UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THEProxy Statement Pursuant to Section 14(A) of The

SECURITIES EXCHANGE ACT OFSecurities Exchange Act of 1934

(AMENDMENT NO.___)

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Internap Network Services Corporation
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Internap Network Services Corporation

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PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION

LOGO

April 28, 2006



25, 2007

Dear Internap Stockholder:


I am pleased to invite you to Internap Network Services Corporation’s 20062007 annual meeting of stockholders. This year’s meeting will be held on Wednesday,Thursday, June 21, 2006,2007, at 10:00 a.m., Eastern Time, at 250 Williams Street, Atlanta, Georgia 30303. Details of the business to be conducted at the annual meeting are given in the attached Notice of Annual Meeting and Proxy Statement. A copy of our 20052006 Annual Report to Stockholders is also enclosed.

Whether or not you plan to attend the annual meeting, we hope you will have your shares represented by marking, signing, dating and returning your proxy card in the enclosed envelope as soon as possible. Your stock will be voted in accordance with the instructions you have given in your proxy card. If you return your signed proxy but no voting instructions are given, your shares will be voted for each of the proposals discussed in the attached Notice of Annual Meeting and Proxy Statement. If you attend the annual meeting, you may vote your shares in person even though you have previously signed and returned your proxy card. Even if you plan to attend the annual meeting, we recommend that you also submit your proxy and voting instructions so that your vote will be counted if you later decide not to attend the meeting.


Very truly yours,
LOGO

James P. DeBlasio

President and Chief Executive Officer




INTERNAP NETWORK SERVICES CORPORATION

NOTICE OF THE 20062007 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 21, 20062007



NOTICE IS HEREBY GIVEN that the 20062007 annual meeting of stockholders of Internap Network Services Corporation, a Delaware corporation, will be held on Wednesday,Thursday, June 21, 2006,2007, at 10:00 a.m., Eastern Time, at 250 Williams Street, Atlanta, Georgia 30303, for the following purposes:

 1.to elect two directorsDirectors for a term expiring at the 20092010 annual meeting;

 2.to consider and act upon a proposal to grant the board of directors the authority to amend our certificate of incorporation to effect a reverse stock split of our common stock at a specific ratio to be determined by our board of directors within a range of one-for-five and one-for-twenty;
3.to consider and act upon a proposal to grant the board of directors the authority to implement an option exchange program pursuant to which eligible employees will be offered the opportunity to exchange their eligible options to purchase shares of our common stock outstanding under our existing equity incentive plans for new stock options at a lower exercise price;
4.to ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for our fiscal year ending December 31, 2006;2007; and

 5.3.to transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof.

The foregoing items of business are more fully described in the proxy statement accompanying this notice and incorporated by reference herein.

The boardBoard of directorsDirectors has fixed the close of business on April 24, 200620, 2007 as the record date for the determination of holders of our common stock entitled to notice of, and to vote at, the annual meeting and any adjournment or postponement thereof. A list of stockholders entitled to vote at the annual meeting shall be open for the examination of any stockholder, for any purpose relevant to the annual meeting, during ordinary business hours, for a period of at least ten days prior to the annual meeting at our principal executive offices at 250 Williams Street, Suite E-100, Atlanta, Georgia 30303.

By order of the Board of Directors,


David H. King

LOGO

Richard Dobb

Corporate Secretary



Atlanta, Georgia

April 28, 2006

25, 2007

Your vote is important. Whether or not you expect to attend the annual meeting, please read the attached proxy statement and then promptly complete, date, sign and return the enclosed proxy card in order to ensure your representation at the annual meeting. A return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Even if you have given your proxy, you may still vote in person if you attend the annual meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the annual meeting, you must obtain from such broker, bank or other nominee a proxy card issued in your name. Contact your broker, bank or other nominee for instructions.



INTERNAP NETWORK SERVICES CORPORATION

250 Williams Street, Suite E-100

Atlanta, Georgia 30303


PROXY STATEMENT

FOR THE 20062007 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 21, 20062007


INFORMATION ABOUT THE ANNUAL MEETING


Our boardBoard of directorsDirectors is soliciting proxies for use at our 20062007 annual meeting of stockholders to be held on Wednesday,Thursday, June 21, 2006,2007, at 10:00 a.m., Eastern Time, or at any adjournment or postponement thereof. The annual meeting will be held at 250 Williams Street, Atlanta, Georgia 30303. When used in this proxy statement, the terms “we,” “us,” “our,” the “Company,” and “Internap” refer to Internap Network Services Corporation.

A copy of our 20052006 Annual Report to Stockholders accompanies this proxy statement. Additional copies of the 20052006 Annual Report to Stockholders, along with copies of our 20052006 Annual Report on Form 10-K,10-K/A, including financial statements and financial statement schedules (but not including documents incorporated by reference) are available to any stockholder without charge upon written request to:

Internap Network Services Corporation
Attention: Corporate Secretary
250 Williams Street, Suite E-100
Atlanta, Georgia 30303

Internap Network Services Corporation

Attention: Corporate Secretary

250 Williams Street, Suite E-100

Atlanta, Georgia 30303

You may also obtain our 20052006 Annual Report on Form 10-K10-K/A over the Internet at the Securities and Exchange Commission’s, or SEC’s, website, www.sec.gov, or at our website, www.internap.com.

This proxy statement and form of proxy card are first being sent or given to stockholders on or about May 4, 2006.


2007.


GENERAL INFORMATION ABOUT VOTING


Who Can Vote

The boardBoard of directorsDirectors has set April 24, 200620, 2007 as the record date for the annual meeting. Only holders of record of our common stock at the close of business on this date will be entitled to notice of, and to vote at, the annual meeting. As of the record date, we had outstanding and entitled to vote ________48,923,480 shares of common stock. Each holder of record of our common stock on the record date will be entitled to one vote for each share held on all matters to be voted upon at the annual meeting.

Matters Submitted to Stockholders for a Vote


You are being asked to vote on the following proposals:


 1.to elect two directorsDirectors for a term expiring at the 20092010 annual meeting;

 2.to consider and act upon a proposal to grant the board of directors the authority to amend our certificate of incorporation to effect a reverse stock split of our common stock at a specific ratio to be determined by our board of directors within a range of one-for-five and one-for-twenty;
3.to consider and act upon a proposal to grant the board of directors the authority to implement an option exchange program pursuant to which eligible employees will be offered the opportunity to exchange their eligible options to purchase shares of our common stock outstanding under our existing equity incentive plans for new stock options at a lower exercise price;
4.to ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for our fiscal year ending December 31, 2006;2007; and

 5.3.to transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof.

No cumulative voting rights are authorized, and dissenters’ rights are not applicable to any of the matters being voted upon.


Quorum

In order for us to conduct the annual meeting, we must have a quorum, which means that a majority of the outstanding shares of our common stock as of the record date must be present, in person or by proxy, at the meeting.

Vote Required

Election of Directors. Stockholders may vote “For” all nominees, “Withhold” their votes as to all nominees or “Withhold” their votes as to specific nominees. The two persons receiving the highest number of votes for election as a directorDirector with a term expiring at the 20092010 annual meeting will be elected. Thiselected, which is called a “plurality.” Abstentions will be counted in determining whether a quorum is present but will have no other effect on the election of directors.Directors.


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Reverse Stock Split. Stockholders may vote “For” the proposal, “Against” the proposal or “Abstain.” The votes required to approve the authorization of the reverse stock split is the affirmative vote of a majority of the shares of our common stock outstanding and entitled to vote. Abstentions and broker non-votes (which are described below under “Failure to Vote”) will not be voted, although they will be counted in determining whether a quorum is present and will have the same effect as a vote against the proposal.

Stock Option Exchange. Stockholders may vote “For” the proposal, “Against” the proposal or “Abstain.” The votes required to approve the stock option exchange program is the affirmative vote of a majority of the shares of our common stock cast, in person or by proxy, at the annual meeting. Abstentions and broker non-votes will not be voted, although they will be counted in determining whether a quorum is present. Abstentions and broker non-votes will have no effect in determining the outcome of the vote on this proposal.
Ratification of the Auditors.Stockholders may vote “For” the proposal, “Against” the proposal or “Abstain.” The vote required to approve the ratification of the appointment of our independent auditorsregistered public accounting firm is the affirmative vote of a majority of the shares of our common stock present, in person or by proxy, at the annual meeting. Abstentions and broker non-votes will not be voted, although they will be counted in determining whether a quorum is present. Abstentions will have the same effect as a vote against the proposal, but broker non-votes will have no effect in determining the outcome of the vote on this proposal.

Failure to Vote

If you do not vote your proxy and your shares are held in street name, your brokerage firm may either:

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vote your shares on routine matters; or

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leave your shares unvoted.

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Under the rules of the New York and American Stock Exchanges,NASDAQ Global Market, which we refer to collectively as the “Exchanges,“NASDAQ,” that govern most domestic stock brokerage firms, member firms that hold shares in street name for beneficial owners may, to the extent that such beneficial owners do not furnish voting instructions with respect to any or all proposals submitted for stockholder action, vote on the election of directors and on certain other routine matters under the rules of the Exchanges.NASDAQ rules. On non-routine matters, if the brokerage firm has not received voting instructions from the stockholder, the brokerage firm cannot vote the shares on that proposal, which is considered a “broker non-vote.” Broker non-votes will be counted for purposes of establishing a quorum to conduct business at the meeting. The proposals to approveproposal for the authorizationelection of a reverse stock splitDirectors and the option exchange program are non-routine matters. Noneratification of the other proposalsappointment of our independent registered public accounting firm are non-routine.routine. Accordingly, brokers that do not receive instructions will be entitled to vote on the election of directorsDirectors and the ratification of the appointment of our independent registered public accounting firm at the annual meeting but may not vote for the proposal to approve a reverse stock split or the authorization of the Company to implement an option exchange program. Broker non-votes will not be counted “For” or “Against” the proposal to approve the authorization of the option exchange program, but will have the same effect as a vote “Against” the proposal to approve the authorization of the reverse stock split.


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meeting.

How to Vote

You may vote by mail. You do thismay vote by mail by signing your proxy card and mailing it in the enclosed envelope. If you mark your voting instructions on the proxy card, your shares will be voted as you instruct. If you return a signed card but do not provide voting instructions, your shares will be voted “For” each of the proposals described in this proxy statement.

You may vote by the Internet. Detailed instructions on how to vote by the Internet are set forth below.

 ·•

For shares registered in your name - —As a stockholder of record, you may go to http://www.proxyvote.com to grant a proxy to vote your shares by means ofvia the Internet. You will be required to provide your number and control number contained on your proxy card. You will then be asked to complete an electronic proxy card. The votes represented by such proxy will be generated on the computer screen, and you will be prompted to submit or revise them as desired.

 ·•

For shares registered in the name of a broker or bank - Most beneficial owners whose stock is held in street name receive instructions for granting proxies from their banks, brokers—If you hold your shares through a broker, bank or other agents, rather than a proxy card. A number of brokers and banks are participating in a program provided through ADP Investor Communication Services, or ADP,nominee, that offersinstitution will send you separate instructions describing the means to grant proxies to vote shares by means of the telephone and Internet. Ifprocedures for voting your shares are held in an account with a broker or bank participating in the ADP program, you may grant a proxy to vote those shares telephonically by calling the telephone number shown on the instruction form received from your broker or bank, or via the Internet at ADP’s website at http://www.bsg.adp.com.shares.

 ·•

General information for all shares voted via the Internet- —We must receive votes submitted via the Internet by 11:59 p.m., Eastern Time, on June 20, 2006.2007. Submitting your proxy via the Internet will not affect your right to vote in person should you decide to attend the annual meeting.

You may also vote by phone. You may vote by phone by using a touch-tone telephone and calling 1-800-690-6903. Have your proxy card in hand when you call and then follow the instructions.

You may also vote in person at the annual meeting. Written ballots will be given to anyone who wants to vote at the annual meeting. If you hold your shares in “street name,” you will need to obtain a proxy from the broker or bank that holds your shares in order to vote at the annual meeting.

Revocability of Proxies

Any stockholder delivering a proxy has the power to revoke it at any time before it is voted by:

 1.giving written notice to the Corporate Secretary, Internap Network Services Corporation, at 250 Williams Street, Suite E-100, Atlanta, Georgia 30303;

 2.executing and delivering to the Corporate Secretary a proxy card bearing a later date; or

 3.voting in person at the annual meeting.
Please note, however, that under the rules of the Exchanges, any beneficial owner of our common stock whose shares are held in a street name by a member brokerage firm may revoke his or her proxy and vote his or her shares in person at the annual meeting only in accordance with applicable rules and procedures of the Exchanges, as employed by the beneficial owner’s brokerage firm.

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Cost of this Proxy

We will bear the entire cost of solicitation of proxies, including the costs of preparing, assembling, printing and mailing this proxy statement, the proxy card and any additional information furnished to stockholders. We

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will furnish copies of solicitation materials to banks, brokerage houses, fiduciaries and custodians holding in their names shares of our common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of common stock for their costs of forwarding solicitation materials to such beneficial owners. We may also solicit proxies by telephone, facsimile or personal solicitation by our directors,Directors, officers or other regular employees. We will not pay any additional compensation to directors,Directors, officers or other regular employees for such services.

Other Matters that May Come Before the Annual Meeting

Our boardBoard of directorsDirectors knows of no matters other than those referred to in the accompanying Notice of 20062007 Annual Meeting of Stockholders whichthat may properly come before the annual meeting. However, ifIf, however, any other matters should be properly presented for consideration and voting at the annual meeting or any adjournments or postponements thereof, the accompanying proxy gives discretionary authority to the persons named as proxies on the form of proxy card to vote the shares represented by all valid proxy cards with respect to such other matters. Those persons intend to vote that proxy in accordance with their best judgment.


PROPOSAL 1 - 1—ELECTION OF DIRECTORS


Under our certificate of incorporation, as amended, the size of our boardBoard of directorsDirectors is set at no less than five (5) nor more than nine (9) members, with the specific number set by resolutions of the boardour Board of directors.Directors. The boardBoard is divided into three classes, with the directorsDirectors in each class serving a three-year term. Currently,With the resignation of Fredric Harman on March 15, 2007, our boardBoard of directorsDirectors currently consists of eightseven members.

The terms of the two directorsDirectors in Class I, Charles B. CoeII, James DeBlasio and Patricia L. Higgins,Kevin Ober, will expire at the annual meeting.


Based upon the recommendation of the Nominations and Governance Committee, the boardBoard of directorsDirectors has nominated each of Mr. CoeDeBlasio and Ms. HigginsMr. Ober for election as Class I directorsII Directors for a term expiring at the 20092010 annual meeting of stockholders and until their successors have been qualified, or until their earlier death, resignation or removal. Each of the nominees has agreed to serve if elected, and the boardBoard of directorsDirectors has no reason to believe they will be unable to serve. If any nominee for directorDirector is unable to serve, the persons named in the proxy may vote for a substitute nominee.


The board of directors unanimously recommends that you vote “For” the election of Mr. Coe and Ms. Higgins as directors to hold office until the 2009 annual meeting of stockholders.THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF MR. DEBLASIO AND MR. OBER AS DIRECTORS TO HOLD OFFICE UNTIL THE 2010 ANNUAL MEETING OF STOCKHOLDERS.

Set forth below is information about the directorDirector nominees and about the incumbent directorsDirectors whose terms will expire in 20072008 and 2008.


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2009.

Nominees for a Term Expiring in 20092010 (Class I)II)

Charles B. Coe, 58, has served as a director since July 2003.  Mr. Coe is a 28-year veteran of the telecommunications industry, including 15 years with BellSouth.  During his career, he served as President of BellSouth Network Services; President of BellSouth Telecommunications; President of BellSouth International; and Group President of Customer Operations for BellSouth Telecommunications.  Previously, Mr. Coe had served in various management positions with AT&T Communications and American Telesystems Corporation.  Mr. Coe holds an M.B.A. degree from Georgia State University and a B.S. degree from The Citadel.

Patricia L. Higgins, 56, has served as a director since December 2004.  Ms. Higgins has nearly 30 years of experience in the telecommunications industry.   Ms. Higgins is the former President, CEO, and a board member of Switch and Data, a leading provider of neutral interconnection and collocation services.  Until 2000, Ms. Higgins served as Chairman and CEO of The Research Board, a premier consulting and research services company for information technology. Prior to 1999, Ms. Higgins was the CIO of Alcoa and also held senior management positions at UNISYS, Verizon (NYNEX) and AT&T. Ms. Higgins currently serves on the Board of Directors of Delta Airlines, Inc., Visteon Corp. and SpectraSite Inc.  Ms. Higgins holds a B.A. degree from Montclair State University and attended Harvard Business School’s Advanced Management Program.  

Incumbent Directors whose Terms Will Expire in 2007 (Class II)

James DeBlasio, 50,51, was appointed as Internap'sInternap’s President and Chief Executive Officer in November 2005, after serving as President and Chief Operating Officer of Internap from September 2005 until November 2005. Mr. DeBlasio has served as a directorDirector of Internap since July 2003. He also previously served as Chairman of the Audit Committee and member of the Nominations and Governance Committee of Internap’s Board of Directors, until he resigned from these committee appointments upon commencing employment as the Company’s President &and Chief Operating Officer in September 2005. From 2003 until September 2005, Mr. DeBlasio served as Financial Vice President of the wireline and wireless product portfolio of Lucent Technologies, a network communications equipment provider. Prior to that, from 2002 to 2003, he was Financial Vice President for Lucent’s Mobility Solutions Group. He served as Financial Vice President—Corporate

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Planning and Analysis for Lucent from 2001 to 2002, as Chief Financial Officer of Lucent’s Optical Networking Group from 2000 to 2001 and as Financial Vice President and Chief Financial Officer of Lucent’s Wireless Networks Group from 1997 to 2000. Mr. DeBlasio holds ana M.B.A degree in Finance and Financial Portfolio Analysis from Seton Hall University and a B.S. degree in Industrial Management from Villanova University.

Fredric W. HarmanKevin L. Ober, 45,46, has served as a directorDirector of Internap since January 1999. Since 1994, Mr. Harman has served as a Managing Member of the General Partners of venture capital funds affiliated with Oak Investment Partners. Mr. Harman served as a General Partner of Morgan Stanley Venture Capital, L.P. from 1991 to 1994. Mr. Harman holds a B.S. degreeOctober 1997 and a M.S. degree in electrical engineering from Stanford University and an M.B.A. degree from Harvard University.

Kevin L. Ober, 45, is a Managing Partner of Divergent Venture Partners. Prior to Divergent, he spent seven years with Vulcan Ventures, a national venture capital firm owned by Paul Allen, co-founder of Microsoft Corporation. While with Vulcan, he led investments in Internet Infrastructureinfrastructure companies such as Internap Network Services Corporation, Nexabit Networks, Wavtrace and Net Perceptions.Perceptions, as well as Internap. Other investments included Command Audio, Capstone Turbine, Colorado Micro Displays, ShareWave, Terastor, and Netschools. Prior to working at Vulcan Ventures, Mr. Ober served in various positions at Conner Peripherals, Inc., a computer hard disk drive manufacturer in San Jose California. He holds a B.S. degree in business administrationBusiness Administration from St. John'sJohn’s University and ana M.B.A. degree from Santa Clara University.

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Fredric Harman was a Class II Director, and he resigned on March 15, 2007.

Incumbent Directors Whose Terms Will Expire in 2008 (Class III)

Eugene Eidenberg, 66,67, has served as a directorDirector since November 1997 and non-executive chairman of the boardour Board of directorsDirectors since April 2002. From November 1997 until April 2002, Mr.Dr. Eidenberg was the chairman of the boardBoard of directors.Directors. From July 2001 until April 2002, Mr.Dr. Eidenberg served as our chief executive officer. Mr.Dr. Eidenberg has been a Strategic Advisor of Granite Venture Associates LLC, an early-stage high tech venture capital firm, since 2005, after co-founding the firm and serving as a Managing Director of the firm from 1999 until 2005 and2005. He has served as a Principal of Hambrecht & Quist Venture Associates, an early-stage high tech venture capital firm, since 1998 and was an advisory director at the San Francisco investment-banking firm of Hambrecht & Quist from 1995 to 1998. Mr.Dr. Eidenberg served for 12 years in a number of senior management positions with MCI Communications Corporation, one of the largest communications networks.Corporation. His positions at MCI included Senior Vice President for Regulatory and Public Policy, President of MCI'sMCI’s Pacific Division, Executive Vice President for Strategic Planning and Corporate Development and Executive Vice President for MCI'sMCI’s international businesses. Mr.Dr. Eidenberg was Secretary to the Cabinet and Assistant to the President during the Carter Administration. Mr.Dr. Eidenberg is currently a director of several private companies. Mr.Dr. Eidenberg holds a Ph.D. and ana M.A. degree from Northwestern University and a B.A. degree from the University of Wisconsin.


William J. Harding, 58,59, has served as a directorDirector since January 1999. Dr. Harding has served as a Managing Member of Morgan Stanley Venture Partners III, LLC since 1997 and a Managing Director of Morgan Stanley & Co., Inc. since 1999. He joined Morgan Stanley & Co., Inc. in October 1994. Dr. Harding is currently a Directordirector of several private companies. Prior to joining Morgan Stanley, Dr. Harding was a General Partner of several venture capital partnerships affiliated with J.H. Whitney & Co. Previously, Dr. Harding was associated with Amdahl Corporation from 1976 to 1985, serving in various technical and business development roles. Prior to Amdahl, Dr. Harding held several technical positions with Honeywell Information Systems. Dr. Harding holds a B.S. degree in Engineering Mathematics and ana M.S. degree in Systems Engineering from the University of Arizona and a Ph.D. in Engineering from Arizona State University. Dr. Harding also served as an officer in the Military Intelligence Branch of the United States Army Reserve.

Dr. Daniel C. Stanzione, Ph. D., 60,61, has served as a Director since October 2004. Dr. Stanzione retired from Lucent Technologies in 2000 where he served as Chief Operating Officer and President of Bell Laboratories. At Lucent’s formation in 1995, Dr. Stanzione was President of Network Systems, Lucent’s business unit whichthat sold products and services to telecommunication Service Providersservice providers around the world. Dr. Stanzione is currently a director of a fewseveral private companies, and Quest Diagnostics, a public company, as well as Internap.two public companies, Quest Diagnostics and Avaya. Dr. Stanzione is currently a consultant and serves on the Network Advisory Board at Accenture. Dr. Stanzione holds a B.S. degree in Electrical Engineering, ana M.S. degree in Environmental Systems Engineering and a Ph. D. in Electrical and Computer Engineering, all from Clemson University.

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Incumbent Directors Whose Terms Will Expire in 2009 (Class I)

Charles B. Coe, 59, has served as a Director since July 2003. Mr. Coe is a 28-year veteran of the telecommunications industry, including 15 years with BellSouth. During his tenure at BellSouth, he served as President of BellSouth Network Services, President of BellSouth Telecommunications, President of BellSouth International, and Group President of Customer Operations for BellSouth Telecommunications. Previously, Mr. Coe had served in various management positions with AT&T Communications and American Telesystems Corporation. Mr. Cole is currently a director of Dycom Industries, Inc. Mr. Coe holds a M.B.A. degree from Georgia State University and a B.S. degree from The Citadel.

Patricia L. Higgins, 57, has served as a Director since December 2004. Ms. Higgins has nearly 30 years of experience in the telecommunications industry. Ms. Higgins is the former President, CEO, and a board member of Switch & Data Facilities Company, Inc., a leading provider of neutral interconnection and collocation services. Until 2000, Ms. Higgins served as Chairman and CEO of The Research Board, a premier consulting and research services company for information technology. Prior to 1999, Ms. Higgins was the CIO of Alcoa Inc. and also held senior management positions at UNISYS Corporation, Verizon (NYNEX) and AT&T Inc. Ms. Higgins currently serves on the board of directors of Delta Airlines, Inc., Visteon Corporation and Barnes and Noble, Inc. Ms. Higgins holds a B.A. degree from Montclair State University and attended Harvard Business School’s Advanced Management Program.

Family Relationships

No family relationships exist among any of our directorsDirectors or executive officers.

Agreements to Elect Directors

No agreements exist to elect any of our directors.


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Directors.

CORPORATE GOVERNANCE


Board of Directors’ Committees and Meetings

The boardBoard of directorsDirectors conducts its business through meetings and actionsit may take action by unanimous written consent of the full boardBoard, but only in rare instances following fulsome consideration and discussion of the issues presented, and through three standing committees of the board, consisting ofBoard, which are an Audit Committee, a Compensation Committee and a Nominations and Governance Committee. The boardBoard of directorsDirectors has adopted a charter for each of these committees that can be found on our website at www.internap.com.

During the fiscal year ended December 31, 2005,2006, the boardBoard of directorsDirectors held six regular and one special meeting,13 meetings, the Audit Committee held five regular and ten specialeight meetings, the Compensation Committee held four regular and two specialsix meetings and the Nominations and Governance Committee held one meeting.two meetings. During the fiscal year ended December 31, 2005,2006, each member of our boardBoard of directorsDirectors attended at least 75% of the meetings of the boardBoard of directorsDirectors and of the committees on which he or she served that were held during the period for which he or she was a directorDirector or committee member.

We have not adopted a formal policy regarding board memberDirector attendance at our annual meetings;meetings. We, however, we strongly encourage all board membersDirectors to attend the annual meeting. SevenAll of our nine directorsDirectors were in attendance at the 20052006 annual meeting of stockholders.

The Board of Directors has affirmatively determined that each current non-employee Director is an “independent director” as that term is defined under NASDAQ rules and regulations. The Board of Directors made no determination of Mr. Harman’s independence, as he resigned on March 15, 2007. Mr. DeBlasio, the

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President and Chief Executive Officer, is not an independent Director because of his employment by the Company. Mr. DeBlasio does not participate in any action of the Board or the Compensation Committee related to his compensation.

Audit Committee.The Audit Committee is composed of Ms. Higgins, Dr. Harding and Mr. Ober. Ms. Higgins is the Chair of the Audit Committee. The Audit Committee is responsible for, among other things:


directly appointing our independent registered public accountants;


discussing with our independent registered public accountants their independence from management;


reviewing with our independent registered public accountants the scope and results of their audit;


approving all audit services and pre-approving all permissible non-audit services to be performed by the independent registered public accountants;


overseeing the financial reporting process and discussing with management and our independent registered public accountants the interim and annual financial statements that we file with the SEC; and


reviewing and monitoring our accounting principles, policies and financial and accounting controls.

All committee members are independent as defined in applicable SEC and American Stock Exchange, or AMEX,NASDAQ rules. The boardBoard of directorsDirectors has determined that Ms. Higgins, the current committee Chair, qualifies as an audit committee financial expert within the meaning of SECNASDAQ rules and regulations.

The Compensation Committee.The Compensation Committee consists of Messrs.Mr. Coe and Harman and Ms. Higgins. Mr. Harman was a member of the Compensation Committee prior to his resignation on March 15, 2007. Mr. Coe currently serves as Chair of the Compensation Committee. The Compensation Committee reviews and recommends to the Board the compensation and benefits of all our officers and establishes and reviews general policies relating to compensation and benefits for our employees. All committee members are independent as defined in applicable SEC and AMEXNASDAQ rules.


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The Nominations and Governance Committee.The Nominations and Governance Committee consists of Messrs.Doctors Stanzione and Eidenberg, andMr. Coe, and Ms. Higgins. Mr. Stanzione currently serves as Chair of the Nominations and Governance Committee. The Nominations and Governance Committee is responsible for assisting the boardBoard of directorsDirectors in identifying and attracting highly qualified individuals to serve as directorsDirectors and selecting directorDirector nominees and recommending them to the boardBoard for election at annual meetings of stockholders. Each member of the Nominations and Governance Committee is independent as defined in applicable SECNASDAQ rules. The Nominations and AMEX rules.Governance Committee is also responsible for monitoring significant developments in the regulation and practice of corporate governance and the duties and responsibilities of directors generally, evaluating and administering the Corporate Governance Guidelines of the Company and recommending changes to the Board and periodically reviewing the Company’s governance structure.

Selection of Director Nominees

General Criteria and Process. The policy of the Nominations and Governance Committee is to consider candidates for Board membership received by Nominations and Governance Committee members, other Board members, management, the Company’s stockholders, third party search firms, and any other appropriate sources. In identifying and evaluating directorDirector candidates, the Nominations and Governance Committee has not set specific criteria for directors.Directors. Under its committee charter, the Nominations and Governance Committee is responsible for determining desired board skills and attributes and may consider strength of character, mature judgment, career specialization, relevant technical skills, diversity, and the extent to which the candidate would fill a present need on the board.Board. The Nominations and Governance Committee may retain a third-partythird party search firm to identify directorDirector candidates and has sole authority to select the search firm and approve the terms and fees of any directorDirector search engagement.

7

Stockholder Nominations.Stockholders who wish to recommend nominees for consideration by the Nominations and Governance Committee must submit their nominations in writing to our Corporate Secretary. Submissions must include sufficient biographical information concerning the recommended individual for the committee to consider the recommended nominee, including age, five-year employment history with employer names and a description of the employer’s business, whether such individual can read and comprehend basic financial statements, and other board memberships, (if any)if any, held by the recommended individual. The submission must be accompanied by a written consent of the individual to stand for election if nominated by the boardBoard of directorsDirectors and to serve if elected by the stockholders. The Nominations and Governance Committee may consider such stockholder recommendations when it evaluates and recommends nominees to the boardBoard of directorsDirectors for submission to the stockholders at each annual meeting. Stockholder nominations made in accordance with these procedures and requirements must be addressed to ourInternap Network Services Corporation, Attn: Corporate Secretary, at 250 Williams Street, Suite E-100, Atlanta, Georgia 30303.

In addition, stockholders may nominate directorsDirectors for election without consideration by the Nominations and Governance Committee. Any stockholder of record may nominate an individual by following the procedures and deadlines set forth in the “Stockholders’ Proposals for 20072008 Annual Meeting” section of this proxy statement and by complying with the eligibility, advance notice and other provisions of our bylaws. Under our bylaws, a stockholder is eligible to submit a stockholder proposal if the stockholder is of record and entitled to vote at the annual meeting. The stockholder also must provide timely notice of the proposal to us. To be timely, the stockholder must provide advance notice not less than 90 nor more than 120 calendar days prior to the anniversary date of the preceding year’s annual meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date.


meeting.

As of December 31, 2005,2006, the Nominations and Governance Committee had not received a recommended nominee from any stockholder or group of stockholders that beneficially owned more than 5% of our common stock for at least one year as of the date of the recommendation.


9

Compensation of Directors

Our non-employee directors receive an annual retainer of $20,000. In addition,

We discuss the Chair of the Board and the Chair of the Audit Committee each receive an annual fee of $10,000, and the chairs of the other committees each receive an annual fee of $5,000. Directors also receive a cash fee of $1,500 per board meeting attended in person, $500 per board meeting attended by telephone, $1,000 per committee meeting attended in person and $500 per committee meeting attended by telephone. They are also reimbursed for certain expenses in connection with attendance at board of directors and committee meetings. Directors who are also employees do not receive any additional compensation for serving on the board of directors or any committees of the board of directors.

In addition, non-employee directors receive an annual option to purchase 20,000 shares of common stock pursuant to our 2005 Incentive Stock Plan. New non-employee directors also receive an initial grant of 250,000 options to acquire shares of common stock under the plan. The options have an exercise price equal to 100% of the fair market value of our common stock onDirectors in the date of grantsection “Compensation Discussion and are fully vested and exercisable as of the date of grant.
Analysis.”

Stockholder Communications with the Board of Directors

The boardBoard of directorsDirectors has a policy and process to facilitate stockholder communications with directors.Directors. Stockholders who wish to communicate directly with the boardBoard of directorsDirectors may do so by writing to Internap Network Services Corporation, 250 Williams Street, Suite E-100, Atlanta, Georgia 30303, Attn: Corporate Secretary or by sending electronic mail toboardofdirectors@internap.com.

The Corporate Secretary will forward all communications received without reviewing or editing them. The Chairman of the boardBoard of directors,Directors, or the other directorDirector to whom your communication is addressed, if other than the board,Board, will decide whether and how to respond to your communication. Such person may consult with the Corporate Secretary regarding his or her response.


10


SECURITY OWNERSHIP OF

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of shares of common stock as of March 1, 200615, 2007for:

our directorsDirectors and director nominees,Director nominees;

•
our Chief Executive Officer and our Named Executive Officers, who include (i) each of our other four

our principal executive officer, our principal financial officer, our threemost highly compensated executive officers other than the principal executive officer and principal financial officer as of December 31, 2006, and one individual who would have been among the three most highly

8

compensated executive officers other than the principal executive officer and the principal financial officer had he been an executive officer as of December 31, 2005 and (ii) two individuals who would have been among the four most highly compensated executive officers had they been executive officers as of December 31, 2005,2006;

our directors, directorDirectors, Director nominees and executive officers as a group,group; and

each stockholder thatwho holds more than a 5% interest in our outstanding common stock.

Unless otherwise indicated in the footnotes, all of such interests are owned directly and the indicated person or entity has sole voting and disposition power.

Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage of ownership held by that person, shares of common stock subject to options and warrants held by that person that are currently exercisable or will become exercisable within 60 days after March 1, 200615, 2007 are deemed outstanding, while these shares are not deemed outstanding for computing percentage ownership of any other person.

The percentage of common stock beneficially owned areis based on 343,610,10448,897,278 shares of our common stock outstanding at March 1, 2006.

15, 2007.

The address for those individuals for which an address is not otherwise indicated is: c/o Internap Network Services Corporation, 250 Williams Street, Atlanta, Georgia 30303.


11

   Common Stock Beneficially Owned 
   Number of Shares  Percent of Class 

David L. Abrahamson (1)

  186,152  * 

David A. Buckel (2)

  196,602  * 

Charles B. Coe (3)

  41,000  * 

James P. DeBlasio (4)

  451,425  * 

Eugene Eidenberg (5)

  235,156  * 

FMR Corp. (6)

  3,130,967  6.4%

Franklin Resources, Inc. (7)

  4,693,076  9.6%

William J. Harding (8)

  46,783  * 

Fredric Harman (9)

  47,914  * 

Patricia L. Higgins (10)

  33,729  * 

Eric Klinker (11)

  74,389  * 

Kevin L. Ober (12)

  18,000  * 

Robert Smith (13)

  —    * 

Daniel C. Stanzione (14)

  29,000  * 

Eric Suddith (15)

  65,525  * 

All Directors and executive officers as a group (15 persons)

  9,249,718  18.9%



  
Common Stock Beneficially Owned
  
Number
of Shares
 
Percent of
Class
      
 
Morgan Stanley Venture Capital III, Inc. (1)
 
 
17,095,550
 
      5.0%
Morgan Stanley Venture Investors III, L.P. (1)  1,415,213  *
The Morgan Stanley Venture Partners Entrepreneur Fund, L.P. (1)  644,861  *
Morgan Stanley Venture Partners III, L.P. (1)  14,739,713       4.3%
Oak Investment Partners VIII, L.P. (2)  28,128,687       8.2%
Oak VIII Affiliates Fund, L.P. (2)  28,128,687       8.2%
Oak Investment Partners X, L.P. (2)  28,128,687       8.1%
Oak X Affiliates Fund, L.P. (2)  28,128,687       8.2%
David L. Abrahamson (3)  2,621,167  *
David A. Buckel (4)  1,163,749  *
Charles B. Coe (5)  390,000  *
James P. DeBlasio (6)  1,340,000  *
Eugene Eidenberg (7)  2,327,431  *
William J. Harding (8)  440,510  *
Fredric W. Harman (2)  28,128,687       8.1%
Patricia L. Higgins (9)  317,301  *
Eric Klinker (10)  944,584  *
Ali Marashi  --  *
Kevin L. Ober (11)  208,333  *
Gregory A. Peters  --  *
Daniel C. Stanzione (12)  270,000  *
Eric Suddith (13)  732,290  *
All directors and executive officers as a group (13 persons)  38,884,052    11.2%
______________________

(1)Consists of (a) 13,179,32212,500 shares of common stock, 37,500 shares of restricted stock that vest in a series of 16 quarterly installments upon the completion of each three month period of service over the service period measured from January 1, 2006 through January 1, 2010, 25,000 shares of restricted stock that vest in a series of 16 quarterly installments at the end of each calendar quarter beginning with the second quarter of 2007 provided that Mr. Abrahamson is employed by the Company at the end of such quarter, and options to purchase 111,152 shares of common stock that are vested and exercisable or that will vest within 60 days.
(2)Consists of 8,236 shares of common stock, 41,248 shares of restricted stock that vest in a series of 16 quarterly installments upon the completion of each three month period of service over the service period measured from January 1, 2006 through January 1, 2010, 75,000 shares of restricted stock that vest in a series of 16 quarterly installments at the end of each calendar quarter beginning with the second quarter of 2007 provided that Mr. Buckel is employed by the Company at the end of such quarter, and options to purchase 72,118 shares of common stock that are vested and exercisable or that will vest within 60 days.

9

(3)Consists of 10,000 shares of common stock and 1,560,391options to purchase 31,000 shares of common stock issuable uponthat are vested and exercisable.
(4)Consists of 5,000 shares purchased in the exerciseopen market, 23,675 shares of warrants heldcommon stock, 50,000 shares of restricted stock that vested 50% on September 30, 2006 with the remainder to vest over three years in equal installments on each of the first three anniversaries after September 30, 2006, 125,000 shares of restricted stock that vest in a series of 16 quarterly installments at the end of each calendar quarter beginning with the second quarter of 2007 provided that Mr. DeBlasio is employed by Morgan Stanley Venture Partners III, L.P., (b) 1,265,395the Company at the end of such quarter, and options to purchase 247,750 shares of common stock that are vested and exercisable or that will vest within 60 days.
(5)Consists of 57,157 shares of common stock and 149,818options to purchase 177,999 shares of common stock issuable upon the exercise of warrantsthat are vested and exercisable. Includes 236 shares held by Morgan Stanley Venture Investors III, L.P., (c) 576,595 shares of common stock, and 68,266 shares of common stock issuable upon the exercise of warrants held by The Morgan Stanley Venture Partners Entrepreneur Fund, L.P. (the funds referred to in (a), (b) and (c) above are referred to herein collectively as the "Funds") and (d) 295,763Mr. Eidenberg, 45,556 shares of common stock held by Morgan Stanley Venture Capital III, Inc. Dr. William J. Harding, one of our directors, is a managing member of Morgan Stanley Venture Partners III, L.L.C., which is the general partner of eachEugene Eidenberg, as trustee of the Funds (the "General Partner"). The General PartnerEugene Eidenberg Trust dated 9/97, 2,799 shares of eachcommon stock held by Eugene Eidenberg, as trustee of the Funds is controlledAnna M. Chavez Educational Trust, and 8,566 shares held by Morgan Stanley Venture Capital III, Inc. ("MSVC III, Inc."), the institutional managing memberAnna M. Chavez.
(6)As of the General Partner and a wholly-owned subsidiary of Morgan Stanley. Voting and dispositive power with respect to the shares of our common stock offered by the Funds in this prospectus is exercised by MSVC III, Inc. The directors of MSVC III, Inc. are Ghassan Bejjani, Guy L. de Chazal, Scott S. Halsted, Dr. Harding, Howard I. Hoffen, M. Fazle Husain and Robert L. Loarie. The Funds have advised us that they are affiliates of one or more broker-dealers and that each of the Funds acquired the securities reflected in this table in the ordinary course of business and, at the time of acquisition, such Fund had no agreements or understandings, directly or indirectly, to distribute such securities. Dr. Harding disclaims beneficial ownership of any of the securities owned by the Funds except to the extent of his proportionate pecuniary interest therein and disclaims beneficial ownership of any of the securities owned by MSVC III, Inc.December 31, 2006. The address for the Fundsof FMR Corp. is c/o Morgan Stanley Venture Partners, 1585 Broadway, 38th Floor, New York, New York 10036. Based on information provided by such stockholders and a Schedule 13G filed by the stockholders on February 13, 2006.82 Devonshire Street, Boston, Massachusetts 02109.

12


(7)(2)As of January 31, 2007. The address of Franklin Resources, Inc. is One Franklin Parkway, San Mateo, California 94403.
(8)
Consists of (a) 6,278,02424,783 shares of common stock and 58,860options to purchase 22,000 shares of common stock issuable upon the exercisethat are vested and exercisable.
(9)Consists of options held by Oak Investment Partners VIII, L.P., (b) 160,32833,914 shares of common stock and 1,140options to purchase 14,000 shares of common stock issuable upon the exercise of options held by Oak VIII Affiliates Fund L.P., (c) 18,269,856shares of common stock, and 2,917,296 shares of common stock issuable upon the exercise of warrants held by Oak Investment Partners X, L.P., (d) 293,298shares of common stock, and 46,833 shares of common stock issuable upon the exercise of warrants held by Oak X Affiliates Fund, L.P., (e) ------94,853stock. Includes 2,878 shares of common stock held by a trust of which Fredric W. Harman one of our directors, is a trustee; (f)trustee and an aggregate of 8,199972 shares of common stock held in trust for the benefit of each of Mr. Harman'sHarman’s three minor children, and (g) 120,000children.
(10)Consists of 4,729 shares of common stock issuable upon the exercise ofand options held by Mr. Harman on behalf of Oak Investment Partners VIII, L.P., Oak VIII Affiliates Fund, L.P., Oak Investment Partners X, L.P. and Oak X Affiliates Fund, L.P.. Mr. Harman is a managing member of the general partner of Oak Investment Partners VIII, L.P., Oak VIII Affiliates Fund, L.P., Oak Investment Partners X, L.P. and Oak X Affiliates Fund, L.P. Oak Associates VIII, LLC is the general partner of Oak Investment Partners VIII, L.P. The names of the parties who share voting and dispositive power with respect to the shares of our common stock held by Oak Investment Partners VIII, L.P. in this proxy statement are Mr. Harman, Bandel L. Carano, Ann H. Lamont, Edward F. Glassmeyer, and Gerald R. Gallagher, all of which are managing members of Oak Associates VIII, LLC. Oak VIII Affiliates, LLC is the General Partner of Oak VIII Affiliates Fund, L.P. The names of the parties who share voting and dispositive power with respect to the shares of our common stock held by Oak VIII Affiliates Fund, L.P. in this proxy statement are Mssrs. Harman and Carano, Ms. Lamont, and Mssrs. Glassmeyer and Gallagher, all of which are managing members of Oak VIII Affiliates, L.L.C. Each of Mssrs. Harman and Carano, Ms. Lamont, and Mssrs. Glassmeyer and Gallagher disclaims beneficial ownership of the securities held by such partnerships to the extent such person does not have a pecuniary interest therein. Oak Investment Partners VIII, L.P. and Oak VIII Affiliates Fund L.P. disclaim beneficial ownership of the shares held by Mr. Harman. Mr. Harman disclaims beneficial ownership of any of the securities owned by any of the above entities to the extent he does not have a pecuniary interest therein. Oak Associates X, LLC is the general partner of Oak Investment Partners X, L.P. The names of the parties who share voting and dispositive power with respect to the shares of our common stock beneficially owned by Oak Investment Partners X, L.P. are Mssrs. Harman and Carano, Ms. Lamont, Mr. Glassmeyer and David B. Walrod, all of which are managing members of Oak Associates X, LLC. Each of such persons disclaims beneficial ownership of the securities held by Oak Investment Partners X, L.P. to the extent such person does not have a pecuniary interest therein. Oak X Affiliates, L.L.C. is the general partner of Oak X Affiliates Fund, L.P. The names of the parties who share voting and dispositive power with respect to the shares of our common stock beneficially owned by Oak X Affiliates Fund, L.P. Mssrs. Harman and Carano, Ms. Lamont, and Mssrs. Glassmeyer and Walrod, all of which are managing members of Oak X Affiliates, L.L.C. Each of such persons disclaims beneficial ownership of the securities held by Oak X Affiliates, L.P. to the extent such person does not have a pecuniary interest therein. Oak Associates X, LLC, Oak Investment Partners X, L.P. and Oak X Affiliates, L.P. disclaim beneficial ownership of the shares held by Mr. Harman. The address for these entities is c/o Oak Investment Partners VIII, L.P., 525 University Avenue, Suite 300, Palo Alto, California 94301. Based on information provided by such stockholders and a Schedule 13G filed by the stockholders on February 13, 2006.

(3)Consists of 52,000purchase 29,000 shares of common stock 500,000that are vested and exercisable.
(11)Consists of 11,486 shares of common stock, 37,500 shares of restricted stock that vest in a series of 16 quarterly installments upon the completion of each three month period of service over the service period measured from January 1, 2006 through January 1, 2010, and options to purchase 2,069,16725,403 shares of common stock that are vested and exercisable or that will vest within 60 days. Mr. Klinker resigned on March 15, 2007.

(4)(12)Consists of 20,000options to purchase 18,000 shares of common stock 550,000that are vested and exercisable.
(13)Mr. Smith resigned from the Company in July 2006. Following his departure, he exercised all of his vested stock options and sold the resulting shares.
(14)Consists of options to purchase 29,000 shares of common stock that are vested and exercisable.
(15)Consists of 230 shares of common stock, 37,500 shares of restricted stock that vest in a series of 16 quarterly installments upon the completion of each three month period of service over the service period measured from January 1, 2006 through January 1, 2010, 25,000 shares of restricted stock that vest in a series of 16 quarterly installments at the end of each calendar quarter beginning with the second quarter of 2007 provided that Mr. Suddith is employed by the Company at the end of such quarter, and options to purchase 593,7492,795 shares of common stock that are vested and exercisable or that will vest within 60 days.

13

10



(5)Consists of 100,000 shares of common stock and options to purchase 290,000 shares of common stock that are vested and exercisable.

(6)Consists of 50,000 shares of common stock, 1,000,000 shares of restricted stock that vest 50% on September 30, 2006 with the remainder to vest over three years in equal installments on each of the first three anniversaries after September 30, 2006, and options to purchase 290,000 shares of common stock that are vested and exercisable or that will vest within 60 days.

(7)Consists of 567,431 shares of common stock and options to purchase 1,760,000 shares of common stock that are vested and exercisable. Includes 455,566 shares of common stock held by Eugene Eidenberg, as trustee of the Eugene Eidenberg Trust dated 9/97, 26,197 shares of common stock held by Eugene Eidenberg, as trustee of the Anna M. Chavez Educational Trust and 85,668 shares held by Anna M. Chavez.

(8)Consists of 240,510 shares of common stock and options to purchase 200,000 shares of common stock that are vested and exercisable.

(9)Consists of 36,586 shares of common stock and options to purchase 270,000 shares of common stock that are vested and exercisable.

(10)Consists of 5,000 shares of common stock, 500,000 shares of restricted stock that vest in a series of 16 quarterly installments upon the completion of each three month period of service over the service period measured from January 1, 2006 through January 1, 2010, and options to purchase 439,584 shares of common stock that are vested and exercisable or that will vest within 60 days.

(11)Consists of 8,333 shares of common stock and options to purchase 200,000 shares of common stock that are vested and exercisable.

(12)Consists of options to purchase 270,000 shares of common stock that are vested and exercisable.

(13)Consists of 500,000 shares of restricted stock that vest in a series of 16 quarterly installments upon the completion of each three month period of service over the service period measured from January 1, 2006 through January 1, 2010, and options to purchase 232,290 shares of common stock that are vested and exercisable or that will vest within 60 days.














14

EXECUTIVE OFFICERS


Executive Officers


In addition to Mr. DeBlasio, our President and Chief Executive Officer, whose biographical information appears under “Proposal 1 - 1—Election of Directors,” set forth below are each of our named executive officers and their ages as of December 31, 2005.

2006.

Name
Age

PositionName

  Age

Position

James P. DeBlasio

5051President and Chief Executive Officer

David L. Abrahamson

4445Vice President, Sales

David A. Buckel

44Vice-President and Chief Financial Officer

  
Eric Klinker37Vice-President, Engineering, Chief Technology Officer and Chief Information Officer 45  
Robert P. Smith44Vice President and Chief MarketingFinancial Officer

Eric Klinker

  
Eric Suddith3845Vice President, OperationsEngineering and Chief Technology Officer

Robert P. Smith

  45Vice President, Marketing and Chief Marketing Officer

Eric Suddith

46Vice President, Human Resources

David L. Abrahamsonhas served as the Company’s Vice President, Sales since January 2003 and as Chief Marketing Officer from October 2002 to May 2005. From August 1999 to September 2002, Mr. Abrahamson was Senior Vice President of BellSouth’s e-Business Services. In this role, he led BellSouth’s e-business applications and services organization where he was responsible for developing and managing BellSouth’s Internet data center products and services. Previously, he was at Sprint, a global communications company, where he held numerous management positions in accounting, operations and finance before becoming a key marketing executive in the consumer business unit. Mr. Abrahamson graduated from Iowa State University with a B.S. degree in Accounting and Business and obtained a Master’s degree from Kansas University.


David A. Buckel has served as the Company’s Vice President and Chief Financial Officer since May 2004, after serving as Financial Vice President from October 2003 until May 2004. Mr. Buckel also previously served as an Investor Relations consultant with the Company from July 2003 until October 2003. From November 2002 to July 2003, he served as Senior Manager and PresidentofAJC Finance & Market Group, a financial consulting firm. Prior to that, Mr. Buckel was Senior Vice President and Chief Financial Officer for two Nasdaq-listed publicNASDAQ-listed companies, Web.com, which was formerly known as Interland Corporation, a provider of applications and web hosting and consulting services from March 2001 through November 2002, and Applied Theory Corporation, a provider of hosting, software development and internetInternet connectivity products, from July 1995 through March 2001. Mr. Buckel, a Certified Management Accountant, holds a B.S. degree in Accounting from Canisius College and ana M.B.A. degree in Finance and Operations Management from Syracuse University.


Eric Klinkerhas served as the Company’s Chief Technology Officer Chief Information Officer and Vice President, Engineering sincefrom October 2005 to March 2007, after holding various other management positions with the Company, including as Chief Technology Officer and Vice President of Engineering since JulyJune 2005 and as Vice President of Engineering since January 2004. Previously, Mr. Klinker held various management positions, most recently as Chief Technology Officer and Chief Architect, at netVmg, a privately-heldprivately held pioneering provider of intelligent route control and bandwidth management products, from 2000 until the company was acquired by Internap in October 2003. Prior to netVmg, Mr. Klinker servedworked with Excite@Home, where he focused on product development of cable and IP network management systems. Mr. Klinker also spent seven years in applied research for the Naval Research Laboratory in Washington, D.C. His primary research interests focused on IP Multicast Routing, Distributed Computing and Information Security. Mr. Klinker holds a B.S. degree in Electrical Engineering from the University of Illinois, Urbana-Champaign, and ana M.S. degree in Electrical Engineering from the Naval Postgraduate School in Monterey, California. Mr. Klinker resigned in March 2007.

Robert P. Smithhas served as the Company’s Vice President, Marketing and Chief Marketing Officer sincefrom May 2005.2005 to July 2006. Prior to joining the Company in May 2001,2005, Mr. Smith was thea Senior Director of BellSouth Product Management from May 2001, where he led teams responsible for next generation enterprise and mass-market products covering full P&Lprofit and loss activities of research, development, marketing, and external

11

messaging. Previously, from November 1999 to May 2001, Mr. Smith was Senior Director of Marketing for Qwest Communications. In this role, he directed product positioning, customer acquisition, advertising, direct mail, call centers, and channel launch programs. Prior to working at Qwest, Mr. Smith was Executive Manager of Internet and VPN Services for MCI and was responsible for global product management of the company’s Internet access products. Mr. Smith has served on the board of directors of the Metro Ethernet Forum, an industry task force with over forty members created to bring standards and interoperability to Ethernet based networks. Mr. Smith holds a bachelor’s degree in historyHistory from East Carolina University.


Eric Suddith has served as the Company’s Vice President of Human Resources since August 2006, after holding various other management positions with the Company including Vice President, Operations since February 2004 after serving as itsand Director of Service Delivery from October 2002. From 2000 until 2002, Mr. Suddith served as the Vice President of Network Engineering with USLCE,US LEC, a communications service provider. Prior to that, from 20001985 to 1985,2000, he held several leadership positions at AT&T, he served as theincluding Business Customer Care General Manager of Network International Transitions. Additionally, over his 15 years with AT&T, Mr. Suddith led several organizations including the National Network Provisioning and Operations organization, National Contract Management, Corporate ITS Services, Product Management, Field Operations and Customer Care. Mr. Suddith served in the United States Air Force and received a B.S. degree in Business and ana M.B.A. degree from Liberty University. He has also completed postgraduate studies at the Wharton Business School and the University of Wisconsin School of Engineering.



15

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Introduction

In this section, we discuss certain aspects of Named Executive Officersour compensation program as it pertains to our principal executive officer, our principal financial officer, our three other most highly compensated executive officers as of December 31, 2006, and one individual who would have been among the three most highly compensated executive officers had he been an executive officer as of December 31, 2006. We refer to these individuals as the “named executive officers.” Our discussion focuses on compensation and practices relating to 2006, our most recently completed fiscal year, and includes relevant actions we have taken thus far in 2007 that affect the compensation of our named executive officers.

We believe that the individual performance of our named executive officers can have a significant impact on our overall results. We, therefore, place considerable importance on the design and administration of our executive compensation program.

Philosophy

Our executive compensation program is designed to: (1) attract, motivate, reward and retain high quality executives necessary for our leadership; (2) ensure that compensation provided to executive officers is closely aligned with our business objectives and financial performance; (3) build a strong link between an individual’s performance and his or her related compensation opportunities; and (4) maximize stockholder value. Our executive compensation practices are intended to provide each executive a total annual compensation that is commensurate with the executive’s responsibilities, experience and demonstrated performance and are intended to be competitive with a select group of peer Internet infrastructure companies, as well as a larger group of other similarly sized technology companies.

Administration

The table below sets forth information concerningCompensation Committee, or the Committee, oversees the establishment of executive compensation paid by uspolicies and programs consistent with our corporate objectives and stockholder interests, as well as reviews the general policies relating to the compensation and benefits for all of our employees. The Board of Directors

12

determines the Committee’s membership. All members of the Committee are independent Directors under NASDAQ rules. The Committee meets at scheduled times during the year, and it may take action by unanimous written consent, but only in rare instances following fulsome consideration and discussion of the issues presented. The Chair of the Committee reports on Committee actions and recommendations at meetings of the full Board of Directors. The Committee engages independent compensation consultants and considers their data and input.

The Committee’s charter, which is available on our website, mandates that the Committee annually review each named executive officer’s compensation package. The Committee considers: (1) the extent to which we attained specified corporate objectives for the preceding year; (2) the extent to which the named executive officer attained his individual objectives for the preceding year; (3) the recommendations of the Chief Executive Officer with respect to compensation of the other named executive officers; (4) the experience and contribution levels of the named executive officer; (5) internal pay equity; and (6) benchmarking the total compensation levels of executive officers in similar positions in companies in a select group of peer Internet infrastructure companies, as well as a larger group of other similarly sized technology companies, through surveys conducted by independent compensation consultants.

The Committee approves the total compensation, including base salary adjustments, cash bonus and long-term incentive awards, of the named executive officers, other than the Chief Executive Officer, based on the factors described in the preceding paragraph. The Committee considers the same factors when evaluating the Chief Executive Officer’s performance and recommends a compensation package, including base salary adjustments, cash bonus and long-term incentive awards, to the Board of Directors for its approval. A majority of the independent Directors of the full Board of Directors must approve the compensation of our Chief Executive Officer.

Use of Consultants

We recognize that competitive compensation is critical for attracting, motivating and rewarding qualified executives. To ensure our named executive officers are compensated appropriately, the Committee retained the services of Aon Consulting, an independent compensation consultant, or Aon, to identify appropriate compensation levels and compensation program design features. Aon assisted the Committee in identifying and establishing median total compensation goals and assisted in general oversight of our executive compensation program. This oversight includes helping the Committee evaluate compensation practices and assisting the Committee with developing and implementing our executive compensation program and philosophy. The Committee used information provided by Aon when approving or recommending compensation levels, but does not delegate authority to set compensation to Aon or to any other party.

In September 2006, Aon conducted a review of labor market salary levels for top executives in similar sized companies and similar industries using published compensation surveys and a selected peer group of companies. The peer group consisted of Internet infrastructure companies, as well as a larger group of similarly situated and sized technology companies, but these companies are not necessarily dispositive of the companies we consider in all comparative analyses. The peer group companies included Akamai Technologies Inc., Arbinet-Thexchange Inc., Cbeyond Communications Inc., Cogent Communications Group, Covad Communications Group, Equinix Inc., Globix Corp., Infospace Inc., Internet Security Systems Inc., Ipass Inc., ITC Deltacom Inc., Navisite Inc., Savvis Inc., Terremark Worldwide Inc., and Vitalstream Holdings, Inc.

Aon matched our executive positions to published compensation survey data for similarly sized companies. These surveys are generally broad in scope and incorporate the comparison data from hundreds of respondent companies. The survey sources on which Aon relied included Aon’s Radford Technology Compensation Surveys and surveys from other well-known sources, including William M. Mercer and Watson Wyatt. Data utilized represented companies of similar size, industry and scope to us, with revenues generally less than $200 million.

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Aon conducted a regression analysis using the peer group database to calculate actual and expected compensation for chief executive officers relative to 2005 net sales and completed an analysis that linked the peer group chief executive officer regression data, the published survey data and our internal hierarchy. This analysis compared relative values from published surveys of positions below the chief executive officer by creating a published survey index to the chief executive officer. Aon set the chief executive officer index at 100% and the indices for positions below the chief executive officer are calculated by dividing the published survey median results for each position by the published median for the chief executive officer’s compensation. These indices were applied to calculate expected compensation levels for the positions below the chief executive officer.

For base salaries, Aon focused on the published survey data results because Aon viewed those results as more indicative of the labor market since the published survey data sources covered many more companies. For total cash compensation, which is salary plus bonus and total direct compensation, which is total cash plus the present value of stock or other long-term compensation, Aon used the peer group regression results because they better represented the labor market on these elements of compensation.

Aon identified the market median salary for each of our named executive officers. Based on that median, we concluded that our named executive officers earned between 94% and 112% of the published surveys’ market median salary for his or her position. We also concluded that our named executive officers had total cash compensation that ranged from 105% to 139% of expected total cash compensation from the peer group regressions, and total direct compensation that ranged from 85% to 151% of the expected total direct compensation from the peer group regressions.

The overall results of the Aon engagement provided the foundation for our actions involving executive compensation in 2006 and will provide the foundation for our actions in 2007.

Executive Compensation Program Overview

The three primary components of our executive compensation program are:

Base salary;

Annual cash incentives; and

Long-term equity incentives, which consist of stock options and restricted stock.

We target total compensation at the median for our peer group.

We believe that the compensation of our named executive officers should be predominately performance-based because these individuals have the greatest ability to influence our performance. To that end, long-term award opportunities are substantially greater than annual cash award opportunities to reflect the strategic roles of our named executive officers in leading us toward long-term growth, increasing profitability and stockholder value creation.

A description of these three components and related programs follows.

1.Base Salary

The Committee establishes base salaries that are sufficient to attract and retain individuals with the qualities it believes are necessary for our long-term financial success and that are competitive in the marketplace. A named executive officer’s base salary generally reflects the officer’s responsibilities, tenure, job performance, special circumstances, and direct competition for the officer’s services. In other cases, the Committee determines salaries in negotiations to recruit certain highly qualified executives for key positions, after consideration of, with no specific weighting, the importance of the position being filled, the experience and background of the candidate, the level of compensation required to induce the candidate to leave his or her current position, and the compensation historically paid to others in that position.

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The Committee reviews the salaries of our executive officers annually in January of each year. In addition to these periodic reviews, the Committee may at any time review the salary of an executive who has received a significant promotion, whose responsibilities have been increased significantly or who is a retention risk. The Committee evaluated the fiscal years ended December 31,year 2006 base salary levels for our named executive officers as part of its annual assessment. Salaries for the named executive officers generally are based upon their personal performance in light of individual levels of responsibility, our overall performance and profitability during the preceding year, economic trends that may affect us, and the competitiveness of the executive’s salary with the salaries of executives in comparable positions at companies of comparable size or with operational characteristics. While the Committee considered each of these factors, it did not assign a specific value to each factor.

As part of the compensation setting process for the named executive officers other than the Chief Executive Officer, the Committee met with our Chief Executive Officer and reviewed the performance of each of the other named executive officers. The Committee then considered the competitiveness of the named executive officer’s salary compared to salaries of executives of our peer group. Generally, salaries are targeted at the median of the published surveys.

As part of the compensation setting process for the Chief Executive Officer, the Committee evaluated the Chief Executive Officer’s performance against Board-approved goals and objectives and considered his compensation compared to the salaries of chief executive officers of our peer group. Considering that Mr. DeBlasio’s tenure as Chief Executive Officer began on November 18, 2005, 2004the Committee recommended to the Board of Directors, and 2003, tothe majority of the independent Directors approved, a compensation plan that left the Chief Executive Officer’s salary unchanged for fiscal year 2006 from fiscal year 2005.

The base salary component of our Named Executive Officers.

Summary Compensation Table
   
Annual Compensation 
  
Long Term Compensation
 
Name and Principal Position
  
Year 
  
Salary ($)
  
Bonus ($) 
  
Other Annual
Compensation
  
Restricted
Stock
Awards
  
Securities
Underlying
Options (#)
 
James P. DeBlasio (1)  2005 $83,404 $100,000 $54,748(2)$480,000(3) 5,020,000 
President and                   
Chief Executive Officer                   
Gregory A. Peters (4)  2005  310,288  72,919  700,000(5) —     —    
Former President and  2004  350,000  183,752  —        6,509,699 
Chief Executive Officer  2003  350,000  157,500  245,222(6)    7,238,796 
David A. Buckel  2005  230,000  40,000  —     —     —    
Vice President and  2004  178,378  —     —       950,000 
Chief Financial Officer  2003                
David L. Abrahamson (7)  2005  230,001  155,282   —     —     —    
Vice President, Sales  2004  230,001  —     —       550,000 
   2003  230,001  21,000(8) —        700,000 
J. Eric Klinker (9)  2005  182,500  —     —     —     —    
Vice President and  2004                
Chief Technology Officer  2003                
Ali Marashi (10)  2005  100,000  —     220,857(11) —     —    
Former Vice President and  2004  200,000  —     —        516,364 
Chief Technology Officer  2003  190,000  —     6,723(12)    —    
Eric Suddith (13)  2005  175,000  —     —     —     —    
Vice President,  2004                
Operations  2003                
executive compensation provides each named executive officer with a fixed minimum amount of annual cash compensation. Set forth below and effective as of January 2006 are the fiscal year 2006 base salaries for our named executive officers:

Name

  Base Salary 

James DeBlasio

  $350,000 

David Buckel

  $240,000 

David Abrahamson

  $230,000 

Eric Klinker

  $200,000 

Robert Smith

  $200,000(1)

Eric Suddith

  $190,000 
(1)Effective September 30, 2005, Mr. DeBlasio began servingSmith resigned his position as our President and Chief Operating Officer and effective November 18, 2005, Mr. DeBlasio began serving as our President and Chief Executive Officer.
(2)Includes $29,748 for relocation expenses and $25,000 for fees paid while a non-executive director of the company.


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(3)
Represents 1,000,000 shares of restricted stock, 50% of which shall vest on September 30, 2006 and the remainder to vest in equal installments on each of the first three anniversaries after September 30, 2006 contingent on Mr. DeBlasio’s continued employment with the company on such vesting dates.
As of December 31, 2005, Mr. DeBlasio held 1,000,000 unvested shares of restricted stock with a value of $430,000 based on the $0.43 closing price of the Company’s Common Stock as of December 30, 2005, which was the last trading date of 2005.
(4)Mr. Peters’ employment was terminated on November 18, 2005.

(5)Includes $700,000 in severance payments, of which $250,000 was paid in December 2005 and $450,000 was paid in January 2006.

(6)Includes $245,222 for relocation expenses in 2003.

(7)From October 2002 until May 2005, Mr. Abrahamson served as our Chief Marketing Officer and effective January 2003,Vice President of Marketing in July 2006.

In January 2007, the Board conducted its annual review of the salaries of the named executive officers. The Board considered each named executive officer’s job performance balanced against his or her retention risk and increased Mr. DeBlasio’s base salary to $425,000, increased Mr. Buckel’s base salary to $260,000, Mr. Abrahamson’s base salary to $250,000, and Mr. Suddith’s base salary to $200,000.

2.Annual Cash Incentives

We believe that our compensation program should focus the named executive officers and other key executives on our annual financial performance and should reward individual performance. To that end, we have adopted the 2006 Executive Bonus Award Incentive Plan, or the Plan. Named executive officers and other executives participate in the Plan and our Chief Executive Officer may recommend to the Committee that other key contributors participate in the Plan.

The purpose of the Plan is to:

Focus participants’ actions on the achievement of annual revenue growth and profitability goals;

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Align participants’ actions on the accomplishment of key operational and strategic goals;

Encourage and reward participants for the achievement of specific objectives; and

Maintain a competitive range of incentive compensation opportunities.

Each named executive officer’s award is based on the following three criteria:

1.Achievement of revenue goals by us, which comprises 25% of the potential award;

2.Achievement of adjusted EBITDA goals by us, which comprises 50% of the potential award; and

3.Achievement of individual goals by the named executive officer, which comprises 25% of the potential award.

We must meet a threshold of financial performance based on revenue, adjusted EBITDA and net income, which excludes equity compensation expenses, for the year in order for any awards to be made pursuant to the Plan. The Board established this minimum financial performance in November of 2005 as part of our business plan for 2006. In addition, a named executive officer must achieve a certain rating in his or her performance review, which includes attaining his or her individual and department budget objectives, to receive any award pursuant to the Plan.

We choose to base awards pursuant to the Plan on adjusted EBITDA and revenue because we believe they are accurate measurements of our core performance. We chose to base the majority of awards pursuant to the Plan based on adjusted EBITDA because adjusted EBITDA has become a commonly used metric, especially for capital-intensive technology companies such as ours, for assessing operating performance, liquidity and valuations by investors, analysts and banks.

With respect to individual goals, the Chief Executive Officer establishes his goals with the Compensation Committee and the Chief Executive Officer oversees the establishment of each of the other named executive officer’s goals for the upcoming year. Upon completion of the year, the Chief Executive Officer rates each of the other named executive officer on the attainment of those goals. A named executive officer receives a Needs Improvement rating, or NI, a Meets Expectations rating, or ME, an Often Exceeds Expectations rating, or OE, or an Exceeds Expectations rating, or EE. The Board rates the Chief Executive Officer using the same rating system. If a named executive officer receives a Needs Improvement rating, he or she is not eligible for any award pursuant to the Plan, regardless of the Company’s financial performance.

To be eligible for awards, a participant must be a full-time employee at the time the Board determines achievement under the Plan. If an executive joins the Company mid-year, his or her award is pro-rated for the portion of the year during which he or she was an executive.

The Board assigns each executive a target level as a percentage of his or her salary. The target award levels for 2006 were:

Name

  Target  Maximum 

James DeBlasio

  60% 120%

David Buckel

  45% 90%

David Abrahamson (1)

  25% 50%

Eric Klinker

  37% 74%

Robert Smith (2)

  —  — 

Eric Suddith

  37% 74%
(1)Note that Mr. Abrahamson began servingalso participates in the 2006 Sales Commission Plan and will participate in a commission plan for 2007.
(2)Mr. Smith resigned his position as ourChief Marketing Officer and Vice President Sales.of Marketing in July 2006.

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The Board retains the sole discretion to determine whether the Company and the named executive officer have met the objectives.

The Board established the following four levels for each of the three criteria: threshold, target, above and maximum. The Board, or in its discretion, the Committee, may adjust the revenue and adjusted EBITDA goals to exclude extraordinary expenses or benefits in its sole discretion.

Potential payment for achievement of the “Threshold” objective for the annual revenue goal and annual adjusted EBITDA goal equals 40% of each respective criteria’s allocated percentage of the individual named executive officer’s target award amount, which is 40% of 25% of the total target award amount in the case of the annual revenue goal and 40% of 50% of the total target award amount, in the case of the annual adjusted EBITDA goal. Potential payment for achievement of the threshold objective for the individual goals is $0.

Potential payment of achievement of the “Target” objective for the annual revenue goal, annual adjusted EBITDA goal and individual goals equals 100% of each criteria’s allocated percentage of the named executive officer’s total target award amount, which are 25%, 50% and 25% of the total target award amount, respectively.

Potential payment for achievement of the “Above” objective for the annual revenue goal, annual adjusted EBITDA goal and individual goals are 130% of each respective goal’s allocated portion of the individual’s target award amount.

Potential payment for achievement of the “Maximum” objective for the annual revenue goal, annual adjusted EBITDA goal and individual goals is 200% of each such goal’s allocated portion of the individual’s target award amount.

The Board determines the potential payment for performance for the annual revenue and annual adjusted EBITDA goals that falls between the “Target,” “Threshold,” “Above,” or “Maximum” objectives by interpolating on a straight-line basis to determine the incentive amount.

In November 2006, the Board established the target revenue and target adjusted EBITDA goals for 2007. The Compensation Committee established the following target award levels for our named executive officers, other than our Chief Executive Officer, and the Board established the target award level for Mr. DeBlasio:

Name

  Target  Maximum 

James DeBlasio

  70% 140%

David Buckel

  50% 100%

David Abrahamson

  25% 50%

Eric Klinker (1)

  —  — 

Robert Smith (2)

  —  — 

Eric Suddith

  37% 74%
(8)(1)Mr. Klinker resigned his position as Vice President and Chief Technology Officer on March 15, 2007.
(2)Mr. Smith resigned his position as Chief Marketing Officer and Vice President of Marketing in July 2006.

These performance targets are not an indication of how we will perform in 2007. The sole purpose of these targets, which the Board established in November 2006, is to establish internal performance-based goals under an annual incentive compensation plan. Consistent with our pay-for-performance compensation philosophy, the Board establishes these goals to align executive compensation with our performance and to encourage the achievement of our goals. As disclosed in our March 1, 2007 press release, we issued revenue guidance of 30% growth and full year adjusted EBIDTA in the range of $34 to $37 million. We are not providing any guidance, nor updating any prior guidance, of our future performance with the disclosure of these performance targets, and you are cautioned not to place any reliance on these performance targets as an indication of our future performance.

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The following table is an illustrative example for a named executive officer whose salary is $240,000 and whose target award is 45%.

   Weight  Threshold  Target  Above  Maximum 

Annual Revenue Bonus Payout

  25%  95%  100%  105%  110%
   $10,800  $27,000  $35,100  $54,000 

Annual Adjusted EBITDA Bonus Payout

  50%  90%  100%  110%  120%
   $21,600  $54,000  $70,200  $108,000 

Individual Goals Bonus Payout

  25%  NI   ME   OE   EE 
   $0  $27,000  $35,100  $54,000 

If our annual revenue was 110% of the annual revenue goal established by the Board, then this named executive officer would receive a bonus for that criteria of $54,000. If our annual adjusted EBITDA objective was 110% of the adjusted EBITDA goal established by the Board, then this named executive officer would receive a bonus of $70,200. If this named executive officer received a rating of Often Exceeds Expectations, or OE, this named executive officer would receive a bonus of $35,100. In total, this named executive officer would receive a total bonus of $159,300.

Applying this matrix, the Board awarded the named executive officers cash bonuses pursuant to the Plan in the following amounts on March 15, 2007 for performance in 2006:

Name

  Amount

James DeBlasio

  $420,000

David Buckel

  $216,000

David Abrahamson

  $150,000

Eric Klinker

  $100,000

Robert Smith (1)

   —

Eric Suddith

  $129,300
(1)Mr. Smith resigned his position as Chief Marketing Officer and Vice President of Marketing in July 2006 and thus, was not eligible for an award pursuant to the Plan.

One of our named executive officers, David Abrahamson, was also eligible to participate in the 2006 Sales Commission Plan, or Sales Plan. The purpose of the Sales Plan is to:

Align compensation with the Company’s vision and strategy;

Incent the sales of high margin, strategic products and services;

Encourage and reward the achievement of specific objectives; and

Maintain a competitive range of incentive compensation opportunities.

Award eligibility was based on two components. The first component was achievement of the net new annual contract value goals. The second component was the achievement of the net new revenue goals. A Commission Review Board, which consists of Mr. Abrahamson, Mr. Buckel, Mr. Suddith, and a non-executive employee, administers the Sales Plan. Mr. Abrahamson received payments pursuant to the Sales Plan in 2006 totaling $107,960.

In addition, the Compensation Committee authorized an additional payment to Mr. Abrahamson of $35,000 if our annual revenues exceeded an established benchmark in 2006. Mr. Abrahamson received this payment in March 2007.

Mr. Abrahamson will participate in a sales commission plan for 2007.

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3.Long-Term Equity Incentives

Historically, the primary form of equity compensation that we awarded consisted of non-qualified stock options. We selected this form because of the favorable accounting and tax treatments and the near universal expectation by employees in our industry that they would receive stock options. Beginning in 2006, however, the accounting treatment for stock options changed as a result of Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment (revised 2004), making the accounting treatment of stock options less attractive because it required the Company to record an expense related to stock options. As a result, we assessed the desirability of granting shares of restricted stock to employees, particularly members of senior management, and concluded that restricted stock would provide an equally motivating form of incentive compensation while permitting us to issue fewer shares, thereby reducing potential dilution. We continue to award stock options to new hires, upon a promotion, as a result of performance evaluations, and in other special situations. Each of the named executive officers received stock options in conjunction with his or her commencement of employment with us.

The Committee grants stock options and restricted stock to named executive officers, other than the Chief Executive Officer, under our 2005 Incentive Stock Plan, or the Stock Plan, which our stockholders approved, to provide long-term incentives that are aligned with the creation of increased stockholder value over time. We believe an executive who owns options or restricted stock will have an increased personal interest in our growth and success. Because these awards vest over time, they also serve as a retention device. The Committee recommends the amounts of the Chief Executive Officer’s awards to the Board and the Board determines his grants. The strike price of options is the fair market value of our stock at the date of grant. Options also typically have a ten-year term and generally vest 25% on the first anniversary of the grant date and in 36 equal monthly installments thereafter. Shares of restricted stock typically vest in 16 equal quarterly installments.

The Committee reviews long-term incentive levels for all named executive officers each fiscal year in light of long-term strategic and performance objectives, each named executive officer’s current and anticipated contributions to our future performance and the value of such named executive officer’s current equity package. When determining the number of stock options or restricted shares to be awarded to a named executive officer, the Committee considers: (1) the named executive officer’s current contribution to our performance; (2) the value already accumulated by the named executive officer from previous grants; (3) the named executive officer’s anticipated contribution in meeting our long-term strategic performance goals; and (4) comparisons to formal surveys of executive long-term incentive awards relative to the median of the peer group, as well as a larger group of other similarly sized technology companies.

With the exception of significant promotions and new hires, we generally make these awards at the first meeting of the Committee each year following the availability of the financial results for the prior year. These grants were made on January 18, 2006 for our 2005 fiscal year and March 15, 2007 for our 2006 fiscal year. For 2007 and future years, we selected this timing in March because it enables us to consider both the Company’s performance and the named executive officer’s performance for the previous year, as well as to consider our expectations for the current year. The Committee’s schedule is determined several months in advance and the proximity of any awards to earnings announcements or other market events is coincidental.

We do not time, and have never timed, the grant of stock options or restricted stock in coordination with the release of material non-public information nor have we timed our release of non-public information for the purpose of affecting the value of executive compensation. Although our Chief Executive Officer may recommend the amount of stock awards granted to management, the Committee, or in the case of awards to our Chief Executive Officer, the Board, approves the grant of all stock awards and does not delegate the timing of grants. We have retained a third party service provider to administer the day-to-day activities of the Stock Plan, but the provider does not determine the recipient of stock awards, the amount of stock awards granted to a participant, the exercise price, or vesting of stock awards.

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Prior to the scheduled meeting of the Committee in March 2007, our Chief Executive Officer provided a list of recommended incentive restricted stock grants for the other named executive officers to the Committee. The following paragraph describes the formula he used to determine the number of shares restricted stock he recommended that the other named executive officers receive.

The named executive officer’s base salary is multiplied by the target bonus percentage established by the Board for that named executive officer for 2007 to arrive at a target bonus. The base salary and the target bonus are added together to yield the target cash compensation. The target bonus percentage is multiplied by a market competitive multiple provided by Aon. Using Aon’s formula, our chief executive officer receives a multiple of 5.5. Other executives receive a lower multiple, which is expressed in increments of 0.5 based on his or her decreasing level of responsibilities from the chief executive officer. These multiples of target bonus reinforce our named executive officers’ strategic role in driving the achievement of our long-term performance objectives and the creation of stockholder value. We calculated the target long-term incentive opportunities for our named executive officers using the following multiples of their target bonus percentages:

Name

  Includes a $21,000 one-time paymentMultiple

James DeBlasio

5.5

David Buckel

4.5

David Abrahamson

3.5

Eric Klinker (1)

—

Robert Smith (2)

—

Eric Suddith

3.5
(1)Mr. Klinker resigned his position as Vice President and Chief Technology Officer on March 15, 2007 prior to the Board’s determination of awards and thus, was not eligible for an award pursuant to the Stock Plan for 2006.
(2)Mr. Abrahamson'sSmith resigned his position as Chief Marketing Officer and Vice President of Marketing in July 2006 and thus, was not eligible for an award pursuant to the Stock Plan for 2006.

The target bonus percentage multiplied by this multiple yields a target long-term incentive as a percentage of target salary. This percentage of target salary is then multiplied by the named executive officer’s 2006 base salary to yield a target long-term incentive amount. This target long-term incentive amount is then divided by the closing price of our common stock on the date we calculated the target awards to yield a target number of restricted shares. Our Chief Executive Officer then adjusted this suggested number in order to achieve parity among our other named executive officers in terms of long-term equity stake and to make a named executive officer’s long-term equity stake more commensurate with his contribution. Our Chief Executive Officer then presented his recommendations to the Committee.

The Committee considered the recommendation in light of the named executive officer’s contribution and anticipated contribution and the results provided from Aon’s competitive market survey. In making its determination of both cash incentives and long-term incentive awards and its recommendation to the Board for Mr. DeBlasio’s awards, the Committee noted that we experienced record revenues of $181.4 million in 2006. The Committee decided to grant each named executive officer a target award based on the above-described matrix and an additional special grant in light of our financial performance in 2006.

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The Board then considered the number of shares of restricted stock to grant to our Chief Executive Officer. The Board applied the same process as described above, which suggested a grant to Mr. DeBlasio of 100,000 shares. The Board also considered this target number in light of Mr. DeBlasio’s contribution and anticipated contribution, as well as our financial performance in 2006, and decided to grant him an additional 25,000 shares as special grant, as indicated in the following table.

Name

  Number of Shares
of Target Grant		  Number of Shares
of Special Grant

James DeBlasio

  100,000  25,000

David Buckel

  35,000  40,000

David Abrahamson

  13,000  12,000

Eric Klinker (1)

  —    —  

Robert Smith (2)

  —    —  

Eric Suddith

  16,000  9,000
(1)Mr. Klinker resigned his position as Vice President and Chief Technology Officer on March 15, 2007 prior to the Board’s determination of awards and thus, was not eligible for an award pursuant to the Stock Plan for 2006.
(2)Mr. Smith resigned his position as Chief Marketing Officer and Vice President of Marketing in July 2006 and thus, was not eligible for an award pursuant to the Stock Plan for 2006.

Perquisites; Other Compensation

We annually review any perquisites that our named executive officers may receive. In general, we do not provide our named executive officers with many of the types of perquisites that other companies offer their executives. As reflected in our Summary Compensation Table, our Chief Executive Officer received $34,518.97 for corporate housing and $13,080.44 for car service during fiscal year 2006. The aggregate cost of these perquisites was $47,599.41.

We provide named executive officers with the same benefit package available to all of our salaried employees. This package includes:

Health and dental insurance;

Basic life insurance;

Long-term disability insurance; and

Participation in our 401(k) plan, including matching contributions.

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 Committee does not expect cash compensation in 2006 to our Chief Executive Officer or any other named executive officer to be in excess of $1 million. We intend to maintain qualification of our 2005 Incentive Stock Plan for the performance-based exception to the $1 million limitation on deductibility of compensation payments.

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Summary Compensation Table

The following table sets forth total compensation for 2006 for our named executive officers.

Summary Compensation Table

Name and Principal
Position

 Year Salary
$		  Bonus
$		 Stock
Awards
$		 Option
Awards
$ (1)		 Non-Equity
Incentive Plan
Compensation
$		 Change in
Pension
Value &
Non-Qualified
Deferred
Compensation
On Earnings
$		 All Other
Compensation
$		 Total
$

James DeBlasio

Chief Executive Officer

 2006 $350,000  —   $119,918 $435,452 $—   $—   $47,599 $952,969

David Buckel

Chief Financial Officer

 2006  235,385  —    70,097  390,611  100,000  —    —    796,093

David Abrahamson

Vice President, Sales

 2006  230,000  —    63,725  691,103  142,960  —    —    1,127,788

Eric Klinker

Chief Technology Officer and Vice President of Engineering

 2006  200,000  —    63,725  174,959  50,000  —    —    488,684

Robert Smith

Chief Marketing Officer and Vice President of Marketing

 2006  297,686(2) —    —    —    20,000  —    —    317,686

Eric Suddith

Vice President of Human Resources

 2006  190,000  —    63,725  153,145  30,000  —    —    436,870
(1)Based on the grant date fair value computed in accordance with his employment agreement.SFAS No. 123R.

(9)(2)Includes Mr. Klinker was designated an officerSmith’s pro rated salary through his resignation in November 2005.July 2006, as well as a severance payment.

All Other Compensation

Name and Principal Position

  Perquisites
and Other
Personal
Benefits
$		  Tax
Reimburse-
ments
$		  Dividend
Equivalents
$		  Payments/
Accruals on
Termination
Plans
$		  Registrant
Contributions
to Defined
Contribution
Plans
$		  Insurance
Premiums
$		  Other
$

James DeBlasio

Chief Executive Officer

  $47,599(1) $—    $—    $—    $—    $—    $—  

David Buckel

Chief Financial Officer

   —     —     —     —     —     —     —  

David Abrahamson

Vice President, Sales

   —     —     —     —     —     —     —  

Eric Klinker

Chief Technology Officer and Vice President of Engineering

   —     —     —     —     —     —     —  

Robert Smith

Chief Marketing Officer and Vice President of Marketing

   —     —     —     —     —     —     —  

Eric Suddith

Vice President of Human Resources

   —     —     —     —     —     —     —  
(10)(1)Mr. Marashi’s employment was terminated on June 30, 2005.The amounts shown for fiscal 2006 include personal use of corporate housing of $34,518.97 and car service of $13,080.44.

(11)
(12)
(13)
Includes $200,000 in severance payments and $20,857 for relocation expenses in 2005.
Includes $6,723 for relocation expenses in 2003.
Mr. Suddith was designated an officer in November 2005.




17

22



Stock OptionsGrants of Plan-Based Awards Table


The following table sets forth information regarding grants of annual incentive awards and stock options for 2006 for each named executive officer.

  

Grant
Date

 Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards		 Estimated Future Payouts
Under Equity Incentive Plan
Awards		 

All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units

#

 

All Other
Stock
Awards:
Number of
Securities
Underlying
Options

#

 

Exercise
of Base
Price of
Option
Awards

$/Sh

 Closing
Market
Price
on
Grant
Date		 

Grant

Date
Fair
Value of
Stock
and
Option
Awards

Name and Principal
Position

  Threshold
$		 Target
#		 Maximum
$		 Threshold
#		 Target
#		 Maximum
#		     

James DeBlasio

Chief Executive Officer

 3/15/07 $—   125,000 $—   —   —   —   —   —   $—   $—   $—  

David Buckel

Chief Financial Officer

 3/15/07
9/28/06
9/28/06
9/28/06
1/18/06		  
 
 
 
 		—  
—  
—  
—  
—  		 75,000
—  
—  
—  
—  		  
 
 
 
 		—  
—  
—  
—  
—  		 —  
—  
—  
—  
—  		 —  
—  
—  
—  
—  		 —  
—  
—  
—  
—  		 —  
—  
—  
—  
55,000		 —  
2,500
2,032
7,967
—  		  
 
 
 
 		—  
14.46
14.46
14.46
—  		  
 
 
 
 		—  
15.02
15.02
15.02
—  		  
 
 
 
 		—  
36,150
29,383
115,203
291,500

David Abrahamson

Vice President, Sales

 3/15/07
9/28/06
9/28/06
9/28/06
9/28/06
1/18/06		  
 
 
 
 
 		—  
—  
—  
—  
—  
—  		 25,000
—  
—  
—  
—  
—  		  
 
 
 
 
 		—  
—  
—  
—  
—  
—  		 —  
—  
—  
—  
—  
—  		 —  
—  
—  
—  
—  
—  		 —  
—  
—  
—  
—  
—  		 —  
—  
—  
—  
—  
50,000		 —  
7,689
2,551
24,949
27,310
—  		  
 
 
 
 
 		—  
14.46
14.46
14.46
14.46
—  		  
 
 
 
 
 		—  
15.02
15.02
15.02
15.02
—  		  
 
 
 
 
 		—  
111,183
36,887
360,763
394,903
265,000

Eric Klinker

Chief Technology Officer and Vice President of Engineering

 3/15/07
9/28/06
9/28/06
1/18/06		  
 
 
 		—  
—  
—  
—  		 —  
—  
—  
—  		  
 
 
 		—  
—  
—  
—  		 —  
—  
—  
—  		 —  
—  
—  
—  		 —  
—  
—  
—  		 —  
—  
—  
50,000		 —  
5,773
11,726
—  		  
 
 
 		—  
14.46
14.46
—  		  
 
 
 		—  
15.02
15.02
—  		  
 
 
 		—  
83,478
169,558
265,000

Robert Smith

Chief Marketing Officer and Vice President of Marketing

 1/18/06  —   —    —   —   —   —   50,000 —    —    —    265,000

Eric Suddith

Vice President of Human Resources

 03/15/07
9/28/06
9/28/06
9/28/06		  25,000
—  
—  
—  		  
 
 
 		—  
—  
—  
—  		 —  
—  
—  
—  		 —  
—  
—  
—  		 —  
—  
—  
—  		 —  
—  
—  
—  		 —  
1,875
4,575
7,925		  
 
 
 		—  
14.46
14.46
14.46		  
 
 
 		—  
15.02
15.02
15.02		  
 
 
 		—  
27,113
66,140
114596
 1/18/06  —    —   —   —   —   50,000 —    —    —    265,000

In June 2006, our stockholders approved a measure to reprice certain outstanding options under our existing equity incentive plans. Options with an exercise price per share greater than or equal to $13.00 were eligible for the repricing. The repricing was implemented through an exchange program under which eligible participants were offered the opportunity to exchange their eligible options for new options to purchase shares. Each new option had substantially the same terms and conditions as the eligible options cancelled except as follows:

The exercise price per share of each replacement option granted in the exchange offer was $14.46, the average of the closing prices of the common stock as reported by the American Stock Exchange and the NASDAQ Global Market, as applicable, for the 15 consecutive trading days ending immediately prior to the Named Executive Officers duringgrant date of the fiscal year endedreplacement options;

For all eligible options with an exercise price per share greater than or equal to $20.00, the exchange ratio was 1-for-2; and

23

Each new option has a three-year vesting period, vesting in equal monthly installments over three years, so long as the grantee continues to be a full-time employee of the Company, and has a ten-year term.

Employees of the Company eligible to participate in the exchange offer tendered, and the Company accepted for cancellation, eligible options to purchase an aggregate of 344,987 shares of common stock, representing 49.4% of the total shares of common stock underlying options eligible for exchange in the exchange offer. The Company issued replacement options to purchase an aggregate of 179,043 shares of common stock in exchange for the cancellation of the tendered eligible options.

The options listed above that were granted on September 28, 2006 were due to this option reprice.

Outstanding Equity Awards Table

The following table provides a detail of outstanding stock options and restricted stock awards for each named executive officer as of December 31, 2005.

2006.

  Option Awards  Stock Awards

Name and Principal
Position

 

Number of
Securities
Underlying
Unexercised
Options

#
Exercisable

  

Number of
Securities
Underlying
Unexercised
Options

#
Unexercisable

 

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

#

 

Option
Exercise
Price

$

 Option
Expiration
Date		  

Number
of
Shares
of Units
of Stock
That
Have
Not
Vested

#

  

Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested (1)

$

 

Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested

#

 

Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested

$

         

James DeBlasio

Chief Executive Officer

 8,000
17,000
2,000
2,000
218,750		(4)
 
 
 
 		 —  
—  
—  
—  
281,250		 —  
—  
—  
—  
—  		 $
 
 
 
 		13.50
13.50
14.90
4.60
4.80		 9/16/2013
9/16/2013
5/27/2014
6/23/2015
9/30/2015		 
 
 
 
 		 50,000
—  
—  
—  
—  		(2)
 
 
 
 		 $
 
 
 
 		993,500
—  
—  
—  
—  		 —  
—  
—  
—  
—  		 —  
—  
—  
—  
—  

David Buckel

Chief Financial Officer

 12,188
48,438
208
169
664		(5)
 
 
 
 		 2,812
26,562
2,292
1,863
7,303		 —  
—  
—  
—  
—  		  
 
 
 
 		11.10
14.30
14.46
14.46
14.46		 10/31/2013
5/12/2014
9/28/2016
9/28/2016
9/28/2016		 
 
(8)
(8)
(8)		 41,248
—  
—  
—  
—  		(3)
 
 
 
 		  
 
 
 
 		819,598
—  
—  
—  
—  		 —  
—  
—  
—  
—  		 —  
—  
—  
—  
—  

David Abrahamson

Vice President, Sales

 109,000
641
213
2,079
2,276		(6)
 
 
 
 		 —  
7,048
2,338
22,870
25,034		 —  
—  
—  
—  
—  		  
 
 
 
 		2.10
14.46
14.46
14.46
14.46		 10/31/2012
9/28/2016
9/28/2016
9/28/2016
9/28/2016		 
(8)
(8)
(8)
(8)		 37,500
—  
—  
—  
—  		(3)
 
 
 
 		  
 
 
 
 		745,125
—  
—  
—  
—  		 —  
—  
—  
—  
—  		 —  
—  
—  
—  
—  

Eric Klinker

Chief Technology Officer and Vice President of Engineering

 6,009
481
977
15,991		(7)
 
 
 		 —  
5,292
10,749
—  		 —  
—  
—  
—  		  
 
 
 		11.10
14.46
14.4
11.10		 10/31/2013
9/28/2016
9/28/2016
10/31/2013		 
(8)
(8)
 		 37,500
—  
—  
—  		(3)
 
 
 		  
 
 
 		745,125
—  
—  
—  		 —  
—  
—  
—  		 —  
—  
—  
—  

Robert Smith

Chief Marketing Officer and Vice President of Marketing

 —    —   —    —   —    —     —   —   —  

Eric Suddith

Vice President of Human Resources

 1,876
7,500		 
 		 —  
—  		 —  
—  		  
 		2.40
4.40		 10/25/2012
4/30/2013		 
 		 37,500
—  		(3)
 		  
 		745,125
—  		 —  
—  		 —  
—  
 156
381
660		 
 
 		 1719
4193
7265		 —  
—  
—  		  
 
 		14.46
14.46
14.46		 9/28/2016
9/28/2016
9/28/2016		(8)
(8)
(8)		 —  
—  
—  		 
 
 		  
 
 		—  
—  
—  		 —  
—  
—  		 —  
—  
—  
(1)The fair market value of a share of Internap stock on the last day of the 2006 fiscal year was $19.87.

24

(2)Mr. DeBlasio was awarded restricted shares on September 30, 2005. 50% of those shares vested on September 30, 2006, with the remaining shares vesting annually over a three-year period beginning September 30, 2006.
(3)The restricted shares began to vest on January 1, 2006 and continue to vest quarterly over a four-year period.
(4)Mr. DeBlasio was granted options on September 30, 2005. 25% vested immediately, but were not exercisable until September 30, 2006 with the remaining shares vesting annually over a four-year period beginning September 30, 2005 and the other options were granted for Mr. DeBlasio’s service as a Director.
(5)Mr. Buckel was granted options on October 31, 2003, May 12, 2004, January 18, 2006, and three separate grants on September 29, 2006. The options vest over a four-year period with the exception of options granted on September 28, 2006. The options vest monthly over a three-year period.
(6)Mr. Abrahamson was granted options on October 31, 2002, January 18, 2006 and four separate grants on September 28, 2006. The options vest over a four-year period with the exception of options granted on September 28, 2006. The options vest monthly over a three-year period.
(7)Mr. Klinker was granted options on October 31, 2003, January 18, 2006 and two separate grants on September 28, 2006. The options vest over a four-year period with the exception of options granted on September 28, 2006. The options vest monthly over a three-year period.
(8)Options granted on September 28, 2006 were due to an option reprice that was offered to all employees in September 2006. The exchange ratio for shares with an exercise price greater than $13.00 and less than $20.00 was 1:1. The exchange ratio for shares with an exercise price greater than or equal to $20.00 was 1:2. New options will vest in equal monthly installments over a three-year period.

Option Grants in Last Fiscal YearExercises and Stock Vesting

  
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% ($)
 
James P. DeBlasio  20,000(1)  0.2  0.46  6/23/2015  5,785  14,662 
   5,000,000(2)  55.8  0.48  9/30/2015  663,076  1,465,224 
                    
                    

The following table provides information with respect to options exercised during fiscal 2006.

   Option Awards  Stock Awards

Name and Principal Position

  

Number of Shares
Acquired on
Exercise

#

  

Value Realized
Upon Exercise

$

  

Number of Shares
Acquired on
Vesting

#

  

Value Realized
On Vesting

$

       

James DeBlasio

Chief Executive Officer

  —    $—    50,000(1) $761,000

David Buckel

Chief Financial Officer

  —     —    13,751(2)  189,046

David Abrahamson

Vice President, Sales

  30,000  $498,876  12,500(2)  171,844

Eric Klinker

Chief Technology Officer and Vice President of Engineering

  3,000  $54,428  12,500(2)  171,844

Robert Smith

Chief Marketing Officer and Vice President of Marketing

  14,583  $216,920  6,250(2)  62,188

Eric Suddith

Vice President of Human Resources

  —     —    12,500(2)  171,844
(1)Mr. DeBlasio received an option to purchase 20,000was awarded restricted shares on September 30, 2005. 50% of common stock while a non-employee director of the Company in accordancethose shares vested on September 30, 2006 with the Company’s non-executive director compensation policy.remaining shares vesting annually over a three-year period beginning September 30, 2006.
(2)Mr. DeBlasio received an optionRestricted shares began to purchase 5,000,000 shares of common stockvest on January 1, 2006 and 1,000,000 shares of restricted stock at the start of his employment under the terms of his employment agreement.continue to vest quarterly over a four-year period.

Option Exercises and Year-End Option ValuesPension Benefits

The following table sets forth information as of December 31, 2005, regarding options held by the Named Executive Officers. There were no stock appreciation rights outstanding at December 31, 2005.
Aggregated Option Exercises In The Last Fiscal Year
And Fiscal Year-End Option Values


Name
  
Shares
Acquired on
Exercise (#)
  
Value
Realized ($)
  
Number of Securities
Underlying Unexercised
Options at Fiscal Year-End (#)
  
Value of Unexercised
In-The-Money
Options
at Fiscal Year-End ($)
 
         
Exercisable
  
Unexercisable 
  
Exercisable
  
Unexercisable 
 
                    
James P. DeBlasio  0  0  290,000  5,000,000  0  0 
Gregory A. Peters  0  0  6,236,607  6,236,887  0  0 
David A. Buckel   0  0  497,915  652,085  0  0 
David L. Abrahamson  0  0  1,840,000  800,000  237,050  68,750 
J. Eric Klinker  0  0  410,417  189,583  0  0 
Ali Marashi  654,400  58,176  0  0  0  0 
Eric Suddith  0  0  195,831  185,419  2,375  1,188 

In the table above, the value of the unexercised in-the-money options is based on the fair market value

None of our common stock, based uponnamed executive officers are covered by a pension plan or other similar benefit plan that provides for payments or other benefits at, following or in connection with retirement.

25

Nonqualified Deferred Compensation

None of our named executive officers are covered by a nonqualified defined contribution or other nonqualified plan that provides for the last reported sales pricedeferral of the common stock of $0.43 on December 30, 2005, minus the per share exercise price multiplied by the number of shares.


18


compensation.

Equity Compensation Plan InformationEmployment Agreements and Potential Payments Upon Termination or Change in Control

The following table provides certain information

We have entered into employment agreements with respect to all of our equity compensation plansnamed executive officers that provide for payments in effect asthe event of December 31, 2005.

 
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
 
 
     35,561,654 (1)
 
 
1.63
 
 
     38,464,958 (2)
       
Equity compensation plans not approved by security holders - - -
  35,561,654 1.63 38,464,958
_______________________
(1)Excludes purchase rights accruing under the 2004 Employee Stock Purchase Plan ("Purchase Plan"). Under the Purchase Plan, each eligible employee may purchase up to $12,500 worth of common stock at each semi-annual purchase date (the last business day of June and December each year), but not more than $25,000 worth of such stock (determined on the basis of the fair market value per share on the date or dates such rights are granted) per calendar year his or her purchase right remains outstanding. The purchase price payable per share will be equal to eighty-five percent (85%) of the lower of (i) the closing selling price per share of common stock on the employee’s entry date into the six month offering period in which that semi-annual purchase date occurs and (ii) the closing selling price per share of common stock on the semi-annual purchase date.

(2)Includes 4,031,657 shares available for issuance under the Purchase Plan.

Executive Employment Agreements
Agreementa change in control or termination of the named executive officer’s employment. We believe that we should protect our named executive officers in the event of a change in control. We also believe that the interests of our stockholders will be best served if the interests of our named executive officers are aligned with Mr. DeBlasio
Effective September 30, 2005, we entered into an at-willthem. Providing change in control benefits should eliminate, or at least reduce, the reluctance of the named executive officers to pursue potential change in control transactions that may be in the best interests of our stockholders. The employment agreement with James DeBlasio. The agreement provides that Mr. DeBlasio will serve asagreements are designed to promote stability and continuity of our President and Chief Operating Officer, and will receive an annual base salary of $320,000. On November 18, 2005, the Board of Directors approved an increase of named executive officers.

Mr. DeBlasio’s annual base salary to $350,000 in connection with his appointment as President and Chief Executive Officer of the Company. The agreement also provided that Mr. DeBlasio would receive a one-time signing bonus of $100,000. Mr. DeBlasio did not participate in the Company’s 2005 Annual Incentive Plan, but the agreement provided that he will be paid a bonus for calendar year 2006 of at least $150,000, subject to the terms of the Company’s Annual Incentive Plan for


19

executives. Further, the Board granted Mr. DeBlasio (i) an option to purchase 5,000,000 shares of common stock, with 25% vested as of September 30, 2005 but not exercisable until September 30, 2006, with the remainder to vest over four years in equal installments on each of the first four anniversaries after September 30, 2005, and (ii) 1,000,000 restricted shares of common stock of the Company, with 50% to vest twelve months after the commencement of his employment and the remainder to vest over three years in equal installments on each of the first three anniversaries after September 30, 2006, all such vesting contingent upon Mr. DeBlasio's continued employment with the Company on the applicable vesting dates. The agreement also contains a provision requiring Mr. DeBlasio to maintain the confidentiality of our confidential information, a non-competition provision for two years 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. DeBlasio may be terminated under the agreement by us or by Mr. DeBlasio, at any time, with or without advance notice. The agreement provides certain benefits upon the termination of Mr.DeBlasio’s employment under certain prescribed circumstances as summarized below.
Severance upon Termination Without Cause. The agreement provides that upon Mr. DeBlasio’shis involuntary termination of employment without cause, (asas such term is defined in the agreement) prior to 12 months after the date of commencement of employment,agreement, he will receive from us a cash severance payment equal to one and one-half (1-1/2) times his then-current base salary, and all his unvested options and additional equity compensation shall vest and become exercisable. The agreement also provides that upon Mr. DeBlasio’s involuntary termination of employment without cause (as such term is defined in the agreement) on or after 12 months after the date of commencement of employment, he will receive from us a cash severance payment equal to one and one-half (1-1/2) times his then-current base salary.
Severance Following Change in Control. If Mr. DeBlasio’s employment is terminated either by the Company without cause or as a result of an involuntary termination, (asas such term is defined in the agreement)agreement, within 12 months of a “change in control” (ascontrol,” as such term is defined in the agreement),agreement, instead of the severance benefits previously described, the Companywe shall pay Mr. DeBlasio a severance payment equal to two (2) times the sum of his then-current base salary and maximum target bonus, and all of his then-unvested stock options and additional equity compensation shall vest and become exercisable. In addition, he will continue to receive health care and life insurance coverage for 24 months as if he were an active employee, (subjectsubject to the employee portion of premiums for such coverage).
Agreement withcoverage. The Board of Directors and Mr. Peters
On December 15, 2005, we entered into a general release agreement with Gregory Peters, in connection with the termination of Mr. Peters’ employment as Chief Executive Officer and director of the Company effective November 18, 2005. Pursuant to the agreement, Mr. Peters received two cash paymentsDeBlasio are in the aggregateprocess of amending his employment agreement and on March 15, 2007, the Board of Directors approved a provision whereby upon Mr. DeBlasio’s death, his unvested stock options and additional equity compensation for the following twelve months would become vested, free of restrictions, other than those imposed by law, and immediately exercisable for a period of twelve months following his death.

The other named executive officers each have an employment agreement, the terms of which are essentially the same regarding potential payments upon a change in control, but differ in the amount of $700,000 through January 2006. The agreement also provides that the Company shall reimburse Mr. Peters, on a monthly basis, for the insurance premiums that Mr. Peters has paid for COBRA continuation coverage under the Company’s group health plan for healthseverance benefits substantially similar to those Mr. Peters was receiving immediately prior to the termination of his employment, for the period from the termination date until the earlier of: (i) eighteen (18) months from the termination date or (ii) the date upon which Mr. Peters becomes eligible to be covered under another employer's group health plan. The agreement also provides, among other things, that Mr. Peters will have certain non-disclosure, non-competition, non-solicitation and non-recruitment obligations.


20

Agreement with Mr. Abrahamson
Effective October 31, 2002, we entered into an at-will employment agreement with David Abrahamson. 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. The agreement provides certain benefits upon the termination of Mr. Abrahamson’s employment under certain prescribed circumstances as summarized below.
Severance upon Termination Without Cause. The agreement provides. These agreements provide that if Mr. Abrahamson’swe terminate the named executive officer’s employment is terminated by us without cause, he will receive from us a cash severance payment. Mr. Buckel’s cash severance payment is an amount equal to one year of his then-current base salary. The cash severance payment for each of Messrs. Abrahamson, Klinker, Smith, and Suddith is an amount equal to the product of (x) the number of days that he was an employee divided by 365 (provided that this ratio shall never exceed one) and (y) his then-current base salary. In addition, upon our termination of Mr. Abrahamson’sthe named executive officer’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’swe terminate the named executive officer’s employment is terminated without cause or he resigns for good reason, in either case within 12 months of a change in control, (asas such term is defined in the agreement),agreement, he will receive a cash severance payment equal to 24 months oftwo (2) times 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),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, (subjectsubject to the employee portion of premiums for such coverages).coverages.
Agreement with Mr. Buckel
Effective May 27, 2004, we entered into

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The table below details the calculation of the payments based upon an at-will employment agreement with David Buckel. Our employment of Mr. Buckel may be terminated under the agreement by us or by Mr. Buckel, at any time, with or without advance notice. The agreement provides certain benefits uponassumed January 1, 2007 termination date and assuming the termination was without cause:

Potential Termination and Change in Control Payments

  Termination Benefit Change in Control Benefit

Name and Principal Position

 

Estimate
of
Total
Severance
Value

$

 

Termination
Reason

 

Cash
Severance
Multiple

 

Equity
Treatment (3)

 

Benefit
Continu-

ation

 

Retirement
Continu-

ation

 Other 

Estimate
of Total
Change in
Control
Value

$

 

Protection
Period

 

Cash
Severance
Multiple

 

Equity
Award
Treatment

 Benefit
Continu-
ation		 Retirement
Continu-
ation

James DeBlasio

Chief Executive Officer

 $525,000 Involuntary Termination Without cause 1.5x Base Salary No accelerated vesting - Executive has 90 days to exercise vested options —   —   —   $6,351,938 12 months 2x(Base Salary + Maximum Target Bonus) 100% vesting of restricted stock and options 24
Months		 —  

David Buckel

Chief Financial Officer

  235,385 Involuntary Termination Without cause 1x Base Salary No accelerated vesting - Executive has 90 days to exercise vested options —   —   —    1,736,813 12 months 2x(Base Salary + Maximum Target Bonus) 100% vesting of restricted stock and options 24
Months		 —  

David Abrahamson

Vice President, Sales

  230,000 Involuntary Termination Without cause #of days/365: No more than 1x Salary No accelerated vesting - Executive has 90 days to exercise vested options —   —   —    1,630,064 12 months 2x(Base Salary + Maximum Target Bonus) 100% vesting of restricted stock and options 24
Months		 —  

Eric Klinker

Chief Technology Officer and Vice President of Engineering

  200,000 Involuntary Termination Without cause # of days/365: No more than 1x Salary No accelerated vesting - Executive has 90 days to exercise vested options —   —   —    1,379,907 12 months 2x(Base Salary + Maximum Target Bonus) 100% vesting of restricted stock and options 24
Months		 —  

Robert Smith

Chief Marketing Officer and Vice President of Marketing

  200,000 Involuntary Termination Without cause # of days/365: No more than 1x Salary No accelerated vesting - Executive has 90 days to exercise vested options —   —   —    548,000 12 months 2x(Base Salary + Maximum Target Bonus) 100% vesting of restricted stock and options 24
Months		 —  

Eric Suddith

Vice President of Human Resources

  190,000 Involuntary Termination Without cause # of days/365: No more than 1x Salary No accelerated vesting - Executive has 90 days to exercise vested options —   —   —    1,337,013 12 months 2x(Base Salary + Maximum Target Bonus) 100% vesting of restricted stock and options 24
Months		 —  

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Compensation of Mr. Buckel’s employment under certain prescribed circumstances as summarized below.

Severance upon Termination Without Cause. DirectorsThe agreement provides that if Mr. Buckel’s employment is terminated by us without cause, he will receive from us a cash severance payment equal to one year

For 2006, our non-employee Directors received an annual retainer of his then-current base salary.$20,000. In addition, upon our terminationthe Chair of Mr. Buckel’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. Buckel’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 coverage).
Agreement with Mr. Klinker
Effective June 15, 2005, we entered into an at-will employment agreement with Eric Klinker. Our employment of Mr. Klinker may be terminated under the agreement by us or by Mr. Klinker, at any time, with or without advance notice. The agreement provides certain benefits upon the termination of Mr. Klinker’s employment under certain prescribed circumstances as summarized below.

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Severance upon Termination Without Cause. The agreement provides that if Mr. Klinker’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. Klinker’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. Klinker’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 coverage).
Agreement with Mr. Suddith
Effective February 1, 2004, we entered into an at-will employment agreement with Eric Suddith. Our employment of Mr. Suddith may be terminated under the agreement by us or by Mr. Suddith, at any time, with or without advance notice. The agreement provides certain benefits upon the termination of Mr. Suddith’s employment under certain prescribed circumstances as summarized below.
Severance upon Termination Without Cause. The agreement provides that if Mr. Suddith’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. Suddith’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. Suddith’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 coverage).


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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") is responsible for establishing executive compensation policies and programs consistent with corporate objectives and stockholder interests, as well as reviewing the general policies relating to the compensation and benefits for all of our employees. The Committee's membership is determined by the Board and is composed entirelythe Chair of independent directors. Thethe Audit Committee meets at scheduled times duringeach received an additional annual fee of $10,000, and the year,Chair of the Compensation Committee and itthe Nominations and Governance Committee each receive an annual fee of $5,000. Directors also considersreceived a cash fee of $1,500 per Board meeting attended in person, $1,000 per committee meeting attended in person, $500 per Board meeting attended by telephone, and takes action$500 per committee meeting attended by written consent. The Committee Chair reports on Committee actions and recommendationstelephone. We also reimburse Directors for certain expenses in connection with attendance at Board of Director and committee meetings. The Committee engages independentDirectors who are also employees do not receive any additional compensation consultants and considers their data and input.
The Company’s executive compensation policy is designed to (1) attract, motivate, reward and retain high quality executives necessary for serving on the leadershipBoard of Directors or any committees of the Company; (2) ensure that compensation providedBoard of Directors.

In addition, each non-employee Director receives an annual option to executive officers is closely aligned with its business objectives and financial performance; and (3) maximize stockholder value.purchase 2,000 shares of common stock. Each new non-employee Director also receives an initial grant of 25,000 options to acquire shares of common stock. The Company's executive compensation policy is intendedoptions have an exercise price equal to provide each executive a total annual compensation that is commensurate with the executive's responsibilities, experience and demonstrated performance and competitive with a select group of peer internet infrastructure companies as well as a larger group of other similarly sized technology companies.

The 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 recommendations100% of the Chief Executive Officer with respect to compensation of the executive officers (other than the Chief Executive Officer); (3) the experience and contribution levels of the individual executive officer; (4) internal pay equity within the company; and (5) benchmarking the total compensation levels of executive officers in similar positions in companies in a select group of peer internet infrastructure companies, as well as a larger group of other similarly sized technology companies, through surveys conducted by independent compensation consultants.
Executive compensation generally consists of three components: (1) base salary; (2) annual cash bonus; and (3) long-term incentive awards consisting of stock options and restricted stock.
Base Salary
Consistent with the Company's policy, salaries are targeted at the median of the peer group. Salary increases for executive officers are based on individual contribution and position relative to the median of the peer group, as well as a larger group of other similarly sized technology companies. This is the same approach as used for other salaried employees.
Annual Cash Bonus

For 2005, the Board approved the 2005 Executive Incentive Plan, under which bonuses were payable based on performance compared to certain Company financial objectives and also on individual performance. The objectives of the 2005 Executive Incentive Plan related to EBITDA, profit margin and revenue growth, as well as individual contribution. In March 2006, the Board determined that the Company’s performance for 2005 met most of the performance objectives and decided to award bonuses to recognize individual performance. All awards were paid in cash. In aggregate, the bonus payments for 2005 to executive officers other than Mr. DeBlasio, who did not participate in the 2005 Executive Incentive Plan, totaled $235,000.


23

Long-term Incentive Awards
The Committee also grants stock options and restricted stock 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 atof our common stock on the date of grant have a ten-year term and generally vest 25% on the first anniversary of vesting commencement dateare fully vested and in 36 equal monthly installments thereafter. Restricted stock typically vests in equal 16 quarterly installments.
Most stock option grants to executive officers occur in conjunction with the executive officer’s commencement of employment with us. The Committee, however, also reviews long-term incentive levels for all executive officers 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 equity package. When determining the number of stock options or restricted shares to be awarded to an executive officer, the Committee considers (1) the executive officer’s current contribution to our performance; (2) the value already accumulated by the executive officer from previous grants; (3) the executive officer’s anticipated contribution in meeting our long-term strategic performance goals; and (4) comparisons to formal surveys of executive long-term incentive awards relative to the medianexercisable as of the peer group, as well as a larger groupdate of grant.

After considering general and specific demands of Board and committee service, the Company’s performance, compensation amounts and trends among companies of comparable size and other similarly sized technology companies. This is the same approach as used for other employees.

Compensation of the Chief Executive Officer
The Committee recommends tofactors, on January 18, 2007, the Board of Directors specific individualapproved certain changes, effective as of January 1, 2007, to compensation actions for the Chief Executive Officer based upon evaluationnon-employee Directors as follows:

The cash fee for Directors for attendance at a Board meeting by telephone increased from $500 to $750 per meeting;

The annual stock option grant to each Director in 2007 is an option to acquire up to 5,000 shares instead of the CEO's performance against Board-approved goals and objectives. The Committee has the practice of tracking the total compensation of CEOs of the peer groupan option to assist in the determination of the compensationacquire up to 2,000 shares of the Company’s CEO.common stock. The Committee also monitors the competitive practice of a broader range of similar sized technology companies. This is the same approach as used for other executive officers.

Compensation of James P. DeBlasio. The material terms of Mr. DeBlasio’s compensation package are described in the sectionoptions have an exercise price equal to 100% of the proxy statement entitled “Executive Compensation — Executive Employment Agreements.”
Compensationfair market value of Gregory A. Peters. Mr. Peters servedour common stock on the date of grant and are fully vested and exercisable as President and Chief Executive from April 2, 2002 until September 30, 2005 and as Chief Executive Officer from September 30, 2005 until November 18, 2005. In addition to the regular cash compensation paid to Mr. Peters for his service as Chief Executive Officer of the Company,date of grant;

Each Director receives an annual grant of 2,500 restricted stock units, which will vest ratably over a general release agreement between Mr. Peters and the Company in connection with the termination of Mr. Peters’ employment as Chief Executive Officer and his resignation as a director in November 2005 provided for Mr. Peters to receive severance payments and reimbursement for certain health insurance premiums as described in the section of the proxy statement entitled “Executive Compensation — Executive Employment Agreements.” The total compensation paid to Mr. Peters during his tenure as Chief Executive Officer in 2005 is set forth in the Summary Compensation Table.


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 notthree-year period, subject to the limitation on deductibility. terms in the stock grant agreement and Stock Plan under which the restricted stock units are granted;

The Committee does not expect cash compensation in 2005 to our Chief Executive Officer or any other executive officer to be in excess of $1 million. We intend to maintain qualification of our 2005 Incentive Stock Compensation Plan for the performance-based exceptionannual retainer paid to the $1 million limitation on deductibility of compensation payments.


24


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


Charles B. Coe
Fredric W. Harman
Patricia L. Higgins

The foregoing reportChair of the Compensation Committee of the Board of Directors increased from $5,000 to $7,500;

Other members of the Compensation Committee receive an annual retainer of $2,500;

Members of the Audit Committee, other than the Chair, receive an annual retainer of $5,000. The Audit Committee Chair’s retainer is $10,000.

The total annual retainer for the Chairman of the Board of Directors increased from $30,000 to $40,000.

Under the prior policy, new non-employee Directors received an initial grant of options to acquire up to 25,000 shares of common stock. As of January 1, 2007, new non-employee Directors instead receive a grant of 12,500 restricted stock units, which will vest ratably over a three-year period, subject to the terms of the stock grant agreement and Stock Plan under which the restricted stock units shall not be deemedgranted.

In addition, the Board adopted a stock retention policy starting in 2007 that will require each Director to retain a fixed percentage of the “net shares” he or she acquires through stock option and restricted stock units. Net shares are shares obtained after costs of exercise and taxes to the Director. For 2007, the stock retention requirement is fifty percent (50%) of these net shares. A Director must retain the stock so acquired until six months following the completion of his or her service as a Director.

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The following table provides information concerning the compensation of our Directors for our most recently completed fiscal year.

Name

  Fees
Earned or
Paid in
Cash $		  Stock
Awards
$		  Option
Awards
$ (1)		  Non-Equity
Incentive
Plan
Comp. $		  Change in
Pension Value &
Non-Qualified
Deferred Comp.
On Earnings $		  All
Other
Comp.
$		  Total $

Eidenberg, Eugene

  $31,500  —    $4,904  —    —    $—    $36,404

Higgins, Patricia

   46,000  9,108(2)  4,904  —    —     —     60,012

Coe, Charles

   39,000  —     4,904  —    —     —     43,904

Harding, William

   27,000  —     4,904  —    —     —     31,904

Harman, Fredric

   30,500  —     4,904  —    —     —     35,404

Ober, Kevin

   35,000  —     4,904  —    —     —     39,904

Stanzione, Daniel

   36,500  —     4,904  —    —     —     41,404
(1)Based on the grant date fair value of outstanding awards that vested in 2006 computed in accordance with FAS 123R. Each non-employee Director received an annual grant of stock options to purchase 2,000 shares of Internap stock.
(2)Ms. Higgins received this award in connection with her service as Vice Chair of the Board of Directors during the period following the departure of our former Chief Executive Officer, Greg Peters.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis and, based on this review and discussion, recommends that the Compensation Discussion and Analysis be incorporated by reference by any general statement incorporating by reference thisincluded in the 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 togetherfiled with the Securities Act,and Exchange Commission.

The Compensation Committee

Charles B. Coe

Patricia L. Higgins

Note that Mr. Harman served as a member of the “Acts”), unless we specifically incorporate this information by reference,Compensation Committee for 2006 and shallresigned from the Board of Directors on March 15, 2007. Accordingly, he did not otherwise be deemed filed under such Acts.


review the Compensation Discussion and Analysis and did not sign the Compensation Committee Report.

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 serveDirectors serves 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 boardBoard of directorsDirectors or Compensation Committee.

CERTAIN RELATIONSHIPS AND TRANSACTIONS


We have entered into indemnification agreements with our directorsDirectors 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 directorsDirectors and executive officers.




25

STOCK PERFORMANCE GRAPH
Our common stock is listed on

There are no transactions, since 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 datebeginning of our initial public offering, until October 4, 2002, when we fell below certain listing criteria oflast fiscal year, or any currently proposed transaction, in which the Nasdaq National Market.

The graph set forth below compares cumulative total returnCompany was or is to our stockholders from an investment in our common stock with the cumulative total return of the Nasdaq Composite Indexbe a participant and the Goldman/Sachs Internet Index, resulting from an initial assumed investment of $100amount involved exceeds $120,000, and in each on December 31, 2000, assumingwhich any related person had or will have a direct or indirect material interest.

We do not have policies and procedures for the reinvestmentreview, approval, or ratification of any dividends, ending at December 31, 2001, December 31, 2002, December 31, 2003, December 31, 2004 and December 31, 2005, respectively.

 Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05
Internap Network Services Corp.$100$16$5$34$13$6
NASDAQ Composite Index$100$79$55$82$89$91
Goldman Sachs Internet Index$100$58$41$80$98$113

The foregoing stock performance graph shall not be deemedtransactions with related persons because we have never had occasion 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.

26
consider a related party transaction.

29


AUDIT COMMITTEE REPORT

The primary function of the Audit Committee is to assist the boardBoard of directorsDirectors in its oversight and monitoring of our financial reporting and auditing process. In April 2004,January 2007, our boardBoard of directorsDirectors adopted an updatedamended and restated Audit Committee Charter that sets forth the responsibilities of the Audit Committee.

Management has primary responsibility for our financial statements and the overall reporting process, including our system of internal controls. The independent registered public accountants audit the annual financial statements prepared by management and 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. The independent registered public accountants also audit Management’s Report on Internal Control over Financial Reporting and discuss with the Audit Committee any issues that come about in conjunction with the audits that 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 registered public accountants.

Representatives of PricewaterhouseCoopers LLP, our independent registered public accountants,accounting firm, attended fiveseven regular meetings 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, 20052006 and our unaudited quarterly financial statements for the quarters ended March 31, June 30 and September 30, 2005.2006. The Audit Committee also discussed with PricewaterhouseCoopers LLP the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (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, 20052006 are compatible with maintaining their independence. The Audit Committee has determined to engage PricewaterhouseCoopers LLP as our independent registered public accountantsaccounting firm for the year ending December 31, 2006.

2007.

Based upon its review of the audited financial statements, including Management’s Report on Internal Control over Financial Reporting, and the discussions noted above, the Audit Committee recommended that the boardBoard of directorsDirectors include the audited financial statements in our Annual Report on Form 10-K10-K/A for the year ended December 31, 20052006 for filing with the SEC.

Audit Committee:


Patricia L. Higgins
William J. Harding
Kevin L. Ober

Audit Committee

Patricia L. Higgins

William J. Harding

Kevin L. Ober

The foregoing 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 of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or the Exchange Act, unless we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.acts.


27

30


PROPOSAL 2 - APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT


Overview

Our board of directors has deemed it advisable and in our stockholders’ best interests to seek the approval of our stockholders of this Proposal 2, authorizing the board of directors to amend our certificate of incorporation to effect a reverse stock split of our common stock at a specific ratio to be determined by the board of directors within a range from one-for-five to one-for-twenty. Our board of directors’ intent is to effect a reverse stock split after our annual meeting, and your approval of this proposal would give our board of directors the authority to effect a reverse stock split based on one of the ratios as set forth below as soon as reasonably practicable.

If this Proposal 2 is approved and after our board of directors selects the exchange ratio for the reverse stock split, then all of the outstanding shares of our outstanding common stock on the date of the reverse stock split will be automatically converted into a smaller number of shares, at the reverse stock split ratio selected by the board of directors, as more fully described below. The ratio will be no greater than one-for-five, and no less than one-for-twenty. The reverse stock split will also reduce the number of shares of our common stock authorized for issuance at the same ratio. After stockholder approval of this Proposal 2, the board will select, at its discretion, the ratio of the reverse stock split, which will be within the range of one-for-five to one-for-twenty, inclusive. In determining the reverse stock split ratio, our board of directors will consider numerous factors, including the historical and projected performance of our common stock before and after the reverse stock split, prevailing market conditions and general economic trends, as well as the projected impact of the reverse stock split on the trading liquidity of our common stock, our ability to continue to maintain our common stock’s listing on national securities exchanges, and investor interest in our stock.

This proposal, if approved, will authorize our board of directors to select the reverse stock split ratio from within a range. We are proposing that our board of directors have this discretion, rather than proposing that stockholders approve a specific ratio at this time, in order to give the board the flexibility to implement a reverse stock split at a ratio that reflects the board’s then-current assessment of the factors described above, including our then-current stock price. The reverse stock split would become effective upon the filing of a Certificate of Amendment of our Certificate of Incorporation with the Secretary of State of the State of Delaware. The form of the Certificate of Amendment to effect the reverse stock split is attached to this proxy statement as Appendix A. The following discussion is qualified in its entirety by the full text of the Certificate of Amendment, which is hereby incorporated by reference.
Purpose of Reverse Stock Split

The board of directors believes that the proposed reverse stock split, at a ratio ranging from one-for-five and one-for-twenty, is advisable to reduce the number of our outstanding common shares in order to increase the trading price of such shares on the American Stock Exchange. The board’s reasons for approving this proposal, as well as the possible disadvantages to a reverse stock split that the board took into account, are summarized below.

Determination of Ratio

The ratio of the reverse stock split, if approved and implemented, will be an integral number between and including five and twenty, as determined by our board of directors in its sole discretion. In determining the reverse stock split ratio, our board of directors will consider numerous factors including:

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·the historical and projected performance of our common stock and volume level before and after the reverse stock split,
·prevailing market conditions,
·general economic and other related conditions prevailing in our industry and in the marketplace generally,
·the projected impact of the selected reverse stock split ratio on trading liquidity in our common stock and our ability to continue our common stock’s listing on the American Stock Exchange, as well as our ability to attract and retain employees,
·our capitalization (including the number of shares of our common stock issued and outstanding),
·the prevailing trading price for our common stock and the volume level thereof, and
·potential devaluation of our market capitalization as a result of a reverse stock split.

The purpose of asking for authorization to implement reverse stock split at a ratio to be determined by our board of directors, as opposed to a ratio fixed in advance, is to give our board of directors the flexibility to take into account then-current market conditions and changes in our stock price and to respond to other developments that may be deemed relevant, when considering the appropriate ratio.

Effects of Reverse Stock Split
A reverse stock split refers to a reduction in the number of outstanding shares of a class of a corporation’s capital stock, which may be accomplished, as in this case, by reclassifying and combining all of our outstanding shares of common stock into a proportionately smaller number of shares. For example, if our board decides to implement a one-for-ten reverse stock split of our common stock, then a stockholder holding 1000 shares of our common stock before the reverse stock split would instead receive 100 shares of our common stock afterwards. Each stockholder’s proportionate ownership of our outstanding shares of common stock would remain the same, except that stockholders that would otherwise receive fractional shares as a result of the reverse stock split will receive cash payments in lieu of fractional shares. All shares of our common stock will remain fully paid and non-assessable.
The primary purpose of the proposed reverse stock split of our common stock is to combine the issued and outstanding shares of our common stock into a smaller number of shares so that the shares of our common stock will trade at a higher price per share than their recent trading prices. Although we expect the reverse stock split will result in an increase in the market price of our common stock, the reverse stock split may not increase the market price of our common stock in proportion to the reduction in the number of shares of our common stock outstanding or result in the permanent increase in the market price, which is dependent upon many factors, including our performance, prospects and other factors detailed from time to time in our SEC reports. The history of similar reverse stock splits for companies in like circumstances is varied. If the reverse stock split is effected and the market price of our common stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of a reverse stock split.

In addition to increasing the market price of our common stock, a reverse stock split will also affect the presentation of stockholders’ equity on our balance sheet. Specifically, because the par value per share of our common stock will not change, the reduction in the number of outstanding shares of common stock will cause our stated capital account to be reduced, and our additional paid-in capital to be increased by an equivalent amount. Total stockholders’ equity will remain unchanged.

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Effect on Authorized and Outstanding Shares

The following table illustrates the effects of a one-for-five and a one-for-twenty reverse stock split, without giving effect to any adjustments for fractional shares of our common stock, on our authorized and outstanding shares of our capital stock and on certain per share data:


  
Number of Shares as of December 31, 2005
 
  
Prior to
Reverse Stock
 
After Reverse Split 
      		 
  
Split
 
1 for 5
 
1 for 20
 
           
Authorized Common Stock  600,000,000  120,000,000  30,000,000 
Common Stock         
Outstanding  341,677,000  68,335,400  17,083,850 
Issuable upon exercise of Options and Warrants  50,560,000  10,112,000  2,528,000 
Stockholder equity at December 31, 2005 $109,727,478 $109,727,478 $109,727,478 
Stockholder equity per share at December 31, 2005 $0.32 $1.61 $6.42 
Net loss for year ended December 31, 2005 $4,962,911 $4,962,911 $4,962,911 
Basic and diluted net loss per share for year ended December 31, 2005 $(0.01)$(0.07)$(0.29)
Effect on Outstanding Options and Warrants
The reverse stock split, when implemented, will affect the outstanding options and warrants to purchase our common stock, which contain anti-dilution provisions. All of our equity incentive plans include provisions requiring appropriate adjustments to the number of shares of common stock covered by the plans and by stock options and other grants under those plans, as well as option exercise prices. For example, if we implement a one-for-ten reverse stock split, each of our outstanding stock options would thereafter evidence the right to purchase one-tenth as many shares of our common stock (rounding any fractional shares down to the nearest whole share) and the exercise price per share would be ten times the previous exercise price. Further, the number of shares of our common stock reserved for issuance (including the number of shares subject to automatic annual increase and the maximum number of shares that may be subject to options) under our existing stock option plans and employee stock purchase plans will be reduced by the same ratio as selected for the reverse stock split.

No Fractional Shares
No fractional shares of common stock will be issued in connection with the reverse stock split. If as a result of the reverse stock split, a stockholder of record would otherwise hold a fractional share, the stockholder will receive a cash payment in lieu of the issuance of any such fractional share in an amount per share equal to the closing price per share on the American Stock Exchange on the trading day immediately preceding the effective date of the reverse stock split (as adjusted to give effect to the reverse stock split), without interest. The ownership of a fractional interest will not give the holder thereof any voting, dividend or other right except to receive the cash payment therefor. The terms of some of our stock option plans do not require us to, and we therefore would not expect to, pay cash to option holders in lieu of any fraction of a share issuable upon the exercise of an option. 

Stockholders should be aware that, under the escheat laws of the various jurisdictions where stockholders reside, where we are domiciled and where the funds will be deposited, sums due for fractional interests that are not timely claimed after the effective time may be required to be paid to the designated agent for each such jurisdiction. Thereafter, stockholders otherwise entitled to receive such funds may have to seek to obtain them directly from the state to which they were paid.

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Accounting Matters

The par value of the shares of our common stock is not changing as a result of the implementation of the reverse stock split. Our stated capital, which consists of the par value per share of our common stock multiplied by the aggregate number of shares of our common stock issued and outstanding, will be reduced proportionately on the effective date of the reverse stock split. Correspondingly, our additional paid-in capital, which consists of the difference between our stated capital and the aggregate amount paid to us upon the issuance of all currently outstanding shares of our common stock, will be increased by a number equal to the decrease in stated capital. Further, net loss per share and book value per share will be increased as result of the reverse stock split because there will be fewer shares of common stock outstanding.

Implementation of Reverse Stock Split; Certificate of Amendment

If our stockholders approve this Proposal 2, we will file the Certificate of Amendment included as Appendix A to this proxy statement (as completed to reflect the reverse stock split ratio as determined by the board of directors, in its discretion, within the range of 1-for-five to 1-for-20 in order to give effect to the reverse stock split). The Certificate of Amendment will become effective when it is filed with the Secretary of State of the State of Delaware.
Reasons For Reverse Stock Split
The board of directors believes that a reverse stock split is desirable for the following reasons:
The anticipated increase in the per share market price of our common stock should also enhance the acceptability of our common stock by the financial community and the investing public.
A variety of brokerage house policies and practices tend to discourage individual brokers within those firms from dealing with lower priced stocks. Some of these policies and practices pertain to the payment of brokers’ commissions and to time-consuming procedures that make the handling of lower priced stock economically unattractive to brokers and therefore difficult for holders of common stock to manage. The expected increase in the per share price of our common stock may help alleviate some of these issues.
The structure of trading commissions also tends to have an adverse impact upon holders of lower priced stock because the brokerage commission on a sale of lower priced stock generally represents a higher percentage of the sales prices than the commission on a relatively higher priced issue, which may discourage trading in lower priced stock. A reverse stock split could result in a price level for our common stock that may reduce, to some extent, the effect of these policies and practices of brokerage firms and diminish the adverse impact of trading commissions on the market for our common stock.

Possible Disadvantages of Reverse Stock Split
Even though our board of directors believes that the potential advantages of a reverse stock split outweigh any disadvantages that might result, the following are some of the possible disadvantages of a reverse stock split:

The reduced number of shares of our common stock resulting from a reverse stock split could adversely affect the liquidity of our common stock.

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A reverse stock split could result in a significant devaluation of our market capitalization and our share price, on an actual or an as-adjusted basis, based on the experience of other companies that have effected reverse stock splits.

A reverse stock split may leave certain stockholders with one or more “odd lots,” which are stock holdings in amounts of less than 100 shares of our common stock. These odd lots may be more difficult to sell than shares of our common stock in even multiples of 100. Additionally, any reduction in brokerage commissions resulting from the reverse stock split, as discussed above, may be offset, in whole or in part, by increased brokerage commissions required to be paid by stockholders selling odd lots created by the reverse stock split.
There can be no assurance that the total market capitalization of our common stock (the aggregate value of all our common stock at the then market price) after the proposed reverse stock split will be equal to or greater than the total market capitalization before the proposed reverse stock split or that the per share market price of our common stock following the reverse stock split will either equal or exceed the current per share market price.
There can be no assurance that the market price per new share of our common stock after the reverse stock split will remain unchanged or increase in proportion to the reduction in the number of old shares of our common stock outstanding before the reverse stock split. For example, based on the market price of our common stock on March 29, 2006 of $0.90 per share, if the stockholders approve this Proposal 2 and the Board of Directors select a reverse stock split ratio of one-for-ten, there can be no assurance that the post-split market price of our common stock would be $9.00 per share or greater.
Accordingly, the total market capitalization of our common stock after the proposed reverse stock split may be lower than the total market capitalization before the proposed reverse stock split and, in the future, the market price of our common stock following the reverse stock split may not exceed or remain higher than the market price prior to the proposed reverse stock split.
If the reverse stock split is effected, the resulting per-share stock price may not attract institutional investors or investment funds and may not satisfy the investing guidelines of such investors and, consequently, the trading liquidity of our common stock may not improve.
While the Board of Directors believes that a higher stock price may help generate investor interest, there can be no assurance that the reverse stock split will result in a per-share price that will attract institutional investors or investment funds or that such share price will satisfy the investing guidelines of institutional investors or investment funds. As a result, the trading liquidity of our common stock may not necessarily improve.
A decline in the market price of our common stock after the reverse stock split may result in a greater percentage decline than would occur in the absence of a reverse stock split, and the liquidity of our common stock could be adversely affected following such a reverse stock split.
If the reverse stock split is effected and the market price of our common stock declines, the percentage decline may be greater than would occur in the absence of a reverse stock split. The market price of our common stock will, however, also be based on our performance and other factors, which are unrelated to the number of shares outstanding. Furthermore, the liquidity of our common stock could be adversely affected by the reduced number of shares that would be outstanding after the reverse stock split.

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Exchange of Stock Certificates
If this proposal authorizing the board of directors to amend our certificate of incorporation to effect a reverse stock split of our common stock is approved by our stockholders, and after our board of directors determines the exchange ratio for a reverse stock split, we will instruct our transfer agent to act as our exchange agent and to act for holders of common stock in implementing the exchange of their certificates.
Commencing on the effective date of a reverse stock split, stockholders will be notified and requested to surrender their certificates representing shares of our common stock to the exchange agent in exchange for certificates representing post-reverse split common stock. One share of new common stock will be issued in exchange for the number of presently issued and outstanding pre-split shares of our common stock determined by the board of directors between the range of five and twenty approved by the stockholders. Beginning on the effective date of a reverse stock split, each certificate representing shares of our common stock will be deemed for all corporate purposes to evidence ownership of shares of our post-reverse split common stock. Holders of warrants and other securities exercisable for shares of our common stock will not be requested to exchange those securities in connection with a reverse stock split. STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Federal Income Tax Consequences
The following summary of the federal income tax consequences of a reverse stock split is based on current law, including the Internal Revenue Code of 1986, as amended, and is for general information only. The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder, and the discussion below may not address all the tax consequences for a particular stockholder. For example, foreign, state and local tax consequences are not discussed below. Accordingly, notwithstanding anything to the contrary, each stockholder should consult his or her tax advisor to determine the particular tax consequences to him or her of a reverse stock split, including the application and effect of federal, state, local and/or foreign income tax and other laws.
Generally, a reverse stock split will not result in the recognition of gain or loss for federal income tax purposes (except with respect to any cash received in lieu of a fractional share as described below). The adjusted basis of the new shares of our common stock will be the same as the adjusted basis of our common stock exchanged for such new shares of our common stock. The holding period of the new, post-split shares of our common stock resulting from implementation of the reverse stock split will include the stockholder’s respective holding periods for the pre-split shares of our common stock exchanged for the new shares of our common stock.
A stockholder who receives cash in lieu of a fractional share will be treated as if we had issued a fractional share to the stockholder and then immediately redeemed the fractional share for cash. Such stockholder should generally recognize gain or loss, as the case may be, measured by the difference between the amount of cash received and the basis of such stockholder’s pre-split shares of our common stock corresponding to the fractional share, had such fractional share actually been issued. Such gain or loss will be capital gain or loss (if such stock was held as a capital asset), and any such capital gain or loss will generally be long-term capital gain or loss to the extent such stockholder’s holding period exceeds 12 months.

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No Dissenters’ Rights
The holders of shares of our common stock will have no dissenters’ rights of appraisal under Delaware law, our certificate of incorporation or our by-laws with respect to the Certificate of Amendment effectuating a reverse stock split.
Vote Required
In order to be adopted, this Proposal 2 must receive the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.




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PROPOSAL 3 - APPROVAL OF STOCK OPTION REPRICING THROUGH AN OPTION EXCHANGE PROGRAM

Overview

On March 15, 2006, our board of directors approved, subject to stockholder approval, this Proposal 3, for the repricing of certain outstanding options to purchase shares of our common stock under our existing equity incentive plans. Our board of directors authorized and directed the compensation committee of the board of directors to make a recommendation to the board on the options eligible for repricing as well as the employees whose options would be eligible for repricing.

On April 6, 2006, on the recommendation of the compensation committee, the board of directors approved, subject to stockholder approval, this Proposal 3, for the repricing of options with an exercise price per share equal to or greater than $1.30. We refer to these options as the “Eligible Options.” (If Proposal 3 is approved by the stockholders and we subsequently complete a reverse stock split, the foregoing $1.30 exercise price per share threshold will be proportionately increased to reflect the reverse stock split.) The repricing applies to Eligible Options held by all persons who are currently employed by us and are employed by us at the time of the exchange, other than our chief executive officer and members of our board of directors. We refer to these persons as “Eligible Participants.”

If approved by stockholders, our board of directors would be authorized to implement the repricing through an option exchange program, under which Eligible Participants will be offered the opportunity to exchange each of their Eligible Options for new options to purchase shares of our common stock. Each new option issued in the exchange program will have substantially the same terms and conditions as the Eligible Option cancelled in exchange for the new option, except as follows:

the exercise price per share for each new option will be equal to an average of the closing prices of our common stock as reported by the American Stock Exchange for the 15 consecutive trading days ending immediately prior to the grant date of the new option (proportionately adjusted, if necessary, to reflect any reverse stock split occurring after the commencement date and before the expiration date of the option exchange program);

with respect to all Eligible Options with an exercise price per share greater than or equal to $2.00 (on a pre-reverse stock split basis), the exchange ratio will be 1-for-2, meaning the aggregate number of shares of common stock underlying the new options issued in replacement of these Eligible Options will be 50% less than the aggregate number of shares of common stock underlying their Eligible Options; and

each new option will have a three (3) year vesting period, vesting in equal monthly installments over the three years, so long as the grantee continues to be a full-time employee of the company and a ten (10) year term. 

If the price of our common stock decreases prior to the commencement date of the option exchange program, we will not expand the option exchange program beyond options with an exercise price per share equal to or greater than $1.30 (on a pre-reverse stock split basis). However, if the price of our common stock increases prior to the commencement date of our option exchange program (other than as a result of any reverse stock split), we will exclude from the option exchange program any options whose exercise price per share is less than the price of our common stock as of the commencement date.

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Under the terms of our equity incentive plans and applicable American Stock Exchange rules, stockholder approval is required to implement the repricing.

We previously allowed employees to cancel outstanding stock options to purchase 8.9 million shares and 2.0 million shares of common stock in 2001 and 2003, respectively, in return for the same number of options to be granted six months and one day after the cancellation. The exercise price of each new grant was the fair value of our common stock on the date of grant. The participating employees did not receive any additional grants of options prior to the future grant date, and were required to remain employed by us in order to receive the new grant. No compensation expense resulted from these previous repricings.

Reasons for the Proposal and Summary of Effects of the Approval of Proposal 3

After careful consideration, our board of directors has determined that it would be in our best interest and in the best interest of our stockholders to implement the proposed repricing of our “underwater” stock options. Stock options are intended to encourage our employees to act as owners, which helps align their interests with those of stockholders. The objective of our equity incentive plans is to encourage ownership of our common stock by key personnel whose long-term employment or service is considered essential to our continued progress. Our board of directors believes that our equity incentive plans have proven to be an effective tool that encourages stock option recipients to act in the stockholders’ interest and enables the recipients to have an economic stake in our success.

Like many other companies in the technology services industry, our stock price has been volatile in recent years and has experienced a substantial decline since January 2004, in particular. As of March 15, 2006, the date our board of directors approved this Proposal 3, subject to stockholder approval, 44% of our outstanding stock options had an exercise price above $0.74 per share. On that date, our common stock’s last reported sale price per share, as quoted on the American Stock Exchange, was $0.74. We believe that these numbers illustrate that a substantial number of our outstanding stock options are underwater and no longer serve as an effective tool to retain and motivate employees. Our board of directors believes that it is critical to our future success to revitalize the incentive value of our stock option program to retain, motivate and reward employees. Our board of directors believes that the failure to address the underwater option issue in the near to medium term will make it more difficult for us to retain our key employees.

In determining to recommend that stockholders approve this Proposal 3, our board of directors considered several alternatives to provide competitive compensation to our employees. To replace equity incentives, we believe we would need to increase base and target bonus compensation. These increases would increase our cash compensation expenses and reduce our cash flow from operations. We continue to believe that stock options are an important component of our employees’ total target compensation, and that replacing this component with additional cash compensation to remain competitive would not be as beneficial as repricing the Eligible Options. Our board of directors also considered granting employees greater amounts of additional stock options at current market prices. However, these additional grants would increase our total number of outstanding stock options, or “overhang.”

Our board of directors believes that the repricing provides an opportunity to motivate our employees to create stockholder value. By more closely aligning the exercise prices of previously granted stock options with the current value of our common stock, we believe that our equity incentive plans will become a more useful tool to help retain our employees, reward their continued loyalty to us, and motivate them to create stockholder value. In addition, the repricing allows us to conserve cash resources and potentially reduce the overhang depending on the level of participation by Eligible Participants, since the exchange ratio with respect to all Eligible Options with an exercise price per share greater than or equal to $2.00 (on a pre-reverse stock split basis) will be 1-for-2. Accordingly, if all Eligible Participants accept the offer in full, the aggregate number of shares of common stock underlying the new options issued in replacement of such Eligible Options will be approximately 9% less than the aggregate number of shares of common stock underlying their Eligible Options.

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The option repricing will likely have a dilutive effect on our existing stockholders’ percentage ownership of us. If the option repricing is effected and Eligible Options are tendered for new options, the new options will have an exercise price equal to an average of the closing prices of our common stock as reported by the American Stock Exchange for the 15 consecutive trading days ending immediately prior to the grant date of the new options (proportionately adjusted, if necessary, to reflect any reverse stock split occurring after the commencement date and before the expiration date of the option exchange program). As a result, the new options will be more likely to be exercised than the Eligible Options that they replace, which will result in dilution to our stockholders. In addition, the trading price of our common stock may decline due to the potential dilutive effects of the option repricing.
Information Regarding Stock Options

As of March 24, 2006, options to purchase approximately 32,724,166 shares were outstanding under all of our equity compensation plans, of which options to purchase approximately 7,233,054 shares of common stock, having exercise prices per share ranging from $1.30 to $69.875, constituted Eligible Options held by Eligible Participants. The following table presents summary information concerning the Eligible Options that are eligible for repricing in the option exchange program if Proposal 3 is approved by stockholders.

Name and Position
 
Number of Shares Underlying Eligible Options
 
Weighted Average Exercise Price Per Share Underlying Eligible Options
 
Average Remaining Contractual Life of Eligible Options (Years)
 
Maximum Number of Shares Underlying New Options that may be Granted
 
James P. DeBlasio,
President, Chief Executive Officer and Director (1)
  
——
  
——
  
——
  
——
 
David Abrahamson  1,250,000 $2.28  7.81  625,000 
David Buckel  1,000,000 $1.67  7.90  875,000 
Eric Klinker  350,000 $2.44  7.86  175,000 
Robert Smith  0 $0  0  0 
Eric Suddith  287,500 $2.40  7.83  143,750 
All directors who are not executive officers as a group (7 persons) [(2)]  ——  ——  ——  —— 
All employees who are not executive officers as a group (320 persons)  
4,345,554
 $2.86  7.05  2,433,339 
 
Total
  
7,233,054
 $2.33  7.69  4,252,089 
——————
(1)Mr. DeBlasio is not eligible to participate in the option exchange program, and therefore all options held by Mr. DeBlasio are not included in the table above.

(2)Our directors are not eligible to participate in the option exchange program, and therefore all options held by them are not included in the table above.


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Accounting Consequences of the Option Repricing

We adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, or SFAS 123(R), on January 1, 2006. Under SFAS 123(R), stock compensation is calculated based upon the fair value of the awards, and the cancellation of an award accompanied by the concurrent grant of (or offer to grant) a replacement award is accounted for as a modification of the terms of the cancelled award. Therefore, the incremental compensation cost is measured as the excess of the fair value of the replacement award over the fair value of the cancelled award, both determined at the modification date. As a result, if the stockholders approve the option repricing, we will incur a non-cash compensation charge for all Eligible Options that are repriced.
The amount of these charges will depend on a number of factors, including:

the exercise price per share of the new options issued in the option exchange program,

the level of participation by Eligible Participants in the option exchange program,

the exercise price per share of Eligible Options cancelled in the option exchange program, and

the remaining term of the new options issued in the option exchange program.

Since these factors cannot be predicted with any certainty at this time and will not be known until the expiration of the option exchange program, we cannot predict the exact amount of the charge that would result from the option exchange program. If all Eligible Participants accept our offer with respect to all Eligible Options and the exercise price per share underlying the new options equals $0.74, the closing price of our common stock on March 15, 2006, we would recognize an incremental non-cash compensation expense of approximately $1.3 million, which would be incurred over the vesting period of the new options issued in the option exchange program.
Vote Required

Stockholders are requested in this Proposal 3 to authorize the board of directors to reprice Eligible Options held by Eligible Participants, through the option exchange program, as unanimously approved by our board of directors. Proposal 3 requires the affirmative vote of a majority of the shares of common stock cast at the annual meeting.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3

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PROPOSAL 4 - 2—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Our Audit Committee has appointed PricewaterhouseCoopers LLP our independent registered public accounting firm, to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2006.2007. 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 registered public accounting firm is not required by our bylaws or otherwise. However, the boardThe Board of directorsDirectors, however, 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 thatthis firm. Even if the selection is ratified, the Audit Committee in their discretion may direct the appointment of a different independent registered public accounting firm 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, 20052006 and 2004.

  
2005
 
2004
 
Audit Fees(1)
 $1,176,287 $1,582,467 
Audit-Related Fees(2)
  46,720  219,156 
Tax Fees(3)
  51,397  93,678 
All Other Fees(4)
  1,500  1,400 
Total $1,275,904 $1,896,701 

2005.

   2006  2005

Audit Fees (1)

  $1,298,297  $1,176,287

Audit-Related Fees (2)

   399,966   46,720

Tax Fees (3)

   52,768   51,397

All Other Fees (4)

   142,804   1,500

Total

  $1,893,835  $1,275,904
(1)Fees related to the audit of Internap’s annual financial statements, including the audit of internal control over financial reporting and the audit of management’s assessment of internal control over financial reporting, and the reviews of the quarterly financial statements filed on Forms 10-Q.

(2)Fees primarily related to international statutory filings and registration statements.

(3)Fees primarily related to tax compliance, advice and planning.

(4)Fees related to services performed in conjunction with other professional services.

Approval of Audit and Permissible Non-Audit Services

Our Audit Committee Charter requires the Audit Committee to review and approve all audit services and all permissible non-audit services to be performed for us by our independent registered public accountants,accounting firm, and the Audit Committee will not approve any services that are not permitted by SEC rules.

The board of directors unanimously recommends that you vote “For” the ratification of the appointment of PricewaterhouseCoopersTHE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP to serve as our independent registered public accounting firm for the fiscal year ended DecemberTO SERVE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006.2007.


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SECTION 16(a)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,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 our review of these reports or of certifications to us that no report was required to be filed, we believe that all of our directorsDirectors and executive officers complied with all Section 16(a) filing requirements applicable to them during the 20052006 fiscal year, except forexcept: Mr. Harman,Suddith, who filed two late Form 4s in connection with his exercise of stock options and in connection with the withholding by the Company of restricted common stock in satisfaction of withholding taxes incurred in connection with the vesting of restricted shares previously awarded to Mr. Suddith; Mr. Buckel, who filed three late Form 4s in connection with his exercise of stock options and in connection with the withholding by the Company of restricted common stock in satisfaction of withholding taxes incurred in connection with the vesting of restricted shares previously awarded to Mr. Buckel, and in connection with the sale of shares of his common stock; Mr. DeBlasio, who filed one late Form 4 in connection with a grantthe withholding by the Company of non-statutoryrestricted common stock options,in satisfaction of withholding taxes incurred in connection with the vesting of restricted shares previously awarded to Mr. Ober,DeBlasio; Mr. Eidenberg who filed one late Form 4 in connection with a salehis exercise of warrants to purchase common stock andstock; Mr. Smith,Coe, who filed one late Form 4 in connection with a purchasehis grant of common stock.



stock options; Mr. Klinker, who filed one late Form 4 in connection with his exercise of stock options; and Mr. Abrahamson, who filed two late Form 4s in connection with his exercise of stock options.

STOCKHOLDERS’ PROPOSALS FOR 20072008 ANNUAL MEETING

Proposals of stockholders, including nominations for the boardBoard of directors,Directors, intended to be presented at the 20072008 annual meeting must be received by us at our executive offices in Atlanta, Georgia, on or before January 2,December 27, 2007 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 boardBoard of directors,Directors, not earlier than February 21, 200722, 2008 and not later than March 23, 20072008 and must comply with the eligibility, advance notice and other provisions of our bylaws. A 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, Suite E-100

Atlanta, Georgia 30303

Attention: Corporate Secretary

HOUSEHOLDING

As permitted under the Exchange Act, only one copy of this proxy statement is being delivered to stockholders residing at the same address, unless such stockholders have notified Internap of their desire to receive multiple copies of this proxy statement. Internap will promptly deliver, upon oral or written request, a separate copy of this proxy statement to any stockholder residing at an address to which only one copy was mailed. Requests for additional copies should be directed to Internap Network Services Corporation, 250 Williams Street, Atlanta, Georgia 30303, Attention: Investor Relations. Stockholders residing at the same address and currently receiving only one copy of the proxy statement may contact Investor Relations at the address above to request multiple copies of the proxy statement in the future. Stockholders residing at the same address and currently receiving multiple copies of the proxy statement may contact Investor Relations at the address above to request that only a single copy of the proxy statement by mailed in the future.

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LOGO

C/O American Stock Transfer

59 Maiden Lane

New York, NY 10038

  
Internap Network Services Corporation
250 Williams Street, Suite E-100
Atlanta, Georgia 30303
Attention: Corporate Secretary

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VOTE BY INTERNET - www.proxyvote.com
250 WILLIAMS STREET NW
SUITE E-100
ATLANTA, GA 30303
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 cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
  
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDERSTOCKHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by Internap Network Services Corporation in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholderstockholder communications electronically in future years.
  
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 cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
  
VOTE BY MAIL
  Mark, sign, and date your proxy card and return it in the postage-paid envelope we have provided or return it to Internap Network Services Corporation, c/o ADP,Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:

INSC01

KEEP THIS PORTION FOR YOUR RECORDS

    DETACH AND RETURN THIS PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.




INTERNAP NETWORK SERVICES CORPORATION

THE BOARD OF DIRECTORS RECOMMENDS A VOTE

“FOR” EACH OF THE BELOW-LISTED PROPOSALS.PROPOSALS.

Vote On Directors


(1)To elect two directorsDirectors to serve until the 20092010 annual meeting and until their successors are elected and qualified, or until such director'sDirector’s earlier death, resignation or removal (except as indicated to the contrary on the right).  

For

All

  

Withhold

All

  

For All

Except

  

To withhold authority to vote for any individual nominee,nominee(s), mark “For All Except” and write the nominee’s namenumber(s) of the nominee(s) on the line below.

      
o
¨		  
o
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o
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01)Charles B. CoeJames DeBlasio for a term to expire at the 20092010 annual meeting
02)Patricia L. Higgins Kevin Ober for a term to expire at the 20092010 annual meeting

For
Against
Abstain
Vote On Proposals
   For  Against  Abstain
Vote On Proposal  
(2)To grant the board of directors the authority to amend our certificate of incorporation to effect a reverse stock split of our common stock at a specific ratio to be determined by our board of directors within a range of one-for-five and one-for-twenty.  
o
  
o
o
(3)To grant the board of directors the authority to implement an option exchange program pursuant to which eligible employees will be offered the opportunity to exchange their eligible options to purchase shares of our common stock outstanding under our existing equity incentive plans for new stock options at a lower exercise price.
o
o
o
(4)

(2)    To ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2006.2007.

  
o
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o
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o
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In their discretion, the proxies are authorized to vote upon such other business as properly may come before the annual meeting and any and all adjournments thereof.
      
This Proxy will be voted in the manner directed by the undersigned stockholder. If this Proxy is returned and no direction is provided by the undersigned stockholder, this Proxy will be voted FOR ALL NOMINEES in Proposal 1 and FOR Proposals 2, 3 and 4.Proposal 2.
      

Please indicate if you plan to attend the annual meeting

  
o
¨		  
o
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YesNo

       
Yes
No

        
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners)  Date Date





INTERNAP NETWORK SERVICES CORPORATION

PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE

20062007 ANNUAL MEETING OF STOCKHOLDERS

Revocable Proxy
COMMON STOCK

The undersigned hereby appoints David Buckel and Dorothy An,Richard Dobb, and each of them, proxies, with full power of substitution, to act for and in the name of the undersigned to vote all shares of common stock of Internap Network Services Corporation (the “Company”) whichthat the undersigned is entitled to vote at the 20062007 Annual Meeting of Stockholders of the Company, to be held on Wednesday,Thursday, June 21, 2006,2007, at 10:00 a.m., Eastern Time, at 250 Williams Street, Atlanta, Georgia, and at any and all adjournments thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the matters listed on the reverse side and in accordance with the instructions listed on the reverse side, with discretionary authority as to any and all other matters that may properly come before the meeting.

PROXY SOLICITED BY THE BOARD OF DIRECTORS

This proxy card will be voted as directed. If no instructions are specified, this proxy card will be voted “FOR” each of the proposals listed on the reverse side of this proxy card. If any other business is presented at the annual meeting, this proxy card will be voted by the proxies in their best judgment. At the present time, the boardBoard of directorsDirectors knows of no other business to be presented at the annual meeting.

The undersigned may elect to withdraw this proxy card at any time prior to its use by: (i) giving written notice to Corporate Secretary,Secretary; (ii) executing and delivering to the Corporate Secretary a duly executed proxy card bearing a later datedate; or (iii) appearingattending at the annual meeting and voting in person.

Please mark, date and sign exactly as your name appears on this proxy card. When shares are held jointly, both holders should sign. When signing as attorney, executor, administrator, trustee, guardian, or custodian, please give your full title. If the holder is a corporation or a partnership, the full corporate or partnership name should be signed by a duly authorized officer.

PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED

POSTAGE-PAID ENVELOPE

(Continued, and to be signed and dated, on the reverse side)