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Preliminary
Proxy Statement
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o
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Definitive
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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Internap
Network Services Corporation
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(Name
of Registrant as Specified In Its
Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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þ
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Fee
not required.
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o
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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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):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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o
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Fee
paid previously with preliminary materials.
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o
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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Very
truly yours,
James
P. DeBlasio
President
and Chief Executive Officer
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1.
|
to
elect two directors for a term expiring at the 2009 annual
meeting;
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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; and
|
5.
|
to
transact such other business as may properly come before the annual
meeting or any adjournment or postponement
thereof.
|
By
order of the Board of Directors,
David
H. King
Corporate
Secretary
|
Internap
Network Services Corporation
Attention:
Corporate Secretary
250
Williams Street, Suite E-100
Atlanta,
Georgia 30303
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1.
|
to
elect two directors for a term expiring at the 2009 annual
meeting;
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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;
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4.
|
to
ratify the appointment of PricewaterhouseCoopers LLP as the independent
registered public accounting firm for our fiscal year ending December
31,
2006; and
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5.
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to
transact such other business as may properly come before the annual
meeting or any adjournment or postponement
thereof.
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·
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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 of 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 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, that offers the means to grant proxies to vote
shares by
means of the telephone and Internet. If 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.
|
·
|
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. Submitting your proxy via the Internet will
not
affect your right to vote in person should you decide to attend the
annual
meeting.
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1.
|
giving
written notice to Corporate Secretary, at 250 Williams Street, Suite
E-100, Atlanta, Georgia 30303;
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2.
|
executing
and delivering to the Corporate Secretary a proxy card bearing a
later
date; or
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3.
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voting
in person at the annual meeting.
|
• |
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.
|
•
|
our
directors and director nominees,
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•
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our
Chief Executive Officer and our Named Executive Officers, who include
(i)
each of our other four most
highly compensated executive officers 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,
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•
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our
directors, director nominees and executive officers as a group, and
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•
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each
stockholder that holds more than a 5% interest in our outstanding
common
stock.
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Common
Stock Beneficially Owned
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||||||
Number
of Shares |
Percent
of
Class |
|||||
|
||||||
Morgan
Stanley Venture Capital III, Inc. (1)
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|
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17,095,550
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5.0%
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Morgan
Stanley Venture Investors III, L.P. (1)
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1,415,213
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*
|
||||
The
Morgan Stanley Venture Partners Entrepreneur Fund, L.P.
(1)
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644,861
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*
|
||||
Morgan
Stanley Venture Partners III, L.P. (1)
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14,739,713
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4.3%
|
||||
Oak
Investment Partners VIII, L.P. (2)
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28,128,687
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8.2%
|
||||
Oak
VIII Affiliates Fund, L.P. (2)
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28,128,687
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8.2%
|
||||
Oak
Investment Partners X, L.P. (2)
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28,128,687
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8.1%
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Oak
X Affiliates Fund, L.P. (2)
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28,128,687
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8.2%
|
||||
David
L. Abrahamson (3)
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2,621,167
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*
|
||||
David
A. Buckel (4)
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1,163,749
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*
|
||||
Charles
B. Coe (5)
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390,000
|
*
|
||||
James
P. DeBlasio (6)
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1,340,000
|
*
|
||||
Eugene
Eidenberg (7)
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2,327,431
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*
|
||||
William
J. Harding (8)
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440,510
|
*
|
||||
Fredric
W. Harman (2)
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28,128,687
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8.1%
|
||||
Patricia
L. Higgins (9)
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317,301
|
*
|
||||
Eric
Klinker (10)
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944,584
|
*
|
||||
Ali
Marashi
|
--
|
*
|
||||
Kevin
L. Ober (11)
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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) 13,179,322 shares of common stock, and 1,560,391 shares of
common
stock issuable upon the exercise of warrants held by Morgan Stanley
Venture Partners III, L.P., (b) 1,265,395 shares of common stock,
and
149,818 shares of common stock issuable upon the exercise of warrants
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) 295,763 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 each of the
Funds
(the "General Partner"). The General Partner of each of the Funds
is
controlled by Morgan Stanley Venture Capital III, Inc. ("MSVC III,
Inc."),
the institutional managing member 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. The address for the Funds
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.
|
(2) |
Consists
of (a) 6,278,024 shares
of common stock, and 58,860 shares of common stock issuable upon
the
exercise of options held by Oak Investment Partners VIII, L.P., (b)
160,328 shares of common stock, and 1,140 shares of common stock
issuable
upon the exercise of options held by Oak VIII Affiliates Fund L.P.,
(c)
18,269,856 shares
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)
293,298 shares
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)
------94,853 shares
of common stock held by a trust of which Fredric W. Harman, one of
our
directors, is a trustee; (f) an aggregate of 8,199 shares of common
stock
held in trust for the benefit of Mr. Harman's three minor children,
and
(g) 120,000 shares of common stock issuable upon the exercise of
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 52,000 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
2,069,167
shares of common stock that are vested and exercisable or that will
vest
within 60 days.
|
(4) |
Consists
of 20,000 shares of common stock, 550,000 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
593,749
shares of common stock that are vested and exercisable or that will
vest
within 60 days.
|
(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.
|
Name
|
Age
|
Position
|
|
James
P. DeBlasio
|
50
|
President
and Chief Executive Officer
|
|
David
L. Abrahamson
|
44
|
Vice
President, Sales
|
|
David
A. Buckel
|
44
|
Vice-President
and Chief Financial Officer
|
|
Eric
Klinker
|
37
|
Vice-President,
Engineering, Chief Technology Officer and Chief Information Officer
|
|
Robert
P. Smith
|
44
|
Vice
President and Chief Marketing Officer
|
|
Eric
Suddith
|
45
|
Vice
President, Operations
|
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
|
(1)
|
|
Effective
September 30, 2005, Mr. DeBlasio began serving 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.
|
|
||
(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, Mr. Abrahamson began serving
as our
Vice President, Sales.
|
(8)
|
|
Includes
a $21,000 one-time payment to Mr. Abrahamson's in accordance with
his
employment agreement.
|
(9)
|
|
Mr.
Klinker was designated an officer in November
2005.
|
(10)
|
|
Mr.
Marashi’s employment was terminated on June 30,
2005.
|
(11)
(12)
(13)
|
|
Includes
$200,000 in severance payments and $20,857 for relocation expenses
in
2005.
Includes
$6,723 for relocation expenses in 2003.
Mr.
Suddith was designated an officer in November
2005.
|
Individual
Grants
|
Potential
Realizable Value
at
Assumed Annual Rates of
Stock
Price Appreciation for
Option
Term ($)
|
|||||||||||||||||||
Name
|
Number
of
Shares
Underlying
Options
Granted
|
%
of Total
Options
Granted
to
Employees
in
Fiscal
Year
|
Exercise
Price
Per
($/Share)
|
Expiration
Date
|
5%
($)
|
10%
($)
|
||||||||||||||
James
P. DeBlasio
|
20,000(1)
|
|
0.2
|
0.46
|
6/23/2015
|
5,785
|
14,662
|
|||||||||||||
5,000,000(2)
|
|
55.8
|
0.48
|
9/30/2015
|
663,076
|
1,465,224
|
||||||||||||||
(1) |
Mr.
DeBlasio received an option to purchase 20,000 shares of common stock
while a non-employee director of the Company in accordance with the
Company’s non-executive director compensation
policy.
|
(2) |
Mr.
DeBlasio received an option to purchase 5,000,000 shares of common
stock
and 1,000,000 shares of restricted stock at the start of his employment
under the terms of his employment agreement.
|
Name
|
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
($)
|
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
|
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.
|
Compensation
Committee:
Charles
B. Coe
Fredric
W. Harman
Patricia
L. Higgins
|
Dec-00
|
Dec-01
|
Dec-02
|
Dec-03
|
Dec-04
|
Dec-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
|
Audit
Committee:
Patricia
L. Higgins
William
J. Harding
Kevin
L. Ober
|
·
|
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.
|
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
|
)
|
•
|
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.
|
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.
|
•
|
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.
|
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
|
(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.
|
Internap
Network Services Corporation
250
Williams Street, Suite E-100
Atlanta,
Georgia 30303
Attention:
Corporate Secretary
|
1
|
200,000,000
plus (600,000,000 multiplied by 1/X). 1/X refers to a fraction
within the
range of 1/5 to 1/20 inclusive, to be selected by the Board of
Directors,
as described in the footnote below.
|
2 |
600,000,000
multiplied by 1/X. 1/X refers to a fraction within the range
of 1/5 to
1/20 inclusive, as described in the footnote
below.
|
3 |
“1/X”
represents a fraction, within the range of 1-for-5 to 1-for-20,
inclusive,
to be determined by the Board of Directors, such that references
to “1/X”
or “1/Xth” are to a number no less than 1/20 and no greater than 1/5, as
selected by the Board of Directors.
|
By
___________________________
|
|
Name:
|
|
Title:
|
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 SHAREHOLDER 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 shareholder 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, 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
|
INTERNAP
NETWORK SERVICES CORPORATION
|
|||||||||||
|
|||||||||||
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE
|
|||||||||||
“FOR”
EACH OF THE BELOW-LISTED PROPOSALS.
|
|||||||||||
|
|||||||||||
Vote
On Directors
|
|
(1)
|
To
elect two directors to serve until the 2009 annual meeting and until
their successors are elected and qualified, or until such director'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, mark “For All
Except” and write the nominee’s name on the line below.
|
|
o
|
o
|
o
|
|
|
|
01)
Charles B. Coe for a term to expire at the 2009 annual
meeting
|
|
|
|
|
|||||
|
|
02)
Patricia L. Higgins for a term to expire at the 2009
annual meeting
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Vote
On Proposals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
To
ratify the appointment of PricewaterhouseCoopers LLP as independent
registered public accounting firm of the Company for the fiscal year
ending December 31, 2006.
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
|
Please
indicate if you plan to attend the annual meeting
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
|
|
Yes
|
|
No
|
|
|
|
||||||
Signature
[PLEASE SIGN WITHIN BOX]
|
|
Date
|
|
Signature
(Joint Owners)
|
|
Date
|
|
Revocable
Proxy
|
COMMON
STOCK
|