Edgar Filing: INTERNAP NETWORK SERVICES CORP

Our Board of Directors has sole discretion to determine whether corporate and individual objectives are met.

Our Board of Directors established the following four levels for each of the three criteria: Threshold, Target, Above and Maximum.

Potential payment for achievement of the “Threshold” objective for the corporate revenue goal and adjusted EBITDA goal was 40% of each criterion’s allocated percentage of the named executive officer’s total target award amount. For 2008, this total potential payment was 40% of 25% of the total target award amount for the corporate revenue goal and 40% of 50% of the total target award amount for the corporate adjusted EBITDA goal. Potential payment for achievement of the threshold objective for the individual goals was $0.

Potential payment for achievement of the “Target” objective for the corporate revenue goal, corporate adjusted EBITDA goal and individual goal was 100% of each criterion’s allocated percentage of the named executive officer’s total target award amount. For 2008, these potential payments were 25%, 50% and 25% of the total target award amount, respectively.

Potential payment for achievement of the “Above” objective for the corporate revenue goal, corporate adjusted EBITDA goal and individual goal was 130% of each respective goal’s allocated portion of the named executive officer’s target award amount.

Potential payment for achievement of the “Maximum” objective for the corporate revenue goal, corporate adjusted EBITDA goal and individual goal was 200% of each respective goal’s allocated portion of the named executive officer’s target award amount.

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

The following table illustrates the potential payments for a named executive officer whose salary was $240,000 and whose target award was 45% of base salary:


	Weight			Threshold			Target			Above			Maximum

Annual Revenue Bonus		25	%		95	%		100	%		105	%		110	%
Payout				$	10,800		$	27,000		$	35,100		$	54,000

Annual Adjusted EBITDA Bonus		50	%		90	%		100	%		110	%		120	%
Payout				$	21,600		$	54,000		$	70,200		$	108,000

Individual Goals Bonus		25	%	Needs Improvement			Meets Expectations			Often Exceeds Expectations			Exceeds Expectations
Payout				$	0		$	27,000		$	35,100		$	54,000

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

For 2008, the Board of Directors approved payment of any Target Award Level, as defined in the 2008 Bonus Plan, or excess of the Target Award Level, in shares of our common stock. The Compensation Committee determined that any payment of bonuses in 2009 will be made in cash. The Compensation Committee will determine each year whether to pay bonuses in cash, shares of our common stock or both.

In 2008, our revenue and adjusted EBITDA were less than the thresholds established in the 2008 Bonus Plan. Because we did not achieve either the revenue or EBITDA target, we did not pay bonuses to named executive officers or other employees based on 2008 performance.

Our Board of Directors has the authority to change performance targets at any point during the year. Any changes in performance targets are not an indication of how we will perform in any given year. The sole purpose of targets is to establish internal performance-based goals under an annual incentive compensation plan.

2009 Executive Bonus Award Incentive Plan

As in 2008, we have adopted the 2009 Executive Bonus Award Incentive Plan (the “2009 Bonus Plan”) to focus our named executive officers and other key executives on our annual financial performance and to reward individual performance. Named executive officers and other executives participate in the 2009 Bonus Plan and our Chief Executive Officer may recommend to the Compensation Committee other key contributors to participate in the 2009 Bonus Plan.

The purpose of the 2009 Bonus Plan is to:


	●	focus participants’ actions on the achievement of corporate annual revenue growth and profitability goals;
	●	align participants’ actions to accomplish key corporate operational and strategic goals;
	●	encourage and reward participants for the achievement of specific individual objectives; and
	●	maintain a competitive range of incentive compensation opportunities.

For 2009, each named executive officer’s award will be based on the following two criteria:


	●	achievement of corporate targets, including revenue, EBITDA and free cash flow, which is EBITDA less capital expenditures, which collectively will comprise 70% of the potential award; and
	●	achievement of individual goals by the named executive officer, which will comprise 30% of the potential award.

The Compensation Committee approved the following target award levels for our named executive officers, other than our Chief Executive Officer, and the Board of Directors approved the target award level for the Chief Executive Officer:


Name	Target			Maximum

James P. DeBlasio (1)		70	%	140	%
George E. Kilguss III		50	%	100	%
Richard P. Dobb		50	%	100	%
Timothy P. Sullivan		50	%	100	%
Randal R. Thompson		50	%	100	%
J. Eric Cooney(2)		100	%	200	%

(1)	Mr. DeBlasio resigned as our President and Chief Executive Officer as of March 15, 2009.
(2)	Mr. Cooney became our President and Chief Executive Officer as of March 16, 2009.

Long-Term Equity Incentives

Historically, we awarded primarily non-qualified stock options as equity compensation due to 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 us to record an expense related to stock options. As a result, we assessed the desirability of granting shares of restricted stock to employees, particularly executive officers, 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 certain new employees, upon a promotion, as a result of performance evaluations and in other special situations.

Our Compensation Committee grants stock options and restricted stock to named executive officers, other than the Chief Executive Officer, under the Amended and Restated Internap Network Services Corporation 2005 Incentive Stock Plan (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 Compensation Committee recommends the amounts of the Chief Executive Officer’s awards to the Board of Directors, and the Board of Directors approves his grants under the Stock Plan. The exercise price of options is the fair market value of our stock on the grant date. Options typically have a 10-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.

Our Compensation Committee annually reviews long-term incentive levels for all named executive officers in light of long-term strategic and performance objectives and each named executive officer’s current and anticipated contributions to our future performance. When determining the number of stock options or shares of restricted stock to be awarded to a named executive officer, the Compensation Committee considers: (a) the named executive officer’s current contribution to our performance; (b) the named executive officer’s anticipated contribution in meeting our long-term strategic performance goals and (c) 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 prepared by our compensation consultants, as discussed above.

With the exception of significant promotions and new hires, we generally make these awards at the first meeting of the Compensation Committee each year following the availability of the financial results for the prior year. These grants were made in March 20, 2008 for our 2007 fiscal year and March 25, 2009 for our 2008 fiscal year. We selected this timing in March because it enables us to consider both our corporate performance and the named executive officer’s performance for the previous year, as well as to consider our expectations for the current year. The Compensation Committee’s schedule is determined 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 Compensation Committee, or in the case of awards to our Chief Executive Officer, the Board of Directors, 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 awards, the amount or timing of awards granted to a participant, the exercise price or vesting of awards.

Prior to the scheduled meeting of the Compensation Committee in March 2009, Compensation Strategies prepared recommendations for the grant of equity awards for employees and executives, including the named executive officers. The Compensation Committee approved the following recommendations:


	●	split the value of the grant of equity awards between restricted stock grants and stock option grants;
	●	modify the vesting of subsequent restricted stock awards to be based 100% on time-based vesting;
	●	discontinue the use of the prior formula based approach for determining equity award amounts in favor of benchmarking award values based on the results of Aon’s competitive market survey discussed above;
	●	grant stock options with vesting of 25% on the first anniversary of the grant date and 36 equal monthly installments thereafter; and
	●	grant restricted stock with vesting of 25% in four annual installments.

Historically, our performance-based vesting of restricted stock has been based on three-year performance periods. The elimination of performance-based vesting for awards made in 2009 reflects the Compensation Committee’s concerns with establishing long-term performance objectives in this challenging and uncertain economic environment. Even with the elimination of performance-based vesting, the Compensation Committee believes that the compensation program for the named executive officer retains significant performance incentives. Specifically, the 2009 Bonus Plan provides significant performance incentives for 2009. The restricted stock and stock option grants also provide longer-term incentives since recipients can benefit significantly from appreciation in our stock price. The inclusion of stock option grants in the equity awards enhances the benefits of stock price appreciation for recipients, thus furthering the goal of rewarding performance and aligning the interests of the named executive officers with those of our stockholders.

To determine the awards for each named executive officer, other than the Chief Executive Officer, the Compensation Committee used the results provided from Aon’s competitive market survey as a benchmark rather than using the formula-based method that we historically used. Specifically, the Compensation Committee targeted awards to be equal to the adjusted 50th percentile of equity incentive award values of the competitive market data. The value of awards at the 50th percentile were first adjusted downward by 20% to reflect a discount from 2008 market values, which the Compensation Committee believes is a fair and reasonable estimate of 2009 market values. The Compensation Committee then made adjustments for individual awards to each named executive officer based on each officer’s contribution and anticipated contribution, which adjustments remained within 10% of the benchmarked amounts.

Mr. Cooney’s equity awards were determined through comprehensive negotiations prior to his hiring. Given Mr. Cooney’s background, extensive experience and considerable professional achievements, the Board of Directors considered the amount and structure of such equity awards to be necessary to attract Mr. Cooney as our Chief Executive Officer as compared to other opportunities available to Mr. Cooney.

The equity awards granted to the named executive officers are as follows:


	Restricted Stock			Stock Options
Name	(#)			(#)
J. Eric Cooney		300,000	(1)		600,000
George E. Kilguss III		37,700			67,900
Richard P. Dobb		37,400			67,400
Timothy P. Sullivan		37,700			67,900
Randal R. Thompson		23,300			41,900

(1) In addition, Mr. Cooney will be granted 200,000 shares of restricted stock on each of the first anniversary and the second anniversary of Mr. Cooney’s commencement of employment.

Stock Retention Guidelines

In March 2009, the Board of Directors revised its stock retention guidelines for the named executive officers. The stock retention guidelines require the named executive officers to retain a certain percentage of the net shares obtained from option exercises or vesting of shares of restricted stock after costs of exercise and taxes. The percentage of net shares obtained from option exercises or vesting of shares of restricted stock after costs of exercise and taxes that each executive is to retain and the time in which he or she is to hold such shares are as follows:


Position	Retention Ratio	Time to Retain From Date of Acquisition

Chief Executive Officer	50.0%	Five Years
Chief Financial Officer	33.3%	Four Years
Chief Administrative Officer	33.3%	Four Years
Chief Technology Officer	33.0%	Four Years
Vice President Global Sales	33.0%	Four Years

These guidelines apply to the grants made pursuant to the Stock Plan in March 2009 described above and will apply to future grants unless subsequently modified by the Board of Directors. The named executive officers are subject to these guidelines for as long as he or she is our employee.

The Board of Directors concluded that the emerging best practices in corporate governance include such guidelines and adopted these stock retention guidelines to further align the interests of the executives with our stockholders’ interests.

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. We describe the perquisites provided to our named executive officers in the Summary Compensation Table below.

We provide named executive officers with the same benefit package available to all of our salaried employees. This package includes: (a) health and dental insurance; (b) basic life insurance; (c) long-term disability insurance; and (d) participation in our 401(k) plan, including discretionary company-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 Compensation Committee does not expect that any portion of our deduction for executives will be disallowed in 2009 by reason of awards granted in 2008.

We do not require all of our compensation programs to be fully deductible under Section 162(m). Certain compensation paid by us in future years may not qualify as performance-based compensation that is excluded from the limitation on deductibility. However, because we have available net operating losses, the impact of any non-deductibility will be negligible.

Summary Compensation Table

The following table presents information regarding compensation for our named executive officers for services rendered during fiscal 2008, 2007 and 2006.


Name and Principal Position	Year		Salary		Bonus		Stock Awards		Option Awards		Non-Equity Incentive Plan Compensation		All Other Compensation		Total
			($)		($)(1)		($)(2)		($)(2)		($)(1)(3)		($)(4)		($)
James P. DeBlasio former President and Chief Executive Officer		2008		460,000		—		813,470		436,645		—		114,618		1,824,733
	2007			425,000		—		524,831		435,452		337,663		27,462		1,750,408
	2006			350,000		—		119,918		435,452		—		47,599		952,969

George E. Kilguss III Vice President and Chief Financial Officer (5)	2008			202,196		—		163,901		—		—		91,837		457,934
	2007			—		—		—		—		—		—		—
	2006			—		—		—		—		—		—		—

Richard P. Dobb Chief Administrative Officer (6)	2008			260,400		—		163,850		—		—		6,954		431,204
	2007			180,000		—		78,783		—		122,580		4,554		385,917
	2006			—		—		—		—		—		—		—

Timothy P. Sullivan Chief Technology Officer (7)	2008			269,792		—		218,320		—		—		25,193		513,305
	2007			180,000		—		78,783		—		—		54		258,837
	2006			—		—		29,978		—		—		—		29,978

Randal R. Thompson Vice President Global Sales	2008			200,000		—		186,418		9,487		—		4,479		400,384
	2007			167,010		30,000		50,166		10,253		125,000		197,487		579,916
	2006			141,458		18,890		14,903		24,430		—		103,961		303,642

Philip N. Kaplan former Chief Strategy Officer (8)	2008			129,693		—		28,979		78,315		—		3,409		240,396
	2007			230,808		—		—		396,641		98,688		5,048		731,185
	2006			148,750		120,000		—		—		—		—		268,750

Vincent Molinaro former Chief Operating Officer (9)	2008			180,000		6,667		543,393		—		—		183,888		913,948
	2007			247,917		13,333		325,086		—		75,000		3,180		664,516
	2006			—		—		—		—		—		—		—

(1)	Includes amounts earned because of achievement of personal performance goals.
(2)	Represents the proportionate amount of the total fair value of stock and option awards that we recognized as an expense in fiscal 2008, 2007 and 2006 for financial accounting purposes, excluding forfeitures related to service-based vesting conditions. We determined the fair values of these awards and the amounts expensed in accordance with SFAS 123R. The awards for which expense is shown in this table include the awards described in the Grants of Plan-Based Awards table of this Proxy Statement, as well as awards granted in prior years for which we continued to recognize expense in fiscal 2008, 2007 and 2006. The assumptions used in determining the grant date fair values of these awards are set forth in the notes to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2008.
(3)	As provided in the 2008 Bonus Plan, the Compensation Committee determined and approved bonus payments in 2008 for performance in 2007 in excess of the targets established in the 2008 Bonus Plan for each named executive officer, other than the Chief Executive Officer, and the Board of Directors determined the bonus payment for the Chief Executive Officer, and paid such excess in shares of common stock on March 15, 2008. Mr. DeBlasio’s bonus consisted of $297,500 paid in cash and $40,163 paid in shares of common stock. Mr. Dobb’s bonus consisted of $108,000 paid in cash and $14,180 paid in shares of common stock. Mr. Thompson’s bonus consisted of $125,000 paid in cash. Mr. Kaplan’s bonus consisted of $87,000 paid in cash and $11,688 paid in shares of common stock. The amounts reported in this column include the value of such shares. The value of these shares is not, however, reflected in the “Stock Awards” column.
(4)	The compensation listed in this column for 2008 includes: (a) our matching contributions to the accounts of the named executive officers under our 401(k) savings plan as follows: $6,900 for Mr. DeBlasio; $4,375 for Mr. Kilguss; $6,900 for Mr. Dobb; $0 for Mr. Sullivan; $4,003 for Mr. Thompson; $3,355 for Mr. Kaplan and $3,833 for Mr. Molinaro; and (b) payments made by us for premiums on certain life insurance policies in the amount of $54 for each of the named executive officers. The compensation listed in this column for Mr. DeBlasio also includes $35,550 for corporate housing, $16,168 for the use of a company-provided automobile and a gross up of $55,946 for the payment of estimated taxes on taxable reimbursements made to Mr. DeBlasio. The compensation listed in this column for Mr. Kilguss also includes a gross up of $23,107 for the payment of taxes related to relocation expenses and $64,302 in relocation expenses. The compensation listed in this column for Mr. Sullivan also includes a gross up of $25,139 for the payment of estimated taxes on taxable reimbursements made to Mr. Sullivan. The compensation listed in this column for Mr. Thompson also includes a sales bonus of $422. The compensation listed in this column for Mr. Molinaro includes a severance payment of $180,000 related to his termination of employment.
(5)	Mr. Kilguss’ employment began in April 2008.
(6)	Mr. Dobb’s employment began in April 2007.
(7)	Mr. Sullivan’s employment began in November 2006.
(8)	Mr. Kaplan resigned as our Chief Strategy Officer in June 2008.
(9)	Mr. Molinaro resigned as our Chief Operating Officer in June 2008.

Grants of Plan-Based Awards

The following table provides information regarding grants of awards made to the named executive officers in 2008:


Name and Principal	Grant			Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)				All Other Stock Awards: Number of Shares of Stock or Units		Grant Date Fair Value of Stock and Option Awards
Name and Principal	Grant			Threshold	Target		Maximum			Grant Date Fair Value of Stock and Option Awards
Position	Date			($)	($)		($)	(#)		($)
James P. DeBlasio		3/15/2008	(2)	—		—	—		6,638	40,160
former President and Chief Executive Officer		3/20/2008		128,800		322,000	644,000		149,776	536,950

George E. Kilguss III		4/30/2008		55,000		137,500	275,000		200,000	962,000
Chief Financial Officer

Richard P. Dobb		3/15/2008	(2)	—		—	—		2,409	14,574
Chief Administrative Officer		3/20/2008		41,545		103,863	207,727		34,606	124,066

Timothy P. Sullivan		3/15/2008	(2)	55,000		137,500	275,000		5,220	31,581
Chief Technology Officer		3/20/2008		—		—	—		53,298	191,078

Randal R. Thompson		3/20/2008		36,000		90,000	180,000		27,908	100,052
Vice President Global Sales

Philip N. Kaplan		3/15/2008	(2)	—		—	—		1,931	11,683
former Chief Strategy Officer		3/20/2008		43,920		109,803	219,600		34,048	122,065

Vincent Molinaro		3/20/2008		70,000		175,000	350,000		69,772	250,136
former Chief Operating Officer

(1)

In 2008, our revenue and adjusted EBITDA were less than the thresholds established in the 2008 Bonus Plan. Because we did not achieve either the revenue or EBITDA target, we did not pay bonuses to the named executive officers or other employees based on 2008 performance.

(2)

As permitted by the Stock Plan, the Compensation Committee determined and approved bonus payments in 2008 for performance in 2007 in excess of the targets established in the Stock Plan for each named executive officer, other than the Chief Executive Officer, and the Board of Directors determined the bonus payment for the Chief Executive Officer, and paid such excess in shares of our common stock on March 15, 2008. Mr. DeBlasio’s bonus consisted of $297,500 paid in cash and $40,163 paid in shares of common stock, or 6,638 shares. Mr. Dobb’s bonus consisted of $108,000 paid in cash and $14,180 paid in shares of common stock, or 2,409 shares. Mr. Kaplan’s bonus consisted of $87,000 paid in cash and $11,688 paid in shares of common stock, or 1,931 shares.

Outstanding Equity Awards At Fiscal Year-End

The following table lists the outstanding stock options and restricted stock awards for each named executive officer as of December 31, 2008:


								Stock Awards
								Number of Shares or Units of Stock That Have Not Vested			Market Value of Shares or Units of Stock That Have Not Vested(1)
	Option Awards
Name and Principal Position	Number of Securities Underlying Unexercised Options (#) Exercisable			Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price		Option Expiration Date
					($)			(#)			($)

James P. DeBlasio		25,000	(2)	—		13.50	9/16/2013		86,972	(3)	217,430
former Chief Executive Officer and President		2,000		—		14.90	5/27/2014		135,734	(4)	339,335
		2,000		—		4.60	6/23/2015		—		—
		406,250		93,750		4.80	9/30/2015		—		—

George E. Killgus III		—		—		—	—		200,000		500,000
Chief Financial Officer

Richard P. Dobb		—		—		—	—		22,500	(5)	56,250
Chief Administrative Officer		—		—		—	—		31,362		78,405

Timothy P. Sullivan		—		—		—	—		26,250		65,625
Chief Technology Officer		—		—		—	—		48,301		120,753

Randal R. Thompson		458		271		5.30	1/18/2016		3,750		9,375
Vice President Global Sales		1,625		562		14.46	9/28/2016		2,812		7,030
		—		—		—	—		30,000		75,000
		—		—		—	—		25,292		63,230

Philip N. Kaplan		—		—		—	—		—		—
former Chief Strategy Officer (6)

Vincent Molinaro		—		—		—	—		—		—
former Chief Operating Officer (7)

(1)	The fair market value of a share of our common stock on December 31, 2008 was $2.50.
(2)	Mr. DeBlasio was granted 500,000 options on September 30, 2005. Of the total award, 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. All of Mr. DeBlasio’s outstanding equity awards vested as of March 15, 2009 in connection with his termination of employment.
(3)	Mr. DeBlasio was awarded shares of restricted stock on September 30, 2005. Of the total award, 50% of those shares vested on September 30, 2006, with the remaining shares vesting annually over a three-year period beginning September 30, 2006. All of Mr. DeBlasio’s outstanding equity awards vested as of March 15, 2009 in connection with his termination of employment.
(4)	Mr. DeBlasio was granted 125,000 shares of restricted stock on March 15, 2007 that vested in a series of 16 quarterly installments at the end of each calendar quarter beginning with the second quarter of 2007. All of Mr. DeBlasio’s outstanding equity awards vested as of March 15, 2009 in connection with his termination of employment.
(5)	Mr. Dobb was granted 30,000 shares of restricted stock on April 23, 2007 with 25% of the award vesting on each anniversary of grant.
(6)	Mr. Kaplan resigned as our Chief Strategy Officer in June 2008.
(7)	Mr. Molinaro resigned as our Chief Operating Officer in June 2008.

Option Exercises and Stock Vested

The following table provides information with respect to options exercised during 2008.


	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 P. DeBlasio former Chief Executive Officer		—		—		68,600		274,468

George E. Kilguss III Chief Financial Officer		—		—		—		—

Richard P. Dobb Chief Administrative Officer		—		—		13,153		64,574

Timothy P. Sullivan Chief Technology Officer		—		—		18,967		92,311

Randal R. Thompson Vice President Global Sales		—		—		16,367		76,572

Philip N. Kaplan former Chief Strategy Officer		25,659		126,242		1,931		11,683

Vincent Molinaro former Chief Operating Officer		—		—		33,430		152,397

Employment Agreements and Potential Payments Upon Termination or Change in Control

James P. DeBlasio. Mr. DeBlasio served as our President and Chief Executive Officer until his resignation effective March 15, 2009, pursuant to an employment agreement (the “Employment Agreement”). Under the Employment Agreement, Mr. DeBlasio was entitled to receive a cash severance payment equal to one and one-half times his then-current base salary if we terminated his employment without cause, as defined in the Employment Agreement, or if Mr. DeBlasio terminated his employment for good reason, also as defined in the Employment Agreement. If we terminated Mr. DeBlasio’s employment without cause or if Mr. DeBlasio terminated his employment for good reason within 24 months of a change in control, as defined in the Employment Agreement, instead of the severance benefit previously described, Mr. DeBlasio would receive a severance payment equal to two times the sum of his then-current base salary plus the greater of (a) his maximum bonus for the year in which the termination occured and (b) his average bonus during the prior two completed years (as a percentage of his base salary upon which his bonus awards were calculated) multiplied by his then-current base salary, and all of his then-unvested stock options and additional equity compensation would vest and become exercisable. In addition, he would continue to receive health care and life insurance coverage for 18 months as if he were an active employee, subject to the employee portion of premiums for such coverage. If Mr. DeBlasio died while employed, all of his unvested equity compensation that would, had he not have died, have become vested within 12 months after the date of his death (assuming fulfillment of any performance criteria and his continued employment by us) would become vested, free of restrictions, other than those imposed by law, and immediately exercisable for a period ending on the earlier of 12 months after the date of death and the original expiration date thereof.

In January 2009, our Compensation Committee recommended, and the Board of Directors approved, modifications related to the severance provisions of the Employment Agreement. Pursuant to the terms of a separation agreement with Mr. DeBlasio, Mr. DeBlasio received (a) a cash payment of $927,200, (b) full vesting of all equity awards previously granted to him as of March 15, 2009 and (c) if he so elects, continued health, dental and vision insurance coverage under our group health plan for 18 months from March 15, 2009 at our cost. Mr. DeBlasio has until March 15, 2010 to exercise any stock options held by him that were vested as of March 15, 2009. Mr. DeBlasio has agreed to provide consulting services to us as needed to assist in the transition and other matters and will be compensated at a rate of $250 per hour for his time. Mr. DeBlasio continues to have certain non-disclosure and non-solicitation obligations.

J. Eric Cooney. On January 29, 2009, we entered into an agreement with Mr. Cooney, including a joinder agreement described below, for him to serve as our President and Chief Executive Officer and as a director, effective as of March 16, 2009. Mr. Cooney receives (a) an annual base salary of $600,000, (b) a cash signing bonus of $300,000 (under certain circumstances, Mr. Cooney will be obligated to reimburse us for $150,000 of the signing bonus if his employment terminates prior to March 1, 2011), (c) an option to purchase 600,000 shares of our common stock at $2.24 per share, the closing price on the day of commencement of work, 25% of which will vest on the first anniversary of the grant date and the remainder to vest in 36 equal monthly installments thereafter, (d) a new hire grant of 300,000 shares of restricted stock, which will vest in four equal annual installments, (e) a grant of 200,000 shares of restricted stock on each of the first anniversary and the second anniversary of Mr. Cooney’s commencement of work, both such grants to vest in four equal annual installments, (f) an annual incentive bonus based upon criteria established by our Board of Directors, with a target level of 100% of base salary and a maximum level of 200% of base salary and (g) customary benefits including vacation. The offer letter provides for “at will” employment. Mr. Cooney also participates in our Employment Security Plan discussed below.

Employment Security Plan. We have entered into an Employment Security Plan with our named executive officers which provides for payments in the event of a change in control or termination of the officer’s employment. We believe that the interests of our stockholders will be best served if the interests of our officers are aligned with them in the event of a change in control. Providing change in control benefits should eliminate, or at least reduce, the reluctance of these officers to pursue potential change in control transactions that may be in the best interests of our stockholders. The Employment Security Plan is designed to promote stability and continuity of our officers and was adopted to bring consistency to executives’ agreements and to minimize the negotiation of individual contracts.

Upon a qualifying termination, as defined in the Employment Security Plan, other than during a protection period, also as defined in the Employment Security Plan, a participant will receive severance equal to his or her then-current base salary for the year in which the termination occurs. Upon a qualifying termination during a protection period (generally, in the event of a change-in-control related termination), a participant will receive severance equal to the sum of his or her then-current base salary plus the maximum bonus for the participant under the applicable bonus plan as established by our Board of Directors for the year in which the termination occurs, and all of his or her unvested equity-based compensation will vest. If the amounts payable to a participant under the Employment Security Plan result in the participant becoming liable for the payment of any excise taxes pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, the participant will receive the greater on an after-tax basis of (a) the severance benefits payable or (b) a reduced severance benefit to avoid the imposition of the 280G excise tax.

A participant is entitled to severance benefits under the Employment Security Plan in consideration for execution of a general release and separation agreement with terms substantially similar to those approved by the Board of Directors and attached to the Employment Security Plan. Our obligation to provide such severance benefits is also conditioned upon the participant’s continued compliance with confidentiality, non-competition, non-solicitation and non-disparagement covenants.

The Employment Security Plan superseded previously-executed employment agreements for Messrs. Dobb, Sullivan, Molinaro and Kaplan. Messrs. Molinaro and Kaplan resigned from their positions in 2008 and no longer participate in the Employment Security Plan. Certain executives also have entered into joinder agreements which modify specific provisions of the Employment Security Plan. The joinder agreements for each of Messrs Dobb, Molinaro, and Kaplan preserved certain benefits of each executive’s superseded employment agreement that were greater than those provided by the Employment Security Plan. The joinder agreement of each named executive officer modifies the general terms of the Employment Security Plan as follows:

J. Eric Cooney. Upon a qualifying termination during a protection period, Mr. Cooney will receive severance equal to the sum of two and one-half times his then-current base salary plus the maximum bonus for him under the applicable bonus plan established by the Board of Directors for the year in which the termination occurs, and all of his unvested equity-based awards will vest. If the amounts payable to Mr. Cooney under the Employment Security Plan would constitute an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, the amounts payable to Mr. Cooney under the Employment Security Plan will be grossed-up for the payment of taxes.

George E. Kilguss III. Mr. Kilguss was entitled to be reimbursed for relocation expenses of up to $75,000. The amounts reimbursed to Mr. Kilguss in 2008 are listed in the Summary Compensation Table above.

Richard P. Dobb. Upon a qualifying termination during a protection period, Mr. Dobb will receive severance equal to the sum of two times his then-current base salary plus the maximum bonus for him under the applicable bonus plan established by the Board of Directors for the year in which the termination occurs.

Timothy P. Sullivan. Upon a qualifying termination during a protection period, Mr. Sullivan will receive severance equal to the sum of two times his then-current base salary plus the maximum bonus for him under the applicable bonus plan established by the Board of Directors for the year in which the termination occurs.

Randal R. Thompson. The terms of Mr. Thompson’s joinder agreement do not modify the Employment Security Plan with respect to his participation.

Philip N. Kaplan. Upon a qualifying termination during a protection period, Mr. Kaplan was entitled to receive severance equal to the sum of two times his then-current base salary plus the maximum bonus for him under the applicable bonus plan established by the Board of Directors for the year in which the termination occurs, and options originally granted to him on December 2, 2004 and December 16, 2005 would have vested in their entirety. Mr. Kaplan voluntarily resigned his position as Chief Operating Officer in June 2008, and did not receive the severance benefits provided under his joinder agreement.

Vincent Molinaro. Upon a qualifying termination, Mr. Molinaro was entitled to receive severance equal to one and one-half times his then-current base salary. Upon a qualifying termination during a protection period, Mr. Molinaro was entitled to receive severance equal to the sum of two times his then-current base salary plus the maximum bonus for him under the applicable bonus plan established by the Board of Directors for the year in which the termination occurs. Mr. Molinaro resigned his position as Chief Operating Officer in June 2008, and was paid severance in the amount of $180,000.

Compensation of Directors

We pay each non-employee director an annual cash retainer of $20,000 plus $1,500 for attendance at each meeting of the Board of Directors scheduled as an in-person meeting and $1,000 for attendance at each committee meeting scheduled as an in-person meeting. We pay directors $750 for attendance at each meeting of the Board of Directors and each committee meeting scheduled as a teleconference meeting.

Dr. Eidenberg currently serves as our Chairman of the Board. For his service as Chairman, Dr. Eidenberg receives an annual retainer of $40,000. This payment is in lieu of the annual director cash retainer fee of $20,000. Dr. Eidenberg receives the standard director fee for attendance at Board and committee meetings and standard director equity compensation (discussed below).

We pay the chairperson of our Audit Committee an annual retainer of $10,000, and each other member of the Audit Committee an annual retainer of $5,000. We pay the chairperson of our Compensation Committee an annual retainer of $7,500, and each other member of the Compensation Committee an annual retainer of $2,500. We pay the chairperson of our Nominations and Governance Committee an annual retainer of $5,000.

We pay director expenses in connection with attending Board and committee meetings. Directors who are also employees do not receive any additional compensation for serving on the Board of Directors or any of its committees.

Director compensation in 2008 also included (a) a fully-vested and exercisable stock option grant of 5,000 shares of our common stock with an exercise price equal to 100% of the fair market value of our common stock on the grant date; and (b) a grant of 2,500 shares of restricted stock, which vest ratably over three years. Each newly-appointed director is also granted 12,500 shares of restricted stock, which vest ratably over three years.

To retain and attract highly-qualified individuals, the Board of Directors has historically targeted its compensation at the median of the market based on a survey provided by Aon for software and Internet technology companies with $200 to $500 million in revenues. Given that the value of the equity component of our Board’s compensation package has fallen significantly below the market median, the Board of Directors has approved an increase in the value of the 2009 annual grants of stock options and restricted stock to a total of $55,000. This increase brings the equity component of the program closer to (but still somewhat below) the target value established by the Board in prior years. The actual number of stock options and shares of restricted stock to be granted in 2009 will be the lesser of dividing $55,000 by either (a) our closing stock price on the grant date, or (b) three dollars per share. The Board intends to further review the components of the compensation program, including both the cash and equity components, later in 2009 to determine the need for any further adjustments within the context of current economic conditions and updated market compensation levels, as consistent with its philosophy of targeting the median of the market for similar companies.

The Board of Directors adopted a stock retention policy in 2007 that requires each director to retain 50% of the “net shares” he or she acquires through exercises of stock option and vesting of restricted stock until six months following completion of the director’s services to us. Net shares are shares obtained after costs of exercise and taxes to the director. Our Board of Directors believes this policy to be an important corporate governance measure and considers it important in further aligning the interests of our directors with those of our stockholders.

The following table lists the compensation paid to our non-employee directors during 2008:


Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)(1)(2)(3)		Option Awards ($)(1)(2)(3)		Total ($)
Eugene Eidenberg, Chairman		61,250		13,779		15,506		90,535
Charles B. Coe		50,500		19,753		15,506		85,759
William J. Harding		45,500		2,392		15,506		63,398
Patricia L. Higgins		63,250		19,753		15,506		98,509
Kevin L. Ober		49,250		19,753		15,506		84,509
Gary M. Pfeiffer		55,750		64,129		15,506		135,385
Daniel C. Stanzione		54,250		13,779		15,506		83,535

(1)	The amounts reported reflect the aggregate dollar amounts recognized for stock awards and option awards, respectively, for financial statement reporting purposes with respect to fiscal 2008 (disregarding any estimate of forfeitures related to service-based vesting conditions). For a discussion of the assumptions and methodologies used to calculate the amounts reported in these columns, please see the discussion of stock and option awards contained in our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2008.
(2)	The grant date fair value of each equity award computed in accordance with SFAS 123(R) is the same as the amount recognized by us for financial statement reporting purposes in accordance with SFAS 123(R). For valuation assumptions, see our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2008.
(3)	The following table lists the number of outstanding stock options and restricted stock awards held by our non-employee directors as of December 31, 2008. All outstanding options are fully vested:

Name	Options		Restricted Stock
Eugene Eidenberg		147,999		4,167
Charles B. Coe		41,000		4,167
William J. Harding(a)		5,000		2,500
Patricia L. Higgins		39,000		4,167
Kevin L. Ober		26,000		4,167
Gary M. Pfeiffer		5,000		10,833
Daniel C. Stanzione		39,000		4,167

(a)

Dr. Harding retired from Morgan Stanley Venture Partners III, LLC and Morgan Stanley & Co., Inc. in October of 2007. He assigned all of his equity compensation received while serving on our Board of Directors to Morgan Stanley, which consisted of 2,500 shares of restricted common stock and options to purchase 27,000 shares of common stock that are vested and exercisable. Dr. Harding disclaims beneficial ownership in all such shares. Because Dr. Harding has retired from Morgan Stanley, such shares are excluded from the table above.

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 included in the proxy statement and filed with the SEC.


	The Compensation Committee

	Charles B. Coe, Chairman
	Patricia L. Higgins
	Gary M. Pfeiffer
	Daniel C. Stanzione

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Of the Compensation Committee members whose names appear on the Compensation Committee Report above, all were committee members during all of 2008. No current member of the Compensation Committee is a current or former executive officer or employee of Internap. None of our executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee during the year ended December 31, 2008.

CERTAIN RELATIONSHIPS AND TRANSACTIONS

No related party had any relationships requiring disclosure by us under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. We do not have policies and procedures for the review, approval or ratification of any transactions with related parties because we have not historically had to consider a related party transaction.

AUDIT COMMITTEE REPORT

The primary function of the Audit Committee is to assist the Board of Directors in its oversight and monitoring of our financial reporting and auditing process. In January 2007, our Board of Directors adopted an amended 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 accounting firm audits the annual financial statements prepared by management and expresses 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 accounting firm also audits the effectiveness of internal control over financial reporting and discusses 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 accounting firm.

Representatives of PricewaterhouseCoopers LLP, our independent registered public accounting firm, attended nine regular meetings of the Audit Committee during 2008. The Audit Committee reviewed and discussed with management and PricewaterhouseCoopers LLP our audited financial statements for the year ended December 31, 2008 and our unaudited quarterly financial statements for the quarters ended March 31, June 30 and September 30, 2008. The Audit Committee also discussed with PricewaterhouseCoopers LLP the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (Communication 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, 2008 are compatible with maintaining their independence. The Audit Committee has determined to engage PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2009.

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 Board of Directors include the audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2008 for filing with the SEC.


	Audit Committee

	Patricia L. Higgins, Chairman William J. Harding Kevin L. Ober Gary M. Pfeiffer

The foregoing report of the Audit Committee shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Exchange Act, unless we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.

PROPOSAL 2—RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Our Audit Committee has appointed PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2009. 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. The Board of Directors, 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 this 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, 2008 and 2007.


	2008		2007
Audit Fees(1)	$	2,250,926	$	1,988,994
Audit-Related Fees(2)		578,049		325,694
Tax Fees(3)		42,265		78,530
All Other Fees(4)		1,500		1,500
Total	$	2,872,740	$	2,394,718

(1)	Fees related to the audit of our annual financial statements, including the audit of the effectiveness 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.
(3)	Fees primarily related to tax compliance, advice and planning.
(4)	Fees related to the renewal of our accounting research software.

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 accounting firm, and the Audit Committee will not approve any services that are not permitted by SEC rules.

The Audit Committee pre-approved all audit and audit related, tax and non-audit related services to be performed for us by our independent registered public accounting firm.

Your 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 December 31, 2009.

PROPOSAL 3—STOCKHOLDER PROPOSAL ON STOCKHOLDER RIGHTS PLAN

The following proposal and supporting statement were submitted by the WHI Technology Fund, LLC, 191 N. Wacker Drive, Chicago, Illinois 60606-1899, which has advised us that it holds shares of our common stock valued at more than $2,000 and has stated its intention to present the proposal at the Annual Meeting:

Whereas, the current Preferred Stock Rights Agreement (“Agreement”) is not in the best interests of the Company, its stockholders, and other relevant constituencies,

Resolved, the Board of Directors should amend the bylaws of the Company to require the following provisions on any future stock rights agreements: 1) any plan must be brought up for shareholder approval within 12 months of adoption, 2) any flip-in or flip-over percentages must be no less than 25%, 3) the automatic sunset provision of any “poison pill” should be no longer than 2 years, and 4) plans should not contain dead-hand or slow-hand provisions. Exceptions to these provisions should be made for rights plans to protect non-operating losses (NOLs) under Section 382. Further, the TIDE Committee of the Board of Directors should immediately terminate the current Agreement under Section 28 thereof.

Supporting Statement

In April, 2007, the Board of Directors instituted a Preferred Stock Rights Agreement. Because Shareholder Rights Plans (typically known as poison pills) dramatically alter the balance of power between shareholders and the Board of Directors, it is important to put safeguards in place to protect against the Board supplanting the rights of the shareholders.

The current poison pill has several provisions that are not in-line with current best practices. First, it has never been subject to a vote of the shareholders. Second, the flip-in percentage of 15% is too low, effectively preventing shareholder’s from gaining enough shares to influence the governance of the Company, and therefore adversely shifting the balance of power between the Board of Directors and shareholders. Third, the 10 year sunset provision is too long. The provisions in this proposal would bring any future Shareholder Rights offerings into compliance with current governance best practices, such as those recommended by the RiskMetrics Group (formerly known as Institutional Shareholder Services, Inc. or ISS).

To correct these deficiencies, we propose the Board of Directors terminate the current Agreement and put provisions in place to make sure that any future rights plans are in-line with current best practices. If the TIDE Committee of the Board of Directors feels that it is still in the best interest of the shareholders, and other relevant parties, to have a rights agreement in place, it should place a proposal for a new rights agreement that meets all of the criteria of this proposal on the proxy for this year’s (or a future) Shareholder meeting. This would bring the rights agreement into compliance with current best practices and concurrently allow shareholders to vote on the matter.

Statement of Your Board of Directors in Opposition to the Stockholder Proposal

Our Board of Directors implemented its stockholder rights plan in April 2007 (the “Rights Plan”) after careful and thorough review of stockholder rights plans in general, best corporate governance practices and its fiduciary duties to stockholders and after concluding that implementing the Rights Plan was in fact in the best interests of our stockholders. The overriding objective of the Rights Plan is to preserve and maximize stockholder value. Our Board of Directors periodically reviews the Rights Plan to determine whether it remains in the best interests of the stockholders or whether changes would be advisable. The Rights Plan will expire on April 11, 2017 unless the Board of Directors affirmatively acts to extend it.

Our Board of Directors adopted the Rights Plan to provide it with a means to respond to abusive takeover tactics that could result in an acquisition of our company that does not maximize stockholder value. The Rights Plan will neither interfere with a favorable negotiated transaction nor preclude unsolicited acquisitions. Rather, the Rights Plan is designed to:


	●	encourage potential acquirors to negotiate with our Board of Directors before attempting an acquisition; 
	●	provide our Board of Directors with adequate time to evaluate an acquisition offer;

	●	strengthen our Board of Director’s position to negotiate the most attractive acquisition offer possible for the benefit of our stockholders; and
	●	provide our Board of Directors with the opportunity to develop alternatives that may maximize stockholder value, preserve our long-term value and ensure that all stockholders are treated fairly.

Absent the existence of the Rights Plan, a potential acquiror may take steps to acquire control of the company while circumventing the Board of Directors through mechanisms such as partial or two-tier tender offers, “creeping” acquisitions through the purchase of stock on the open market and other unfair or abusive acquisition tactics. These approaches allow acquirors to avoid negotiating with the Board of Directors, generally resulting in a stronger position for the acquiror to achieve a lower acquisition price at the expense of some or all of the stockholders.

Our Board of Directors owes fiduciary duties to all of our stockholders, regardless of the size of their holdings, to evaluate any legitimate acquisition proposal and determine whether it would maximize stockholder value. This is a duty that the Board of Directors takes extremely seriously. The Rights Plan provides our Board of Directors with an important means by which to fulfill its fiduciary duties. Before adoption of the Rights Plan, our Board of Directors carefully reviewed best corporate governance practices with respect to stockholder rights plans. We further received the advice of outside legal counsel with respect to our fiduciary duties to our stockholders in connection with the adoption of the Rights Plan. The Rights Plan was not designed to prevent or hinder acquisition proposals that are favorable to our stockholders or that would be inconsistent with our fiduciary duties to stockholders. Because our Board of Directors has the right to redeem the rights issued under the Rights Plan and thus remove the Rights Plan as an impediment to an acquisition, the Board of Directors then has the means to facilitate a transaction that is in the best interests of our stockholders or negotiate a higher value in the face of an unfavorable proposal. Indeed, many companies with stockholder rights plans have received unsolicited acquisition proposals and have redeemed their rights once the board of directors negotiated the offer and concluded that it was in the best interests of stockholders.

The proposal recommends that the current Rights Plan be terminated and proposes guidelines for any future stockholder rights plan. We believe that these guidelines would result in a weaker, less effective stockholder rights plan that would be less likely to accomplish the goals discussed above. The Rights Plan was carefully designed to provide the Board of Directors with the means to fulfill its fiduciary duties to our stockholders.

Contrary to the view expressed by this proposal’s proponent, the existence of the Rights Plan does not supplant stockholder rights. Seven of the Board of Director’s eight members are independent directors, all of whom are well versed in business and financial matters as well as the company’s business. We believe our Board of Directors is in the best position to negotiate on behalf of all stockholders, evaluate the adequacy of any offers and seek the highest price if a sale is determined to be in the best interests of the company and our stockholders. Neither Delaware law nor any rule or regulation of the NASDAQ Global Market requires stockholder approval of the Rights Plan. Our Board of Directors further believes that termination of the Rights Plan or requiring stockholder approval of any new stockholder rights plan could seriously undermine its ability to fulfill its fiduciary duties to preserve and maximize stockholder value.

Current economic conditions further support the necessity for the Rights Plan. Market valuations generally are low as compared to historical valuations. It is during such times that hostile acquisition activity generally increases as potential acquirors take advantage of short-term drops in market capitalization. A stockholder rights plan is an advisable deterrent to such activity. According to a study by Shark Repellant, the number of companies adopting stockholder rights plans in 2008 increased by 81%. We believe this is reflective of the need for stockholder rights plans in the current market environment. Furthermore, a 1997 Georgeson & Company study of takeover premiums from 1992 to 1996 estimated that premiums paid to acquire target companies with stockholder rights plans averaged 8% higher than for those companies without stockholder rights plans.

Our Board of Directors believes that continuing the Rights Plan is consistent with, and in furtherance of, its fiduciary duties and is in your best interests. Terminating the Rights Plan, particularly in these uncertain economic times, would remove an important tool that our Board of Directors should have for your protection. Our Board believes that any decision to terminate the Rights Plan should be made by the Board of Directors and should be made in the context of a specific acquisition proposal.

Your Board of Directors unanimously recommends that you vote AGAINST the stockholder proposal.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act and SEC regulations require our directors, executive officers and persons who own more than 10% of our outstanding common stock, to file reports of ownership and changes in ownership of our common stock with the SEC. Directors, executive officers and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.

Based solely on our review of copies of these reports or of certifications to us that no report was required to be filed, we believe that all of our directors and executive officers complied with all Section 16(a) filing requirements applicable to them during the 2008 fiscal year, except Mr. Dobb, who filed one late Form 4 in connection with the sale of shares to cover tax withholding obligations upon vesting of restricted stock.

STOCKHOLDERS’ PROPOSALS FOR 2010 ANNUAL MEETING

To be considered timely, any stockholder proposal intended to be presented at the 2010 annual meeting must be received by us at our executive offices in Atlanta, Georgia, no later than March 20, 2010 and no earlier than February 18, 2010. Pursuant to applicable rules under the Exchange Act, some stockholder proposals may be eligible for inclusion in our 2010 proxy statement and proxy card. Any such stockholder proposals must be submitted in writing to our Secretary no later than December 31, 2009.

You should address all stockholder proposals to the attention of the Secretary of Internap Network Services Corporation, 250 Williams Street, Suite E-100, Atlanta, Georgia 30303.

SOLICITATION OF PROXIES

We will initially seek proxies by mail. Our directors, officers and employees also may solicit proxies by telephone or facsimile or personally without additional compensation. Proxies may be solicited by nominees and other fiduciaries who may mail materials to or otherwise communicate with the beneficial owners of shares held by them. We will pay all costs of solicitation of proxies, including the charges and expenses of brokerage firms, banks, trustees or other nominees for forwarding proxy materials to beneficial owners. We have engaged Morrow & Co., LLC, 470 West Avenue, Stamford, Connecticut 06902, to assist us in the solicitation of proxies at an initial anticipated cost of approximately $6,500 plus reasonable out-of-pocket expenses.

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 us of their desire to receive multiple copies of this Proxy Statement. We 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.


	1.	Elect three directors for three-year terms expiring in 2012;

	2.	Ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for our fiscal year ending December 31, 2009;

	3.	Consider and vote on a stockholder proposal relating to our Rights Agreement; and

	4.	Transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof.


Q:	Why am I receiving these materials?

A:	Our Board of Directors is providing these proxy materials to you in connection with its solicitation of proxies for use at the Internap 2009 Annual Meeting of Stockholders, which will take place on June 18, 2009, at our corporate headquarters located at 250 Williams Street, Suite E-100, Atlanta, Georgia, at 10:00 a.m. local time. Stockholders are invited to attend the annual meeting and are requested to vote upon the proposals described in this Proxy Statement.

Q:	What information is contained in these materials?

A:	The information included in this Proxy Statement relates to the proposals to be voted upon at the annual meeting, the voting process, the compensation of our directors and named executive officers and certain other required information. Our Annual Report to Stockholders for the year ended December 31, 2008, which includes our audited consolidated financial statements, is included in these proxy materials. Your proxy, which you may use to vote, is also enclosed.

Q:	What proposals will be voted upon at the Annual Meeting?

A:	There are three proposals scheduled to be voted upon at the annual meeting:

	●	election of three directors for three-year terms expiring in 2012;
	●	ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for our fiscal year ending December 31, 2009; and
	●	consideration of a stockholder proposal relating to our Rights Agreement.

	In addition, such other business as may properly come before the meeting will be considered and voted upon. We are not currently aware of any other matters to be considered and voted upon at the meeting.

Q:	How does Internap’s Board of Directors recommend that I vote?

A:	Your Board of Directors recommends that you vote your shares “FOR” each of the nominees to the Board of Directors and “FOR” ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for our fiscal year ending December 31, 2009. Your Board of Directors recommends that you vote your shares “AGAINST” the stockholder proposal relating to our Rights Agreement.

Q:	Who may vote?

A:	You may vote at the annual meeting or by proxy if you were a stockholder of record at the close of business on April 24, 2009. Each stockholder is entitled to one vote per share on each matter presented. As of April 24, 2009, there were 50,805,919 shares of our common stock outstanding.

Q:	How do I vote before the Annual Meeting?

A:	We offer the convenience of voting by mail-in proxy, telephone or the Internet as described in more detail below. See the enclosed proxy for voting instructions. If you properly sign and return the proxy in the form we have provided or properly vote by telephone or the Internet, your shares will be voted at the annual meeting and at any adjournment of that meeting.

Q:	What if I return my proxy but do not provide voting instructions?

A:	If you specify a choice, your proxy will be voted as specified. If you return a signed proxy but do not specify a choice, your shares will be voted in favor of the election of all nominees named in this Proxy Statement, in favor of the proposal to ratify PricewaterhouseCoopers LLP as the independent registered public accounting firm for our fiscal year ending December 31, 2009 and against the stockholder proposal relating to our Rights Agreement. In all cases, your proxy will be voted in the discretion of the individuals named as proxies on the proxy card with respect to any other matters that may come before the annual meeting.

Q:	Can I change my mind after I vote?

A:	You may revoke your proxy at any time before it is exercised by delivering written notice of revocation to the Secretary of Internap or by attending and voting at the annual meeting.

Q:	How can I vote my shares in person at the Annual Meeting?

A:	Shares held directly in your name as the stockholder of record may be voted in person at the annual meeting. If you choose to vote in person, please bring the enclosed proxy card and proof of identification. Even if you plan to attend the annual meeting in person, we recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the annual meeting. Shares held in “street name” through a brokerage account or by a bank or other nominee may be voted in person by you if you obtain a signed proxy from the record holder giving you the right to vote the shares.

Q:	What is the quorum requirement for the Annual Meeting?

A:	The presence in person or by proxy of the holders of a majority of the shares entitled to vote at the annual meeting is necessary to constitute a quorum. In determining the presence or absence of a quorum for the annual meeting, all shares for which a proxy or vote is received will be counted as present and represented at the meeting, including abstentions and shares represented by a broker vote on any matter.

Q:	What is the voting requirement to approve each of the proposals?

A:	A plurality of the shares voting is required to elect directors. This means that the nominees who receive the most votes will be elected. In counting votes on the election of directors, only votes “for” or “withheld” affect the outcome. Broker non-votes (which are explained below) will be counted as not voted and will be deducted from the total shares of which a plurality is required.

	Each other matter to be voted upon at the annual meeting will be approved if a majority of the shares present or represented at the meeting and entitled to vote upon the proposal are voted in favor of such matter. In counting votes on each such matter, abstentions will be counted as voted against the matter and broker non-votes will be counted as not voted upon the matter and deducted from the total shares of which a majority is required.

Q:	What are broker non-votes and what effect do they have on the proposals?

A:	Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a particular proposal because (a) the broker has not received voting instructions from the beneficial owner and (b) the broker lacks discretionary voting power to vote those shares.

	If you do not vote your proxy and your shares are held in street name, your brokerage firm may either vote your shares on routine matters or leave your shares unvoted. Under the rules of the NASDAQ Global Market, 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. 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 proposal for the election of directors and the ratification of the appointment of our independent registered public accounting firm are routine. The stockholder proposal relating to our Rights Agreement is non-routine. Accordingly, brokers that do not receive instructions will be entitled to vote on the election of directors and the ratification of the appointment of our independent registered public accounting firm at the annual meeting, but may not vote for the stockholder proposal relating to our Rights Agreement.

Q:	What does it mean if I receive more than one proxy or voting instruction card?

A:	It means that your shares are registered differently or are in more than one account. Please provide voting instructions for all proxy and voting instruction cards you receive.

Q:	Where can I find the voting results of the Annual Meeting?

A:	We will announce preliminary voting results at the annual meeting and publish final results in our quarterly report on Form 10-Q for the second quarter of 2009.

	Common Stock Beneficially Owned
Name and Address of Beneficial Owner	Number of Shares(1)		Percent of Class

Kornitzer Capital Management, Inc.(2)		3,428,025		6.7	%
5420 West 61st Place
Shawnee Mission, Kansas 66205
Integral Capital Management VII, LLC, Integral Capital		4,310,000		8.5	%
Management VIII, LLC and ICP Absolute Return
Management, LLC(3)
3000 Sand Hill Road, Building 3, Suite 240
Menlo Park, California 94025
J. Eric Cooney(4)		400,000		*
James P. DeBlasio(5)		774,284		1.5	%
Charles B. Coe		61,000		*
Eugene Eidenberg(6)		250,156		*
William J. Harding(7)		32,282		*
Patricia L. Higgins		48,729		*
Kevin L. Ober		31,000		*
Gary M. Pfeiffer		20,000		*
Daniel C. Stanzione		53,000		*
George E. Kilguss III		237,700		*
Richard P. Dobb		96,849		*
Timothy P. Sullivan		128,022		*
Randal R. Thompson		99,437		*
Philip N. Kaplan(8)		329,321		*
Vincent Molinaro(9)		33,430		*
All directors and executive officers as a group (15 persons)		2,595,210		5.0	%

¨	Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

	(1)	Title of each class of securities to which transaction applies:

	(2)	Aggregate number of securities to which transaction applies:

	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.


	By order of the Board of Directors,


	Corporate Secretary and Chief Administrative Officer


Audit Committee	Compensation Committee	Nominations and Governance Committee

William J. Harding	Charles B. Coe (Committee Chair)	Charles B. Coe
Patricia L. Higgins (Committee Chair)	Patricia L. Higgins	Eugene Eidenberg
Kevin L. Ober	Gary M. Pfeiffer	Patricia L. Higgins
Gary M. Pfeiffer	Daniel C. Stanzione	Daniel C. Stanzione (Committee Chair)


	●	appoints, retains, compensates, oversees, evaluates and, if appropriate, terminates our independent registered public accounting firm;
	●	annually reviews the performance, effectiveness, objectivity and independence of our independent registered public accounting firm and our internal audit function;
	●	establishes procedures for the receipt, retention and treatment of complaints regarding accounting and auditing matters;
	●	reviews with our independent registered public accounting firm the scope and results of their audit;
	●	approves all audit services and pre-approves all permissible non-audit services to be performed by our independent registered public accounting firm;
	●	reviews our policies and systems with respect to risk assessment and risk management and discusses significant risks or exposures with management and our independent registered public accounting firm;
	●	oversees the financial reporting process and discusses with management and our independent registered public accounting firm the interim and annual financial statements that we file with the Securities and Exchange Commission (the “SEC”); and
	●	reviews and monitors our accounting principles, policies and financial and accounting controls.


	●	assists the Board of Directors in discharging its responsibilities relating to executive compensation and fulfilling its responsibilities relating to our compensation and benefit programs and policies;
	●	oversees the overall compensation structure, policies and programs, and assesses whether the compensation structure establishes appropriate incentives;
	●	reviews and approves corporate and personal goals and objectives relevant to Chief Executive Officer compensation, evaluates the performance of the Chief Executive Officer in light of these goals and objectives, and, together with the other independent directors, approves the compensation of the Chief Executive Officer based on the evaluation;
	●	reviews and approves the compensation of our executive officers, including bonuses and equity compensation;
	●	administers and makes recommendations with respect to our stock option and other equity-based incentive plans; and
	●	reviews and discusses with management our Compensation Discussion and Analysis and related disclosures required by the rules of the SEC and recommends to the Board of Directors whether such disclosures should be included in our annual report and proxy statement.


	●	interviews each potential director nominee and recommends, consistent with criteria approved by the Board, suitable candidates for nomination or appointment to the Board;
	●	in conjunction with the Board, establishes qualification standards for Board and committee membership;
	●	develops and recommends to the Board an annual self-evaluation process for the Board and its committees and oversees the evaluation process;
	●	establishes and recommends director independence guidelines to the Board; and
	●	reviews and reports on all matters generally relating to corporate governance.

	(1)	Amount Previously Paid:

	(2)	Form, Schedule or Registration Statement No.:

	(3)	Filing Party:

(2)	Based on information set forth in Schedule 13G filed January 9, 2009. Kornitzer reported that it had sole voting power over 3,428,025 shares of common stock, sole dispositive power over 3,304,650 shares of common stock and shared dispositive power over 123,375 shares of common stock.
(3)	Based on information set forth in Amendment No. 1 to Schedule 13G filed February 9, 2009. Integral Capital Management VII, LLC reported that it had shared voting and dispositive power over 2,500,000 shares of common stock; Integral Capital Management VIII, LLC reported that it had shared voting and dispositive power over 1,400,000 shares of common stock; and ICP Absolute Return Management, LLC reported that it had shared voting and dispositive power over 410,000 shares of common stock.
(4)	Mr. Cooney became our President and Chief Executive Officer on March 16, 2009.
(5)	Mr. DeBlasio resigned as our President and Chief Executive Officer on March 15, 2009. In connection with the termination of his employment, all outstanding shares of restricted stock and options to purchase common stock became immediately vested as of his termination date.
(6)	Includes 236 shares of common stock held by Dr. Eidenberg; 45,556 shares of common stock held by Dr. Eidenberg, as trustee of the Eugene Eidenberg Trust dated 9/97; 2,799 shares of common stock held by Eugene Eidenberg, as trustee of the Anna M. Chavez Educational Trust; 40,000 shares of common stock held by the Eugene Eidenberg Grantor Retained Annuity Trust and 8,566 shares held by Anna M. Chavez.
(7)	Dr. Harding retired from Morgan Stanley Venture Partners III, LLC and Morgan Stanley & Co., Inc. in 2007. At that time, Dr. Harding assigned all of his equity compensation received while serving on our Board of Directors to Morgan Stanley, which consisted of 2,500 shares of restricted common stock and options to purchase 27,000 shares of common stock that are vested and exercisable. Dr. Harding disclaims beneficial ownership in all such shares. Because Dr. Harding has retired from Morgan Stanley, such shares are excluded from the table above.
(8)	Mr. Kaplan resigned his position as Chief Strategy Officer in June 2008. The number of shares reported in the table above is based on the latest information available to us which may not reflect the current holdings of Mr. Kaplan.
(9)	Mr. Molinaro resigned his position as Chief Operating Officer in June 2008. The number of shares reported in the table above is based on the latest information available to us which may not reflect the current holdings of Mr. Molinaro.


	●	making it more difficult to assess future market conditions and set appropriate performance targets;
	●	making it more difficult for our named executive officers and our company to achieve their respective performance targets; and
	●	contributing to reductions in our stock price, which in turn may adversely affect the value of equity compensation.


	●	the 2008 Confidential Radford Executive Compensation Survey, Telecommunications Products/Services with revenues from $200 million to $1 billion;
	●	the 2007 William M. Mercer Executive Compensation Report, All Organizations with revenues less than $1 billion; and
	●	the 2007 Watson Wyatt Industry Report on Top Management Compensation, All Organizations with revenues from $150 million to $750 million.


	●	base salary;
	●	annual cash incentives; and
	●	long-term equity incentives, consisting of stock options and restricted stock.

Name	Base Salary

James P. DeBlasio(1)	$	460,000
George E. Kilguss III(2)		275,000
Richard P. Dobb(3)		272,800
Timothy P. Sullivan(4)		275,000
Randal R. Thompson		200,000
Philip N. Kaplan(5)		244,000
Vincent Molinaro(6)		360,000

	(1)	Mr. DeBlasio resigned as our President and Chief Executive Officer as of March 15, 2009.
	(2)	Mr. Kilguss became our Chief Financial Officer in April 2008.
	(3)	Mr. Dobb received an increase of his base salary from $248,000 to $272,800 in June 2008 for his promotion to Chief Administrative Officer.
	(4)	Mr. Sullivan received an increase of his base salary to from $250,000 to $275,000 in March 2008 in recognition of additional responsibilities assumed in his role as Chief Technology Officer.
	(5)	Mr. Kaplan resigned as our Chief Strategy Officer in June 2008.
	(6)	Mr. Molinaro resigned as our Chief Operating Officer in June 2008.


	●	focus participants’ actions on the achievement of corporate annual revenue growth and profitability goals;
	●	align participant’s actions to accomplish key corporate operational and strategic goals;
	●	encourage and reward participants for the achievement of specific individual objectives; and
	●	maintain a competitive range of incentive compensation opportunities.


	●	achievement of corporate revenue goals, which comprised 25% of the potential award;
	●	achievement of corporate adjusted EBITDA goals, which comprised 50% of the potential award; and
	●	achievement of individual goals by the named executive officer, which comprised 25% of the potential award.