee of which Mr. Gionesi or his spouse are co-trusteesthe Eugene Eidenberg Trust dated 9/97, and 27,77126,197 shares issuable onof common stock held by Eugene Eidenberg, as trustee of the exercise of options that are exercisable within 60 days of September 30, 2002.Anna M. Chavez Educational Trust.

(8)

IncludesConsists of 240,510 shares of common stock and options to purchase 140,000 shares issuable on the exercise of optionscommon stock that are exercisable within 60 days of September 30, 2002.vested and exercisable.

(9)

Includes 262,321 shares issuable on the exerciseConsists of options to purchase 1,100,000 shares of common stock that are vested and exercisable or that will vest within 60 days of September 30, 2002.days.

(10)

Includes 1,074,746 shares held by Mr. McBride as trustee of the McBride Trust, the McBride Grandchildren’s Trust No. 1, the McBride Grandchildren’s Trust No. 2, the McBride Grandchildren’s Trust No. 3 and the McBride Legacy Trust for the benefit of Mr. McBride’s minor children, and 421,400 shares issuable on exerciseConsists of options to purchase 1,058,225 shares of common stock that are vested and exercisable or that will vest within 60 days of September 30, 2002. Mr. McBride disclaims beneficial ownership of the shares held by him as trustee of the McBride Trust, the McBride Legacy Trust and the McBride Grandchildren’s Trust Nos. 1, 2 and 3.days.

(11)

Includes 1,539,087Consists of 50,000 shares held by Crossroads Associates, LLC, 400,000of common stock and options to purchase 140,000 shares held by Crossroads Associates II, LLC,of common stock that are vested and 18,000 shares held by Mr. Naughtin as trustee of the Eric Weaver Gift Protection Trust, the Hugh Naughtin Gift Protection Trust, and the Rose Naughtin Gift Protection Trust. Mr. Naughtin disclaims beneficial ownership of the 18,000 shares held by him as trustee of the Eric Weaver Gift Protection Trust, the Hugh Naughtin Gift Protection Trust and the Rose Naughtin Gift Protection Trust.exercisable.

(12)

Includes 541,331 shares issuable on the exerciseConsists of options to purchase 3,654,167 shares of common stock that are vested and exercisable or that will vest within 60 days of September 30, 2002.days.

(13)

Consists of 852,938 shares of common stock and options to purchase 140,000 shares of common stock that are vested and exercisable. Includes 166,50083,250 shares of common stock held by the Shurtleff Garretson Education Trust. The names of the parties who share power to vote and power to dispose of the shares of our common stock beneficially owned by the Shurtleff Garretson Education Trust are Robert D. Shurtleff, Jr. as trusteeand Cynthia G. Shurtleff, the trustees of the Shurtleff Family Trust, 195,813Garretson Education Trust.

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EXECUTIVE COMPENSATION

Compensation of Named Executive Officers

The table below sets forth summary information concerning compensation paid by us during the fiscal years ended December 31, 2003, 2002 and 2001, to our Named Executive Officers.

Summary Compensation Table

				Annual Compensation																Long-Term Compensation
Name and Principal Position				Year				Salary ($)				Bonus ($)				Other Annual Compensation				Securities Underlying Options (#)
Gregory A. Peters (1)					2003			$	350,000			$	157,500			$	245,222	(2)			7,238,796
President and Chief					2002				250,795				—				30,353	(2)			2,400,000
Executive Officer					2001				—				—				—				—
Robert R. Jenks (3)					2003				234,936				—				56,042	(4)			2,200,000
Vice President and					2002				—				—				—				—
Chief Financial Officer					2001				—				—				—				—
David L. Abrahamson (5)					2003				230,001				21,000	(6)			—				700,000
Chief Marketing Officer					2002				39,218				—				—				1,500,000
and Vice President, Sales					2001				—				—				—				—
Walter G. DeSocio (7)					2003				240,000				—				—				—
Vice President — Chief					2002				60,923				—				—				1,250,000
Administrative Officer,					2001				—				—				—				—
General Counsel and Secretary
Ali Marashi (8)					2003				190,000				—				6,723	(9)			—
Vice President and Chief					2002				175,874				—				26,222	(9)			1,627,816
Technology Officer					2001				150,000				—				—				302,440

 

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(1)

Effective April 2, 2002, Mr. Peters began serving as our President and Chief Executive Officer.

(2)

Includes $245,222 and $30,353 for relocation expenses in 2003 and 2002, respectively.

(3)

Effective February 2003, Mr. Jenks began serving as our Vice President and Chief Financial Officer.

(4)

Includes $56,042 for relocation expenses.

(5)

Effective October 2002, Mr. Abrahamson began serving as our Chief Marketing Officer, and effective January 2003, Mr. Abrahamson also began serving as our Vice President, Sales.

(6)

Includes $21,000 as a sign-on payment to Mr. Abrahamson's employment agreement.

(7)

Effective September 2002, Mr. DeSocio began serving as our Vice President and General Counsel, and effective December 2002, Mr. DeSocio also began serving as our Vice President — Chief Administrative Officer, General Counsel and Secretary.

(8)

Effective August 2002, Mr. Marashi began serving as our Vice President and Chief Technology Officer.

(9)

Includes $6,723 and $26,222 for relocation expenses in 2003 and 2002, respectively.

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Stock Options

The following table sets forth information regarding options granted to the Named Executive Officers during the fiscal year ended December 31, 2003:

Option Grants in Last Fiscal Year

Individual Grants

																				Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term ($)
Name				Number of Shares Underlying Options Granted				% of Total Options Granted to Employees in Fiscal Year				Exercise Price Per ($/Share)				Expiration Date				5% ($)				10% ($)
Gregory A. Peters					4,000,000 1,000,000 2,238,796				17% 4% 9%				0.44 0.43 2.16				2/27/2013 3/10/2013 12/24/2013			$	1,106,855 270,425 3,034,168			$	2,804,987 685,309 7,689,178
Robert R. Jenks					2,200,000				9%				0.47				1/24/2013				686,113				1,704,992
David L. Abrahamson					700,000				3%				2.16				12/24/2013				948,688				2,404,161
Walter G. DeSocio					—				n/a				—				—				—				—
Ali Marashi					—				n/a				—				—				—				—

 

Option Exercises and Year-End Option Values

The following table sets forth information as of December 31, 2003, regarding options held by the Named Executive Officers. There were no stock appreciation rights outstanding at December 31, 2003.

Aggregated Option Exercises In The Last Fiscal Year
And Fiscal Year-End Option Values

												Number of Securities Underlying Unexercised Options at Fiscal Year-End (#)								Value of Unexercised In-The-Money Options at Fiscal Year-End ($)
Name				Shares Acquired on Exercise (#)				Value Realized ($)				Exercisable				Unexercisable				Exercisable				Unexercisable
Gregory A. Peters					—			$	—				2,883,334				6,755,462			$	5,453,168			$	9,299,277
Robert R. Jenks					—				—				870,833				1,329,167				1,724,249				2,631,751
David L. Abrahamson					—				—				437,500				1,762,500				980,000				2,586,500
Walter G. DeSocio		��			—				—				390,625				859,375				814,063				1,790,938
Ali Marashi					124,200				83,214				865,181				1,076,075				1,077,439				2,047,776

 

In the table above, the value of the unexercised in-the-money options is based on the fair market value of our common stock, based upon the last reported sales price of the common stock on December 31, 2003 minus the per share exercise price multiplied by the number of shares.

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Equity Compensation Plan Information

The following table provides certain information with respect to all of our equity compensation plans in effect as of December 31, 2003.

Plan Category				(a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights				(b) Weighted-average Exercise Price of Outstanding Options, Warrants and Rights				(c) Number of Securities Remaining Available for Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Equity compensation plans approved by security holders					39,149,932			$	1.52				14,749,878
Equity compensation plans not approved by security holders					11,030				2.71				211,883
Total					39,160,962			$	1.52				14,961,761

 

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(1)

Calculation based upon exercise prices of outstanding options, warrants and rights and an assumed purchase price equal to 85% of fair market value of the Company’s common stock on April 7, 2003 pursuant to the 1999 Employee Stock Purchase Plan for the total number of shares issuable upon exercise of warrants held by Mr. Shurtleff exercisable within 60 days of September 30, 2002 and 140,000 shares issuable on exercise of optionsunder that are exercisable within 60 days of September 30, 2002. Mr. Shurtleff disclaims beneficial ownership of the shares held by the Shurtleff Family Trust.plan.

(14)

Shares held by Mr. Vent consist of common stock, Series A preferred stock (on an as converted basis), and 16,933 shares issuable on exercise of warrants that are exercisable within 60 days of September 30, 2002.

(15)

Shares held by the group consist of common stock, Series A preferred stock (on an as converted basis), 5,473,415 shares of issuable on exercise of warrants that are exercisable within 60 days of September 30, 2002 and 3,845,873 shares issuable on exercise of options that are exercisable within 60 days of September 30, 2002.

Summaries of Plans Not Approved by Our Stockholders

OTHER BUSINESSSwitchSoft Systems, Inc. Founders 1996 Stock Option Plan

The boardWe assumed the SwitchSoft Systems, Inc. Founders 1996 Stock Option Plan, which we refer to as the 1996 Plan, in connection with the acquisition of directors doesVPNX.com, Inc. Although some grants are still outstanding under this plan, we do not intend to presentissue any businessadditional grants from the 1996 Plan. The 1996 Plan provides for grants of incentive stock options and nonqualified stock options for which up to 1,041,050 shares have been authorized. Employees are eligible to receive incentive stock options and employees, directors and independent contractors are eligible for nonqualified options. Terms and conditions of options are determined by our board or a committee appointed by the board. The exercise price cannot be less than 85% of fair market value at grant in the Special Meetingcase of a nonqualified option, or 100% in the case of an incentive stock option, and will be paid in cash, by check, or through a deferred payment arrangement approved by our board, or by delivery of other property if authorized by our board. The term of an option is limited to 10 years from grant. The options vest at a rate at least 20% per year. Upon termination of employment other than due to death or disability, options may generally be exercised for one month or a longer period determined by our board of directors. Upon termination due to death or disability, options may generally be exercised for 12 months or a longer period determined by our board of directors. If we are the surviving corporation in any merger, business combination, reorganization or reconsolidation, options under the 1996 Plan will be appropriately adjusted. If we are not the surviving corporation, outstanding options terminate unless assumed or replaced with substitute options. The board may amend the 1996 Plan at any time, but stockholder approval is required if the amendment would increase the shares available, materially modify the eligibility requirements, or materially increase the benefits accruing to plan participants, and optionee consent is required for the amendment to alter or impair the rights of existing optionees. The 1996 Plan automatically terminates ten years after its adoption.

SwitchSoft Systems, Inc. 1997 Stock Option Plan

We assumed the SwitchSoft Systems, Inc. 1997 Stock Option Plan, which we refer to as set forththe 1997 Plan, in connection with the acquisition of VPNX.com, Inc. Although some grants are still outstanding under this plan, we do not intend to issue any additional grants from the 1997 Plan. The 1997 Plan provides for grants of incentive stock options and nonqualified stock options for which up to 1,746,450 shares have been authorized. Employees are eligible to receive incentive stock options and employees, directors and independent contractors are eligible for nonqualified options. Terms and conditions of options are determined by our board or a committee appointed by the board. The exercise price cannot be less than 85% of fair market value at grant in the accompanying Noticecase of Special Meeting of Stockholders, and has no present knowledge that any others intend to present business at the meeting. If, however, other matters requiring the vote of the stockholders properly come before the Special Meetinga nonqualified option, or any adjournment or postponement thereof, the persons named100% in the accompanying formcase of proxy intendan incentive stock option, and will be paid in cash, by check, or through a deferred

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payment arrangement approved by our board, or by delivery of other property if authorized by our board. The term of an option is limited to exercise their discretionary authority10 years from grant. The options vest at a rate at least 20% per year. Upon termination of employment other than due to votedeath or disability, options may generally be exercised for one month or a longer period determined by our board of directors. Upon termination due to death or disability, options may generally be exercised for 12 months or a longer period determined by our board of directors. If we are the proxies held by themsurviving corporation in accordanceany merger, business combination, reorganization or reconsolidation, options under the 1997 Plan will be appropriately adjusted. If we are not the surviving corporation, outstanding options terminate unless assumed or replaced with their judgmentsubstitute options. The board may amend the 1997 Plan at any time, but stockholder approval is required if the amendment would increase the shares available, materially modify the eligibility requirements, or materially increase the benefits accruing to plan participants, and optionee consent is required for the amendment to alter or impair the rights of existing optionees. The 1997 Plan automatically terminates ten years after its adoption.

Executive Employment Agreements

Agreement with Mr. Peters

Effective March 28, 2002, Mr. Peters entered into an at-will employment agreement with us. The agreement provides that Mr. Peters serves as to such matters.

BY ORDEROFTHE BOARDOF DIRECTORS

Gregory Peters

our President and Chief Executive Officer and receives an annual base salary of $350,000. Mr. Peters is eligible for a discretionary bonus ranging from 50% to 150% of his base salary based on performance. Under the agreement, Mr. Peters was required to relocate no later than October 1, 2002, and received a relocation allowance (plus a gross-up payment to cover taxes on any taxable portion of the relocation allowance), which was repayable to us in part if Mr. Peters terminated employment without good reason before March 28, 2003. In addition, we paid for housing searches for Mr. Peters and his spouse in connection with the relocation. Under the agreement, Mr. Peters received an option to purchase 2,400,000 shares of our stock under our Amended 1999 Equity Incentive Plan, which vests with respect to 25% of the shares on the first anniversary of grant and monthly in 1/48 increments thereafter, has a term of ten years, an exercise price equal to the closing price of our common stock on the date of grant, and will remain exercisable for one year following termination of his employment other than for cause. The agreement also provided for a performance-based stock option grant of 1,000,000 shares under our Amended 1999 Equity Incentive Plan or our 1998 Stock Option/Stock Issuance Plan, which vests with respect to 100% of the shares on the sixth anniversary of grant or earlier if certain performance goals are met, has an exercise price equal to the closing price of our stock on the date of grant, has a term of ten years, and will remain exercisable for one year following termination of Mr. Peters’ employment other than for cause. In addition, we reimbursed Mr. Peters up to $7,500 plus a tax bonus up to $5,500 for attorneys’ fees in connection with Mr. Peters’ negotiation of his employment agreement. The agreement also requires Mr. Peters to execute a confidentiality, non-raiding, invention assignment and non-competition agreement with us, which survives termination of Mr. Peters’ employment.

Severance Upon Termination Without Cause or Due to Good Reason.  Upon our termination of Mr. Peters’ employment without cause, or Mr. Peters’ voluntary termination for good reason, Mr. Peters will receive a cash severance payment equal to twelve months of his then current base salary, on the condition that Mr. Peters executes a release of claims.

Severance Upon Change in Control.  If Mr. Peters’ employment is terminated without cause or he resigns for good reason, in either case within 13 months of a change in control (as defined in the agreement), in lieu of the otherwise applicable severance payments, Mr. Peters will receive a cash severance payment equal to 12 months of his then-current base salary and then-current earned discretionary bonus, and 100% of his unvested stock options become fully vested and exercisable, on the condition that Mr. Peters executes a release of claims. Limitations apply if any payment under the agreement would be considered a parachute payment under section 280G of the Internal Revenue Code of 1986, as amended.

November 8,Other Severance.  If Mr. Peters terminates employment with us and requests a waiver of non-competition provisions but we unreasonably refuse to waive the non-competition provisions, Mr. Peters will receive a payment of 12 months of his base salary less any severance payments he is otherwise entitled to under the agreement, on the condition that Mr. Peters executes a release of claims. Such severance payments are to be paid pro rata over the remaining period of the non-competition provisions.

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Agreement with Mr. Jenks

Effective February 1, 2003, we entered into an at-will employment agreement with Mr. Robert R. Jenks. The agreement provides that Mr. Jenks will serve as our Vice President and Chief Financial Officer, and will receive an annual base salary of $250,000, which may be increased or decreased by our chief executive officer in consultation with our board or compensation committee. The agreement also provides that Mr. Jenks will receive a bonus of up to 50% of his base salary, based on the satisfaction of performance goals, if we adopt a bonus plan for executives and senior officers. We have not implemented such a bonus plan at this time. Any bonus may be payable in shares of our common stock or other equity securities, including restricted stock and stock options. The agreement provides that Mr. Jenks will accrue 20 days of combined vacation/sick leave annually and will receive three personal days each year. The agreement also contains a provision requiring Mr. Jenks to maintain the confidentiality of our confidential information, a non-competition provision for one year following termination of employment (which may be waived), and a provision prohibiting solicitation of our employees within one year following termination of employment. Our employment of Mr. Jenks may be terminated under the agreement by us or by Mr. Jenks, at any time, with or without advance notice.

Severance upon Termination Without Cause.  The agreement provides that if Mr. Jenks’ employment is terminated by us without cause, he will receive from us a cash severance payment equal to one year of his then-current base salary. In addition, upon our termination of Mr. Jenks’ employment without cause, his unvested options and any other unvested equity compensation he received from us will terminate, and his vested options will remain exercisable no later than three months after termination of his employment.

Severance Following Change in Control.  If Mr. Jenks’ employment is terminated without cause or he resigns for good reason, in either case within 12 months of a change in control (as such term is defined in the agreement), he will receive a cash severance payment equal to 24 months of his then-current base salary and then-current maximum target bonus, and 100% of his unvested stock options and additional equity compensation shall become vested, free of restrictions (if any), and immediately exercisable for the remaining term of the relevant grant or award. In addition, he will continue to receive health care and life insurance coverage for 24 months as if he were an active employee (subject to the employee portion of premiums for such coverages).

Agreement with Mr. Abrahamson

Effective October 31, 2002, we entered into an at-will employment agreement with Mr. David Abrahamson. The agreement provides that Mr. Abrahamson will serve as our Chief Marketing Officer and will receive an annual base salary of $230,000, which may be increased or decreased by our chief executive officer in consultation with our board or compensation committee. The agreement also provides that Mr. Abrahamson will receive a bonus of up to 50% of his base salary, based on the satisfaction of performance goals, if we adopt a bonus plan for executives and senior officers. We have not implemented such a bonus plan at this time. Any bonus may be payable in shares of our common stock or other equity securities, including restricted stock and stock options. The agreement provides that Mr. Abrahamson will accrue 20 days of combined vacation/sick leave annually and will receive three personal days each year. The agreement also contains a provision requiring Mr. Abrahamson to maintain the confidentiality of our confidential information, a non-competition provision for one year following termination of employment (which may be waived), and a provision prohibiting solicitation of our employees within one year following termination of employment. Our employment of Mr. Abrahamson may be terminated under the agreement by us or by Mr. Abrahamson, at any time, with or without advance notice.

Severance upon Termination Without Cause.  The agreement provides that if Mr. Abrahamson’s employment is terminated by us without cause, he will receive from us a cash severance payment equal to one year of his then-current base salary. In addition, upon our termination of Mr. Abrahamson’s employment without cause, his unvested options and any other unvested equity compensation he received from us will terminate, and his vested options will remain exercisable no later than three months after termination of his employment.

Severance Following Change in Control.  If Mr. Abrahamson’s employment is terminated without cause or he resigns for good reason, in either case within 12 months of a change in control (as such term is defined in the agreement), he will receive a cash severance payment equal to 24 months of his then-current base salary and then-current maximum target bonus, and 100% of his unvested stock options and additional equity compensation shall

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become vested, free of restrictions (if any), and immediately exercisable for the remaining term of the relevant grant or award. In addition, he will continue to receive health care and life insurance coverage for 24 months as if he were an active employee (subject to the employee portion of premiums for such coverages).

Agreement with Mr. DeSocio

Effective September 30, 2002, we entered into an at-will employment agreement with Mr. Walter DeSocio. The agreement provides that Mr. DeSocio will serve as our Vice President and General Counsel and will receive an annual base salary of $240,000, which may be increased or decreased by our chief executive officer in consultation with our board or compensation committee. The agreement also provides that Mr. DeSocio will receive a bonus of up to 50% of his base salary, based on the satisfaction of performance goals, if we adopt a bonus plan for executives and senior officers. We have not implemented such a bonus plan at this time. Any bonus may be payable in shares of our common stock or other equity securities, including restricted stock and stock options. The agreement provides that Mr. DeSocio will accrue 20 days of combined vacation/sick leave annually and will receive three personal days each year. The agreement also contains a provision requiring Mr. DeSocio to maintain the confidentiality of our confidential information, a non-competition provision for one year following termination of employment (which may be waived), and a provision prohibiting solicitation of our employees within one year following termination of employment. Our employment of Mr. DeSocio may be terminated under the agreement by us or by Mr. DeSocio, at any time, with or without advance notice.

Severance upon Termination Without Cause.  The agreement provides that if Mr. DeSocio’s employment is terminated by us without cause, he will receive from us a cash severance payment equal to one year of his then-current base salary. In addition, upon our termination of Mr. DeSocio’s employment without cause, his unvested options and any other unvested equity compensation he received from us will terminate, and his vested options will remain exercisable no later than three months after termination of his employment.

Severance Following Change in Control.  If Mr. DeSocio’s employment is terminated without cause or he resigns for good reason, in either case within 12 months of a change in control (as such term is defined in the agreement), he will receive a cash severance payment equal to 24 months of his then-current base salary and then-current maximum target bonus, and 100% of his unvested stock options and additional equity compensation shall become vested, free of restrictions (if any), and immediately exercisable for the remaining term of the relevant grant or award. In addition, he will continue to receive health care and life insurance coverage for 24 months as if he were an active employee (subject to the employee portion of premiums for such coverages).

Agreement with Mr. Marashi

Effective December 31, 2002, we entered into an at-will employment agreement with Mr. Ali Marashi. The agreement provides that Mr. Marashi will serve as our Vice President and Chief Technology Officer, and will receive an annual base salary of $190,000, which may be increased or decreased by our chief executive officer in consultation with our board or compensation committee. The agreement also provides that Mr. Marashi will receive a bonus of up to 50% of his base salary, based on the satisfaction of performance goals, if we adopt a bonus plan for executives and senior officers. We have not implemented such a bonus plan at this time. Any bonus may be payable in shares of our common stock or other equity securities, including restricted stock and stock options. The agreement provides that Mr. Marashi will accrue 20 days of combined vacation/sick leave annually and will receive three personal days each year. The agreement also contains a provision requiring Mr. Marashi to maintain the confidentiality of our confidential information, a non-competition provision for one year following termination of employment (which may be waived), and a provision prohibiting solicitation of our employees within one year following termination of employment. Our employment of Mr. Marashi may be terminated under the agreement by us or by Mr. Marashi, at any time, with or without advance notice.

Severance upon Termination Without Cause.  The agreement provides that if Mr. Marashi’s employment is terminated by us without cause, he will receive from us a cash severance payment equal to one year of his then-current base salary. In addition, upon our termination of Mr. Marashi’s employment without cause, his unvested options and any other unvested equity compensation he received from us will terminate, and his vested options will remain exercisable no later than three months after termination of his employment.

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Severance Following Change in Control.  If Mr. Marashi’s employment is terminated without cause or he resigns for good reason, in either case within 12 months of a change in control (as such term is defined in the agreement), he will receive a cash severance payment equal to 24 months of his then-current base salary and then-current maximum target bonus, and 100% of his unvested stock options and additional equity compensation shall become vested, free of restrictions (if any), and immediately exercisable for the remaining term of the relevant grant or award. In addition, he will continue to receive health care and life insurance coverage for 24 months as if he were an active employee (subject to the employee portion of premiums for such coverages).

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee is responsible for, among other things, approving the compensation and benefits for our officers and for reviewing the general policies relating to the compensation and benefits for all of our employees. This report reflects our compensation philosophy.

Executive Officer Compensation

Our executive compensation program has been designed to (1) ensure that compensation provided to executive officers is closely aligned with its business objectives and financial performance; (2) enable us to attract and retain those officers and other key executives who contribute to our long-term success; and (3) maximize stockholder value.

Executive compensation generally consists of three components: (1) base salary; (2) annual cash bonus; and (3) long-term incentive awards. The Chief Executive Officer annually recommends executive officer compensation levels to the Compensation Committee. The Compensation Committee makes the final determination of executive compensation levels but relies on the Chief Executive Officer’s annual recommendations because it believes the Chief Executive Officer is the most qualified person to make assessments about individual performance.

The Compensation Committee annually reviews and establishes each executive officer’s compensation package by considering (1) the extent to which specified corporate objectives for the preceding year were attained; (2) the experience and contribution levels of the individual executive officer; and (3) to a lesser extent, the salary and bonus levels of executive officers in similar positions in companies in the same or related industries as Internap.

For 2004, the Compensation Committee has decided not to establish specific objectives, including financial performance goals, for its executive officers against which bonus compensation would be paid and not to implement a bonus program for such officers. There is no assurance that the Compensation Committee will establish such objectives or such a program or pay bonus compensation in the future.

The Compensation Committee also grants stock options to executive officers to provide long-term incentives that are aligned with the creation of increased stockholder value over time. Options typically are granted at fair market value at the date of grant, have a ten year term and generally vest 25% on the first anniversary of vesting commencement date and in equal 36 monthly installments thereafter.

Most stock option grants to executive officers occur in conjunction with the executive officer’s acceptance of employment with us. The Compensation Committee, however, reviews stock option levels for all executive officers throughout each fiscal year in light of long-term strategic and performance objectives, each executive officer’s current and anticipated contributions to our future performance and the value of such executive’s current stock option package. When determining the number of stock options to be awarded to an executive officer, the Compensation Committee considers the executive officer’s current contribution to our performance, the executive officer’s past option awards and their current value, the executive officer’s anticipated contribution in meeting our long-term strategic performance goals and comparisons to formal and informal surveys of executive stock option grants made by other Internet infrastructure companies.

Compensation of the Chief Executive Officer

The compensation for our chief executive officer is set by the board of directors based upon the recommendations of the Compensation Committee. The Compensation Committee reviews our Chief Executive Officer’s compensation annually using the same criteria and policies as are employed for other executive officers. Mr. Peters’ base salary is determined in accordance with his employment agreement. In 2003, Mr. Peters received

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a base salary of $350,000. In addition, he received a bonus of $210,000 on February 27, 2003, payable in bi-monthly installments commencing in April 2003, and relocation benefits, including gross-up payments of $245,222. The Compensation Committee awarded Mr. Peters options to purchase $4,000,000 shares of our common stock at the then-current market price of $0.44 per share, options to 1,000,000 shares of our common stock at the then-current market price of $0.43 per share and options to purchase 2,238,796 shares of our common stock at the then current market price of $2.16 per share.

Limitations on the Deductibility of Executive Compensation

Compensation payments in excess of $1 million to the Chief Executive Officer or the other five most highly compensated executive officers are subject to a limitation on deductibility by us under Section 162(m) of the Internal Revenue Code of 1986, as amended. Certain performance-based compensation is not subject to the limitation on deductibility. The Compensation Committee does not expect cash compensation in 2003 to our Chief Executive Officer or any other executive officer to be in excess of $1 million. We intend to maintain qualification of our 2002 Stock Compensation Plan, Amended and Restated 1998 Stock Option/Stock Issuance Plan, and Amended 1999 Equity Incentive Plan for the performance-based exception to the $1 million limitation on deductibility of compensation payments.

The Compensation Committee believes its executive compensation philosophy serves Internap’s interests and the interests of our stockholders.

Compensation Committee:

Charles B. Coe
Fredric W. Harman
Robert D. Shurtleff, Jr.

PROXY VOTING CARDThe foregoing report of the Compensation Committee shall not be deemed to be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act” and, together with the Securities Act, the “Acts”), unless we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.

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Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee is a former or current officer or employee of the Company or any of its subsidiaries. None of our executive officers or directors serve as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our board of directors or Compensation Committee.

CERTAIN RELATIONSHIPS AND TRANSACTIONS

In 2003 and 2002, we engaged Korn/Ferry International, a national executive recruiting firm, to assist in the identification and recruitment of senior executives. For 2003 and 2002, we paid Korn/Ferry $3,178 and $262,096, respectively, in connection with executive placements. As of December 31, 2003, the Company owed $75,000 to Korn/Ferry, and that amount was paid in the first quarter of 2004 after approval by the Audit Committee of our board of directors. Gregory A. Peters, our president and chief executive officer, is the son-in-law of a managing director of Korn/Ferry.

We have entered into indemnification agreements with our directors and executive officers for the indemnification of and advancement of expenses to such persons to the fullest extent permitted by law. We also intend to enter into these agreements with our future directors and executive officers.

STOCK PERFORMANCE GRAPH

Our common stock is listed on the AMEX under the symbol “IIP” and has traded on the AMEX since February 18, 2004. Our common stock traded on the Nasdaq SmallCap Market from October 4, 2002 until February 17, 2004 when we voluntarily delisted our common stock from the Nasdaq SmallCap Market. Prior to that, our common stock traded on the Nasdaq National Market from September 29, 1999, the date of our initial public offering, until October 4, 2002 when we fell below certain listing criteria of the Nasdaq National Market.

Internap Network Services CorporationThe graph set forth below compares cumulative total return to our stockholders from an investment in our common stock with the cumulative total return of the Nasdaq Composite Index and the Goldman/Sachs Internet Index, resulting from an initial assumed investment of $100 in each on September 29, 1999, the date of our initial public offering, and assuming the reinvestment of any dividends, ending at December 31, 2000, December 31, 2001, December 31, 2002, and December 31, 2003, respectively.

The foregoing stock performance graph shall not be deemed to be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act or the Exchange Act, unless we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.

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AUDIT COMMITTEE REPORT

The primary function of the Audit Committee is to assist the board of directors in its oversight and monitoring of our financial reporting and auditing process. In April 2004, our board of directors adopted an updated Audit Committee Charter that sets forth the responsibilities of the Audit Committee. A copy of the Audit Committee Charter is filed as Appendix A to this proxy statement.

Management has primary responsibility for our financial statements and the overall reporting process, including our system of internal controls. The independent auditors audit the annual financial statements prepared by management, express an opinion as to whether those financial statements fairly present our financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States, and discuss with the Audit Committee any issues they believe should be raised with the Audit Committee. The Audit Committee monitors these processes, relying, without independent verification, on the information provided to it and on the representations made by management and the independent auditors.

Representatives of PricewaterhouseCoopers LLP, our independent auditors, attended each meeting of the Audit Committee. The Audit Committee reviewed and discussed with management and PricewaterhouseCoopers LLP our audited financial statements for the year ended December 31, 2003 and our unaudited quarterly financial statements for the quarters ended March 31, June 30 and September 30, 2003. The Audit Committee also discussed with PricewaterhouseCoopers LLP the matters required to be discussed by Statement on Auditing Standards No. 61 (Communications with Audit Committees).

The Audit Committee also received the written disclosures and the letter from PricewaterhouseCoopers LLP that are required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and has discussed with PricewaterhouseCoopers LLP its independence. The Audit Committee considered whether the services provided by PricewaterhouseCoopers LLP for the year ended December 31, 2003 are compatible with maintaining their independence. The Audit Committee has determined to engage PricewaterhouseCoopers LLP as our independent auditors for the year ending December 31, 2004.

Based upon its review of the audited financial statements and the discussions noted above, the Audit Committee recommended that the board of directors include the audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2003 for filing with the SEC.

Audit Committee:

James P. DeBlasio
William J. Harding
Kevin L. Ober

This Proxy Is Solicited By The Board Of Directors Offoregoing report of the Audit Committee Report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act or the Exchange Act, unless we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.

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PROPOSAL 2 — ADOPTION OF THE 2004 EMPLOYEE STOCK PURCHASE PLAN

General

In April 2004, our board of directors adopted the 2004 Internap Network Services Corporation ForEmployee Stock Purchase Plan, or the Plan, subject to the approval of our stockholders. The Special Meeting Of Stockholders To Be Held On December 17, 2002.purpose of the Plan is to encourage ownership of our common stock by each of our eligible employees by permitting eligible employees to purchase our common stock at a discount. Although we previously adopted, and our stockholders approved, the 1999 Employee Stock Purchase Plan, there are no shares remaining available for issuance under that Plan. Accordingly, our board of directors determined that it is in the best interest of our company and our stockholders to adopt the Plan.

The undersigned,following is a summary of the principal features of the Plan. However, the summary does not purport to be a complete description of all the provisions of the Plan, and a copy of the Plan is attached to this proxy statement as Appendix B. Assuming that our stockholders approve the adoption of the Plan at the annual meeting, the effective date of the Plan will be June 15, 2004.

Shares Reserved Under the Plan

If adoption of the Plan is approved by our stockholders, there will be 6,000,000 shares of our common stock reserved for issuance under the Plan.

Eligibility to Participate in the Plan

The Plan is intended to qualify as an “employee stock purchase plan” within the meaning of section 423 of the Internal Revenue Code of 1986, as amended (the “Code”). All employees who work for us or a participating subsidiary corporation more than 20 hours per week on a regular basis are eligible to participate in the Plan, other than (1) an employee who customarily is employed for 5 months or less in any calendar year, (2) an employee who is a citizen of a country that prohibits grants of options to such employee, (3) an employee who is a “highly compensated employee” (as defined in Code section 414(q)) and who is in a category of employees that the plan administrator has determined to exclude or (4) an employee who would own, immediately after the right to purchase stock under the Plan is granted, stock possessing 5% or more of the total voting power or value of all of our stock. Participation in the Plan is voluntary. As of March 31, 2004, approximately 300 employees would have been eligible to participate in the Plan.

Administration of the Plan

The plan administrator, who is a person or entity designated by our board of directors, will administer the Plan. The plan administrator, acting in its absolute discretion, shall exercise such powers and take such action as expressly called for under the Plan and has the power to interpret the Plan and to take such other action in the administration and operation of the Plan as it deems equitable under the circumstances. Our board of directors has designated the Compensation Committee of our board of directors as the “plan administrator”.

Terms of Participation in the Plan

Eligible employees may elect to participate in the Plan for two consecutive calendar quarters, referred to as a holder“purchase period,” by properly completing and filing an election form at any time during a designated period immediately preceding the purchase period. A participation election is in effect until it is amended or revoked by the participating employee. The eligible employee must authorize us to withhold a minimum of $10.00 per pay period of his or her compensation during the purchase period, subject to a maximum of $12,500 during any purchase period. A participating employee may not make any contribution under the Plan except through payroll deduction.

On the last day of each purchase period, unless a participating employee has withdrawn all of the contributions credited to the account established for him or her by the plan administrator, the participating employee’s payroll deductions automatically will be used to exercise an “option” granted to the participant under the Plan to purchase shares of our common stock from us at the purchase price, up to the maximum number of shares permitted under the Plan. The maximum amount that can be purchased during any purchase period also may be limited by the number of authorized shares remaining for sale under the Plan. In addition, in accordance with section 423 of the Code,

24

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in no event may a participating employee purchase more than $25,000 of common stock under the Plan during any calendar year.

The purchase price for shares of common stock and/or sharesunder the Plan for a purchase period will be the lesser of 85% of the closing sale price per share of common stock issuableas reported byThe Wall Street Journal on the first day of the offering period or 85% of such closing price as reported byThe Wall Street Journal on the last day of the purchase period.

A participating employee may amend his or her payroll deduction election form during a purchase period to reduce or stop his or her payroll deductions. A participating employee also has the right at any time on or before the last day of the purchase period to withdraw the entire balance credited to his or her account. If a participating employee makes such a withdrawal election, such balance will be paid to him or her in cash (without interest) as soon as practicable after the plan administrator receives his or her withdrawal election.

If a participating employee’s status as an eligible employee terminates for any reason during a purchase period, cash credited to such participating employee’s account will be refunded to the participating employee without interest.

If a participating employee’s account has a cash balance remaining at the end of a purchase period (other than a balance that represents the value of a fractional share), such balance will be refunded to the participating employee in cash following the purchase period. Any balance representing the value of a fractional share will be carried forward to the next purchase period.

Termination of employment for any reason during a purchase period automatically will be treated as an election by a participating employee to withdraw the cash balance credited to his or her account at that time.

Transfer of Balances Under the Plan

No participating employee may assign, transfer or otherwise dispose of the balance credited to his or her account or his or her right to purchase our common stock under the Plan except by will or the applicable laws of descent and distribution.

Adjustments for Changes in Capitalization

Upon a change in our capitalization, such as a stock dividend or stock split, the plan administrator will adjust the shares reserved for issuance under the Plan, the shares covered by outstanding elections of participating employees and the purchase price for such elections as it determines equitable.

Amendment and Termination

Our board of directors may amend the Plan to the extent that the board deems necessary or appropriate in light of, and consistent with, section 423 of the Code, the laws of Delaware. Any such amendment will be subject to stockholder approval to the extent such approval is required under section 423, the laws of Delaware or other applicable law. Our board of directors also may terminate the Plan or any offering made under the Plan at any time; provided, however, the board may not modify, cancel, or amend any stock purchase right for a purchase period after the beginning of the purchase period unless (1) each participating employee consents in writing to the modification, amendment or cancellation, (2) the modification only accelerates the purchase date for the purchase period, or (3) the board acting in good faith deems that such action is required under applicable law.

Federal Income Tax Consequences

The Plan is intended to qualify as an “employee stock purchase plan” under section 423 of the Code. The following is a general summary of the federal income tax consequences of the Plan, assuming the Plan satisfies the requirements of Code Section 423, based on current federal income tax laws, regulations (including proposed regulations) and judicial and administrative interpretations thereof, all of which are frequently amended, and which may be retroactively applied to transactions described herein. Individual circumstances may vary these results. Furthermore, individuals participating in the Plan may be subject to taxes other than federal income taxes, such as federal employment taxes, state and local income taxes and estate or inheritance taxes.

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The amounts deducted from a participating employee’s pay to purchase shares will be taxable income to the participating employee and must be included in gross income for federal income tax purposes in the year in which the amounts otherwise would have been paid to the employee. A participating employee will not be required to recognize any income for federal income tax purposes upon conversionthe purchase of Seriesshares. However, the participating employee will determine his or her taxable income for the year in which he or she sells or otherwise disposes of shares purchased under the Plan in accordance with the following paragraphs.

The federal income tax consequences of a sale or disposition of shares acquired under the Plan depend in part on the length of time the shares are held by a participating employee before such sale or disposition. If an eligible employee sells or otherwise disposes of shares acquired under the Plan (other than any transfer resulting from his or her death) within two years after the first day of the offering period for the shares, the participating employee must recognize ordinary income in the year of such sale or disposition in an amount equal to the excess of (1) the fair market value of the shares on the date the shares were purchased by him or her over (2) his or her purchase price. This amount of ordinary income is recognized by the participating employee even if the fair market value of the shares has decreased since the date the shares were purchased, and the ordinary income recognized is added to his or her basis in the shares. Any gain realized on the sale or disposition in excess of the basis in the shares (after increasing the basis by the amount of the ordinary income recognized) will be taxed as capital gain, and any loss realized (after increasing the basis in the shares by the ordinary income recognized) will be a capital loss. Whether the capital gain or loss will be long-term or short-term gain or loss will depend on how long the shares were held.

If a participating employee sells or otherwise disposes of shares acquired under the Plan after holding the shares for two years after the first day of the offering period for the shares, or the participating employee dies, he or she must include as ordinary income in the year of sale (or his or her taxable year ending with his or her death) an amount equal to the lesser of (1) the excess of the fair market value of the shares on the first day of the offering period over 85% of the closing sale price of the shares on the first day of the offering period, or (2) the excess of the fair market value of the shares on the date he or she sells or otherwise disposes of the shares, or on the date of his or her death, over the purchase price. Except in the case of a transfer as a result of death, the amount of ordinary income recognized by the employee is added to his or her basis in the shares. The basis of shares transferred as a result of the death of a participating employee will not be increased as a result of the ordinary income recognized by the deceased employee. Any gain realized on the sale or disposition in excess of the participating employee’s basis (after increasing the basis in the shares by the ordinary income recognized) will be taxed as a long-term capital gain. Any loss realized will be treated as long-term capital loss.

Recommendation of the Board of Directors

The board of directors unanimously recommends that you vote “For” the adoption of the 2004 Employee Stock Purchase Plan.

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PROPOSAL 3 — RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

Our Audit Committee has appointed PricewaterhouseCoopers LLP to serve as our independent auditors for the fiscal year ending December 31, 2004. PricewaterhouseCoopers LLP has audited our financial statements since our inception in 1996. Representatives of PricewaterhouseCoopers LLP are expected to be present at the annual meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Stockholder ratification of the appointment of PricewaterhouseCoopers LLP as our independent auditors is not required by our bylaws or otherwise. However, the board of directors is submitting the selection of PricewaterhouseCoopers LLP to our stockholders for ratification as a matter of good corporate governance. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether to retain that firm. Even if the selection is ratified, the Audit Committee in their discretion may direct the appointment of different independent auditors at any time during the year if they determine that such a change would be in the best interests of us and our stockholders.

Audit Fees

The following table shows the fees paid or accrued by us for the audit and other services provided by PricewaterhouseCoopers LLP for the fiscal years ended December 31, 2003 and 2002.

				2003				2002
Audit Fees(1)				$	423,289			$	217,099
Audit-Related Fees(2)					285,631				—
Tax Fees(3)					23,953				30,711
All Other Fees(4)					1,400				219,527
Total				$	734,273			$	467,337

 

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(1)

Fees related to the audit of Internap’s annual financial statements and the reviews of the quarterly financial statements filed on Forms 10-Q.

(2)

Fees primarily related to services performed in conjunction with international statutory filings and registration statements.

(3)

Fees primarily related to tax compliance, advice and planning.

(4)

Fees related to other professional services.

Approval of Audit and Permissible Non-Audit Services

Section 10A(i)(1) of the Exchange Act and related SEC rules require that all auditing and permissible non-audit services to be performed by a company’s principal accountants be approved in advance by the Audit Committee of the Board of Directors, subject to a de minimus exception set forth in the SEC rules (the “De Minimis Exception”). Pursuant to Section 10A(i)(3) of the Exchange Act and related SEC rules, the Audit Committee has established procedures by which the Audit Committee may review and pre-approve such services provided that the pre-approval is detailed as to the particular service or category of services to be rendered. None of the audit-related or non-audit services described above were performed pursuant to the De Minimis Exception during the periods in which the pre-approval requirement has been in effect.

The board of directors unanimously recommends that you vote “For” the ratification of the appointment of PricewaterhouseCoopers LLP to serve as our independent auditors for the fiscal year ending December 31, 2004.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, and regulations of the SEC thereunder require our directors, officers and persons who own more than 10% of our common stock, as well as certain affiliates of such persons, to file initial reports of their ownership of our common stock and subsequent reports of changes in such ownership with the SEC. Directors, officers and persons owning more than 10% of our common stock are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.

Based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2003, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent stockholders were complied with, except for Ali Marashi, our Chief Technology Officer, who did not timely file three Form 4s with respect to the exercise of options to acquire 124,200 shares of our common stock and the subsequent disposition of these shares.

STOCKHOLDERS’ PROPOSALS FOR 2005 ANNUAL MEETING

Proposals of stockholders, including nominations for the board of directors, intended to be presented at the 2005 annual meeting must be received by us at our executive offices in Atlanta, Georgia, on or before Wednesday, December 29, 2004 to be eligible for inclusion in our proxy statement and form of proxy relating to that meeting and to be introduced for action at the meeting. In accordance with our bylaws, for business to be properly brought before a meeting, but not included in the proxy, a stockholder must submit a proposal, including nominations for the board of directors, not earlier than Thursday, January 27, 2005 and not later than Saturday, February 26, 2005 and must comply with the eligibility, advance notice and other provisions of our bylaws. A preferred stock (“Shares”copy of our bylaws is available upon request to the address below.

Stockholder proposals should be sent to:

Internap Network Services Corporation
250 Williams Street
Atlanta, Georgia 30303
Attention: Corporate Secretary

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APPENDIX A

AMENDED AND RESTATED CHARTER OF THE AUDIT COMMITTEE

March 2004

PURPOSE

The purpose of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Internap Network Services Corporation, a Delaware corporation (the “Company”), hereby appoints Gregory Peterswill be to (i) study, review and John Scanlon,evaluate the Company’s accounting, auditing and reporting practices, including internal audit and control functions; (ii) serve as a focal point for communication between non-committee directors, the independent accountants and the Company’s management; and (iii) monitor transactions between the Company and its employees, officers and members of the Board, or any affiliates of the foregoing.

COMPOSITION

The Audit Committee shall consist of at least three members of the Board of Directors. The members of the Committee will be appointed by and serve at the discretion of the Board and shall satisfy the independence and experience requirements of the federal securities laws, the Securities and Exchange Commission and the American Stock Exchange (“AMEX”). Specifically, each member of them, with full power of substitution, to vote all Shares for which the undersigned is entitled to vote through the execution of a proxy with respectAudit Committee shall be “independent”, pursuant to the Special MeetingSarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and as defined in Section 10A3 of the StockholdersSecurities Exchange Act of 1934, as amended, (the “Exchange Act”) and the rules and regulations promulgated by the AMEX, and be financially literate and at least one member of the Audit Committee shall be a “financial expert”, as such term is used in Section 407 of the Sarbanes-Oxley Act and in the Exchange Act.

FUNDING

The Company shall provide for appropriate funding, as determined by the Committee, for the payment of compensation (1) to the registered public accounting firm employed by the Company for the purpose of rendering or issuing an audit report, and (2) to any other advisors employed by the Committee.

FUNCTIONS AND AUTHORITY

The operation of the Committee will be held on December 17, 2002 orsubject to the provisions of the Bylaws of the Company, the Delaware General Corporation Law, the federal securities laws and the corporate laws of any adjournment thereof.

Youother state that may revoke this proxy at any time by forwardingapply to the Company a subsequently dated proxyin the future, each as in effect from time to time. The Committee will have the full power and authority to carry out the following responsibilities:

1.

Appoint annually the firm of certified public accountants to be employed by the Company as its independent auditors for the ensuing year, which firm is ultimately accountable to the Committee as representatives of the Company’s shareholders, and take all appropriate courses of action to be taken in connection with services performed for the Company by the independent auditors.

2.

Set policies for the hiring of employees or former employees of the Company’s independent auditor.

3.

Review the engagement of the independent auditors, including the scope, extent and procedures of the audit, the compensation to be paid therefor and all other matters the Committee deems appropriate. Such independent auditors shall report directly to the Committee.

4.

Evaluate the performance of the independent auditors and, if so determined by the Committee, to replace the independent auditors. The Committee shall be directly responsible for the appointment, compensation and oversight of the independent auditors, including the resolution of any disagreements with management and the auditors regarding financial reporting.

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5.

Receive written statements from the independent auditors periodically delineating all relationships between the auditors and the Company consistent with Independence Standards Board Standard No. 1, to consider and discuss with the auditors any disclosed relationships or services that could affect the auditors’ objectivity and independence and otherwise to take appropriate action to oversee the independence of the auditors.

6.

Review and discuss the Company’s (A) annual audited financial statements, (B) quarterly unaudited financial statements, (C) Annual Reports on Form 10-K and (D) Quarterly Reports on Form 10-Q with management and the independent auditor, such discussions to include:

a.

major issues regarding accounting and auditing principles and practices;

b.

the adequacy of internal controls that could significantly affect the Company’s financial statements;

c.

an analysis prepared by management and the independent auditor of significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including analysis of the effects of alternative GAAP methods;

d.

the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations;” and

e.

the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.

7.

Obtain and review annually a report by the independent auditor describing (1) the independent auditor’s quality-control procedures; (2) material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (3) to further assess the auditor’s independence, all relationships between the independent auditor and the Company.

8.

Annually examine whether regular rotation of the lead partner of the Company’s independent auditor has occurred as required by law and consider whether there should be rotation of the independent auditor itself, and present the Committee’s conclusions to the Board.

9.

Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit.

10.

Meet with the independent auditor prior to the audit to review the planning and staffing of the audit.

11.

Obtain from the independent auditor assurance that Section 10A of the Securities Exchange Act of 1934, as amended, has not been implicated.

12.

Have familiarity, through the individual efforts of its members, with the accounting and reporting principles and practices applied by the Company in preparing its financial statements, including without limitation, the policies for recognition of revenues in financial statements.

13.

Assist and interact with the independent auditors to enable them to perform their duties in the most efficient and cost effective manner.

14.

Evaluate the cooperation received by the independent auditors during their audit or quarterly review examination, including their access to all requested records, data and information, and elicit the comments of management regarding the responsiveness of the independent auditors to the Company’s needs.

15.

Review the Company’s balance sheet, profit and loss statement and statements of cash flows and stockholders’ equity for each annual and interim period, and any changes in accounting policy that have occurred during such period.

16.

Review and approve all professional services provided to the Company by its independent auditors and consider the possible effect of such services on the independence of such auditors. In addition, the Committee shall have the authority to, and shall be required to in its sole discretion, approve (1) all audit

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services and (2) all permissible non-audit services provided to the Company by its outside auditors, as required by Section 202 of the Sarbanes-Oxley Act and Section 10A of the Exchange Act. The Committee shall approve in advance all permissible non-audit services to be provided by the independent auditors.

17.

Discuss the Company’s earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies. These discussions may be had generally and need not include advance discussion of each earnings release. Discussions will include the type and presentation of information to be included in earnings press releases, with particular attention to any use of pro forma or adjusted non-GAAP information.

18.

Review the appointment of the senior internal auditing executive.

19.

Review the significant reports to management prepared by the internal auditing department and management’s responses.

20.

Establish procedures for (1) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and (2) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

21.

Engage its own independent legal counsel and other advisers as it deems necessary to carry out its duties. The Company shall provide the necessary funding for the Committee to engage such advisers, as provided above.

22.

Consult with the independent auditors and discuss with management the scope and quality of internal accounting and financial reporting controls in effect.

23.

Review the reports provided to the Committee by the Company’s outside auditors pursuant to Section 204 of the Sarbanes-Oxley Act.

24.

Prepare the report required by the rules of the Securities and Exchange Commission to be included in the Company’s annual proxy statement.

25.

Investigate, review and report to the Board the propriety and ethical implications of any transactions, as reported or disclosed to the Committee by the independent auditors, employees, officers, members of the Board or otherwise, between the Company and any employee, officer or member of the Board of the Company or any affiliates of the foregoing.

26.

Report regularly to the Board of Directors.

27.

Request that the Company file this Charter as an appendix to the Proxy Statement at least once every three years and maintain a copy on the Company’s website.

28.

Review and assess the adequacy of this Charter annually and submit it to the Board for approval.

29.

Evaluate the performance of the Committee itself.

30.

Perform such other functions and have such power as may be necessary or convenient in the efficient and lawful discharge of the foregoing.

MEETINGS

The Committee will hold at least one regular meeting per calendar quarter and additional meetings as the Committee deems appropriate. The President, Chief Executive Officer, Chairman of the Board and Chief Financial Officer may attend any meeting of the Committee, except for portions of the meetings where his, her or their presence would be inappropriate, as determined by the Company priorCommittee Chairman. Meet separately, at least quarterly, with management, the internal auditors (or other personnel responsible for the Company’s internal audit function) and the independent auditors.

Unless a Chairman is elected by the full Board, the members of the Committee may designate a Chairman by majority vote of the Committee. Committee members may be removed from the Committee by the Board in its discretion.

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MINUTES AND REPORTS

Minutes of each meeting will be kept and distributed to each member of the Committee, members of the Board who are not members of the Committee and the Secretary of the Company. The Chairman of the Committee will report to the Special Meeting,Board from time to time, or whenever so requested by attending the Special MeetingBoard.

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APPENDIX B

2004 INTERNAP NETWORK SERVICES CORPORATION

EMPLOYEE STOCK PURCHASE PLAN

B-1

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TABLE OF CONTENTS

								Page
§ 1.				PURPOSE					B-4
DEFINITIONS									B-4
2.1				Account					B-4
2.2				Authorization					B-4
2.3				Board					B-4
2.4				Code					B-4
2.5				Eligible Employee					B-4
2.6				Exercise Date					B-4
2.7				Fair Market Value					B-4
2.8				Internap					B-4
2.9				1993 Act					B-4
2.10				1934 Act					B-5
2.11				Offering Period					B-5
2.12				Option Price					B-5
2.13				Participating Employee					B-5
2.14				Participating Employer					B-5
2.15				Plan					B-5
2.16				Plan Administrator					B-5
2.17				Purchase Period					B-5
2.18				Stock					B-5
2.19				Subsidiary					B-5
§ 3.				SHARES RESERVED UNDER THE PLAN					B-5
§ 4.				EFFECTIVE DATE					B-5
§ 5.				PLAN ADMINISTRATOR					B-5
§ 6.				PARTICIPATION					B-5
6.1				Requirements					B-5
6.2				Continuity Authorization					B-6
6.3				Termination					B-6
§ 7.				GRANTING OF OPTIONS					B-6
7.1				General Rule					B-6
7.2				Statutory Limitation					B-6
7.3				Insufficient Number of Shares of Stock					B-6
§ 8.				PAYROLL DEDUCTIONS					B-6
8.1				Initial Authorization					B-6
8.2				Continuing Authorization					B-6
8.3				Authorization Amendment					B-6
8.4				Authorization Revocation and Withdrawal Rights					B-7
8.5				Account Credits, General Assets and Taxes					B-7
8.6				No Cash Payments					B-7
§ 9.				EXERCISE OF OPTION					B-7
9.1				General Rule					B-7
9.2				Automatic Refund					B-7
9.3				Delivery of Stock					B-7
§ 10.				TERMINATION OF EMPLOYMENT					B-7
§ 11.				NON-TRANSFERABILITY					B-8
§ 12.				ADJUSTMENT					B-8
§ 13.				SECURITIES REGISTRATION					B-8

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								Page
§ 14.				AMENDMENT OR TERMINATION					B-8
§ 15.				MISCELLANEOUS					B-9
15.1				Shareholder Rights					B-9
15.2				No Contract of Employment					B-9
15.3				Withholding					B-9
15.4				Construction					B-9
15.5				Rule 16b-3					B-9

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§ 1.

PURPOSE

The primary purpose of this Plan is to encourage Stock ownership by each Eligible Employee of Internap by permitting the purchase of Stock at a discount which is permissible under § 423 of the Code. Internap intends that this Plan constitute an “employee stock purchase plan” within the meaning of § 423 of the Code and, votingfurther, intends that any ambiguity in person.this Plan or any related offering be resolved to effect such intent.

§ 2.

DEFINITIONS

Returned proxy cards will2.1  Account — means the separate bookkeeping account which shall be voted (1) as specifiedestablished and maintained by the Plan Administrator for each Participating Employee for each Purchase Period to record the payroll deductions made on his or her behalf to purchase Stock under this Plan.

2.2  Authorization — means the matters listed below; (2)participation election and payroll deduction authorization form which an Eligible Employee shall be required to properly complete in accordancewriting and timely file with the boardPlan Administrator before the end of directors’ recommendationsan Offering Period in order to participate in this Plan for the related Purchase Period and which shall require an Eligible Employee to provide such information and to take such action as the Plan Administrator in his or her discretion deems necessary or helpful to the orderly administration of this Plan.

2.3  Board — means the Board of Directors of Internap.

2.4  Code — means the Internal Revenue Code of 1986, as amended.

2.5  Eligible Employee — means each employee of Internap or a Subsidiary except —

(a)

an employee who customarily is employed (within the meaning of Code § 423(b)(4)(B)) 20 hours or less per week by Internap or such Subsidiary,

(b)

an employee who customarily is employed (within the meaning of Code § 423(b)(4)(C)) for not more than 5 months in any calendar year by Internap or such Subsidiary,

(c)

an employee who would own (immediately after the grant of an option under this Plan) stock possessing 5% or more of the total combined voting power or value of all classes of stock of Internap based on the rules set forth in § 423(b)(3) and § 424 of the Code,

(d)

a highly compensated employee (as defined under § 414(q) of the Code) who falls within a category of highly compensated employees that the Plan Administrator has determined in its discretion to exclude under this Plan, and

(e)

an employee who is a citizen of a country whose laws would prohibit the granting of an option under this Plan.

2.6  Exercise Date — means for each Purchase Period the last day of such Purchase Period.

2.7  Fair Market Value — means (1) the closing price on any date for a share of Stock as reported byThe Wall Street Journal or, ifThe Wall Street Journal no longer reports such closing price, such closing price as reported by a newspaper or trade journal selected by the proxyPlan Administrator or, if no such closing price is signed but whereavailable on such date, (2) such closing price as so reported for the immediately preceding business day, or, if no specificationnewspaper or trade journal reports such closing price or if no such price quotation is made;available, (3) the price which the Plan Administrator acting in good faith determines through any reasonable valuation method that a share of Stock might change hands between a willing buyer and (3) in accordance with the judgmenta willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of the proxies on any other matters that may properly come before the meeting. Please mark your choice like this:  xrelevant facts.

2.8  GrantingInternap — means Internap Network Services Corporation, a proxy on the Internet

You may grant a proxy to vote your Shares by means of the Internet. The Internet voting procedures below are designed to authenticate your identity, to allow you to grant a proxy to vote your Shares and to confirm that your instructions have been recorded properly. If you grant a proxy to vote via the Internet, you should understand there may be costs associated with electronic access that you must bear, such as usage charges from Internet access providers and telephone companies. The Company iscorporation incorporated under the laws of the State of Delaware, and Section 212(c) of the Delaware General Corporation Law specifically permits electronically transmitted proxies, provided that each such proxy contains or is submitted with information from which the inspector of election can determine that such proxy was authorized by the stockholder.

Vote By Internet - www.proxyvote.com

Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site. You will be prompted to enter your 12-digit Control Number which is located below to obtain your records and to create an electronic voting instruction form.

Vote By Phone - 1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call. You will be prompted to enter your 12-digit Control Number which is located below and then follow the simple instructions the Vote Voice provides you.

Vote By Mail

Mark, sign, and date your proxy card and return it in the postage-paid envelope we have provided or return itsuccessor to Internap Network Services Corporation.

2.9  1993 Act — means the Securities Act of 1933, as amended.

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2.10  1934 Act — means the Securities Exchange act of 1934, as amended.

2.11  Offering Period — means the period set by the Plan Administrator which precedes the beginning of the related Purchase Period and which shall continue for no more than 15 days.

2.12  Option Price — means for each Purchase Period the lesser of 85% of the Fair Market Value for a share of Stock on the first day of such Purchase Period or 85% of the Fair Market Value for a share of Stock on the last day of such Purchase Period.

2.13  Participating Employee — means for each Purchase Period each Eligible Employee who is employed by a Participating Employer and who has satisfied the requirements set forth in § 4 of this Plan for such Purchase Period.

2.14  Participating Employer — means for each Purchase Period Internap and each Subsidiary which the Plan Administrator designates as a Participating Employer for such Purchase Period.

2.15  Plan — means this 2004 Internap Network Services Corporation c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.Employee Stock Purchase Plan.

2.16  Plan Administrator — means the person or entity so designated by the Board.

2.17  Purchase Period — means two consecutive calendar quarters.

2.18  Stock — means Internap Network Services Corporation common stock.

2.19  Subsidiary — means each corporation which is a subsidiary of Internap (within the meaning of §424(f) of the Code).

§ 3.

SHARES RESERVED UNDER THE PLAN

Effective June 15, 2004 there shall (subject to § 12) be a total of 6,000,000 such shares so reserved, less the number previously issued under this Plan. All such shares of Stock shall be reserved to the extent that Internap deems appropriate from authorized but unissued shares of Stock or from shares of Stock which have been reacquired by Internap.

§ 4.

EFFECTIVE DATE

The original effective date of this Plan shall be June 15, 2004.

§ 5.

PLAN ADMINISTRATOR

This Plan shall be administered by the Plan Administrator. The Plan Administrator acting in its absolute discretion shall exercise such powers and take such action as expressly called for under this Plan and, further, the Plan Administrator shall have the power to interpret this Plan and to take such other action in the administration and operation of this Plan as the Plan Administrator deems equitable under the circumstances, which action shall be binding on Internap, on each affected Participating Employee and Participating Employer and on each other person directly or indirectly affected by such action.

§ 6.

PARTICIPATION

6.1  Requirements. Each Eligible Employee who is employed by a Participating Employer on the first day of an Offering Period shall satisfy the requirements to be a Participating Employee for the related Purchase Period if

(a)

he or she has properly completed and filed an Authorization with the Plan Administrator on or before the last day of such Offering Period to purchase shares of Stock pursuant to options granted under this Plan, and

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(b)

his or her employment as an Eligible Employee continues uninterrupted throughout the period which begins on the first day of such Offering Period and ends on the first day of the related Purchase Period, and no Eligible Employee’s employment shall be treated as interrupted by a transfer directly between Internap and any Subsidiary or between one Subsidiary and another Subsidiary.

6.2  Continuity Authorization. An Authorization shall continue in effect until amended under § 8.2 or revoked under § 8.4.

6.3  Termination. A Participating Employee’s status as such shall terminate for a Purchase Period (for which he or she has an effective Authorization) at such time as his or her account is withdrawn under § 8.3 or his or her employment terminates under § 10.

§ 7.

GRANTING OF OPTIONS

7.1  General informationRule. Subject to § 7(b) and § 7(c), each Participating Employee for each Purchase Period automatically shall be granted an option as of the first day of such Purchase Period to purchase at the Option Price a maximum number of whole shares of Stock, which number shall be determined by dividing $12,500.00 by the Fair Market Value of a share of Stock on the first day of such Purchase Period.

7.2  Statutory Limitation. No option granted under this § 7 to any Eligible Employee shall permit his or her rights to purchase shares of Stock under this Plan or under any other employee stock purchase plan (within the meaning of § 423 of the Code) established by Internap or any Subsidiary to accrue (within the meaning of § 423(b)(8) of the Code) at a rate which exceeds $25,000 of the Fair Market Value of such Stock for any calendar year.

7.3  Insufficient Number of Shares of Stock. If the number of shares of Stock reserved for purchase for any Purchase Period is insufficient to cover the number of shares which Participating Employees elect to purchase on the Exercise Date for of such Purchase Period, then the number of shares of Stock which each Participating Employee has a right to purchase at the end of such Purchase Period shall be reduced to the number of shares of Stock which the Plan Administrator shall determine by multiplying the number of shares of Stock reserved under this Plan by a fraction, the numerator of which shall be the number of shares of Stock which such Participating Employee elected to purchase at the end of such Purchase Period and the denominator of which shall be the total number of shares of Stock which all Shares voted viaParticipating Employees elected to purchase at the Internetend of such Purchase Period.

§ 8.

PAYROLL DEDUCTIONS

8.1  Initial Authorization. Each Participating Employee’s initial Authorization shall specify the specific dollar amount which he or she authorizes his or her Participating Employer to deduct from his or her compensation each pay period (determined in accordance with such Participating Employer’s standard payroll policies and practices) during the Purchase Period for which such Authorization is in effect, provided

(a)

the minimum amount deducted from a Participating Employee’s compensation during any pay period in a Purchase Period shall not be less than $10.

(b)

the maximum amount deducted from a Participating Employee’s compensation during any Purchase Period shall not exceed the lesser of $12,500 or such amount as set from time to time by the Plan Administrator.

8.2  Continuing Authorization. An Authorization once timely filed under § 6(a)(1) shall continue in effect until amended under § 8.3 or revoked under § 8.4.

8.3  Authorization Amendment. An Authorization may be amended during any Offering Period and such amendment shall be effective for the related Purchase Period if timely filed under § 6(a)(1).

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8.4  Authorization Revocation and Withdrawal Rights.

(a)

Revocation. A Participating Employee shall have the right during any Purchase Period to revoke an Authorization, and such revocation stop the payroll deductions which he or she previously had authorized for such Purchase Period if he or she files an Authorization revocation with the Plan Administrator before the Exercise Date for such Purchase Period, and such payroll deductions shall stop as soon as practicable after the Plan Administrator actually receives such Authorization revocation.

(b)

Withdrawal.  If a Participating Employee revokes his or her Authorization, he or she may elect to withdraw the entire balance credited to his or her Account for such Purchase Period without interest. If a Participating Employee makes such a withdrawal election, such balance shall be paid to him or her in cash (without interest) as soon as practicable after the Plan Administrator receives his or her withdrawal election. If no such election is made, such Account balance shall be applied to exercise his or her option under § 9.

8.5  Account Credits, General Assets and Taxes. All payroll deductions made for a Participating Employee shall be credited to his or her Account as of the pay day as of which the deduction is made. All payroll deductions shall be held by Internap or by one, or more than one, Subsidiary (as determined by the Plan Administrator) as part of the general assets of Internap or any such Subsidiary, and each Participating Employee’s right to the payroll deductions credited to his or her Account shall be those of a general and unsecured creditor. Internap or such Subsidiary shall have the right to withhold on payroll deductions to the extent such person deems necessary or appropriate to satisfy applicable tax laws.

We must8.6  No Cash Payments. No Participating Employee may make any contribution to his or her Account except through payroll deductions made in accordance with this § 8.

§ 9.

EXERCISE OF OPTION

9.1  General Rule. Each Participating Employee automatically shall be deemed to exercise his or her option granted for each Purchase Period on the related Exercise Date for the purchase of as many whole shares of Stock subject to such option as the balance credited to his or her Account as of that date will purchase at the Option Price for such shares of Stock.

9.2  Automatic Refund. If a Participating Employee’s Account has a remaining balance after his or her option has been exercised as of an Exercise Date under this § 9, such balance automatically shall be refunded to the Participating Employee in cash (without interest) as soon as practicable following such Exercise Date unless such balance is attributable to a fractional share, in which event such Account balance may be carried forward (without interest) to the immediately following Purchase Period.

9.3  Delivery of Stock. A stock certificate representing any shares of Stock purchased upon the exercise of an option under this Plan shall be held for or, at the Participating Employee’s direction and expense, delivered to the Participating Employee and shall be registered in his or her name; provided, however, Internap shall not have any obligation to deliver a certificate to a Participating Employee which represents a fractional share of Stock. No Participating Employee (or any person who makes a claim through a Participating Employee) shall have any interest in any shares of Stock subject to an option until such option has been exercised and the related shares of Stock actually have been delivered to such person or have been transferred to a brokerage account for such person at a broker-dealer designated by the Plan Administrator.

§ 10.

TERMINATION OF EMPLOYMENT

If a Participating Employee’s employment as an Eligible Employee terminates on or before the Exercise Date for a Purchase Period for any reason whatsoever, his or her Account shall be distributed as if he or she had elected to withdraw his or her Account in cash under § 8.4 immediately before the date his or her employment had so terminated. However, if a Participating Employee is transferred directly between Internap and a Subsidiary or between

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one Subsidiary and another Subsidiary while he or she has an Authorization in effect, his or her employment shall not be treated as terminated merely by reason of such transfer and any such Authorization shall (subject to all the terms and conditions of this Plan) remain in effect after such transfer for the remainder of such Purchase Period.

§ 11.

NON-TRANSFERABILITY

Neither the balance credited to a Participating Employee’s Account nor any rights to the exercise of an option or to receive votes submitted viashares of Stock under this Plan shall be transferable other than by will or by the Internetlaws of descent and distribution, and any option shall be exercisable during a Participating Employee’s lifetime only by 11:59 p.m., Eastern Time, on December 16, 2002. Submitting your proxy via the InternetParticipating Employee.

§ 12.

ADJUSTMENT

The number, kind or class (or any combination thereof)of shares of Stock reserved under § 3, and the Option Price such shares or Stock as well as the number, kind or class (or any combination thereof) of shares of Stock subject to grants under this Plan shall be adjusted by the Plan Administrator in an equitable manner to reflect any change in the capitalization of Internap, including, but not limited to such changes as stock dividends or stock splits.

§ 13.

SECURITIES REGISTRATION

As a condition to the receipt of shares of Stock under this Plan, an Eligible Employee shall, if so requested by Internap, agree to hold such shares of Stock for investment and not with a view of resale or distribution to the public and, if so requested by Internap, shall deliver to Internap a written statement satisfactory to Internap to that effect. Furthermore, if so requested by Internap, the Eligible Employee shall make a written representation to Internap that he or she will not affect yoursell or offer for sale any of such Stock unless a registration statement shall be in effect with respect to such Stock under the 1933 Act and any applicable state securities law or the Eligible Employee shall have furnished to Internap an opinion in form and substance satisfactory to Internap of legal counsel satisfactory to Internap that such registration is not required. Certificates representing the Stock transferred upon the exercise of an option may at the discretion of Internap bear a legend to the effect that such Stock has not been registered under the 1933 Act or any applicable state securities law and that such Stock cannot be sold or offered for sale in the absence of an effective registration statement as to such Stock under the 1933 Act and any applicable state securities law or an opinion in form and substance satisfactory to Internap of legal counsel satisfactory to Internap that such registration is not required.

§ 14.

AMENDMENT OR TERMINATION

This Plan may be amended by the Board from time to time to the extent that the Board deems necessary or appropriate in light of, and consistent with, § 423 of the Code and the laws of the State of Delaware, and any such amendment shall be subject to the approval of Internap’s shareholders to the extent such approval is required under § 423 of the Code or the laws of the State of Delaware or to the extent such approval is required to satisfy any requirements under applicable law. The Board also may terminate this Plan or any offering made under this Plan at any time; provided, however, the Board shall not have the right to votemodify, cancel, or amend any option outstanding after the beginning of a Purchase Period unless (1) each Participating Employee consents in person should you decidewriting to attendsuch modification, amendment or cancellation, (2) such modification only accelerates the Special Meeting.Exercise Date for the related Purchase Period or (3) the Board acting in good faith deems that such action is required under applicable law.

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§ 15.

MISCELLANEOUS

15.1  Shareholder Rights. No Participating Employee shall have any rights as a shareholder of Internap as a result of the grant of an option pending the actual delivery of the Stock subject to such option to such Participating Employee.

15.2  No Contract of Employment. The grant of an option to a Participating Employee under this Plan shall not constitute a contract of employment and shall not confer on a Participating Employee any rights upon his or her termination of employment.

Your Board15.3  Withholding. Each option shall be made subject to the condition that the Participating Employee consents to whatever action the Plan Administrator directs to satisfy the federal and state tax withholding requirements, if any, which the Plan Administrator in its discretion deems applicable to the exercise of Directors Unanimously Recommends a Vote “For” Proposal 1 and Asks That You Approve Eachsuch option.

15.4  Construction. All references to sections (§) are to sections (§) of this Plan unless otherwise indicated. This Plan shall be construed under the laws of the Six Reverse Split Amendments.State of Georgia. Finally, each term set forth in § 2 shall have the meaning set forth opposite such term for purposes of this Plan and, for purposes of such definitions, the singular shall include the plural and the plural shall include the singular.

Proposal 115.5  Rule 16b-3. The Plan Administrator shall have the right to amend any option to withhold or otherwise restrict the transfer of any Stock or cash under this Plan to an Eligible Employee as the Plan Administrator deems appropriate in order to satisfy any condition or requirement under Rule 16b-3 to the extent Rule 16 of the 1934 Act might be applicable to such grant or transfer.

TO APPROVE EACH AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND TO AUTHORIZE THE BOARD OF DIRECTORS TO EFFECT A REVERSE STOCK SPLIT OF OUR COMMON STOCK IN A RATIO OF 1-FOR-5, 1-FOR-10, 1-FOR-15, 1-FOR-20, 1-FOR-25 OR 1-FOR-30, AS DETERMINED BY THE BOARD OF DIRECTORS, AT ANY TIME PRIOR TO THE NINE MONTH ANNIVERSARY OF THE SPECIAL MEETING OF STOCKHOLDERS TO WHICH THIS PROXY RELATES:WITNESS WHEREOF, Internap Network Services Corporation has caused its duly authorized officer to execute this Plan to evidence its adoption of this Plan.

INTERNAP NETWORK SERVICES CORPORATION

By:

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Date:

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¨    FOR

¨VOTE BY INTERNET - www.proxyvote.com    AGAINST

¨    ABSTAIN