UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  SCHEDULE 14A

                  Proxy Statement Pursuant to Section 14(a) of
              the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X|  Preliminary Proxy Statement
|_|  CONFIDENTIAL,  FOR  USE  OF THE  COMMISSION  ONLY  (AS  PERMITTED  BY  RULE
     14A-6(E)(2))
|_|  Definitive Proxy Statement
|_|  Definitive Additional Materials
|_|  Soliciting Material Pursuant to ss.240.14a-12

                                 INTERLAND, INC.
--------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)

--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

|X|  No fee required.

|_|  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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):

          ----------------------------------------------------------------------

     (4)  Proposed maximum aggregate value of transaction:

          ----------------------------------------------------------------------

     (5)  Total fee paid:

          ----------------------------------------------------------------------

|_|  Fee paid previously with preliminary materials.

|_|  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.

     (1)  Amount Previously Paid:

          ----------------------------------------------------------------------

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

          ----------------------------------------------------------------------

     (3)  Filing Party:

          ----------------------------------------------------------------------

     (4)  Date Filed:

          ----------------------------------------------------------------------




<PAGE>

                                                                   
                                 INTERLAND, INC.
                     303 PEACHTREE CENTER AVENUE, SUITE 500
                             ATLANTA, GEORGIA 30303

--------------------------------------------------------------------------------
                  NOTICE OF 2006 ANNUAL MEETING OF SHAREHOLDERS
--------------------------------------------------------------------------------

TO OUR SHAREHOLDERS:

     Notice is Hereby  Given that the 2006  Annual  Meeting of  Shareholders  of
Interland, Inc., a Minnesota corporation ("Interland" or the "Company"), will be
held on March 31, 2006, at 10:00 a.m.,  Eastern  Time, at the Marriott  Marquis,
265 Peachtree Center Avenue, Atlanta, Georgia 30303, for the following purposes:

     1.   To elect  directors  to serve until their  successors  are elected and
          qualified.

     2.   To approve an amendment to the Company 's Articles of Incorporation to
          increase  the  authorized  number  of  shares of  Capital  Stock  from
          21,000,000 to 26,000,000 shares.

     3.   To  approve  a  proposal  to adopt the  Interland,  Inc.  2006  Equity
          Incentive Plan.

     4.   To  transact  such other  business  as may  properly  come  before the
          meeting or any adjournment(s) or postponement(s) thereof.

     These items of business  are more fully  described  in the proxy  statement
accompanying  this notice.  Only shareholders of record at the close of business
on February  17, 2006 are  entitled to notice of, and to vote at, the meeting or
any adjournment of the meeting.

     YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN.

     All  shareholders  are  cordially  invited to attend the meeting in person.
Shareholders  will be required to furnish  proof of ownership  of the  Company's
common stock before being admitted to the meeting.  Shareholders  holding shares
in the name of a broker,  bank or other nominee must bring a statement  from the
broker,  bank or nominee  confirming  their  ownership of the  Company's  common
stock.

     To ensure  your  representation  at the  meeting  in the  event you  cannot
attend,  you are urged to return a proxy as soon as possible.  Shareholders  may
vote, sign, date and return the enclosed proxy in the  postage-prepaid  envelope
provided.  As an alternative to using the paper proxy to vote,  shareholders may
vote  electronically  via the  Internet  or by  telephone.  Please see the proxy
statement for additional details. Shareholders attending the meeting may vote in
person, even if they have returned a proxy.

     Financial  and other  information  about the  Company is  contained  in the
enclosed  Annual  Report on Form 10-K,  as  amended,  for the fiscal  year ended
August 31, 2005.

                                            By Order of the Board of Directors,

                                            Jonathan B. Wilson
                                            Corporate Secretary
Atlanta, Georgia
March 3, 2006

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,  PLEASE COMPLETE,  DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED  POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.


<PAGE>


                                 INTERLAND, INC.
                     303 PEACHTREE CENTER AVENUE, SUITE 500
                             ATLANTA, GEORGIA 30303

--------------------------------------------------------------------------------
                                 PROXY STATEMENT

                       2006 ANNUAL MEETING OF SHAREHOLDERS
--------------------------------------------------------------------------------

GENERAL

     The  enclosed  proxy is  solicited  on behalf of the board of  directors of
Interland,  Inc., a Minnesota corporation (the "Company"), for use at the annual
meeting of shareholders  (the "Annual Meeting") to be held on March 31, 2006, at
10:00 a.m.,  Eastern Time, or at any adjournment or postponement of the meeting.
The meeting will be held at the Marriott  Marquis,  265 Peachtree Center Avenue,
Atlanta,  Georgia 30303. The purposes of the meeting are described in this proxy
statement and the  accompanying  Notice of 2006 Annual Meeting of  Shareholders.
This proxy  statement and the enclosed  proxy are first being mailed on or about
March [3], 2006 to all shareholders  entitled to vote at the meeting.  An Annual
Report to  shareholders  for the fiscal  year ended  August 31, 2005 is enclosed
with this proxy statement.

     The  Company's  principal  executive  offices are located at 303  Peachtree
Center Avenue,  Suite 500,  Atlanta,  Georgia 30303 and its telephone  number is
(404) 260-2477.

VOTING OF PROXIES

     By executing and returning the proxy either by returning the paper proxy or
by submitting your proxy by telephone or  electronically  via the Internet,  you
are authorizing  Jeffrey M. Stibel,  Gonzalo  Troncoso and Jonathan B. Wilson to
represent   you  and  vote  your  shares  at  the  meeting   according  to  your
instructions.

     Shareholders with shares held directly or in an account at a brokerage firm
may vote those shares by calling the telephone  number or accessing the Internet
site  referenced  in your voting form.  Votes  submitted  electronically  by the
Internet or telephone  must be received by midnight,  Eastern Time, on March 30,
2006.

     The Internet  voting  procedures are designed to  authenticate  shareholder
identities,  to allow  shareholders  to give their  voting  instructions  and to
confirm  that  the  shareholders'  instructions  have  been  recorded  properly.
Shareholders  voting via the Internet should  understand that there may be costs
associated  with electronic  access,  such as usage charges from Internet access
providers and telephone companies, that must be borne by the shareholder.

     The giving of a proxy will not affect  your right to vote in person  should
you decide to attend the meeting.  Shareholders  holding shares in the name of a
broker or other  nominee who wish to vote in person at the meeting  must bring a
statement  from the  broker or nominee  confirming  ownership  of the  Company's
common stock.

REVOCABILITY OF PROXIES

     A person  giving a proxy may  revoke  it at any time  before it is voted by
delivering  to the Company a written  notice of  revocation  or a duly  executed
proxy  bearing a later date or by  attending  the  meeting and voting in person.
Please note,  however,  that if a  shareholder's  shares are held of record by a
broker,  bank or  other  nominee  and  that  shareholder  wishes  to vote at the
meeting,  the shareholder must bring to the meeting a statement from the broker,
bank or other nominee  confirming  that  shareholder's  beneficial  ownership of
shares.

EXPENSES OF SOLICITING PROXIES

     The Company will bear the cost of  soliciting  proxies.  In  addition,  the
Company may reimburse brokerage firms and other persons representing  beneficial
owners of shares for their expenses in forwarding solicitation materials to such
beneficial owners. The Company's  directors,  officers and employees may solicit


<PAGE>

proxies personally or by telephone,  facsimile,  telegram or by electronic means
without additional  compensation.  The costs of soliciting proxies will be borne
by the Company.

INFORMATION REGARDING OUR FISCAL YEAR

     On January 1, 2006, the Company changed from a fiscal year ending August 31
to a calendar year end.  Consequently,  the Company had a four-month  transition
period from September 1, 2005 through December 31, 2005 (which is referred to in
this proxy statement as the "Transition Period" or "2005-T"). The information in
this  proxy  statement  generally  provides  information  as to  the  four-month
Transition  Period  as well as some  information  related  to the full year from
September  1, 2004  through  August 31, 2005 (which is referred to in this proxy
statement as "Fiscal 2005"). References to years prior to 2005 are references to
fiscal years. For financial and other  information  about the Company for Fiscal
2005,  please see the Company's  Annual  Report on Form 10-K, as amended,  filed
with the SEC.  A copy is  enclosed.  For  financial  information  regarding  the
Transition  Period,  please refer to the Company Form 10-Q filed with the SEC on
February 9, 2006.


                     VOTING SECURITIES AND PRINCIPAL HOLDERS

RECORD DATE

     Only  shareholders  of record at the close of business on February 17, 2006
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.

OUTSTANDING SHARES

     The Company has only one class of stock  outstanding,  the Company's common
stock,  $0.01 par value per share. As of the Record Date,  16,563,486  shares of
common stock were issued and outstanding.

VOTING RIGHTS

     Each  shareholder  is entitled  to one vote for each share of common  stock
held as of the Record Date for all matters.  A majority of all votes eligible to
be cast is required to establish a quorum for the transaction of business at the
meeting.  Shares that are voted "for,"  "against,"  "withhold"  or "abstain" are
treated as present at the meeting for the purposes of  establishing a quorum and
are also treated as shares  entitled to vote at the meeting  (the "Votes  Cast")
with  respect to each  matter.  Abstentions  will have the same  effect as votes
against  a  proposal.  Broker  non-votes  will be  counted  for the  purpose  of
determining the presence or absence of a quorum for the transaction of business,
but will not be counted for the purpose of determining  the number of Votes Cast
with  respect to the  particular  proposal on which a broker has  expressly  not
voted.  This means  that a broker  non-vote  will not affect the  outcome of the
voting on a proposal.

     There are no rights of appraisal or similar dissenters' rights with respect
to any matter to be acted upon pursuant to this proxy statement.



                                       2

<PAGE>



         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth ownership  information  with respect to the
common  stock of the  Company,  as of February  17,  2006,  with  respect to (i)
persons known by the Company to  beneficially  own more than 5% of the Company's
common stock, (ii) each director and director nominee of the Company, (iii) each
Named  Executive  Officer of the  Company  listed in the  "Summary  Compensation
Table"  below,  and (iv) all current  directors  and  executive  officers of the
Company as a group.


<TABLE>
<CAPTION>
<S>                                                                  <C>                         <C>
                                                                               INTERLAND, INC.
                                                                                 COMMON STOCK
                                                                     -------------------------------------
                                                                      AMOUNT AND NATURE OF       PERCENT
                          NAME OF BENEFICIAL OWNER                   BENEFICIAL OWNERSHIP(1)     OF CLASS
------------------------------------------------------------------   -----------------------     ---------
PAR Investment Partners, L.P. (2)                                            2,000,000             12.2%
Dimensional Fund Advisors, Inc. (3)                                          1,259,412              7.7
Kinderhook Partners, LP (4)                                                    989,637              6.0
Seymour Holtzman / S. H. Holdings, Inc. (5)                                    918,172              5.6
Jeffrey M. Stibel (6)                                                          779,446              4.6
Joel J. Kocher (7)                                                             273,655              1.7
Robert T. Slezak (8)                                                           118,150               *
Robert Lee (9)                                                                  68,800               *
John B. Balousek (10)                                                           71,400               *
John Patrick Crecine (11)                                                       32,300               *
Gonzalo Troncoso (12)                                                           28,193               *
Jonathan Wilson (13)                                                            23,005               *
Glenn R. Hofmann (14)                                                           22,686               *
Richard A. Pitrolo (15)                                                         15,000               *
Efrem Gerszberg (16)                                                            10,000               *
Alex A. Kazerani (17)                                                           55,000               *
Denise R. Grey                                                                       0               *
Allen L. Shulman                                                                     0               *
All current directors and executive officers as a Group (12 persons) (18)    2,393,121             13.9%

----------------------------------------------------------------------------------------------------------
</TABLE>


*    Less than 1%
      
1.   Unless  otherwise  indicated  below,  the persons and entities named in the
     table have sole  voting  and  investment  power with  respect to all shares
     beneficially owned, subject to community property laws where applicable.
      
2.   Information  is based in part on Schedule 13G filed on February 12, 2002 by
     PAR  Investment  Partners,  L.P.  Represents  2,000,000  shares held by PAR
     Investment Partners, L.P. ("PAR Investment"), of which PAR Group, L.P. is a
     general  partner.   PAR  Capital   Management,   Inc.  provides  investment
     management services for PAR Investment.  Edward L. Shapiro, who served as a
     member of the Board of  Directors  of  Interland  from March 2002 to August
     2005, is a Vice President and shareholder of PAR Capital Management,  Inc.,
     and a limited partner of PAR Group, L.P. PAR Capital Management,  Inc. is a
     reporting  company  under the Exchange  Act. The  principal  office for PAR
     Investment,  PAR  Group,  L.P.  and PAR  Capital  Management,  Inc.  is One
     Financial Center, Suite 1600, Boston, Massachusetts 02111.
      
3.   Information is based on Schedule 13G filed on February 6, 2006. Dimensional
     Fund  Advisors,  Inc.  is the  institutional  investment  manager  for  the
     following funds which hold the stock: DFA US Small Cap Value Portfolio; DFA
     Tax-Managed US Small Cap Value Portfolio;  DFA US Micro Cap Portfolio;  DFA
     US Small  Cap  Portfolio;  DFA  Tax-Managed  US Small  Cap  Portfolio;  DFA
     Tax-Managed  US  Marketwide  Value  Portfolio;   DFA  Variable-Small  Value
     Portfolio;  DFA Tax-Managed US Equity Portfolio;  SA US Small Company Fund;
     and DFA US Small Xm Value  Portfolio.  The principal office for Dimensional
     Fund  Advisors,  Inc.  is 1299 Ocean  Avenue,  11th  Floor,  Santa  Monica,
     California 90401.
  
4.   Information is based on Schedule 13G filed on January 9, 2006. The Schedule
     13G  indicates  that  the  shares  are  beneficially  owned  by  Kinderhook
     Partners,  LP,  Kinderhook  GP,  LLC,  its  general  partner and Stephen J.


                                       3

<PAGE>

     Clearman,   its  managing  member.  The  principal  office  for  Kinderhook
     Partners, LP is 1 Executive Drive, Suite 160, Fort Lee, New Jersey 07024.

5.   Includes  22,000  shares  subject to options held by Mr.  Holtzman that are
     exercisable within 60 days after February 17, 2006. Information is based in
     part on Schedule 13D filed jointly by Mr.  Holtzman,  Jewelcor  Management,
     Inc. and S.H. Holdings, Inc. on July 21, 2004. Includes 896,172 shares held
     by S.H. Holdings,  Inc., which, in turn, are beneficially owned by Jewelcor
     Management Inc. (JMI). Mr. Holtzman may be deemed to have shared voting and
     investment  power over the  896,172  shares  beneficially  owned by JMI, of
     which Mr. Holtzman is the chairman,  president and chief executive  officer
     and  indirectly,  with his wife,  the primary  shareholder.  The  principal
     office for both  companies  is 100 N. Wilkes  Barre  Blvd.,  Wilkes  Barre,
     Pennsylvania 18702.

6.   Includes  424,998  shares  subject to options  held by Mr.  Stibel that are
     exercisable within 60 days after February 17, 2006.
  
7.   Includes  244,510  shares  subject to options  held by Mr.  Kocher that are
     exercisable within 60 days after February 17, 2006.
      
8.   Includes  33,300  shares  subject to options  held by Mr.  Slezak  that are
     exercisable within 60 days after February 17, 2006.
      
9.   Includes  42,200  shares  subject  to  options  held by Mr.  Lee  that  are
     exercisable within 60 days after February 17, 2006.
      
10.  Includes  42,200  shares  subject to options held by Mr.  Balousek that are
     exercisable within 60 days after February 17, 2006.
      
11.  Includes  32,300  shares  subject to options  held by Dr.  Crecine that are
     exercisable within 60 days after February 17, 2006.

12.  Includes  25,358  shares  subject to options held by Mr.  Troncoso that are
     exercisable within 60 days after February 17, 2006.
      
13.  Includes  21,548  shares  subject to options  held by Mr.  Wilson  that are
     exercisable within 60 days after February 17, 2006.

14.  Includes  22,686  shares  subject to options  held by Mr.  Hofmann that are
     exercisable within 60 days after February 17, 2006.

15.  Includes  15,000  shares  subject to options  held by Mr.  Pitrolo that are
     exercisable within 60 days after February 17, 2006.
      
16.  Includes  10,000 shares  subject to options held by Mr.  Gerszberg that are
     exercisable within 60 days after February 17, 2006. Does not include shares
     held by Jewelcor Management, Inc. and S. H. Holdings, Inc. Mr. Gerszberg is
     an officer of Jewelcor  Management,  but does not exercise control over its
     securities.

17.  Includes  10,000  shares  subject to options held by Mr.  Kazerani that are
     exercisable within 60 days after February 17, 2006.

18.  Includes  946,100 shares subject to options that are exercisable  within 60
     days after February 17, 2006.



                                       4

<PAGE>


                        DIRECTORS AND EXECUTIVE OFFICERS

AS DESCRIBED UNDER PROPOSAL ONE BELOW, PROXIES WILL BE VOTED FOR THE ELECTION OF
THE FOLLOWING  NOMINEES AS DIRECTORS TO SERVE UNTIL THE NEXT REGULAR  MEETING OF
SHAREHOLDERS  AND UNTIL THEIR  SUCCESSORS  ARE DULY ELECTED AND  QUALIFIED.  THE
BOARD OF DIRECTORS  HAS NO REASON TO BELIEVE  THAT ANY OF THE  NOMINEES  WILL BE
UNAVAILABLE FOR SERVICE IF ELECTED,  BUT IF ANY ARE UNAVAILABLE,  PROXIES MAY BE
VOTED FOR SUCH SUBSTITUTE AS THE BOARD MAY DESIGNATE.

           Name                     Age                Position
           ----                     ---                --------
    Jeffrey M. Stibel                32    Chief Executive Officer and Director
    Seymour Holtzman                 70    Chairman of the Board of Directors
    John B. Balousek                 60    Director
    John Patrick Crecine, PhD        66    Director
    Efrem Gerszberg                  31    Director
    Alex Kazerani                    32    Director
    Robert Lee                       57    Director
    Robert T. Slezak                 48    Director

     JEFFREY M. STIBEL was appointed  President and Chief  Executive  Officer of
Interland  and a member of the Board of Directors  in August  2005.  From August
2000 to August 2005, Mr. Stibel held executive  positions at United Online, Inc.
(NASDAQ:  UNTD),  a  technology  company  that owns and  operates  branded  ISPs
(NetZero, Juno and BlueLight Internet) and Web services (Classmates.com, MySite,
PhotoSite and  FreeServers).  Mr. Stibel was most recently Senior Vice President
overseeing  Web  hosting,  email,  online  digital  photos,  search  and  domain
registration across United Online's numerous brands. Prior to working for United
Online,  from  September 1999 to August 2000, Mr. Stibel was Chairman and CEO of
Simpli.com Inc., a search and marketing  technology  company  currently owned by
ValueClick,  Inc. (NASDAQ:  VCLK). Mr. Stibel previously worked at GTE (Verizon)
on  SuperPages,  an online yellow pages and  eCommerce  business  directory.  In
addition,  he has worked in mergers and acquisitions at the law firm of Skadden,
Arps, Slate,  Meagher & Flom LLP and in marketing for The Greenfield  Consulting
Group.  He  currently  serves  on the board of  directors  for  several  private
companies.  Mr.  Stibel  received a master's  degree from Brown  University  and
studied  business and brain science at MIT's Sloan School of  Management  and at
Brown University, where he was a Brain and Behavior Fellow.

     SEYMOUR  HOLTZMAN  was  appointed  as Chairman of the Board of Directors of
Interland in August 2005.  For many years,  he has been the  President and Chief
Executive  Officer of Jewelcor,  Incorporated,  a former New York Stock Exchange
company that operated a chain of retail  stores.  He is Co-Chairman of the Board
of  Directors of George  Foreman  Enterprises,  Inc.  (OTC:  GFME),  formerly MM
Companies,  Inc.  (OTC:  MMCO).  He has held the  position of  Chairman  and now
Co-Chairman since January 2001 and was appointed Chief Executive Officer in June
2004. Mr.  Holtzman has also been a director and Chairman of the Board of Casual
Male Retail Group,  Inc.  since April 2000.  Mr.  Holtzman  currently  serves as
Chairman and Chief  Executive  Officer of each of Jewelcor  Management,  Inc., a
company primarily involved in investment and management services;  C.D. Peacock,
Inc., a Chicago, Illinois retail jewelry establishment; and S.A. Peck & Company,
a retail and mail order jewelry company based in Chicago, Illinois. From 1986 to
1988,  Mr.  Holtzman  was Chairman of the Board and Chief  Executive  Officer of
Gruen Marketing Corporation,  an American Stock Exchange listed company involved
in the nationwide distribution of watches.

     JOHN B.  BALOUSEK  has served as a member of the Board of  Directors  since
August 1999.  He currently  serves as a director on the boards of Aptimus,  Inc.
and Central Garden & Pet Company (NASDAQ:  CENT),  both publicly held companies,
and several  privately  held firms.  From 1998 to 1999, Mr.  Balousek  served as
Executive Vice President and a founder of PhotoAlley.com,  a San-Francisco-based
start-up company providing  electronic commerce services.  He served as Chairman
and CEO of True North Technologies,  a digital and interactive  services company
of  True  North   Communications,   parent  company  of  Foote  Cone  &  Belding
Communications,  Inc., a global  advertising and  communications  company,  from
March to July 1996. Mr. Balousek  continued to serve as a director of True North
Communications  until  January  1997.  From 1991 to February  1996, he served as
President,  Chief  Operating  Officer  and  Director  of  Foote  Cone &  Belding
Communications.



                                       5

<PAGE>

     Dr. John  Patrick  Crecine became a director of Interland in November 2003.
Dr. Crecine is Chief Executive Officer of B.P.T., Inc., a private investor,  and
consultant. He was President of the Georgia Institute of Technology from 1987 to
mid-1994.  Previously he served as a Professor at the University of Michigan and
founding  director of the Institute of Public Policy  Studies from 1965 to 1975.
Dr.  Crecine  became Dean of the College of  Humanities  and Social  Sciences at
Carnegie Mellon University in 1976, a position he held until 1983 when he became
the University's Provost and Senior Vice President for Academic Affairs. He held
that position until his Georgia Tech appointment. He is a member of the Board of
the Georgia  Department of Industry,  Trade and Tourism.  Dr. Crecine was also a
Director of INTERMET Corporation, formerly a publicly held company, from 1993 to
November, 2005.

     EFREM  GERSZBERG was appointed to Interland's  Board of Directors in August
2005. He has been the President and Chief  Operating  Officer of George  Foreman
Enterprises,  Inc. (OTC: GFME),  formerly MM Companies,  Inc. (OTC: MMCO), since
May 2004. In addition,  in August 2005, Mr.  Gerszberg was appointed as a member
of the Board of  Directors  of  George  Foreman  Enterprises.  Since  2003,  Mr.
Gerszberg has been the Chief Operating  Officer of Jewelcor  Management Inc., an
entity  primarily  engaged  in  investment  and  management  services.  Prior to
Jewelcor  Management,  from 1999 through 2003,  Mr.  Gerszberg was a proprietary
trader of equities  and futures for JP Capital,  Carlin  Trading and  Schoenfeld
Securities.  Since its inception in 1993, Mr.  Gerszberg has served on the Board
of Directors and Strategic  Advisory Panel of Ecko  Unlimited,  a privately held
young men's apparel company.  Mr. Gerszberg earned his J. D. from Rutgers School
of Law.

     ALEX  KAZERANI was  appointed to  Interland's  Board of Directors in August
2005.  Mr.  Kazerani  has  founded  and  successfully  led a number of  business
initiatives including KnowledgeBase.net and HostPro, Inc. (which was acquired by
the  Company in 1999) and has  extensive  experience  developing  and  designing
technology solutions and operations for web hosting applications and data center
build-outs.  Mr. Kazerani is currently Vice President of Talisma's KnowledgeBase
Group.  From March 2001 to March  2005,  Mr.  Kazerani  was  Chairman  and Chief
Executive Officer of KnowledgeBase Solutions,  Inc., prior to its acquisition by
Talisma.  In addition  to this  position,  Mr.  Kazerani is a partner in several
venture capital funds and was a finalist at the 2005 Ernst & Young  Entrepreneur
of the Year award. Mr. Kazerani earned a B.A. degree in International  Relations
and Economics from Tufts University.

     ROBERT LEE has  served as a member of the Board of  Directors  since  April
1999.  He is  currently  also a  director  on  the  boards  of  Blue  Shield  of
California,  Broadvision,  Inc. (NASDAQ:  BVSN) and Netopia, Inc. (NASDAQ: NTPA)
From  1995 to May  1998,  he  served as  President  of  Business  Communications
Services  for Pacific  Bell.  Mr. Lee also served as Executive  Vice  President,
California Market Group, for Pacific Bell from 1993 to 1995.

     ROBERT T.  SLEZAK  has served as a member of the Board of  Directors  since
August  2001.  He  currently  also  serves as a director on the boards of Matrix
Bancorp Inc. and Pegasus Communications Corp., both publicly held companies. Mr.
Slezak has worked as an independent  management  consultant since November 1999.
From  October 1989 to November  1999,  he served as Chief  Financial  Officer of
Ameritrade Holding Corporation,  managing the accounting,  finance, tax, mergers
and  acquisitions  and regulatory  reporting  functions of this online brokerage
firm.

     Set forth below is information  regarding senior  executives of the Company
who are not also directors, as well as other key management personnel. The Board
of Directors has determined that the Company's executive vice presidents and its
General Counsel are executive officers.  Biographical  information regarding the
senior vice presidents is for informational purposes only:

     GONZALO  TRONCOSO,  age 43,  serves as Executive  Vice  President and Chief
Financial  Officer  for  Interland.  Mr.  Troncoso  brings  diverse  finance and
accounting  experience  having held posts in the US,  Europe and Latin  America.
Before  joining  Interland  in  2001,  he was  Chief  Financial  Officer  of SRC
International  from 1986 to 1997,  Director of Global  Acquisitions  for Chatham
Technologies  International  from  1997 to 1998  and  Finance  Director  at both
Anixter International and PSINet. He also held several mid-management  positions
at  Colgate-Palmolive's  Colombian subsidiary.  Mr. Troncoso earned a Bachelor's
Degree in Finance & Accounting from Universidad  Javeriana in Colombia and holds
an MBA from St. Joseph's University in Philadelphia.

     RICHARD  PITROLO,  age 46,  serves as Executive  Vice  President  and Chief
Operating  Officer.  From November 2003 until his  appointment as Executive Vice
President and Chief  Operating  Officer in October 2005,  Mr.  Pitrolo served as
Vice  President of Service  Delivery,  overseeing  all  functions of the Service
Delivery team. Prior to Interland,  he served as Vice President of North America
CRM  Operations  for Stream  International  (Solectron),  from  November 2002 to
November  2003 and vice  President  of  Operations  Planning  from  June 2000 to
November  2002.  He also served as the  Director of  Operations  and Support for
Inacom  from  August  1998 to June 2000,  President  and  General  Manager of PC
Technology  Services  from June  1997 to July  1998,  and  Manager  of  Advanced
Services  at Gateway  2000 from April 1995 to June  1997.  Mr.  Pitrolo  holds a
Bachelor's  Degree in Business  Administration  from the  University  of Central
Oklahoma.



                                       6

<PAGE>

     VIKAS  RIJSINGHANI,  age 37,  serves as  Senior  Vice  President  and Chief
Technology Officer, a position he has held since December 2005.  Rijsinghani has
created  and  led  technology  divisions  at  several  companies.  He was  Chief
Technology  Officer and a founding member of VerticalOne  Corporation  which was
sold to S1  Corporation  (NASDAQ:  SONE) and was  Chief  Technology  Officer  at
Proficient Systems.  Previously,  Rijsinghani was President of Neoglyphics Media
Corporation,  a website design and consulting firm. In addition, he held various
senior technology  management roles at Sun Microsystems and PriceWaterhouse.  He
graduated  from Cornell  University  with dual  degrees in Computer  Science and
Electrical Engineering.

     JUDY HACKETT,  age 46, serves as Senior Vice President and Chief  Marketing
Officer,  a position she has held since December  2005. She was Chief  Marketing
Officer at CareerBuilder,  an online and print  recruitment  company co-owned by
Tribune  (NYSE:TRB),  Knight  Ridder  (NYSE:KRI)  and  Gannett  (NYSE:GCI)  from
November  2001 to  March  2002  where  she  led  consumer  marketing,  corporate
communications,  and product  development.  Prior to CareerBuilder,  Hackett was
Senior Vice President of Marketing and Communications at HeadHunter.NET from May
1998 to November  2001 and helped take the company  public in 1999.  Hackett was
Senior Vice President of Marketing and Advertising for TBS  Superstation and has
held several roles in advertising and marketing at television stations.  Hackett
has received  numerous  industry awards in her career  including an EMMY,  ADDY,
PRSA Phoenix Award and Promax/BPME Gold Medallion. She graduated from Kent State
University with a degree in Journalism.

     JONATHAN B. WILSON,  age 40,  serves as Senior Vice  President  and General
Counsel for  Interland,  a position he has held since October  2005.  Mr. Wilson
joined  Interland  in 2001 as  Assistant  General  Counsel  and was  promoted to
General Counsel in January 2004. Prior to joining Interland,  Mr. Wilson was the
General Counsel of an Internet  start-up after more than ten years of large firm
private practice with Atlanta firms including King & Spalding. Mr. Wilson is the
Chair  of  the  Internet  Industry  Committee  for  the  ABA's  Public  Utility,
Communications  and  Transportation  Law Section and has served in that capacity
since founding the committee in 1997. Mr. Wilson is a co-author and co-editor of
Internet Forms and Commentary:  A Practitioner's  Guide to E-Commerce  Contracts
and the World Wide Web (American Bar Association: 2003) and is the author of Out
of Balance:  Prescriptions for Reforming the American  Litigation System (2005).
He earned his J.D.  from George  Washington  University  and  graduated Phi Beta
Kappa from William and Mary.

     JAMES  CARRINGTON,  age 53,  serves as Senior Vice  President  of Sales and
Business  Development for Interland,  a position he has held since October 2005.
Carrington  was Vice  President of Sales at  SwitchBoard  from  December 2003 to
December  2004 where he  developed  and  implemented  a national and local sales
strategy which  significantly  increased sales and revenues.  Carrington is a 15
year veteran of Monster Worldwide where he was Vice President of Sales from 1998
to 2003 and has extensive experience creating results-driven sales organizations
focusing on both direct and indirect  channels.  Carrington  earned a Bachelor's
Degree in Liberal Arts from Assumption  College and also holds Masters Degree in
Psychology from Anna Maria College.

     PETER DELGROSSO,  age 32, joined the Company as Vice President of Corporate
Communications  in  August,  2005.  Prior  to  Interland,   Mr.  Delgrosso  held
management  positions with United Online,  Inc., an internet  service  provider,
from  August  2000 to July  2005,  including  serving as the Vice  President  of
Corporate  Communications from April to July 2005. From September 1999 to August
2000,  Mr.  Delgrosso  served  as  Director  of  Corporate   Communications  for
Simpli.com, Inc., a marketing and technology firm.

     CHRIS NOWLIN,  age 32, serves as Senior Vice  President of Human  Resources
for  Interland,  a  position  he has held  since  October  2005.  Nowlin  joined
Interland  from  HostPro  in 1999 and has  served  in  several  human  resources
leadership positions,  including Director of Compensation,  followed by Director
of Human Resources. Prior to joining Interland in 1999, he served in a multitude
of human  resources  leadership  positions for the  Automobile  Club of Southern
California.  Nowlin  earned a  Bachelor's  Degree in  Sociology & Business  from
Pepperdine  University  and  also  holds an MBA  from  Pepperdine  University's,
Graziadio School of Business and Management.




                                       7

<PAGE>



                              CORPORATE GOVERNANCE

INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES

     The board of directors currently consists of nine directors.  The number of
directors  has been reduced to eight,  effective as of the annual  meeting.  The
board has determined  that the following seven  directors are  "independent"  as
defined  under  Rule  4200(a)(15)  of the  NASDAQ  listing  standards:  John  B.
Balousek,  John Patrick Crecine,  PhD, Efrem Gerszberg,  Seymour Holtzman,  Alex
Kazerani,  Robert Lee,  and Robert T. Slezak.  The  independent  directors  hold
regular  executive  sessions without  management.  During the Transition  Period
ended December 31, 2005, the board of directors held a total of two meetings and
during  Fiscal 2005 held a total of 12 meetings  and also took action by written
consent.  Each member of the board of  directors  who served on the board during
the  Transition  Period ended  December 31, 2005  attended  more than 75% of the
meetings of the board of directors and committees of the board of which he was a
member.  The  board  of  directors  maintains  standing  Nominating,  Audit  and
Compensation Committees. The members of the committees are listed below.


<TABLE>
<CAPTION>
<S>                                          <C>                                    <C>
      Audit Committee                        Nominating Committee                   Compensation Committee
      ---------------                        --------------------                   -----------------------
      Robert T. Slezak, Chairman             Robert Lee, Chairman                   Robert Lee, Chairman
      John B. Balousek                       John B. Balousek                       John B. Balousek
      John Patrick Crecine                   John Patrick Crecine                   Efrem Gerszberg
                                             Robert T. Slezak                       Alex Kazerani
</TABLE>


     Nominating  Committee.  The board has a Nominating  Committee consisting of
John B. Balousek,  John Patrick Crecine,  Robert Lee, and Robert T. Slezak, each
of whom is an  "independent  director"  as defined by the NASDAQ  Stock  Market.
During the Transition Period the Nominating  Committee held no meetings and held
one meeting during Fiscal 2005. The  Nominating  Committee  assists the board in
establishing  qualification criteria for the Company's  non-employee  directors,
identifying  and evaluating  candidates for nomination to the  shareholders  for
election to the board of directors, and developing and recommending to the board
corporate  governance  guidelines and procedures  applicable to the Company. The
Nominating  Committee operates under a written charter setting out its functions
and  responsibilities.  A current copy can be viewed on the Company's website at
http://www.interland.com/legal/mission.asp.

     The   Nominating   Committee  has   established   the   following   general
qualifications criteria for the Company's directors:

     o    The backgrounds and  qualifications  of the directors  considered as a
          group should provide a significant  breadth of  experience,  knowledge
          and abilities and assist the board in fulfilling its responsibilities.

     o    Because a mix of viewpoints and ideas enhances the board's  ability to
          function effectively,  the diversity of the board should be considered
          when considering  potential nominees.  Potential nominees shall not be
          discriminated against on the basis of race, religion, national origin,
          sex, sexual orientation,  disability, or any other basis prohibited by
          law.

     o    Nominations  shall be in accordance with the procedures  prescribed by
          the bylaws.

     o    At least a majority of the directors shall be independent.

     o    Each  director  must be an  individual  of the highest  character  and
          integrity,  with an inquiring mind,  vision, a willingness to ask hard
          questions and the ability to work well with others.

     o    Each  director  must have the  capacity  and desire to  represent  the
          balanced,  best  interests  of the  shareholders  as a  whole  and not
          primarily a special interest group or constituency.

     o    A nominee should have demonstrated the business acumen, experience and
          ability  to use sound  judgment  and to  contribute  to the  effective
          oversight  of  the  business  and   financial   affairs  of  a  large,
          multifaceted, global organization.



                                       8

<PAGE>

     o    A nominee  should be  committed to  understanding  the Company and its
          industry and to spending the time necessary to function effectively as
          a  director,   including  regularly  attending  and  participating  in
          meetings of the board and its committees.

     o    A nominee  should  neither  have,  nor appear to have,  a conflict  of
          interest  that would impair the  nominee's  ability to  represent  the
          interests  of  all  the  Company's  shareholders  and to  fulfill  the
          responsibilities of a director.

     o    A nominee  should have  independent  opinions  and be willing to state
          them in a constructive manner.

     In addition,  the Nominating  Committee from time to time  establishes  and
modifies  specific  criteria  desirable to be represented on the board including
knowledge and experience in business strategy, leadership,  industry experience,
finance and audit, and other skills beneficial to the business objectives of the
Company.

     The board is responsible for selecting  director  nominees on behalf of the
Company,  with  the  assistance  of the  Nominating  Committee.  The  Nominating
Committee   will   consider   nominees  for  directors   properly   proposed  by
shareholders.   Any   shareholder   who  desires  to  propose  a  candidate  for
consideration by the Nominating  Committee should include in that  shareholder's
proposal  at  a  minimum  the  nominee's  name  and   qualifications  for  board
membership.  Proposed  candidates must be received by the deadline for inclusion
of shareholder  proposals in the proxy  statement,  as described at "Shareholder
Proposals"  below.  We anticipate  that the deadline for such  proposals for the
2007 Annual  Meeting will be November 3, 2006, but this deadline could change if
the date of the 2007 Annual Meeting changes. These proposals should be addressed
to:

                               Corporate Secretary
                                 Interland, Inc.
                     303 Peachtree Center Avenue, Suite 500
                             Atlanta, Georgia 30303

     The Nominating Committee may from time to time use a variety of methods for
identifying  and  evaluating  nominees for director.  In the past, the Company's
board of  directors  has  assessed  and in the future the  Company's  Nominating
Committee  is expected  to assess the  appropriate  size of the board,  expected
vacancies  on the  board  and  the  availability  of  desirable  candidates  for
appointment to the board. Candidates may come to the attention of the Nominating
Committee through current board members, management,  professional search firms,
shareholders and other persons. The Company has not engaged any third parties to
identify or assist in finding candidates. The board has not received any outside
nominations or candidates for this Annual Meeting.

     Compensation Committee. The Company maintains a Compensation Committee. The
members of the  Compensation  Committee are John B. Balousek,  Efrem  Gerszberg,
Alex Kazerani,  and Robert Lee. During the Transition  Period ended December 31,
2005,  the  Compensation  Committee held one meeting and during Fiscal 2005 held
six meetings and also took action by written consent. The Compensation Committee
operates under a written charter setting out its functions and responsibilities.

     Audit  Committee.  The Company has a separately  designated  standing audit
committee  established in accordance with Section  3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended (the "Exchange  Act").  John B. Balousek,  John
Patrick Crecine,  and Robert T. Slezak are members of the Audit  Committee.  The
Company's  board of directors has  determined  that all members of the Company's
Audit Committee are  "independent" as defined in Rules 4200(a)(15) of the NASDAQ
listing standards.

     During the Transition  Period ended December 31, 2005, the Audit  Committee
held one meeting and also took action by written  consent.  During  Fiscal 2005,
the Audit  Committee held nine meetings.  The Audit  Committee  operates under a
written charter setting out its functions and  responsibilities.  A copy of that
charter is attached hereto as Appendix B.

     Audit  Committee  Financial  Expert.  The Company's  board of directors has
determined  that in its judgment,  Mr. Slezak  qualifies as an "audit  committee
financial expert" in accordance with the applicable rules and regulations of the
Securities and Exchange  Commission ("SEC"). An audit committee financial expert
is a  person  who has (1) an  understanding  of  generally  accepted  accounting
principles  and  financial  statements;  (2) the  ability to assess the  general
application of such  principles in connection with the accounting for estimates,
accruals  and  reserves;  (3)  experience  preparing,   auditing,  analyzing  or


                                       9

<PAGE>

evaluating  financial  statements that present a breadth and level of complexity
of accounting issues that are generally comparable to the breadth and complexity
of issues  that can  reasonably  be  expected  to be raised by the  registrant's
financial  statements,  or experience  actively  supervising one or more persons
engaged in such activities;  (4) an understanding of internal  controls over and
procedures for financial reporting;  and (5) an understanding of audit committee
functions.

COMMUNICATIONS WITH DIRECTORS

     Shareholders  may communicate  with the Company's  directors in writing via
mail to Interland,  Inc., 303 Peachtree Center Avenue,  Suite 500,  Atlanta,  GA
30303, Attention:  Board Members. If directed to one or more specific members of
the Board of  Directors,  the name or names  should be  given.  All  shareholder
messages  will  be  forwarded  directly  to  the  directors   specified  by  the
shareholder  and a copy supplied to the Company's  Secretary.  As of the date of
this proxy statement, no material action has been taken by the board as a result
of a shareholder communication.

DIRECTOR ATTENDANCE AT SHAREHOLDER MEETINGS

     At last year's  Annual  Meeting of  shareholders,  Jeffrey M. Stibel was in
attendance.  The board does not have a formal  policy on director  attendance at
shareholder meetings.

CODE OF CONDUCT

     All employees and directors of the Company,  including the Company's  Chief
Executive Officer,  Chief Financial Officer and principal  accounting officer or
controller,  are required to comply with the  Interland,  Inc.  Code of Conduct.
This Code is available on the legal  notices page of the  Company's  web site at
www.Interland.com.  The Company will disclose on its web site any  amendments to
or  waivers  from  provisions  of the  Code  as  required  by the  rules  of the
Securities  and Exchange  Commission  and the NASDAQ Stock Market.  The board of
directors  has  also  established  procedures  for the  receipt,  retention  and
treatment of complaints  regarding  accounting,  internal accounting controls or
auditing  matters and the  confidential,  anonymous  submission  by employees of
concerns regarding questionable accounting or auditing matters. These procedures
are        outlined        on       the        Company's        website       at
http://www.interland.com/legal/available.asp. Complaints regarding these matters
will be reviewed under Audit Committee direction and oversight.


                             EXECUTIVE COMPENSATION

     The following table sets forth the cash and non-cash  compensation for each
of the last three  full  fiscal  years and the  Transition  Period for  services
rendered to the Company,  its predecessors and its  subsidiaries,  awarded to or
earned by any  individual who served as Chief  Executive  Officer of the Company
during the Transition  Period ended December 31, 2005 and each of the other four
most highly  compensated  executive  officers of the Company who were serving as
executive  officers at the end of the Transition  Period ended December 31,2005,
whose combined salary and bonus earned in the twelve month period ended December
31, 2005, exceeded $100,000 and two former executive officers who were no longer
officers  at fiscal  year end but who  would  have  been  among the most  highly
compensated executive officers for that twelve month period  (collectively,  the
"Named Executive Officers").





                                       10

<PAGE>




<TABLE>
<CAPTION>
                                                      SUMMARY COMPENSATION TABLE
<S>                          <C>           <C>           <C>          <C>              <C>             <C>
                                                                                         LONG-TERM
                                                                                        COMPENSATION
                                                       ANNUAL COMPENSATION                 AWARDS
                                           ------------------------------------------- --------------
                                                                                         SECURITIES        
                                                                       OTHER ANNUAL      UNDERLYING        ALL OTHER
NAME AND PRINCIPAL POSITION   FISCAL YEAR   SALARY (2)    BONUS (2)   COMPENSATION (3)    OPTIONS      COMPENSATION (4)
---------------------------- ------------  ------------  -----------  ---------------- --------------  ----------------

JEFFREY M. STIBEL               2005 (T*)  $      - (5)  $37,500 (6)  $       -                 -      $         -
 President & Chief Executive    2005       $      - (5)  $     -      $       -         1,700,000 (7)  $         -
    Officer                     2004       $      -      $     -      $       -                        $         -
                                2003       $      -      $     -      $       -                 -      $         -

GONZALO TRONCOSO                2005 (T*)  $ 63,269      $     -      $       -            50,000 (8)  $         -
 Executive Vice President,      2005       $166,154      $37,800      $       -            10,000 (9)  $         -
 Chief Financial Officer        2004       $141,923      $18,000      $       -             6,000 (9)  $         -
                                2003       $      -      $     -      $       -                 -      $         -

RICHARD A. PITROLO              2005 (T*)  $ 62,500      $     -      $       -            50,000 (8)  $         -
 Executive Vice President,      2005       $175,000      $42,000      $       -                 -      $         -
 Chief Operating Officer        2004       $142,788      $47,272(10)  $       -            15,000 (9)  $    15,406 (11)
                                2003       $      -      $     -      $       -                 -      $         -

GLENN R. HOFMANN                2005 (T*)  $ 58,846      $     -      $       -            25,000 (8)  $    85,000 (13)
 Former Senior Vice President,  2005       $160,769      $35,700      $       -            10,000 (9)  $         -
 Products & Technology (12)     2004       $      -      $     -      $       -                 -      $         -
                                2003       $      -      $     -      $       -                 -      $         -

JONATHAN B. WILSON              2005 (T*)  $ 58,808      $     -      $       -            25,000 (8)  $         -
 Senior Vice President,         2005       $      -      $     -      $       -                 -      $         -
 General Counsel                2004       $      -      $     -      $       -                 -      $         -
                                2003       $      -      $     -      $       -                 -      $         -

ALLEN L. SHULMAN                2005 (T*)  $ 49,269      $     -      $       -                 -      $         -
 Former President & Chief       2005       $274,231      $     -      $       -            20,000 (9)  $   362,500 (13)
 Operating Officer (14)         2004       $256,401      $     -      $       -             6,000 (9)  $         -
                                2003       $251,750      $84,966      $       -            27,500 (9)  $     1,926

DENISE R. GREY                  2005 (T*)  $ 29,077      $     -      $       -                 -      $   115,000 (13)
 Former Vice President,         2005       $      -      $     -      $       -                 -      $         -
 Sales & Marketing (14)         2004       $      -      $     -      $       -                 -      $         -
                                2003       $      -      $     -      $       -                 -      $         -
</TABLE>


     (T*) Refers to the Transition Period from September 1, 2005 to December 31,
          2005.

     (1)  Includes  compensation  deferred by the employee  under the  Company's
          qualified 401(k) retirement plans.

     (2)  Includes  amounts paid under the  Company's  profit  sharing plans and
          amounts awarded and paid under the Management and Executive  Incentive
          Plan (the  "Incentive  Plan,"  formerly the Micron  Electronics,  Inc.
          Executive  Bonus  Plan) for fiscal  2004 and earned and paid under the
          Incentive Plan for prior fiscal years.

                                       11

<PAGE>

     (3)  Excludes  certain  perquisites and other amounts that in the aggregate
          did not exceed the lesser of $50,000 or 10% of the total annual salary
          and bonuses for the officer.

     (4)  Except as otherwise noted, consists of matching  contributions made by
          the Company under qualified 401(k) retirement plans.

     (5)  Executive has voluntarily elected to receive no base salary.

     (6)  Represents  performance  bonus earned by Mr. Stibel (terms outlined in
          employment agreement).

     (7)  Represents  options issued as an "inducement  grant" under NASDAQ Rule
          4350(i)(1)(A)(iv)  and pursuant to that certain Option Agreement dated
          as of July 28, 2005 between the Company and Mr. Stibel.

     (8)  Represents  options to purchase  shares of the Company's  common stock
          granted under the Company's 2005 Equity  Incentive Plan 

     (9)  Represents  options to purchase  shares of the Company's  common stock
          granted under the Company's 2002 Equity Incentive Plan.

     (10) Includes $22,272 paid as an initial employment bonus. 

     (11) This amount  represents  $15,406 of  relocation  assistance  

     (12) This  individual's  employment with the Company commenced on September
          14,  1998,  and he became an executive  officer on April 5, 2004.  His
          employment with the Company terminated as of February 28, 2006.

     (13) Represents severance payment.

     (14) This  individual's  employment with the Company  terminated on October
          18, 2005.

     Executive  officer  participation  in  various  clubs,   organizations  and
associations  may also be  funded by the  Company  or its  subsidiaries.  During
Fiscal 2005 and the Transition  Period,  no executive officer received more than
$2,000 to cover participation in such clubs, organizations and associations.




                                       12

<PAGE>


                     OPTION GRANTS IN THE TRANSITION PERIOD

     The  following  tables  provide  information  with respect to stock options
granted in the  Transition  Period to each of the Named  Executive  Officers who
received options.  In accordance with the rules of the SEC, the table sets forth
the  hypothetical  gains or "option spreads" that would exist for the options at
the end of their  respective  terms  based on assumed  annual  rates of compound
stock price  appreciation  of 5% and 10% from the dates the options were granted
to the end of the  respective  option  terms.  Actual  gains,  if any, on option
exercises are dependent on the future  performance of the Company's common stock
and overall  market  conditions.  There can be no assurance  that the  potential
realizable values shown in this table will be achieved.


<TABLE>
<CAPTION>
<S>                    <C>                   <C>                 <C>                 <C>           <C>           <C>

                                                  TRANSITION PERIOD
                                                  INDIVIDUAL GRANTS                                POTENTIAL REALIZABLE
                       ------------------------------------------------------------------------       VALUE AT ASSUMED
                       NUMBER OF              PERCENT OF                                           ANNUAL RATES OF STOCK
                       SECURITIES            TOTAL OPTIONS                                           PRICE APPRECIATION
                       UNDERLYING             GRANTED TO             EXERCISE                         FOR OPTION TERM
                        OPTIONS              EMPLOYEES IN            PRICE          EXPIRATION     -----------------------
      NAME              GRANTED              FISCAL 2005-T          PER SHARE          DATE           5%           10%
-------------------    -----------           --------------       -------------     -----------    ---------    ----------
Jeffrey M. Stibel          --                     --                     --             --             --             --
Gonzalo Troncoso         50,000      (1)         5.6%                 $ 2.86         10/12/2015     $ 89,932     $ 227,905
Richard A. Pitrolo       50,000      (1)         5.6%                 $ 2.86         10/12/2015     $ 89,932     $ 227,905
Glenn R. Hofmann         25,000      (1)         2.8%                 $ 2.86         10/12/2015     $ 44,966     $ 113,953

Jonathan B. Wilson       25,000      (1)         2.8%                 $ 2.86         10/12/2015     $ 44,966     $ 113,953
</TABLE>


     (1)  Represents  options  granted  pursuant  to the  Company's  2005 Equity
          Incentive Plan,  one-third of which vest first anniversary of the date
          of grant,  with the remainder  vesting in equal monthly  increments of
          2.78% per month over the following 24 months. Options granted pursuant
          to the Company's  2005 Equity  Incentive Plan are granted as incentive
          stock  options  ("ISOs") or NSOs.  ISOs are  granted  with an exercise
          price equal to 100% of the fair market  value (as defined in the plan)
          of the Company's  common stock on the date of grant.  NSOs granted and
          set forth in the above table were granted with an exercise price equal
          to 100% of the fair  market  value  (as  defined  in the  plan) of the
          Company's common stock on the date of grant. Options granted under the
          2005 Equity  Incentive  Plan vest upon the  occurrence  of a change in
          control (as defined in the plan).

     (2)  Reflects  percent of total options to purchase shares of the Company's
          common stock granted to employees during 2005-T.



                                       13

<PAGE>



     AGGREGATED OPTION EXERCISES AND OPTION VALUES IN THE TRANSITION PERIOD


     The following  table provides  information  regarding  Company stock option
exercises during the Transition Period by the Named Executive Officers,  and the
value of such officers' unexercised options at December 31, 2005:



<TABLE>
<CAPTION>
<S>                      <C>              <C>                <C>                <C>               <C>
                                                                                                      VALUE OF UNEXERCISED
                                                             NUMBER OF SECURITIES UNDERLYING         IN-THE-MONEY OPTIONS AT
                            SHARES                            UNEXERCISED OPTIONS AT 2005-T                  2005-T
                          ACQUIRED ON                        ---------------------------------    ----------- --- --------------
       NAME                EXERCISE       VALUE REALIZED       EXERCISABLE      UNEXERCISABLE     EXERCISABLE     UNEXERCISABLE
--------------------     --------------   ---------------    --------------    ---------------    -----------     --------------
Jeffrey M. Stibel                                               189,040         1,510,960         $ 405,546        $ 3,233,454
Gonzalo Troncoso                                                 25,358            50,000         $  20,800        $    78,500
Richard A. Pitrolo                                               15,000            50,000         $   7,700        $    78,500
Glenn R. Hofmann                                                 22,686            25,000         $  21,900        $    39,250
Jonathan B. Wilson                                               21,548            25,000         $  18,600        $    39,250
Allen L. Shulman                                                      0                 0         $       0        $         0
Denise R. Grey                                                        0                 0         $       0        $         0
</TABLE>


COMPENSATION OF DIRECTORS

     Members of the board of directors  who are not  employees of the Company or
employees,  officers or directors of any  subsidiary or affiliate of the Company
are paid an annual retainer.  The annual retainer is payable in arrears in equal
quarterly  installments  within the first thirty days of each fiscal  quarter to
qualified  directors  holding office during the prior fiscal quarter.  Qualified
directors  who hold  office  for less than an entire  fiscal  quarter  receive a
pro-rated portion of the annual retainer.  The Company reimburses  directors for
travel and lodging  expenses,  if any, incurred in connection with attendance at
board meetings or performance of director services.

     On  April  14,  2005,  the  board  of  directors  approved  a new  director
compensation policy for non-employee directors.  The compensation package became
effective as of June 1, 2005.  Non-employee directors will receive an annual fee
of $25,000,  and will continue to be reimbursed for travel expenses  incurred to
attend  board  meetings.  This  represents  a decrease in the annual fee,  which
previously  was  set at  $40,000  per  year.  For  each  meeting  attended  by a
non-employee  director  during  a fiscal  year in  excess  of four  face-to-face
meetings and four  telephonic  meetings,  the Company will pay the  non-employee
director  $1,000  for each  additional  face-to-face  meeting  and $500 for each
telephonic  meeting.  The  Chair of the  Compensation  Committee  and the  Audit
Committee  (if the Chair is not an  employee  of the  Company)  each  receive an
annual fee of $5,000,  and the  Chairman of the Board (if the Chairman is not an
employee of the Company) receives a fee of $10,000,  in addition to the standard
director fee. In addition,  each non-employee  director receives an annual grant
of options to purchase  10,000 shares of common  stock,  and the Chairman of the
Board (if the Chairman is not an employee of the Company) receives an additional
annual grant of options for 12,000  shares.  There was also an initial  grant of
options to purchase 20,000 shares to each non-employee director,  effective June
1, 2005.  The annual  grants  began on September  1, 2005.  Those grants  vested
immediately.

EMPLOYMENT ARRANGEMENTS

     The Company has entered into employment  agreements with Jeffrey M. Stibel,
the Company's Chief Executive  Officer,  Gonzalo  Troncoso,  the Company's Chief
Financial Officer,  Richard A. Pitrolo,  the Company's Chief Operations Officer,
and  Jonathan B.  Wilson,  the  Company's  General  Counsel  (collectively,  the
"Executive Agreements").

     The Company also entered into  employment  agreements  with certain  former
officers and employees, including Joel J. Kocher, the Company's former Chairman,
President,  and Chief Executive Officer;  Allen L. Shulman, its former President
and Chief Operating  Officer;  and Glenn R. Hofmann,  the Company's  Senior Vice
President of Products and Technology.

     In connection  with the appointment of Jeffrey M. Stibel as Chief Executive
Officer in July 2005,  Mr.  Stibel and the Company  entered  into an  employment
agreement.  Mr. Stibel's agreement has an indefinite term, and his employment is
on an "at will" basis.  His  employment may be terminated by either party at any
time,  for any  reason.  Under  Mr.  Stibel's  current  agreement,  he will  not
initially draw any salary. The Company and Mr. Stibel have agreed that if he has
continued to serve for over three years  without a salary  increase,  then on or
before  July 28,  2008,  they  will  negotiate  in good  faith a salary  that is
commensurate  with the  then-current  market rate for  executives  with  similar
background and experience. Mr. Stibel will be entitled to an annual bonus in the
amount of $100,000 based upon his achieving  reasonable  goals to be established
by the Board and Mr. Stibel.  In July, 2005, Mr. Stibel purchased 250,000 shares
of the  Company's  common  stock at a price of $2.29  per  share  pursuant  to a

                                       14

<PAGE>

Subscription  Agreement.  The Company agreed to nominate Mr. Stibel for election
to the Board of Directors at the Company's 2005 annual meeting of  shareholders,
and to continue to so nominate  him for so long as he serves in the  capacity of
Chief  Executive  Officer.  The Company  represented to Mr. Stibel that it would
nominate  Alex  Kazerani  for  election to the Board of  Directors at the annual
meeting of shareholders.  The Board of Directors nominated, and the shareholders
elected,  Mr. Stibel and Mr.  Kazerani to the Board at that meeting (held August
31,  2005).  The Company and Mr.  Stibel have agreed to  restrictive  covenants,
including confidentiality, invention assignment, and non-competition provisions.

     If  Mr.  Stibel's  employment  is  terminated  for  Non-Performance  Due to
Disability (as defined in the agreement), in addition to continued participation
in the  Company's  plans,  he will be entitled to benefits  under the  Company's
disability  plan and a severance  benefit of $350,000.  In  addition,  any stock
options or  restricted  stock then held by Mr.  Stibel,  including  the  current
option  grant  described  below,  will be subject  to  accelerated  vesting  and
extended  exercisability as described further below. If Mr. Stibel's  employment
is  terminated  by death,  his heirs will receive his benefits and the severance
benefit.  If Mr. Stibel's employment is terminated by the Company other than for
Cause or by him for Good Reason (as those  terms are  defined in his  employment
agreement),  or if his  employment is terminated  within six months  following a
Change in Control or  Corporate  Transaction  (as those terms are defined in his
employment agreement),  Mr. Stibel will be entitled to continue participation in
the Company's  employee benefit plans, and to the severance benefit of $350,000.
In addition,  any stock  options or  restricted  stock then held by Mr.  Stibel,
including  the  current  option  grant  described  below,  will  be  subject  to
accelerated  vesting and  extended  exercisability  as described  below.  If any
payment or distribution (including an acceleration of option vesting), under the
employment  agreement  or  otherwise,  is subject  to the excise tax  imposed by
Section 4999 of the  Internal  Revenue  Code of 1986  (relating  to  "parachute"
payments), Mr. Stibel will be entitled to a "gross-up payment" in an amount such
that after Mr. Stibel pays all taxes  (including the excise tax,  income tax and
all others)  payable  with  respect to the  gross-up  payment,  he will retain a
sufficient amount to pay the excise tax.

     In connection with Mr. Stibel's  appointment,  on July 28, 2005 the Company
granted Mr.  Stibel an option to purchase 1.7 million  shares of Company  common
stock  at an  exercise  price of  $2.29.  The  option  shares  vest  and  become
exercisable at the rate of 47,222 shares per month,  beginning  August 28, 2005.
On the three-year  anniversary of the grant date, all unvested  shares will vest
and  become  exercisable.  The option is subject  to  accelerated  vesting  upon
termination of his employment without Cause, for Good Reason,  within six months
following a Change in Control or a Corporate  Transaction,  for  Non-Performance
Due to Disability, or death. In addition, Mr. Stibel entered into a Subscription
Agreement  with the Company on July 28, 2005 under  which he  purchased  250,000
shares of the  Company's  common stock for a purchase  price of $2.29 per share.
Mr.  Stibel has demand  registration  rights with  respect to the shares under a
Registration Rights Agreement.

     The Executive Agreements for the other Named Executive Officers provide for
a Base Salary and a lump sum  severance  payment of six months of Base Salary in
the event of  termination  other than for Cause.  The annual  Base Salary is set
forth in an exhibit to each  Executive  Agreement  as follows:  $185,000 for Mr.
Troncoso, $185,000 for Mr. Pitrolo, and $175,000 for Mr. Wilson. These Executive
Agreements also provide for additional performance-based compensation, specified
to be up to 50% of Base Salary in the case of Mr. Pitrolo and Mr. Troncoso,  and
up to 35% of Base  Salary  in the  case of Mr.  Wilson.  These  executives  also
entered  into  a  separate   Confidentiality   and   Non-Competition   Agreement
("Non-Competition Agreement"). The Non-Competition Agreement provides for a term
of twelve months after termination.  Each  Non-Competition  Agreement  prohibits
competition  with the Company and disclosure of confidential  information by the
executive.   The  Non-Competition   Agreements  also  prohibit  solicitation  of
customers or employees by the executive.  The Executive  Agreements allow either
the Company or the officer to terminate the officer's active employment with the
Company for any reason,  voluntary or  involuntary,  with or without  cause,  by
providing notice to that effect in writing.

     The  Company   maintains  no  formal   change  of  control   agreements  or
arrangements  with  individual  Company  executives,  except to the extent  that
certain executive  employment  agreements  provide,  as described above, for the
payment of severance if the executive is terminated  within several months after
a change of control.  However,  the Company's  equity  incentive plans typically
provide for the vesting of any or all options  granted  pursuant to the plans to
accelerate and become  immediately  exercisable  upon a change of control of the
Company, as defined in the applicable plans.

     Mr. Shulman,  the Company's former  President and Chief Operating  Officer,
left the  Company in October  2005.  He and the  Company  entered  into a mutual
release, and he surrendered his outstanding stock options. The Company agreed to
pay Mr. Shulman $362,500 in severance.



                                       15

<PAGE>

     On December 6, 2005,  Glenn R. Hofmann and the Company entered into a First
Amendment of  Employment  Agreement and Release of Claims (the  "Amendment")  in
respect of Mr. Hofmann's employment agreement, which provided that (a) Interland
would pay Mr.  Hofmann a lump sum  payment of $85,000 on or about  December  14,
2005, (b) Mr. Hofmann's  employment with the Company would terminate on or about
February  28,  2006,  (c) Mr.  Hofmann  would  assist in the  transition  of the
management  of  the  Technology  and  Products  Department  from  Mr.  Hofmann's
leadership to that of Vikas  Rijsinghani,  who was recently hired by the Company
as its Chief Technology Officer, and (d) Mr. Hofmann would have no further right
to severance benefits upon termination of his employment for any reason.

     In connection with his resignation as Chairman and Chief Executive Officer,
Mr.  Kocher and the  Company  entered  into a  Separation  Agreement  and Mutual
Release of Claims, executed August 3, 2005, and effective August 11, 2005, which
specifies the terms of Mr.  Kocher's  retirement  and  supersedes  the severance
provisions  of his  employment  agreement.  The material  terms of the agreement
include the following:

     o    After his resignation, Mr. Kocher remained as a member of the Board of
          Directors.   He   received   the   customary   non-employee   director
          compensation  from that date forward.  Mr. Kocher will not be standing
          for reelection at the annual meeting.

     o    He received severance in the aggregate amount of $360,000, plus a cash
          sum of  approximately  $9,500  approximating 12 months' COBRA premiums
          and related costs.

     o    He was entitled to exercise during the Transition Period (as that term
          is defined in his employment  agreement),  and for 30 days thereafter,
          any stock options that vested during that period.

     o    The Company agreed, subject to certain exceptions,  to the extent that
          Mr.  Kocher  elects  to  employ  separate  counsel,  to pay 50% of any
          reasonable attorneys' fees of such counsel that may be incurred in the
          future in connection with pending  litigation in which the Company and
          Mr. Kocher are co-defendants,  up to an annual maximum of $60,000. The
          Company  paid  $12,800 in attorney  fees under this  agreement  in the
          Transition  Period  ended  December  31,  2005.  Mr.  Kocher  was also
          entitled to  reimbursement  of any such amounts  incurred prior to the
          effective  date,  up to a maximum of $12,800.  Any such amount will be
          set off against  the  $60,000 cap for the first year.  The Company has
          been paying for joint  counsel for the Company and Mr.  Kocher in this
          matter,  and will  continue to pay for that  counsel in the defense of
          the Company.

     o    The agreement also contains  mutual  releases of all claims and causes
          of action and covenants not to sue.

                        --------------------------------

     Notwithstanding  anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended,  that might incorporate  filings,  including this Proxy
Statement, in whole or in part, the following Compensation Committee report, the
Performance Graph on page 20 and the Audit Committee Report on page 21 shall not
be incorporated by reference into any such filings.


         REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
                        REGARDING EXECUTIVE COMPENSATION

COMPENSATION COMMITTEE

     Directors John B. Balousek, Efrem Gerszberg,  Alex Kazerani, and Robert Lee
serve on the  Compensation  Committee.  The  Company's  board of  directors  has
determined  that  all  members  of  the  Company's  Compensation  Committee  are
"independent" as defined in Rules  4200(a)(15) of the NASDAQ listing  standards.
The Committee met one time in the Transition Period and six times in Fiscal 2005
and intends to meet  quarterly  or more  frequently  as the  Company's  board of
directors may request.

     The  Committee's  primary  responsibility  is to review and  establish  the
compensation of the Company's officers,  including salary, bonuses, stock option
grants,  employment  contracts  and  other  compensation.  Compensation  for the
Company's executive officers for Fiscal 2005, including base salary, performance
bonuses,  stock option  grants and other  compensation,  was  determined  by the
Compensation  Committee and reviewed by the Company's board of directors.  It is
the  Committee's  practice  from time to time to engage  reputable,  independent
external  consulting firms to help assess the  competitiveness  of the Company's
compensation practices as they relate to industry and peer group practices.



                                       16

<PAGE>

EXECUTIVE OFFICER COMPENSATION

     The Company's executive officer  compensation  programs are described below
to  provide a general  understanding  of the  various  components  of  executive
officer compensation. These executive officer compensation programs are designed
to  attract,  retain and reward  highly  qualified  executive  officers  who are
important  to the  success of the  Company  and to provide  incentives  relating
directly to the financial  performance and long-term growth of the Company, thus
aligning executive interests with the interests of the shareholders. The various
components of the Company's executive officer compensation programs are, in most
cases,  the same as those  generally made available to employees of the Company.
The following is a summary of the executive officer compensation programs:

CASH COMPENSATION

     Base  Salary.  The base  salary of each  executive  officer is  established
primarily  upon (i) a review of  executive  compensation  offered  by  companies
generally  comparable  to the Company,  and (ii) a subjective  evaluation of the
executive officer's expected  contribution to the Company,  including individual
performance, level of responsibility and technical expertise.

     Performance  Bonuses.  Lump sum cash  bonuses  to  executive  officers  are
intended to reward executive  officers for the Company's  financial  performance
and achievement of individual  performance  goals during the fiscal year and are
earned and paid pursuant to the  Management  and Executive  Incentive  Plan (the
"Incentive Plan"), which was approved by the Company's  shareholders in November
1999. Under the Incentive Plan,  individual target bonuses are established for a
performance period based on each officer's expected  contribution to the Company
and competitive market analysis.  Fiscal 2005 and Transition Period bonuses were
awarded  under the  Incentive  Plan based on  achievement  of  specific  Company
financial  performance measured in Earnings Before Income Taxes and Amortization
as well as individual  contributions  to Company  performance for the applicable
performance period.

     On October 12,  2005,  the  Compensation  Committee  approved a proposal to
create a 2006 Bonus Plan with potential  bonuses in the ranges  indicated below,
subject to the discretion of the CEO to reward extraordinary contributions, with
such plan to be funded subject to the Company's  achievement of positive  EBITDA
profitability  for calendar year 2006 (all accruals  factored in,  including the
payment of the bonus):

           Executive Vice President                    0 - 50%
           Senior Vice President                       0 - 40%
           Vice President                              0 - 35%
           Director                                    0 - 30%
           Key contributor                             0 - 10%

EQUITY COMPENSATION

     To provide long-term  incentive to the executive  officers and employees of
the Company and its subsidiaries, the Company grants incentive and non-statutory
stock options pursuant to the Company's  equity  incentive  plans.  Such options
provide a link to long-term  growth in the value of the Company's  common stock.
The criteria  used to determine  who  receives  stock  options and the number of
stock  options  granted is  generally  based on a subjective  evaluation  of the
individual's long-term impact on the Company. That criteria includes: ability to
directly  contribute  to the  Company's  corporate  success  and future  revenue
growth,  ability to develop  efficiencies that result in cost reductions without
compromising  product  quality or  quantity,  ability to  develop  processes  or
programs that directly support the attainment of corporate  objectives,  ability
to design or develop new products or services,  or develop innovative  processes
that   make   the   Company   more   competitive,    ability   to   manage   key
departments/functions  and other relevant items,  as appropriate.  Stock options
granted to employees and executive officers under the Plan typically have a term
of ten  years.  Most of the  options,  when  granted,  vested  25% on the  first
anniversary of each grant, then at a monthly rate of 2.0833% for each successive
month until fully vested.  On May 24, 2005,  the board of directors  approved an
amendment to all of the Company's  unvested,  outstanding  stock options held by
current  officers,  employees or directors for which the exercise price exceeded
the closing  price on the NASDAQ  Stock  Market as of that date.  The  amendment
provided  that the  vesting of such will be  accelerated  such that the  options
became  fully  exercisable  as of May 31,  2005.  All of the  Company's  286,139
unvested  options  at that time had  exercise  prices  which  qualified  for the
amendment.

     During the Transition Period Messrs. Troncoso,  Pitrolo, Hofmann and Wilson
received grants of stock options to acquire 50,000,  50,000, 25,000, and 25,000,
respectively.  These options were granted  pursuant to the Company's 2005 Equity
Incentive Plan and one-third of which vest at the first  anniversary of the date
of grant,  with the remainder  vesting in equal monthly  increments of 2.78% per


                                       17

<PAGE>

month over the following 24 months.  Options  granted  pursuant to the Company's
2005 Equity  Incentive Plan are granted as incentive  stock options  ("ISOs") or
NSOs.  ISOs are granted with an exercise  price equal to 100% of the fair market
value (as  defined  in the plan) of the  Company's  common  stock on the date of
grant.  NSOs  granted  and set forth in the above  table  were  granted  with an
exercise  price equal to 100% of the fair market  value (as defined in the plan)
of the Company's common stock on the date of grant.

OTHER COMPENSATION

     In addition to cash and equity  compensation  programs,  executive officers
participate in various other employee benefit plans, including,  but not limited
to, a time-off plan. Under the time-off plan, full-time employees of the Company
and its subsidiaries  (including executive officers) are allowed to accumulate a
predetermined number of hours based on length of service for vacation, holidays,
sick time,  emergencies  and personal  needs.  This program was modified for all
employees on April 8, 2003 to limit future  accumulation to 160 hours.  Prior to
this change, the maximum accumulation was 400 hours. Employees with in excess of
160 hours on April 8, 2003 had until  August 31, 2004 to take the excess,  after
which any hours over 160 were  forfeited.  Executive  officer  participation  in
various clubs,  organizations and associations may also be funded by the Company
or its subsidiaries.  During Fiscal 2005 and the Transition Period, no executive
officer  received  more  than  $2,000  to  cover  participation  in such  clubs,
organizations and associations.

CEO COMPENSATION

     Joel J. Kocher is a director, and until August 2005 was the Chairman of the
board of directors and Chief  Executive  Officer,  of the Company.  Mr. Kocher's
annual  base  salary  was based on an  analysis  of  compensation  paid to chief
executive officers of comparable  companies and on a subjective  analysis of Mr.
Kocher's  experience,  level of responsibility  and contribution to the Company.
During  Fiscal  2005,  Mr.  Kocher was  granted  options  under the 2002  Equity
Incentive Plan to purchase a total of 50,000 shares of Interland common stock.

     On July 28, 2005, the Company hired Jeffrey M. Stibel,  to become the Chief
Executive  Officer of the Company  effective August 11, 2005. In connection with
his hiring,  the Company and Mr. Stibel  entered into an  employment  agreement,
which was  negotiated  at  arms-length.  Under the terms of the  agreement,  Mr.
Stibel will not receive a salary.  He will be eligible for an annual bonus of up
to $100,000 paid quarterly,  based on mutually agreed upon financial targets for
the Company.  In connection with his hiring,  Mr. Stibel also received an option
to purchase up to 1.7 million  shares of common stock at the market price on the
hire date of $2.29 per share.




                                       18

<PAGE>


TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION

     The Omnibus Budget  Reconciliation  Act of 1993 added Section 162(m) to the
Internal Revenue Code.  Section 162(m) limits  deductions for certain  executive
compensation  in  excess  of $1  million.  Certain  types  of  compensation  are
deductible  only if performance  criteria are specified in detail,  and payments
are contingent upon shareholder  approval of the compensation  arrangement.  The
Company  believes that it is generally in the best interests of its shareholders
to structure  its  compensation  plans to achieve  maximum  deductibility  under
Section 162(m) with minimal sacrifices in flexibility and corporate  objectives.
With respect to non-equity compensation  arrangements and amounts paid under the
Incentive  Plan,  the  Compensation  Committee  has  reviewed the terms of those
arrangements  likely to be subject to Section  162(m) and believes  that at this
time the Company is in compliance with Section 162(m). The Company also believes
the 1995 Stock  Option Plan and the HostPro 2000 Equity  Incentive  Plans are in
compliance  with Section  162(m).  The  Compensation  Committee will continue to
monitor  compliance  with  Section  162(m) and will take  appropriate  action if
warranted.  Since  corporate  objectives  may not always be consistent  with the
requirement for full deductibility, it is conceivable that the Company may enter
into  compensation  arrangements  under which payments are not deductible  under
Section 162(m).  Deductibility  is not the sole factor used by the  Compensation
Committee in ascertaining appropriate levels or methods of compensation.

                            Compensation Committee of the Board of Directors

                            Robert Lee, Chairman
                            John B. Balousek
                            Efrem Gerszberg
                            Alex Kazerani





                                       19

<PAGE>


                                PERFORMANCE GRAPH

     The following graph compares the cumulative total shareholder return on the
Company's  common stock for the period from August 31, 2000 through December 31,
2005 with the cumulative  total return for the same period as (i) the Center for
Research in Securities  Prices  ("CRSP") Total Return Index for The NASDAQ Stock
Market (U.S.  Companies),  (ii) a "peer  group"  selected by  management  of the
Company and (iii) the CRSP Total Return Index for NASDAQ  Computer  Manufacturer
Stocks (the "Computer Manufacturer Index"). Each of these indices is prepared by
a third party and is publicly  available.  As the Company no longer manufactures
computer hardware, the Computer Manufacturer Index no longer tracks stocks of an
industry or line-of-business comparable to the Company. The Company has not been
able to identify an index in the  Company's  line-of-business.  The "Peer Group"
consists of the following  stocks,  each of which is a  publicly-traded  company
that provides Web hosting services: Earthlink, Inc. (NASDAQ NM: ELNK), Imergent,
Inc. (IIG),  Internet Security Systems, Inc. (NASDAQ NM: ISSX),  NaviSite,  Inc.
(NASDAQ NM: NAVI),  Register.com,  Inc. (NASDAQ NM: RCOM), Savvis Communications
Corp.  (SVVS),  and Yahoo,  Inc.  (NASDAQ NM: YHOO).  The Company  operated on a
fiscal year ending August 31 until August 31, 2005.  The Company has now changed
its fiscal year to one ending December 31. In prior years,  the Company included
the  following  company  in the  Performance  Graph,  which is  either no longer
publicly traded or no longer engaged in web hosting:  Globix Corp.  (GBIX).  For
consistent  presentation  and a more meaningful  comparison to the indices shown
herein,  the  Company's  stock  performance  graph for the last five full fiscal
years was  plotted  assuming an August 31 fiscal  year-end.  The graph also sets
forth a comparison to the indices for the Transition  Period.  These comparisons
assume  an  investment  of  $100  at the  commencement  of the  period  and  the
reinvestment of dividends paid during the period, as applicable.

     Note:  Management  cautions  that the stock price  performance  information
shown in the graph below may not be  indicative of current stock price levels or
future stock price performance.

                 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
          AMONG INTERLAND, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX,
            THE NASDAQ COMPUTER MANUFACTURERS INDEX AND A PEER GROUP

                                [GRAPH OMITTED]


     *    $100 invested on 8/31/00 in stock or  index-including  reinvestment of
          dividends. Fiscal year ending December 31.



<TABLE>
<CAPTION>
<S>                               <C>      <C>      <C>      <C>      <C>      <C>      <C>

                                                    Cumulative Total Return
                                  --------------------------------------------------------------
                                    8/00     8/01     8/02     8/03     8/04     8/05     12/05

INTERLAND, INC.                    100.00    11.37    18.46     7.11     2.83     1.85      3.21
NASDAQ STOCK MARKET (U.S.)         100.00    43.09    32.30    44.80    45.49    53.33     54.92
NASDAQ COMPUTER MANUFACTURERS      100.00    23.56    19.33    26.10    26.53    28.73     29.86
PEER GROUP                         100.00    11.97     9.48    26.35    43.89    50.80     59.29
</TABLE>




                                       20

<PAGE>



             REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

     The  purpose of the Audit  Committee  is to assist the board in its general
oversight of the  Company's  financial  reporting,  internal  controls and audit
functions.  The Audit Committee is comprised solely of independent  directors as
defined by NASD and applicable SEC rules.  The board has adopted a written Audit
Committee  Charter  that  sets  out  the  organization,   purpose,   duties  and
responsibilities  of the  Audit  Committee  in  greater  detail.  A copy of that
charter is attached hereto as Appendix B.

     The Audit  Committee has the ultimate  authority to select the  independent
registered public accounting firm, evaluate their performance, approve all audit
and non-audit  work and the fees  associated  therewith.  The  management of the
Company is  responsible  for the  preparation  and  integrity  of the  financial
reporting  information  and  related  systems  of  internal  control.  The Audit
Committee,  in carrying out its role, relies on the Company's senior management,
including  senior  financial  management  and  has  ongoing  meetings  with  the
Company's independent registered public accounting firm.

     The  Audit  Committee  selected  and  retained  PricewaterhouseCoopers  LLP
("PwC") to serve as the Company's independent  registered public accounting firm
for Fiscal 2005. Before the 2005 audit commenced, the Audit Committee determined
that the payments made or expected to be made by the Company to PwC for nonaudit
services  in 2005 did not impair the  auditor's  independence.  Also,  the Audit
Committee discussed with PwC the overall scope and their plans for the audit.

     Management is responsible for the  preparation,  presentation and integrity
of the  Company's  financial  statements;  accounting  and  financial  reporting
principles;  establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rule 13a-15(e));  establishing and maintaining  internal
control over  financial  reporting (as defined in Exchange Act Rule  13a-15(f));
evaluating  the  effectiveness  of  disclosure  controls  and  procedures;   and
evaluating  any change in internal  control over  financial  reporting  that has
materially  affected,  or is reasonably  likely to materially  affect,  internal
control  over  financial  reporting.   PwC  is  responsible  for  performing  an
independent  integrated  audit  of the  consolidated  financial  statements  and
expressing an opinion on the conformity of those financial  statements with U.S.
generally accepted accounting principles.

     The Audit Committee has reviewed and discussed the  consolidated  financial
statements with management and PwC, the Company's independent  registered public
accounting  firm.  The Audit  Committee  reviewed  PwC's  Report of  Independent
Registered  Public  Accounting  Firm included in the Company's  Annual Report on
Form  10-K for  Fiscal  Year  2005  related  to its  audit  of the  consolidated
financial statements.

     The Audit  Committee  has  discussed  with PwC the  matters  required to be
discussed by Statement on Auditing Standards No. 61, as amended,  "Communication
with Audit  Committee" and PCAOB Auditing  Standard No. 2, "An Audit of Internal
Control  Over  Financial  Reporting  Performed in  Conjunction  with an Audit of
Financial  Statements."  In addition,  PwC has provided the Audit Committee with
the written disclosures and letter required by the Independence  Standards Board
Standard No. 1, as amended,  "Independence  Discussions with Audit  Committees",
and the Audit Committee has discussed with PwC their firm's independence.

     Based  on  their  review  of  the  consolidated  financial  statements  and
discussions  with  management  and PwC  referred to above,  the Audit  Committee
recommended to the board of directors that the audited  financial  statements be
included in the Company's  Annual Report on Form 10-K for Fiscal Year 2005,  for
filing with the Securities and Exchange Commission.

     The  Audit  Committee  anticipates  that  PWC will  serve as the  Company's
independent  auditor for fiscal 2006, but has not yet formally requested that it
do so.

                                    Audit Committee of the Board of Directors


                                    Robert T. Slezak, Chairman
                                    John B. Balousek
                                    John Patrick Crecine





                                       21

<PAGE>


                           RELATED PARTY TRANSACTIONS

     On February 7, 2006 William Pemble, the Company's  Executive Vice President
of Consumer Products entered into a First Amendment of Employment  Agreement and
Release of Claims (the "Amendment") in respect to his employment agreement.  The
parties  agreed that (a)  Interland  would pay Mr.  Pemble a lump sum payment of
$92,500 on or about  February 13, 2006,  (b) Mr.  Pemble's  employment  with the
Company would terminate on or about February 7, 2006, (c) the Company waived the
limitations on transfer  provided in Mr.  Pemble's  Restricted  Stock  Agreement
dated  December 22, 2005 in order to allow Mr. Pemble to sell 153,466  shares of
Interland  common stock to a group of Interland  Board  Members,  executives and
other private investors, (d) Interland and Web Internet, LLC ("WILLC") agreed to
amend the Transition  Services  Agreement,  entered into in connection  with the
closing of Interland's  acquisition of substantially  all of WILLC's assets,  to
require Mr.  Pemble to assist in the  transition  of  responsibilities  from the
WILLC office in Bethel,  Connecticut  to  Interland's  headquarters  in Atlanta,
Georgia and (e) Mr.  Pemble would have no further  right to  severance  benefits
upon his termination of employment for any reason.

     In addition,  pursuant to a Sale Agreement dated February 7, 2006,  William
Pemble sold 153,466 shares of Interland common stock in a private placement to a
group of  purchasers  consisting of three  non-employee  members of the Board of
Directors of Interland,  Jeffrey M. Stibel,  the Chief  Executive  Officer and a
member of the Board of Directors,  two private investors and several  additional
executives of Interland,  including the Company's Chief Financial Officer, Chief
Marketing  Officer,   Chief  Technology  Officer,   General  Counsel  and  other
executives.  The purchase price of $4.40 per share was determined based upon the
closing price on January 25, 2006.

     On December 6, 2005,  Company  entered  into an  Agreement  with its former
Chief  Executive  Officer and Chairman  Joel Kocher in which Kocher  voluntarily
surrendered  for  cancellation  options  previously  granted  for  approximately
216,434 shares of the Company's  common stock,  and the Company  repurchased the
options for nominal  consideration of $1.00. The cancelled  options had exercise
prices over $21 per share.

      COMPLIANCE UNDER SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
the Company's  directors and officers and persons who own beneficially more than
10%  (collectively,  the  "Beneficial  Owners")  of a  registered  class  of the
Company's equity securities, to file initial reports of ownership and reports of
changes of ownership with the Securities  and Exchange  Commission  (the "SEC").
Copies of all filed reports are required to be furnished to the Company pursuant
to Section  16(a).  Based  solely on the reports  received by the Company and on
written  representations  from reporting persons,  the Company believes that the
Beneficial Owners complied with all applicable Section 16(a) filing requirements
during  the fiscal  year ended  August 31,  2005,  except  each of Cindy  Appel,
William  Jones,  Joel Kocher,  Richard A. Pitrolo and Allen L. Shulman filed one
late Form 4 to report one exempt option grant.  During the Transition Period the
Company believes that the Beneficial Owners complied with all applicable Section
16(a) filing requirements,  except each of Glenn R. Hofmann, Richard A. Pitrolo,
Gonzalo  Troncoso  and  Jonathan B.  Wilson  filed one late Form 4 to report one
exempt option grant.


                                  PROPOSAL ONE:
                              ELECTION OF DIRECTORS

     The  Company's  board of  directors  has fixed the number of  directors  at
eight,  effective at the annual meeting,  and it is contemplated that a board of
eight  directors  will  be  elected  at the  Annual  Meeting.  Unless  otherwise
instructed,  the proxy  holders  will vote the proxies  received by them for the
eight nominees named below, all of whom are presently  directors of the Company.
For further  information  see "DIRECTORS AND EXECUTIVE  OFFICERS  above.  In the
event that any  nominee is unable or declines to serve as a director at the time
of the Annual  Meeting,  the proxies  will be voted for any nominee who shall be
designated by the then present board of directors to fill the vacancy or for the
balance  of those  nominees  named  without  a  substitute.  In the  event  that
additional  persons are nominated  for election as directors,  the proxy holders
intend to vote all proxies  received by them in such a manner as will ensure the
election of as many of the nominees listed below as possible. It is not expected
that any nominee will be unable or will decline to serve as a director. The term
of office of each person  elected as a director will begin on March 31, 2006 and
continue until the next Annual Meeting of  shareholders  and until such person's
successor has been duly elected and  qualified,  or until such person's  earlier
death, resignation, removal or disqualification.

     The board's  nominees for election or re-election at the Annual Meeting are
John B. Balousek,  John P. Crecine,  Efrem  Gerszberg,  Seymour  Holtzman,  Alex
Kazerani,  Robert  Lee,  Robert T.  Slezak  and  Jeffrey  M.  Stibel.  The board
recommends a vote "FOR" the election of each of the foregoing nominees.



                                       22

<PAGE>

     Assuming a quorum is  present,  the eight  nominees  receiving  the highest
number of affirmative votes of the shares of the Company's common stock entitled
to vote on this matter shall be elected as the directors.

                                  PROPOSAL TWO


 AMENDMENT TO THE ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF
                                  COMMON STOCK

     The Company's  articles of incorporation  authorize the Company to issue up
to 21,000,000 shares of capital stock,  $0.01 par value per share. This proposal
would amend the articles of  incorporation  to authorize the Company to issue up
to 26,000,000  shares of capital stock.  As of February 17, 2006,  20,969,135 of
the  21,000,000  authorized  shares had been issued or reserved  for issuance as
follows:

     o    16,563,486 shares of common stock were issued and outstanding;
     o    3,513,405  shares of common  stock were  reserved  for  issuance  upon
          exercise of stock options;
     o    387,855  shares  of common  stock  were  reserved  for  issuance  upon
          exercise of warrants; and
     o    504,389  shares of common stock were  reserved for future grants under
          equity incentive and stock purchase plans.

     Therefore, there were 30,865 unissued and unreserved shares remaining as of
February 17, 2006.

     This  increase  of  5.0  million  shares  will  give  the  Company  greater
flexibility  for stock splits and stock  dividends,  grants under employee stock
incentive and purchase plans, financings, mergers and acquisitions and for other
general corporate purposes.

     Under  the  proposed  amendment  to  the  articles  of  incorporation,  the
additional  shares of  capital  stock will be  available  for  issuance  without
further shareholder  action,  unless shareholder action is otherwise required by
Minnesota  law or the rules of The Nasdaq Stock Market or any stock  exchange on
which  the  Company's  shares  may then be  listed  or  quoted.  The  additional
authorized shares would be part of the Company's  authorized  capital stock. The
Board of Directors is empowered,  without further shareholder approval, to cause
the Company to issue shares of either common stock or preferred stock from among
its  authorized  shares,  and to fix  and  determine  the  relative  rights  and
preferences of preferred shares, subject to the limits of Minnesota law. Because
the board of directors  has this power,  it may afford the holders of any future
preferred shares powers or rights, voting or otherwise,  senior to the rights of
holders of common stock.  Current shareholders will not have "preemptive" rights
to purchase any of the  additional  authorized  shares.  Any future  issuance of
additional  authorized  shares  of  common  stock  will  decrease  the  existing
shareholders'  equity  ownership and may have a dilutive effect on the rights of
those  holding  common stock at the time the  additional  authorized  shares are
issued.  The Company  has no current  arrangements,  understandings  or plans to
issue a material amount of shares of common stock, other than shares reserved to
cover past and future  grants  under  existing  incentive  plans.  Although  the
proposal to increase the number of  authorized  shares of capital stock has been
prompted by business and financial considerations,  shareholders should be aware
that one of the effects of the amendment may be to facilitate  future efforts by
the Company to deter or prevent  changes in or removal of  management or changes
in  control  of the  Company.  This could  include  changes in control  that are
favored  by  a  majority  of  the  independent  shareholders  or  in  which  the
shareholders   might   otherwise   receive  a  premium  for  their  shares  over
then-current  market prices or benefit in some other manner.  The Company is not
aware of any  effort to  accumulate  its  securities  or obtain  control  of the
Company  through a tender  offer  proxy  contest or  otherwise.  The  Company 's
articles  of  incorporation  and bylaws  contain  provisions  that could have an
anti-takeover effect, including the following:

     o    shareholders may only take action at a meeting or by unanimous written
          consent;
     o    vacancies  on the  board of  directors  may be  filled by the board by
          majority vote of the directors then in office; and
     o    special meetings of shareholders may only be called by the Chairman of
          the  Board,  the  President  or  by  the  board  of  directors,  or  a
          shareholder  holding  10 % of the  outstanding  stock,  except  that a
          shareholder  must hold 25% of the outstanding  stock to call a special
          meeting that relates to a business combination.

     Assuming the presence of a quorum,  the  affirmative  vote of a majority of
the shares present is required to approve this proposal.


                                       23

<PAGE>

                    THE BOARD OF DIRECTORS RECOMMENDS A VOTE
                               "FOR" THIS PROPOSAL


                                 PROPOSAL THREE:
                             PROPOSAL TO APPROVE THE
                                 INTERLAND, INC.
                           2006 EQUITY INCENTIVE PLAN


     On February 20, 2006,  the Board of  Directors,  subject to the approval of
shareholders, adopted the 2006 Equity Incentive Plan (the "2006 Plan"). The 2006
Plan  shall  be  effective  as of the  date of  such  approval  of  shareholders
("Effective  Date").  A copy of the 2006 Plan is attached  hereto as Appendix A.
Interland  is seeking  shareholder  approval of the 2006 Plan in order to comply
with  applicable  Nasdaq  rules and to preserve  the ability to grant  incentive
stock  options  pursuant to the Internal  Revenue Code of 1986,  as amended (the
"Code").

     Options  and  other  stock  awards  may be  granted  under the 2006 Plan to
employees, officers and directors of Interland and certain subsidiaries, as well
as to certain consultants, independent contractors who have not provided capital
raising  services.  Interland  estimates  that,  as of the  date of  this  proxy
statement,  approximately  280  employees  (including  officers) are eligible to
participate in the 2006 Plan. The following discussion summarizes the 2006 Plan.

Purpose of Plan

     Interland desires to (i) attract and retain persons eligible to participate
in the 2006  Plan  ("Participants");  (ii)  motivate  Participants,  by means of
appropriate  incentives,  to achieve  long-range goals;  (iii) provide incentive
compensation  opportunities  that are  competitive  with those of other  similar
companies;  and (iv)  further  identify  Participants'  interests  with those of
Interland's other shareholders through compensation that is based on Interland's
common stock, and thereby promote the long-term  financial interest of Interland
and its  subsidiaries,  including the growth in value of Interland's  equity and
enhancement  of long-term  shareholder  return.  The 2006 Plan is not  qualified
under  Section  401(a) of the Code and is not subject to the  provisions  of the
Employee Retirement Income Security Act of 1974.

Shares Reserved for the Plan

     Interland's 2006 Plan provides for the grant of options ("Options"),  stock
appreciation  rights ("SARs") and stock units,  performance  shares,  restricted
stock  awards and  restricted  stock unit  awards  (collectively  referred to as
"Other Stock  Awards").  Options,  SARs and Other Stock Awards are  collectively
referred to herein as "Awards."  The maximum  number of shares of stock that may
be  awarded  under  the 2006  Plan  shall be equal  to 1.0  million  shares.  In
addition,  the following  restrictions  are imposed  under the 2006 Plan:  (i) a
maximum of 1.0 million  shares  issued  under  Options  intended to be Incentive
Stock Options  ("ISOs") under Section 422 of the Code, (ii) a maximum of 400,000
shares may be issued  under  Options and SARs to any one  individual  during any
consecutive  twelve-month  period,  (iii) a maximum of 1.0 million shares in the
aggregate  may be subject to Other Stock  Awards,  and (iv) no more than 400,000
shares may be  subject  to Awards  that are  intended  to be  "performance-based
compensation" (as that term is used for purposes of Code Section 162(m)) granted
to any individual during any one-year fiscal period.  These maximums are subject
to adjustment in the event of stock  dividends,  stock  splits,  combination  of
shares,  recapitalization,   reorganization,  merger,  consolidation,  split-up,
spin-off,  exchange of shares or other changes in the  outstanding  common stock
("Corporate  Transactions").  Any such  adjustment will be made by the Committee
(as defined below).  The Plan maximum shall not be reduced for shares subject to
plans assumed by Interland in an acquisition of an interest in another  company.
Shares subject to Awards that are forfeited or canceled shall again be available
for new  Awards  under  the 2006  Plan.  Shares  issued  under the 2006 Plan may
consist,  in whole or in part,  of  authorized  and unissued  shares or treasury
shares or shares purchased on the open market or privately.

     The 2006 Plan  permits the grant of ISOs and  non-qualified  stock  options
("NQOs").  The Compensation Committee will determine the terms and conditions of
Options  granted under the 2006 Plan,  including the exercise  price  ("Exercise
Price"),  which may not be less than the fair market value of Interland's common
stock on the date of grant,  all subject to certain  limitations  provided under
the 2006 Plan.

     Awards may be settled  through  cash  payments,  the  delivery of shares of
common stock, the granting of replacement  Awards,  or a combination  thereof as
the Committee shall determine. Any Award settlement may be subject to such rules
and procedures as the Committee may establish, to the extent consistent with the
2006 Plan.



                                       24

<PAGE>

Administration of the Plan

     The 2006 Plan will be administered by the Compensation  Committee appointed
by the Board of Directors of Interland.  The Committee  shall be selected by the
Board,  and shall  consist  solely of two or more  members  of the Board who are
non-employee  Directors  within the meaning of Rule 16b-3  under the  Securities
Exchange Act of 1934, as amended,  are outside  Directors  within the meaning of
Code Section 162(m), and are "independent" as required by Nasdaq. Subject to the
terms of the 2006 Plan, in  administering  the 2006 Plan and the Awards  granted
under the 2006 Plan, the Committee will have the authority to:

     o    Determine  the  employees of Interland  and its  subsidiaries  to whom
          Awards may be granted and the types of Awards;
     o    Determine the time or times at which Awards may be granted;
     o    Determine  the  Option  price for shares  subject  to each  Option and
          establish the terms,  conditions,  performance criteria,  restrictions
          and other provisions of each Award;
     o    Determine  the extent to which Awards will be structured to conform to
          Section 162(m) of the Code;
     o    Establish terms and conditions of Awards to conform to requirements of
          jurisdictions outside the United States;
     o    Waive or otherwise modify any vesting or other restrictions  contained
          in Awards;
     o    Amend, without shareholder approval,  any outstanding Award to provide
          additional rights and benefits permitted by the 2006 Plan and Sections
          162(m) and 409A of the Code; and
     o    Interpret   the  2006  Plan  and   prescribe  and  rescind  rules  and
          regulations, if any, relating to and consistent with the 2006 Plan.

     As of  February  17,  2006,  the  Committee  was  composed  of Robert  Lee,
chairman,  John B. Balousek , Efrem Gerszberg,  and Alex Kazerani.  The terms of
the  Compensation  Committee  members  expire  at  the  Annual  Meeting  of  the
Shareholders. They are all candidates for reelection.

Amendment of the Plan.

     The 2006 Plan may be terminated or amended by the Board of Directors at any
time,  except that the following  actions may not be taken  without  shareholder
approval:

     o    Any increase in the number of shares that may be  delivered  under the
          2006 Plan (except by certain  adjustments  provided for under the 2006
          Plan);
     o    Any change in the classes of person  eligible to receive  Awards under
          the 2006 Plan;
     o    Any change in the 2006 Plan requirements  regarding the Exercise Price
          (relating to fair market value); or
     o    Any other 2006 Plan amendment that would require shareholder  approval
          under applicable law, regulation or rule.

     Awards may not be granted under the 2006 Plan after the date of termination
of the 2006 Plan,  which has a ten year  duration,  but Awards  granted prior to
that date shall continue to be exercisable and vest according to their terms.

Option Repricing

     The  Committee  may not,  without  first  obtaining  shareholder  approval,
"reprice"  outstanding  Options  or  SARs  as  such  term  is used by the SEC or
otherwise lower their exercise or base prices, or make any material amendment in
violation of Nasdaq requirements.

Eligibility for Participation

     Each employee,  officer or director of Interland or any of its subsidiaries
is  eligible  to  participate  in  the  2006  Plan.   Consultants,   independent
contractors  and  advisors  to the  Company or a  Subsidiary  who have  provided
services,  none of which are in connection  with the offer or sale of securities
in a capital-raising transaction, are also eligible.

     Nothing  contained in the 2006 Plan or in any Option  agreement  may confer
upon any  person  any right to  continue  as an  employee  of  Interland  or its
subsidiaries,  or limit in any way any right of shareholders or of the Board, as
applicable, to remove such person.



                                       25

<PAGE>

New Plan Benefits

     No Awards have been granted under the 2006 Plan. No determination  has been
made by the Board or the Committee  regarding the number of Awards to be granted
to  any  executive  officer,  director,   executive  officers  as  a  group,  or
non-executive employees. It is impossible to determine the benefits that will be
paid to any  individuals  pursuant  to the 2006 Plan  should it be  approved  by
Interland's  shareholders.  For informational purposes only, the following table
sets  forth the  options  granted  in the  Transition  Period  to the  specified
individuals and groups:


<TABLE>
<CAPTION>
<S>                                                               <C>                      <C>
                                                                   Number of Shares
               Name and Position                                   Underlying Grants        Dollar Value (1)
               ------------------                                 ------------------       ----------------
Jeffrey M. Stibel                              
President and Chief Executive Officer                                          0             $         0

Gonzalo Troncoso
Executive Vice President and Chief Financial Officer                      50,000             $   227,905

Richard V. Pitrolo
Executive Vice President and Chief Operating Officer                      50,000             $   227,905

Glenn R. Hofmann
Senior Vice President, Products & Technology                              25,000             $   113,953

Jonathan B. Wilson
Senior Vice President and General Counsel                                 25,000             $   113,953

Allen L. Shulman
Former President and Chief Operating Officer                                 0               $         0

Denise R. Grey
Former Vice President Sales & Marketing                                      0               $         0

Non-Executive Director Group                                              92,000             $   373,892

Executive officers as a group, including the
Named Executive Officers                                                 150,000             $   683,716

All non-executive officers and other employees as a group                530,000             $ 2,697,640

          Total                                                          680,000             $ 3,381,356
</TABLE>


     (1)  Assumes  a  potential  realizable  value  using a 10%  annual  rate of
          appreciation  which  is the  same  as  the  hypothetical  grant  value
          determined  for  options  granted  in 2005-T  to the  Named  Executive
          Officers. See the chart at "Option Grants in 2005-T."



                                       26

<PAGE>


For  informational  purposes  only,  the following  table sets forth the options
granted in Fiscal 2005 to the specified individuals and groups:



<TABLE>
<CAPTION>
<S>                                                             <C>                      <C>
                                                                 Number of Shares
                   Name and Position                            Underlying Grants        Dollar Value (1)
                   ------------------                           ------------------       ----------------
Jeffrey M. Stibel                                                                         
President and Chief Executive Officer                                    1,700,000        $    6,204,439

Gonzalo Troncoso
Executive Vice President and Chief Financial Officer                        10,000        $       47,972

Richard V. Pitrolo
Executive Vice President and Chief Operating Officer                             0        $            0

Glenn R. Hofmann
Senior Vice President, Products & Technology                                10,000        $       47,972

Jonathan B. Wilson
Senior Vice President and General Counsel                                        0        $            0

Allen L. Shulman
Former President and Chief Operating Officer                                20,000        $       83,512

Denise R. Grey
Former Vice President Sales & Marketing                                          0        $            0

Non-Executive Director Group                                               131,200        $      459,782

Executive officers as a group, including the
Named Executive Officers                                                 1,750,000        $    6,430,633

All non-executive officers and other employees as a group                  304,000        $    1,167,839

          Total                                                          2,054,000        $    7,598,472
</TABLE>


     (1)  Assumes  a  potential  realizable  value  using a 10%  annual  rate of
          appreciation  which  is the  same  as  the  hypothetical  grant  value
          determined for options  granted in Fiscal 2005 to the Named  Executive
          Officers. See the chart at "Option Grants in Fiscal 2005."


     The market price of the  securities  underlying the options,  warrants,  or
rights as of  February  16,  2005 is $5.84,  based on the  closing  price on the
NASDAQ National Market.

Exercise Price and Vesting

     The  exercise  price per share for each  Option or SAR shall be at whatever
price is approved by the  Committee  but shall not be less than 100% of the fair
market  value per share of common  stock on the  grant  date.  The "fair  market
value" shall be:

     o    If Interland's stock is then quoted on the Nasdaq National Market, its
          closing  price  on  the  Nasdaq   National   Market  on  the  date  of
          determination as reported in The Wall Street Journal;

     o    If  Interland's  stock is  publicly  traded  and is then  listed  on a
          national  securities  exchange,  its  closing  price  on the  date  of
          determination on the principal national  securities  exchange on which
          Interland's  stock is listed or admitted to trading as reported in The
          Wall Street Journal;

     o    If  Interland's  stock is  publicly  traded  but is not  quoted on the
          Nasdaq National Market nor listed or admitted to trading on a national
          securities  exchange,  the average of the closing bid and asked prices
          on the date of  determination  as reported by The Wall Street  Journal
          (or, if not so  reported,  as otherwise  reported by any  newspaper or
          other source as the Board may determine); or

     o    If none of the  foregoing  is  applicable,  by the  Committee  in good
          faith,  provided that such determination of Fair Market value complies
          with the requirements of Section 409A of the Code.

Adjustments to Exercise Price and Number of Shares;  Change of Control Corporate
Transactions.

     In the event of a Corporate Transaction, the Committee may adjust Awards to
preserve  the  benefits  or  potential  benefits  of the  Awards.  Action by the
Committee may include adjustment of: (i) the number and kind of shares which may
be delivered  under the 2006 Plan; (ii) the number and kind of shares subject to


                                       27

<PAGE>

outstanding  Awards;  and (iii) the Exercise  Price of  outstanding  Options and
SARs;  as well as any other  adjustments  that the  Committee  determines  to be
equitable and consistent with the requirements of Section 409A of the Code.

     In general,  if  Interland  is merged  into or  consolidated  with  another
corporation,  whether  or not  Interland  is the  surviving  corporation,  or if
Interland is liquidated,  or sells or otherwise disposes of substantially all of
its assets to another  corporation while Options or Awards are outstanding under
the 2006 Plan:

     o    After the effective  date of the merger,  consolidation,  liquidation,
          sale or  other  disposition,  as the case may be,  each  holder  of an
          outstanding Option or other Award shall be entitled,  upon exercise of
          that  Option  or  Award or in  place  of it,  as the  case may be,  to
          receive,  at the  option  of the  Committee  and in lieu of  shares of
          common stock,  (i) the number and class or classes of shares of common
          stock or other  securities  or property to which the holder would have
          been  entitled  if,  immediately  prior to the merger,  consolidation,
          liquidation, sale or other disposition, the holder had been the holder
          of record of a number of shares of common stock equal to the number of
          shares of common stock as to which that Option may be exercised or are
          subject to the Award or (ii) shares of common  stock the company  that
          is the surviving  corporation  as of the date of payment as determined
          by the  Committee  in its sole  discretion,  equal to the value of the
          shares of stock or other securities or property  otherwise payable per
          (i) above;

     o    If  Options  or other  Awards  have  not  already  become  exercisable
          pursuant  to the change in control  provisions  of the 2006 Plan,  the
          Board of Directors may waive any  limitations  set forth in or imposed
          pursuant  to this Plan so that all Options or other  Awards,  from and
          after a date prior to the effective date of the merger, consolidation,
          liquidation,  sale or other disposition, as the case may be, specified
          by the Board of Directors, shall be exercisable in full; and

     o    All  outstanding  Options  or SARs may be  cancelled  by the  Board of
          Directors  as of the  effective  date  of any  merger,  consolidation,
          liquidation,  sale or other disposition  provided that any optionee or
          SAR  holder  shall have the right  immediately  prior to such event to
          exercise  his or her  Option or SAR to the  extent  such  optionee  or
          holder is otherwise able to do so in accordance  with the 2006 Plan or
          his or her individual Option or SAR agreement; provided, further, that
          any such  cancellation  shall be  contingent  upon the  payment to the
          affected  Participants  of an  amount  equal to (i) in the case of any
          out-of-the-money  Option  or  SAR,  cash,  property  or a  combination
          thereof having an aggregate value equal to the value of such Option or
          SAR, as  determined  by the  Committee or the Board of  Directors,  as
          applicable,  in its  sole  discretion,  and  (ii)  in the  case  of an
          in-the-money  Option or SAR, cash,  property or a combination  thereof
          having  an  aggregate  value  equal to the  excess of the value of the
          per-share  amount  of  consideration  paid  pursuant  to  the  merger,
          consolidation, liquidation, sale or other disposition, as the case may
          be, giving rise to such cancellation,  over the exercise price of such
          Option or SAR  multiplied  by the number of shares of Stock subject to
          the Option or SAR.

     Change in Control.  Subject to the  provisions of the 2006 Plan relating to
the adjustment of shares,  and except as otherwise  provided in the 2006 Plan or
the Award agreement  reflecting the applicable  Award,  upon the occurrence of a
Change in Control as defined below:

     o    All  outstanding  Options held  (regardless  of whether in tandem with
          SARs) shall become fully exercisable,

     o    All  outstanding  SARs  (regardless of whether in tandem with Options)
          shall become fully exercisable, and

     o    All Other Stock Awards held shall become fully vested.

     The term "Change in Control" means a change in the beneficial  ownership of
Interland's  voting  stock or a change in the  composition  of the  Board  which
occurs as follows:

     o    Any "person,", including a "syndication" or "group" as those terms are
          used in Section 13(d)(3) of the Securities Exchange Act of 1934, is or
          becomes the beneficial owner, directly or indirectly, of securities of
          the Company  representing  40% or more of the combined voting power of
          the  Company's  then  outstanding  "voting  securities,"  which is any
          security which ordinarily  possesses the power to vote in the election
          of the Board of Directors of a  corporation  without the  happening of
          any precondition or contingency;

                                       28

<PAGE>

     o    The Company is merged or  consolidated  with another  corporation  and
          immediately  after giving effect to the merger or  consolidation  less
          than 80% of the  outstanding  voting  securities  of the  surviving or
          resulting entity are then  beneficially  owned in the aggregate by (x)
          the   shareholders  of  the  Company  in  their   capacities  as  such
          immediately prior to such merger or consolidation,  or (y) if a record
          date  has  been  set to  determine  the  shareholders  of the  Company
          entitled to vote on such merger or consolidation,  the shareholders of
          the Company as of such record date;

     o    If at any time the following do not constitute a majority of the Board
          of Directors of the Company (or any  successor  entity  referred to in
          clause (ii) above:  persons who, prior to their election as a Director
          of the Company (or successor  entity if  applicable)  were  nominated,
          recommended  or  endorsed  by a  formal  resolution  of the  Board  of
          Directors of the Company or the  Nominating  and Corporate  Governance
          Committee thereof; or

     o    The  Company  transfers  substantially  all of its  assets to  another
          corporation which is a less than 80% owned subsidiary of the Company.

     Notwithstanding the foregoing,  with respect to Other Stock Awards that are
subject to Section  409A of the Code,  a "Change of Control"  must  constitute a
change in the  ownership or effective  control of the Company or a change in the
ownership  of a  substantial  portion  of the assets of the  Company  within the
meaning of Section 409A of the Code.

Duration and Termination of 2006 Plan and Options

     The 2006  Plan  shall  have a  duration  of ten  years  from the date it is
approved by shareholders;  provided that in the event of 2006 Plan  termination,
the  2006  Plan  shall  remain  in  effect  as long as any  Awards  under it are
outstanding;  provided, further, however, that no Award may be granted under the
2006 Plan on a date  that is more than ten years  from the date the 2006 Plan is
approved by shareholders.

     Each Award  expires on the  expiration  date  specified  by the  Committee;
provided,  however, that the expiration date with respect to any Award shall not
be later  than the  ten-year  anniversary  of the  date on  which  the  Award is
granted.

Means of Exercise of Options

     An Option or a SAR shall be exercisable  in accordance  with such terms and
conditions and during such periods as may be  established by the Committee.  The
payment of the exercise  price of an Option granted under the 2006 Plan shall be
subject to the following:

     o    The full exercise price for shares of common stock  purchased upon the
          exercise  of any  Option  shall be paid at the  time of such  exercise
          (except that, in the case of an exercise  arrangement  approved by the
          Committee  and  described  below,  payment  may be  made  as  soon  as
          practicable after the exercise).

     o    The exercise price shall be payable in cash or by tendering (by actual
          delivery of shares)  shares of common stock that are acceptable to the
          Committee  that  have  been  held  for  at  least  six  months  by the
          Participant  (with such shares  valued at fair market  value as of the
          day of tender), or in any combination of cash or shares, as determined
          by the Committee.

     o    To the extent  permitted by applicable law, a Participant may elect to
          pay the exercise  price upon the exercise of an Option by  irrevocably
          authorizing  a third  party  to sell  shares  of  common  stock  (or a
          sufficient portion of the shares) acquired upon exercise of the Option
          and remit to  Interland a sufficient  portion of the sale  proceeds to
          pay the entire exercise price.

Non-Transferability of Awards

     Except as provided by the  Committee,  no Award is  transferable  except by
will or by the laws of  descent  and  distribution.  Shares  subject  to  Awards
granted under the 2006 Plan that have lapsed or terminated  may again be subject
to Awards granted under the 2006 Plan.



                                       29

<PAGE>

Restrictions on Stock Awards

     Each Stock  Award  shall be subject to such  conditions,  restrictions  and
contingencies  as the Committee shall  determine.  These may include  continuous
service  and/or  the  achievement  of  performance  measures  designated  by the
Committee.  The performance  measures that may be used by the Committee for such
Awards  shall be  measured  by  revenues,  income or such other  criteria as the
Committee may specify.

     The Committee  may designate  whether any Stock Awards being granted to any
Participant are intended to be "performance-based  compensation" as that term is
used in Section 162(m) of the Code.  Any Stock Awards  designated as intended to
be  "performance-based  compensation" shall be conditioned on the achievement of
one or more performance  measures.  The performance measures that may be used by
the  Committee  for such Stock  Awards  shall be based on any one or more of the
following, as selected by the Committee: return on capital or increase in pretax
earnings of Interland and/or one or more divisions and/or  subsidiaries,  return
on  shareholders'  equity  of  Interland,  increase  in  earnings  per  share of
Interland,  sales of Interland and/or one or more divisions and/or subsidiaries,
pretax earnings of Interland and/or one or more divisions  and/or  subsidiaries,
net  earnings of Interland  and/or one or more  divisions  and/or  subsidiaries,
control of operating  and/or  non-operating  expenses of Interland and/or one or
more  divisions  and/or  subsidiaries,  margins of Interland  and/or one or more
divisions  and/or  subsidiaries,  market price of  Interland's  securities  and,
solely  for  a  Stock  Award  not  intended  to  constitute   "performance-based
compensation"  under Section 162(m) of the Code,  other factors directly tied to
the performance of Interland and/or one or more divisions and/or subsidiaries or
other performance  criteria.  For Stock Awards intended to be "performance-based
compensation,"  the grant of the Awards and the establishment of the performance
measures  shall be made during the period  required  under Section 162(m) of the
Code.

Federal Tax Consequences

     The following  discussion  addresses certain anticipated federal income tax
consequences  to recipients of awards made under the 2006 Plan and to Interland.
It is based on the Code and interpretations  thereof as in effect on the date of
this  proxy  statement.  It is not  intended  as tax  advice to any  individual.
Recipients  of awards  made  under the 2006 Plan  should  consult  their own tax
advisors to determine the tax consequences to them based on their own particular
circumstances.

Options

     Grant of Options.  There will be no federal income tax  consequences to the
grantee  of an  Option  or  Interland  upon the grant of either an ISO or an NQO
under the 2006 Plan.

     Exercise  of NQOs.  Upon the  exercise  of an NQO for the  shares  that are
vested at the time of exercise,  the grantee  generally will recognize  ordinary
compensation  income,  subject to withholding and employment taxes, in an amount
equal to: (a) the fair market  value,  on the date of exercise,  of the acquired
shares of Common  Stock,  less (b) the  exercise  price  paid for those  shares.
Subject  to  Sections  162(m)  and  280G of the Code (as  discussed  below)  and
Interland  satisfying  applicable  reporting  requirements,  Interland  will  be
entitled to a tax deduction equal to the compensation  income  recognized by the
grantee. Gains or losses recognized by the grantee upon a subsequent disposition
of the shares will be treated as long-term capital gains or losses if the shares
are held for more than a year from the date of  exercise.  Such  gains or losses
will be  short-term  capital gains or losses if the shares are held for one year
or less.  For purposes of computing  gain or loss,  the  grantee's  basis in the
shares  received will be the exercise  price paid for the shares plus the amount
of income, if any, recognized upon exercise of the Option.

     Exercise of ISOs.  Upon the exercise of an ISO, the grantee will  recognize
no  immediate  taxable  income for regular  income tax  purposes,  provided  the
grantee was continuously  employed by Interland or a subsidiary from the date of
grant  through the date which is three  months prior to the date of exercise (or
through  the date  which is one year prior to the  exercise  date in the case of
total disability).

     The  exercise  of  an  ISO  will,  however,  result  in an  adjustment  for
alternative  minimum tax  purposes in an amount  equal to the excess of the fair
market  value of the shares at exercise  over the exercise  price.  Depending on
particular  circumstances relating to the grantee, that adjustment may result in
alternative  minimum tax  liability to the grantee upon the exercise of the ISO.
Subject to certain limitations,  alternative minimum tax paid in one year may be
carried  forward and credited  against  regular federal income tax liability for
subsequent  years.  If the grantee retains the shares acquired upon the exercise
of the ISO for more than two years  from the date of grant and one year from the
date of  exercise,  any gain on a later  sale of the  shares  will be treated as
long-term  capital gain, and Interland will not be entitled to any tax deduction
with respect to the ISO.



                                       30

<PAGE>

     If the grantee  disposes of the shares of Common  Stock  received  upon the
exercise of an ISO before the  expiration  of the two-year and one-year  holding
periods discussed above, a "Disqualifying  Disposition"  occurs, and the grantee
will have ordinary  compensation  income,  and  Interland  will be entitled to a
corresponding deduction, at the time of such disposition. The amount of ordinary
income  and  deduction  generally  will be equal to the  lesser of: (a) the fair
market  value of the shares of Common  Stock on the date of  exercise  minus the
exercise price; or (b) the amount realized upon  disposition of the Common Stock
minus the exercise  price.  If the amount  realized on  disposition  exceeds the
value of the shares on the date of exercise,  such excess amount will be taxable
as capital  gain.  To be entitled to a deduction as a result of a  Disqualifying
Disposition,  Interland  must  satisfy  applicable  reporting  requirements.  In
addition,   for  Disqualifying   Dispositions  by  certain  executive  officers,
Interland's  deduction  is subject to the limits of Sections  162(m) and 280G of
the Code.

Stock-Settled Stock Appreciation Rights

     Generally,  a participant who is granted a stock-settled stock appreciation
right under the 2006 Plan will not recognize  any taxable  income at the time of
grant.  The participant will generally  recognize  ordinary income upon exercise
equal to the fair market value of the Common Stock  received by the grantee upon
exercise of an SAR on the day it is received.

     The Common Stock  received by the grantee upon exercise of an SAR will have
a tax basis equal to the fair market  value of such Common  Stock on the date of
exercise.  Upon a subsequent sale of the Common Stock, any gain or loss realized
will be capital gain or loss,  long-term or  short-term,  depending upon whether
the shares were held for more than one year from the date of exercise.

     In general, there are no federal income tax deductions allowed to Interland
upon the  grant or  termination  of  stock-settled  stock  appreciation  rights.
Subject  to  Sections  162(m)  and  280G of the Code  and  Interland  satisfying
applicable reporting requirements,  upon the exercise of the stock-settled stock
appreciation  right,  however,  Interland  will be entitled  to a deduction  for
federal  income tax  purposes  equal to the amount of  ordinary  income that the
participant is required to recognize as a result of the exercise.


Restricted Shares

     Unless a  grantee  who  receives  an Award of  Restricted  Shares  makes an
election  under Section 83(b) of the Code as described  below,  there will be no
federal  income tax  consequences  to either  the  grantee  or  Interland  until
expiration of the  restricted  period and the  satisfaction  of any  Performance
Goals or other conditions applicable to the Restricted Shares. At that time, the
grantee  generally will recognize  ordinary income equal to the then fair market
value of the shares of Common Stock and,  subject to Sections 162(m) and 280G of
the Code and Interland satisfying applicable reporting  requirements,  Interland
will be entitled to a corresponding deduction. In general, any dividends paid to
the  grantee  while  the  restrictions  or other  conditions  applicable  to the
Restricted Shares apply will be taxable  compensation income to the grantee, and
Interland  will be entitled to a  corresponding  deduction  with respect to such
dividends, subject to Sections 162(m) and 280G of the Code.

     If the  grantee  makes an  election  under  Section  83(b) of the Code with
respect to the Restricted Shares (a "Section 83(b) Election"),  the grantee will
recognize  ordinary  income  equal to the fair  market  value of the  Restricted
Shares as of the date of grant,  and Interland  generally  will be entitled to a
corresponding  deduction,  subject to Section  162(m) of the Code.  In addition,
cash  dividends  paid to the  grantee  would  generally  be taxable at a current
maximum  rate of 15%  applicable  to  dividend  income.  Interland  would not be
entitled to a deduction  with respect to any dividends  paid to the grantee if a
Section 83(b) Election is made with respect to the Restricted Shares.

     Upon a subsequent sale of Restricted  Shares,  any gain or loss realized by
the grantee will be capital gain or loss,  long-term  or  short-term,  depending
upon  whether  the  Restricted  Shares were held for more than one year from the
date of grant if a  Section  83(b)  Election  is made or,  if no  Section  83(b)
Election is made, more than one year from the date of vesting.  The basis of the
Restricted Shares sold for purposes of calculating gain or loss will be the fair
market value of those shares at the time of grant if a Section 83(b) Election is
made or at the time of vesting if a Section 83(b) Election is not made.

Other Stock-Based Awards

     Generally,  a participant who is granted an other  stock-based  award under
the 2006 Plan will  recognize  ordinary  income at the time the shares of Common
Stock associated with the award are received in an amount equal to the excess of
the fair market value of the Common Stock  received  over any amount paid by the
participant  in  exchange  for the  stock.  If,  however,  the  Common  Stock is
non-vested  (meaning  that the employee is required to work for a period of time
in order to have the right to sell the Common  Stock) when it is received  under
the 2006 Plan, and the participant  does not make a Section 83(b) Election,  the


                                       31

<PAGE>

participant  generally will not recognize  income until the Common Stock becomes
vested,  at which time the participant  will recognize  ordinary income equal to
the excess of the fair market  value of the Common  Stock on the date it becomes
vested over any amount paid by the participant in exchange for the Common Stock.

     In the case of other  stock-based  awards that take the form of Interland's
unfunded and unsecured promise to issue shares of Common Stock at a future date,
the  grant  of this  type of  award is not a  taxable  event to the  participant
because it  constitutes  an unfunded  and  unsecured  promise to issue shares of
Common Stock at a future date. Once this type of award vests and the participant
receives  the shares of Common  Stock,  the tax rules  discussed in the previous
paragraph  will  apply  to  receipt  of such  shares.  If an  award  constitutes
non-qualified  deferred  compensation under Section 409A of the Code, it will be
required to be structured to comply with Section 409A to avoid the imposition on
the participant of penalties and interest.

     If a participant receives the cash equivalent of shares of Common Stock (in
lieu of  receiving  shares of Common  Stock),  the  participant  will  recognize
ordinary  compensation  income at the time of receipt of such cash in the amount
of the cash received.

     Subject to Sections  162(m) and 280G of the Code and  Interland  satisfying
applicable reporting  requirements,  in the year that the participant recognizes
ordinary compensation income in respect of an award,  Interland will be entitled
to a deduction for federal  income tax purposes  equal to the amount of ordinary
compensation income that the participant is required to recognize.

Section 162(m) Limitation

     In  general,  Section  162(m) of the Code  limits to $1 million the federal
income tax  deductions  that may be claimed  in any tax year by  Interland  with
respect to compensation  payable to any employee who is chief executive  officer
or one of the other four  highest  paid  executive  Officers of Interland on the
last  day  of  that  tax  year.   This   limit   does  not   apply  to   certain
"performance-based  compensation"  paid under a plan that meets the requirements
of Section 162(m) the Code and the regulations promulgated thereunder. Interland
believes  that the  Options  and SARs to be  granted  under  the 2006  Plan will
qualify for the performance-based  compensation  exception to the Section 162(m)
limitations  because  Options  and  SARs  will be  granted  only if  stockholder
approval  of the 2006 Plan is  obtained,  and any taxable  compensation  will be
based  solely on an  increase  in value of the stock after the date of the Award
(since the Option and SAR exercise prices will be no less than fair market value
on the date of grant).  Deductions  attributable to Restricted  Shares and Stock
Units may also qualify for this  exception  provided  that the  compensation  is
contingent on attaining one or more Performance  Goals.  However,  the Committee
has the ability to grant  Restricted  Shares and Stock Units that do not qualify
for this exception.

Golden Parachute Tax and Section 280G of the Code

     If an Award is  accelerated  as a result of a Change in  Control,  all or a
portion  of the  value of the Award at that  time may be a  "parachute  payment"
under Section 280G of the Code for certain  employees and other  individuals who
perform  services  for  Interland.  Section  280G  generally  provides  that  if
parachute  payments  equal or exceed three times an Award  holder's  average W-2
compensation for the five tax years preceding the year of the Change in Control,
Interland  will not be  permitted  to claim its  deduction  with  respect to any
"excess  parachute  payments"  made  to the  individual.  An  "excess  parachute
payment"  generally  is the portion of a parachute  payment  that  exceeds  such
individual's historical average compensation. Section 280G of the Code generally
applies to employees or other individuals who perform services for Interland if,
within the 12-month period preceding the Change in Control, the individual is an
officer  of  Interland,  a  shareholder  owning  more  than 1% of the  stock  of
Interland, or a member of the group consisting of the lesser of the highest paid
1% of the employees of Interland or the highest paid 250 employees of Interland.
A  recipient  of an excess  parachute  payment is subject to a 20% excise tax on
such excess parachute payment under Section 4999 of the Code.

Section 409A of the Code

     Section  409A was added to the Internal  Revenue Code by the American  Jobs
Creation  Act of 2004.  It is  generally  effective  January 1, 2005 and applies
broadly to most  forms of  deferred  compensation,  including  certain  types of
equity-based  compensation.  Section 409A provides strict rules for elections to
defer (if any) and timing of payouts.  If the  requirements  of Section 409A are
not  met,   recipients  of  deferred   compensation   may  suffer   adverse  tax
consequences, including taxation at the time of vesting of an award and interest
and a 20% penalty on any deferred  income.  However,  the failure to comply with
Section  409A  would  not  impact   Interland's   ability  to  deduct   deferred
compensation.  Although  the IRS and the  Treasury  Department  have issued only
limited  guidance  on the  interpretation  of this new law,  Interland  does not
intend  to grant any  awards  under the Plan  that  would  not  comply  with the
requirements of Section 409A of the Code.



                                       32

<PAGE>

     The  discussion  set forth above is intended only as a summary and does not
purport to be a complete  enumeration  or analysis of all  potential tax effects
relevant to recipients of Awards under the 2006 Plan.  The foregoing  discussion
is based on current provisions of the Code, which are subject to change.

     In addition,  we have not undertaken to discuss the tax treatment of Awards
under  the 2006  Plan in  connection  with a merger,  consolidation  or  similar
transaction.  Such treatment will depend on the terms of the transaction and the
method of dealing with the Awards in connection therewith.

Tax Withholding

     Whenever Interland proposes, or is required, to distribute shares under the
2006 Plan, Interland may require the recipient to satisfy any federal, state and
local tax withholding  requirements prior to the delivery of any certificate for
such shares or, in the  discretion of the  Committee,  Interland may permit such
withholding  obligation to be satisfied through cash payment by the Participant,
but only to the extent of the  minimum  amount  required  to be  withheld  under
applicable law.

Unfunded Status of the 2006 Plan

     The 2006 Plan is intended to constitute an "unfunded" plan of compensation.
With  respect to any  payments  not yet made to a  Participant  or  optionee  by
Interland, nothing contained in the 2006 Plan shall give any such Participant or
optionee  any  rights  that are  greater  than  those of a general  creditor  of
Interland.

Equity Compensation Plan Information

     The  following  table  provides  information  as of December  31, 2005 with
respect to shares of Interland  common  stock that may be issued under  existing
equity  compensation  plans.  Interland's  Board  of  Directors  in the past has
awarded grants of options to executive  officers and employees on a case-by-case
basis when sufficient shares were not available under equity  compensation plans
approved by  shareholders.  Interland  does not intend to continue this practice
except  to  the   extent   that   shares   are   otherwise   unavailable   under
shareholder-approved  plans and the grants are  permitted by  applicable  NASDAQ
rules.


<TABLE>
<CAPTION>
<S>                                                  <C>                        <C>                     <C>
                                                                                                            NUMBER OF SECURITIES
                                                      NUMBER OF SECURITIES        WEIGHTED AVERAGE         REMAINING AVAILABLE FOR
                                                       TO BE ISSUED UPON         EXERCISE PRICE OF          FUTURE ISSUANCE UNDER
                                                          EXERCISE OF               OUTSTANDING           EQUITY COMPENSATION PLANS
                                                      OUTSTANDING OPTIONS,       OPTIONS, WARRANTS          (EXCLUDING SECURITIES
                                                      WARRANTS AND RIGHTS            AND RIGHTS           REFLECTED IN COLUMN (A))
                                                             (A)(1)                    (B)(1)                      (C)(1)
                                                     -----------------------    ---------------------    ---------------------------

Plans Approved by Shareholders                             1,613,405                 $   6.45                       504,389 
Plans Not Approved by Shareholders                         1,915,000                 $   2.98                             0 
                                                                                                                            
Total                                                      3,528,405                 $   4.58                       504,389 
                                                                                                                            
</TABLE>


______________________
(1)  Excludes  127,411  shares of common stock to be issued upon the exercise of
options issued under the 1999 Stock  Incentive Plan of  Interland-Georgia,  Inc.
(the "1999  Plan"),  which  options have a weighted  average  exercise  price of
$29.54. The Company assumed the outstanding options under the 1999 Plan when the
Company acquired Interland-Georgia, Inc. on August 6, 2001.



                                       33

<PAGE>


DESCRIPTION OF PLANS NOT APPROVED BY SHAREHOLDERS

     The foregoing  table includes a total of 1,915,000  shares subject to stock
options  which were not  approved by  shareholders  because  they were issued as
"inducement grants" pursuant to NASDAQ Rule 4350(i)(1)(A)(iv).  The terms of the
inducement grants are summarized in the table below:


<TABLE>
<CAPTION>
<S>                                <C>                 <C>              <C>
                                                         EXERCISE
            NAME                   # SHARES                 PRICE        EXPIRATION DATE
Peter Delgrosso                       200,000             $   2.29            7/28/13
Joel Kocher                            15,000  (1)           90.00            1/13/08
Jeffrey Stibel                      1,700,000                 2.29            7/28/13

</TABLE>

--------------------
(1) This stock option was cancelled in December 2005.

     In addition,  the table includes a grant under an equity incentive plan not
previously  approved by Shareholders,  which was the 2001 Equity Incentive Plan.
The 2001 Equity  Incentive  Plan resulted from the  assumption and amendment and
restatement of the HostPro,  Inc. 2000 Equity Incentive Plan I and HostPro, Inc.
2000  Equity  Incentive  Plan II (the  "HostPro  Plans").  The  Company  and the
Company's wholly owned subsidiary, HostPro, originally adopted the HostPro Plans
on August 17,  2000,  reserving a total of 10 million  shares of HostPro  common
stock for issuance under the HostPro Plans.

On March 22, 2001,  the Company merged a wholly owned  subsidiary  into HostPro,
with the  subsidiary  being the  surviving  corporation  and  taking on the name
"HostPro,  Inc." At the time of that merger,  the Company  assumed,  amended and
restated the HostPro Plans as the 2001 Equity Incentive Plan. In connection with
that merger, the Company assumed  outstanding options to purchase HostPro common
stock.  Each then  outstanding  option to purchase  HostPro common stock granted
under the HostPro Plans was converted  into an option to purchase  0.5715 shares
of the Company's  common stock.  At the time of the merger,  options to purchase
4,027,418  shares of HostPro  common  stock were  outstanding  under the HostPro
Plans.

The 2001 Equity  Incentive  Plan was designed to meet the "broadly  based plans"
exemption from the shareholder approval requirement for stock option plans under
the NASDAQ Stock Market listing requirements as those requirements then existed.
No more than 50% of the total number of shares  subject to options or restricted
stock awards  granted under the plan were to be issued to officers and directors
of the Company or any  subsidiary  of the  Company,  or any other  person  whose
transactions  in the  Company's  common  stock were subject to Section 16 of the
Securities  Exchange Act and persons who are not employees or subject to Section
16 were to receive  at least 50% of all  options  and  restricted  stock  awards
granted under the plan.

A total of 6,858,000  shares of common stock (685,800 shares after giving effect
to the 1-for-10  reverse stock split effective August 1, 2003) were reserved for
issuance  under the plan,  including the shares  subject to options issued under
the HostPro Plans and converted  into options to purchase  Company common stock.
This  number of shares  was to be  adjusted  proportionately  to  reflect  stock
splits,  stock  dividends and other  similar  events.  Any shares  subject to an
option or other award granted under the plan that terminates  without any shares
being issued will again be available  for grant and issuance  under the plan. In
addition,  any shares issued under the plan that the Company  repurchased at the
original issue price were to again be available for issuance under the plan.

The terms and conditions of the 2001 Equity Incentive Plan are substantially the
same as the 2002 Equity  Incentive Plan,  except that the 2001 Equity  Incentive
Plan does not provide for the grant of incentive stock options,  does not comply
with the requirement for tax deductibility  under Section 162(m) of the Internal
Revenue Code and adoption of and amendments to the 2001 Equity Incentive Plan do
not require approval of the shareholders. In addition, the 2001 Equity Incentive
Plan  provides for the grant of restricted  stock awards,  while the 2002 Equity
Incentive Plan does not. The ability to issue additional  options under the 2001
Equity  Incentive Plan was terminated  following the adoption of the 2002 Equity
Incentive Plan at the Annual Meeting of Shareholders on April 24, 2002.

     Assuming the presence of a quorum,  the  affirmative  vote of a majority of
the shares present is required to approve this proposal.

                    THE BOARD OF DIRECTORS RECOMMENDS A VOTE
                               "FOR" THIS PROPOSAL



                                       34

<PAGE>



                  INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     The  Audit   Committee   board  of   directors   is   expected  to  appoint
PricewaterhouseCoopers  LLP,  independent  registered public accounting firm, to
audit the consolidated  financial  statements of the Company for the fiscal year
ending December 31, 2006, but has not yet done so. If appointed,  they will also
be asked to audit the Transition Period at that time.

     Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Annual  Meeting.  They will have the opportunity to make a statement if they
so desire, and are expected to be available to respond to appropriate questions.

FEES PAID TO INDEPENDENT  REGISTERED PUBLIC ACCOUNTING FIRM IN FISCAL 2004, 2005
AND THE TRANSITION PERIOD

     During fiscal 2004, 2005 and the Transition  Period,  the Company  incurred
the following fees for services performed by PricewaterhouseCoopers LLP:


<TABLE>
<CAPTION>
<S>                           <C>                      <C>                          <C>
                              TRANSITION PERIOD            FISCAL 2005                  FISCAL 2004
                              ------------------       ---------------------        --------------------
Audit Fees                       $  92,000               $     1,066,383 (1)            $  479,340  (1)
Audit Related Fees (2)                   0                        25,668                    15,500 
Tax Fees                                 0                             0                         0 
All Other Fees                           0                             0                         0 
</TABLE>


     (1)  Audit fees were for services performed by PricewaterhouseCoopers  LLP,
          except $29,787  related to the 401(k) benefit plan audit  performed by
          Grant Thornton LLP.

     (2)  Includes  due  diligence  reviews of potential  transactions  and work
          paper reviews.

     All of the services  described  above were approved by the Company's  audit
committee.  The Audit  Committee  has  determined  that the payments made to its
independent  registered public accounting firm for these services are compatible
with maintaining such auditors' independence.

     In accordance with the Audit Committees  Charter,  policies and procedures,
all services performed by the independent  registered public accounting firm are
approved by the Audit  Committee of the Board of Directors prior to performance.
The Chairman of the audit  committee  has been  delegated  the  authority by the
committee to pre-approve  the engagement of the  independent  registered  public
accounting firm when the entire  committee is unable to do so. The Chairman must
report  all  such  pre-approvals  to the  entire  audit  committee  at the  next
committee meeting.




                                       35

<PAGE>


                              SHAREHOLDER PROPOSALS

     Appropriate  proposals  of  shareholders  intended to be  presented  at the
Company's 2007 Annual Meeting of Shareholders pursuant to Rule 14a-8 promulgated
under the  Securities  Exchange  Act of 1934 must be  received by the Company by
November 3, 2006 for inclusion in its proxy statement and form of proxy relating
to that meeting.  If such shareholder  proposals are not timely received,  proxy
holders  will  have  discretionary  voting  authority  with  regard  to any such
shareholder  proposals  which may come  before the 2007 Annual  Meeting.  If the
month and day of the next annual  meeting is advanced or delayed by more than 30
calendar  days from the month and day of the annual  meeting to which this proxy
statement  related,   the  Company  shall,  in  a  timely  manner,   inform  its
shareholders of the change, and the date by which proposals of shareholders must
be received.

     Upon the written request of any record or beneficial  owner of common stock
of the Company  whose proxy was  solicited  in  connection  with the 2006 Annual
Meeting of Shareholders,  the Company will furnish such owner, without charge, a
copy of its Annual  Report on Form 10-K  without  exhibits  for its fiscal  year
ended August 31, 2005 and its Form 8-K Requests for a copy of such Annual Report
on Form 10-K and Form 8-K should be  addressed  to  Jonathan  Wilson,  Corporate
Secretary,  Interland,  Inc., 303 Peachtree Center Avenue,  Suite 500,  Atlanta,
Georgia 30303.


                                 OTHER BUSINESS

     The board of directors does not intend to bring any other  business  before
the meeting,  and the Company  does not know of any other  matters to be brought
before the meeting  except as specified in the notice of the meeting.  As to any
business that may properly come before the meeting, however, it is intended that
proxies,  in the form  enclosed,  will be voted in  respect  of such  matters in
accordance with the judgment of the persons voting the proxies.



                   TELEPHONE AND INTERNET VOTING ALTERNATIVES

     Shareholders with shares held directly or in an account at a brokerage firm
may vote  those  shares  telephonically  by  calling  the  telephone  number  or
accessing the Internet  site  referenced  in your voting form.  Votes  submitted
electronically  via the Internet or by  telephone  must be received by midnight,
Eastern Time, on March 30, 2006.

     The Internet  voting  procedures are designed to  authenticate  shareholder
identities,  to allow  shareholders  to give their  voting  instructions  and to
confirm  that  the  shareholders'  instructions  have  been  recorded  properly.
Shareholders  voting via the Internet should  understand that there may be costs
associated  with electronic  access,  such as usage charges from Internet access
providers and telephone companies, that must be borne by the shareholder.

     The giving of a proxy will not affect  your right to vote in person  should
you decide to attend the Annual Meeting. Shareholders holding shares in the name
of a broker or other  nominee  who wish to vote in person at the Annual  Meeting
must bring a statement  from the broker or nominee  confirming  ownership of the
Company's common stock.

     WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE,  DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.



                                       36

<PAGE>




                                   APPENDIX A

                                 INTERLAND, INC.
                           2006 EQUITY INCENTIVE PLAN


                                    SECTION 1

                                     GENERAL


     1.1 Purpose.  The Interland,  Inc. 2006 Equity  Incentive Plan (the "Plan")
has been  established  by  Interland,  Inc.  (the  "Company") to (i) attract and
retain persons  eligible to participate in the Plan; (ii) motivate  Participants
(as  defined in Section  1.2  below),  by means of  appropriate  incentives,  to
achieve  long-range goals;  (iii) provide incentive  compensation  opportunities
that are  competitive  with those of other similar  companies;  and (iv) further
identify  Participants'  interests  with  those  of the  Company's  shareholders
through  compensation  that is based on the Company's  common stock; and thereby
promote the long-term  financial  interests of the Company and its Subsidiaries,
as defined  in  Section  8(i),  including  the growth in value of the  Company's
equity and enhancement of long-term  shareholder  return.  Pursuant to the Plan,
Participants may receive Options,  SARs, or Other Stock Awards,  each as defined
herein (collectively referred to as "Awards").

     1.2  Participation.  Subject to the terms and  conditions of the Plan,  the
Committee as defined in Section 5 shall  determine and  designate,  from time to
time,  from among the Eligible  Grantees,  as defined in Section 8(f) (including
transferees of Eligible  Grantees to the extent the transfer is permitted by the
Plan and the applicable Award Agreement),  those persons who will be granted one
or more Awards under the Plan, and thereby become "Participants" in the Plan. In
the  discretion  of the  Committee,  a  Participant  may be  granted  any  Award
permitted under the provisions of the Plan (except that ISOs may only be granted
to employees of the Company and its  Subsidiaries),  and more than one Award may
be granted to a Participant. Awards may be granted as additions to, alternatives
to or replacements of other Awards outstanding under the Plan, or any other plan
or arrangement  of the Company or a Subsidiary  (including a plan or arrangement
of a business or entity, all or a portion of which is acquired by the Company or
a Subsidiary).

     1.3  Operation,   Administration,   and  Definitions.   The  operation  and
administration  of the Plan,  including the Awards made under the Plan, shall be
subject  to  the   provisions   of  Section  4  (relating   to   operation   and
administration).  Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 8 of the Plan).

     1.4 Compliance with Section 409A of the Code. Notwithstanding any provision
of the Plan to the  contrary,  if any  Award  constitutes  or  provides  for the
deferral of  compensation  within the meaning of Section  409A of the Code,  the
Award shall comply and be  administered  in all respects,  in such manner as the
Committee shall  determine to be necessary or  appropriate,  to conform with the
applicable   requirements  of  Section  409A  of  the  Code  (and  the  Treasury
Regulations  and  other  applicable  guidance   promulgated   thereunder),   the
applicable  Award Agreement shall include all provisions  required for the Award
to comply with the  applicable  requirements  of Section  409A of the Code;  and
those provisions of the Award Agreement shall be deemed to constitute provisions
of the Plan. If the  Committee  grants any Awards or takes any other action that
would inadvertently result in the imposition of a penalty on a Participant under
Section  409A of the Code,  then the  Company,  in its  discretion,  may, to the
maximum extent permitted by law, unilaterally rescind ab initio, sever, amend or
otherwise  modify  the grant or action (or any  provision  of the Award) in such
manner as may be necessary for the penalty to be inapplicable or reduced.


                                    SECTION 2

                                OPTIONS AND SARS

     2.1 Definitions.

     (a) The grant of an "Option" entitles the Participant to purchase shares of
Stock at an Exercise Price  established by the Committee.  Options granted under
this Section 2 may either be Incentive Stock Options  ("ISOs") or  Non-Qualified
Options ("NQOs"), as determined in the discretion of the Committee.  An "ISO" is
an  Option  that is  intended  to  satisfy  the  requirements  applicable  to an
"incentive  stock option"  described in Section  422(b) of the Internal  Revenue
Code of 1986,  as  amended  (the  "Code").  An "NQO"  is an  Option  that is not
intended to be an "incentive  stock option" as that term is described in Section
422(b) of the Code.



                                       37

<PAGE>

     (b) A stock  appreciation  right (a  "SAR")  entitles  the  Participant  to
receive,  in cash or Stock (as determined in accordance  with  subsection  2.5),
value equal to (or otherwise  based on) the excess of: (a) the Fair Market Value
(as defined in Section 8) of a  specified  number of shares of Stock at the time
of exercise; over (b) an Exercise Price established by the Committee.

     2.2 Exercise Price. The Exercise Price of each Option and SAR granted under
this  Section 2 shall be not less than 100% of the Fair Market  Value of a share
of Stock on the date of grant of the Award. Unless a higher price is established
by the Committee or determined by a method  established  by the Committee at the
time the Option or SAR is granted,  the  Exercise  Price for each Option and SAR
shall  be equal  to 100% of the  Fair  Market  Value on the date of grant of the
Award.

     2.3 Exercise.  An Option and a SAR shall be exercisable in accordance  with
such terms and  conditions  and during such periods as may be established by the
Committee, before or after grant.

     2.4 Payment of Option Exercise Price.  The payment of the Exercise Price of
an Option granted under this Section 2 shall be subject to the following:

     (a) Subject to the following  provisions of this  subsection  2.4, the full
Exercise  Price for shares of Stock  purchased  upon the  exercise of any Option
shall  be paid at the  time of such  exercise  (except  that,  in the case of an
exercise  arrangement  approved by the  Committee  and  described  in  paragraph
2.4(c), payment may be made as soon as practicable after the exercise).

     (b) The Exercise Price shall be payable (i) in cash;  (ii) by tendering (by
actual delivery of shares) shares of Stock that are acceptable to the Committee,
have been held by the  participant  for at least six months,  and were valued at
Fair  Market  Value  as of the  day  the  shares  are  tendered;)  (iii)  in any
combination of cash or shares,  as determined by the  Committee;  or (iv) by any
other  method  approved  or  accepted by the  Committee  in its sole  discretion
subject to such rules and  regulations  as the  Committee may  establish.  Where
expressly  approved for the  Participant  by the Committee and when permitted by
law (including,  without  limitation,  Section 402 of the  Sarbanes-Oxley Act of
2002 and Section  409A of the Code),  the  Exercise  Price may also be paid by a
personal note, waiver of compensation, or cancellation of indebtedness.

     (c) To the extent  permitted by applicable  law, a Participant may elect to
pay the Exercise Price upon the exercise of an Option by irrevocably authorizing
a third  party to sell shares of Stock (or a  sufficient  portion of the shares)
acquired  upon  exercise  of the  Option and remit to the  Company a  sufficient
portion  of the sale  proceeds  to pay the  entire  Exercise  Price  and any tax
withholding resulting from such exercise.

     2.5 Settlement of Award. Shares of Stock delivered pursuant to the exercise
of an Option or a SAR shall be  subject  to such  conditions,  restrictions  and
contingencies  as the Committee may establish in the applicable Award Agreement.
Settlement  of SARs may be made in shares of Stock  (valued at their Fair Market
Value at the  time of  exercise),  in  cash,  or in a  combination  thereof,  as
determined in the discretion of the Committee. The Committee, in its discretion,
may impose such  conditions,  restrictions  and  contingencies  with  respect to
shares of Stock  acquired  pursuant to the exercise of an Option or a SAR as the
Committee determines to be desirable.


                                    SECTION 3

                               OTHER STOCK AWARDS

     3.1 Definitions. The term "Other Stock Awards" means any of the following:

     (a) A "Stock Unit" Award is the grant of a right to receive shares of Stock
in the future.

     (b) A "Performance  Share" Award is a grant of a right to receive shares of
Stock or Stock Units,  which is contingent on the  achievement of performance or
other objectives during a specified period.

     (c) A  "Restricted  Stock"  Award  is a grant of  shares  of  Stock,  and a
"Restricted Stock Unit" Award is the grant of a right to receive shares of Stock
in the  future,  with such  shares of Stock or right to future  delivery of such
shares of Stock subject to a risk of forfeiture or other  restrictions that will
lapse  upon the  achievement  of one or more goals  relating  to  completion  of
service by the Participant,  or achievement of performance or other  objectives,
as determined by the Committee.

     3.2 Restrictions on Stock Awards.  Each Stock Unit Award,  Restricted Stock
Award,  Restricted Stock Unit Award and Performance Share Award shall be subject
to the following:


                                       38

<PAGE>

     (a) Any such Award shall be subject to such  conditions,  restrictions  and
contingencies as the Committee shall determine.

     (b) The Committee  may  designate  whether any such Awards being granted to
any Participant are intended to be "performance-based compensation" as that term
is used in Section 162(m) of the Code. Any such Awards designated as intended to
be  "performance-based  compensation" shall be conditioned on the achievement of
one or more "Performance Measures." The Performance Measures that may be used by
the  Committee  for  such  Awards  shall  be  based  on any  one or  more of the
following, as selected by the Committee: return on capital or increase in pretax
earnings of the Company and/or one or more divisions and/or subsidiaries, return
on  shareholders'  equity of the Company,  increase in earnings per share of the
Company,  sales of the Company and/or one or more divisions and/or subsidiaries,
pretax earnings of the Company and/or one or more divisions and/or subsidiaries,
net earnings of the Company  and/or one or more divisions  and/or  subsidiaries,
control of operating and/or non-operating  expenses of the Company and/or one or
more divisions  and/or  subsidiaries,  margins of the Company and/or one or more
divisions and/or subsidiaries,  market price of the Company's  securities,  and,
solely for an Award not intended to constitute "performance-based  compensation"
under Section 162(m) of the Code, other factors directly tied to the performance
of the  Company  and/or  one or more  divisions  and/or  subsidiaries  or  other
performance   criteria.   For   Awards   intended   to   be   "performance-based
compensation,"  the grant of the Awards and the establishment of the Performance
Measures  shall be made during the period  required under Code Section 162(m) of
the Code and Treasury Regulations Section 1.162-27.


                                    SECTION 4

                          OPERATION AND ADMINISTRATION

     4.1 Effective Date; Duration. The Plan shall be effective as of the date of
its approval by the shareholders of the Company (the "Effective Date"). The Plan
shall have a duration of ten years from the Effective Date; provided that in the
event of Plan termination, the Plan shall remain in effect as long as any Awards
under it are  outstanding;  provided  further,  however,  that no  Award  may be
granted  under the Plan on a date that is more than ten years from the Effective
Date.

     4.2 Awards Subject to Plan.  Awards granted under the Plan shall be subject
to the following:

     (a) Subject to the following provisions of this subsection 4.2, the maximum
number  of shares  of Stock  that may be  delivered  to  Participants  and their
beneficiaries under the Plan shall be equal to 1.0 million shares.

     (b) To the extent any shares of Stock covered by an Award are not delivered
to a Participant or beneficiary  because the Award is forfeited or canceled,  or
the shares of Stock are not delivered because the Award is settled in cash, such
shares shall not be deemed to have been  delivered  for purposes of  determining
the maximum  number of shares of Stock  available  for delivery  under the Plan.
Moreover,  if the Exercise Price of any Option granted under the Plan or the tax
withholding  requirements  with respect to any Award  granted under the Plan are
satisfied by tendering shares of Stock to the Company (by either actual delivery
or by  attestation)  or by  surrendering  unexercised  Options,  or if a SAR  is
exercised,  only the  number of shares of Stock  issued,  net of shares of Stock
tendered,  will be deemed  delivered  for  purposes of  determining  the maximum
number of shares of Stock  available  for issuance  under the Plan.  The maximum
number of shares of Stock  available  for  delivery  under the Plan shall not be
reduced for shares  subject to plans assumed by the Company in an acquisition of
an interest in another company.

     (c) Subject to adjustment in accordance with paragraphs  4.2(d) and 4.2(e),
the following additional maximums are imposed under the Plan:

     (i)  Subject to the overall  maximum  number of shares of Stock that may be
issued in  accordance  with Section  4.2(a) of the Plan,  the maximum  number of
shares of Stock that may be issued pursuant to Options intended to be ISOs shall
be up to 1.0 million shares;

     (ii)  The  maximum  number  of  shares  of  Stock  that  may be  issued  in
conjunction with Other Stock Awards granted pursuant to Section 3 shall be up to
1.0 million shares;

     (iii) The  maximum  number of shares of Stock that may be covered by Awards
granted to any one  individual  pursuant to Section 2  (relating  to Options and
SARs) shall be 400,000 during any fiscal year; and

     (iv) No more than  400,000  shares of Stock may be  subject  to Stock  Unit
Awards,  Restricted  Stock Awards,  Restricted Stock Unit Awards and Performance
Share Awards that are intended to be  "performance-based  compensation" (as that


                                       39

<PAGE>

term is used for purposes of Code Section  162(m)) granted to any one individual
during  any  one  fiscal-year   period  (regardless  of  when  such  shares  are
deliverable).

     (d) If the outstanding  shares of Stock are changed into or exchanged for a
different  number or kind of shares or other securities of the Company by reason
of  any  recapitalization,   reclassification,   stock  split,  stock  dividend,
combination,  subdivision  or similar  transaction,  or if the Company  makes an
extraordinary  dividend or distribution to its shareholders  (including  without
limitation  to  implement a spinoff)  (each,  a "Corporate  Transaction")  then,
subject to any required action by the  shareholders  of the Company,  the number
and kind of shares of Company stock  available  under the Plan or subject to any
limit or maximum hereunder shall automatically be proportionately adjusted, with
no action  required on the part of the  Committee or  otherwise.  Subject to any
required  action by the  shareholders,  the number and kind of shares covered by
each outstanding  Award, and the price per share in each such Award, may, at the
discretion of the  Committee,  be  proportionately  adjusted for any increase or
decrease  in the  number  of  issued  shares  of the  Company  resulting  from a
Corporate  Transaction  or any other  increase or decrease in the number of such
shares, or any decrease in the value of such shares, effected without receipt of
consideration  by the Company.  Notwithstanding  the  foregoing,  no  fractional
shares  shall be issued or made  subject  to an  Option,  SAR or Stock  Award in
making the foregoing  adjustments.  All adjustments  made by the Committee under
this Section shall be final, conclusive and binding upon the holders of Options,
SARs and Stock Awards.

     (e) If the Company merges or consolidates with another corporation, whether
or not the Company is a surviving  corporation,  or if the Company is liquidated
or  sells  or  otherwise  disposes  of  substantially  all of its  assets  while
unexercised  Options or other Awards  remain  outstanding  under this Plan,  (A)
subject to the  provisions of clause (C) below,  after the effective date of the
merger,  consolidation,  liquidation, sale or other disposition, as the case may
be, each holder of an outstanding Option or other Award shall be entitled,  upon
exercise  of that  Option  or Award or in  place of it,  as the case may be,  to
receive,  at the option of the Committee and in lieu of shares of Stock, (i) the
number and class or classes of shares of Stock or other  securities  or property
to which the  holder  would  have been  entitled  if,  immediately  prior to the
merger,  consolidation,  liquidation,  sale or other disposition, the holder had
been the holder of record of a number of shares of Stock  equal to the number of
shares of Stock as to which that Option may be  exercised  or are subject to the
Award or (ii) shares of stock of the company that is the  surviving  corporation
in such merger,  consolidation,  liquidation, sale or other disposition having a
value, as of the date of payment under Subsection 4.2(e)(i) as determined by the
Committee in its sole  discretion,  equal to the value of the shares of Stock or
other securities or property otherwise payable under Subsection  4.2(e)(i);  (B)
if Options or other Awards have not already become  exercisable  under Section 5
hereof, the Board of Directors may waive any limitations set forth in or imposed
pursuant to this Plan so that all Options or other Awards, from and after a date
prior to the effective date of that merger, consolidation,  liquidation, sale or
other  disposition,  as the case may be,  specified  by the Board of  Directors,
shall be  exercisable in full;  and (C) all  outstanding  Options or SARs may be
cancelled  by the Board of  Directors  as of the  effective  date of any merger,
consolidation, liquidation, sale or other disposition provided that any optionee
or SAR holder shall have the right  immediately  prior to such event to exercise
his or her Option or SAR to the extent such optionee or holder is otherwise able
to do so in  accordance  with this  Plan  (including  Section  5 hereof)  or his
individual  Option  or  SAR  agreement;   provided,   further,   that  any  such
cancellation  pursuant  to this  Section  4.2(e)  shall be  contingent  upon the
payment to the  affected  Participants  of an amount equal to (i) in the case of
any  out-of-the-money  Option or SAR,  cash,  property or a combination  thereof
having  an  aggregate  value  equal  to the  value  of such  Option  or SAR,  as
determined  by the Committee or the Board of Directors,  as  applicable,  in its
sole  discretion,  and (ii) in the case of an in-the-money  Option or SAR, cash,
property or a combination  thereof having an aggregate value equal to the excess
of the value of the  per-share  amount of  consideration  paid  pursuant  to the
merger,  consolidation,  liquidation, sale or other disposition, as the case may
be, giving rise to such cancellation,  over the exercise price of such Option or
SAR multiplied by the number of shares of Stock subject to the Option or SAR.

     (f) In the event of a change  in the  shares of the  Company  as  presently
constituted,  which is limited to a change of all of its authorized  shares with
par value into the same number of shares  with a different  par value or without
par value,  the shares  resulting from any such change shall be deemed to be the
shares within the meaning of this Plan.

     (g) Any  adjustments  pursuant to Section 4.2(e) shall be made by the Board
or Committee,  as the case may be, whose  determination in that respect shall be
final, binding and conclusive,  regardless of whether or not any such adjustment
shall have the result of causing an ISO to cease to qualify as an ISO.

     (h)  Except  as  hereinbefore  expressly  provided  in  this  Section  4, a
Participant  shall have no rights by reason of any subdivision or  consolidation
of shares  of stock of any class or the  payment  of any stock  dividend  or any
other  increase  or decrease in the number of shares of stock of any class or by
reason of any dissolution,  liquidation, merger, or consolidation or spin-off of
assets or stock of another  corporation,  and any issue by the Company of shares


                                       40

<PAGE>

of stock of any class,  shall not affect,  and no adjustment  by reason  thereof
shall be made with respect to, the number or price of shares of Stock subject to
an Award, unless the Committee shall otherwise determine.

     (i) The grant of any Award pursuant to this Plan shall not adversely affect
in any  way  the  right  or  power  of the  Company  (A)  to  make  adjustments,
reclassifications,  reorganizations  or  changes  of  its  capital  or  business
structure, (B) to merge or consolidate,  (C) to dissolve,  liquidate or sell, or
transfer  all or any part of its  business  or assets or (D) to issue any bonds,
debentures, preferred or other preference stock ahead of or affecting the Stock.
If any action described in the preceding  sentence results in a fractional share
for any Participant under any Award hereunder, such fraction shall be completely
disregarded  and the  Participant  shall be entitled only to the whole number of
shares resulting from such adjustment.

     4.3  General  Restrictions.  Delivery  of shares of Stock or other  amounts
under the Plan shall be subject to the following:

     (a) Notwithstanding any other provision of the Plan, the Company shall have
no  liability  to deliver  any shares of Stock  under the Plan or make any other
distribution  of benefits  under the Plan unless such  delivery or  distribution
would  comply with all  applicable  laws  (including,  without  limitation,  the
requirements of the Securities Act of 1933), and the applicable  requirements of
any securities exchange or similar entity.

     (b) To the extent that the Plan provides for issuance of stock certificates
to reflect the  issuance of shares of Stock,  the  issuance may be effected on a
non-certificated  basis,  to the extent not  prohibited by applicable law or the
applicable rules of any stock exchange.

     4.4 Tax  Withholding.  All  distributions  under  the Plan are  subject  to
withholding  of all  applicable  taxes,  and the  Committee  may  condition  the
delivery of any shares or other benefits under the Plan on  satisfaction  of the
applicable  withholding  obligations.  The  Committee,  in its  discretion,  and
subject to such requirements as the Committee may impose prior to the occurrence
of such  withholding,  may permit such  withholding  obligations to be satisfied
through  cash  payment  by the  Participant  or by an  election  to have  shares
withheld,  but only to the extent of the minimum amount  required to be withheld
under applicable law.

     4.5 Use of  Shares.  Subject  to the  overall  limitation  on the number of
shares of Stock that may be  delivered  under the Plan,  the  Committee  may use
available  shares of Stock as the form of payment  for  compensation,  grants or
rights earned or due under any other  compensation  plans or arrangements of the
Company or a Subsidiary,  including the plans and arrangements of the Company or
a Subsidiary assumed in business combinations.

     4.6  Dividends  and  Dividend   Equivalents.   An  Award  may  provide  the
Participant with the right to receive dividend  payments or dividend  equivalent
payments  with respect to Stock  subject to the Award (both before and after the
Stock subject to the Award is earned,  vested, or acquired),  which payments may
be either made currently or credited to an account for the Participant,  and may
be  settled  in  cash  or  Stock  as  determined  by  the  Committee.  Any  such
settlements,  and any such  crediting of dividends  or dividend  equivalents  or
reinvestment in shares of Stock, may be subject to such conditions, restrictions
and  contingencies  as  the  Committee  shall  establish.   Notwithstanding  the
foregoing,  the  right to  receive  dividend  payments  or  dividend  equivalent
payments  with respect to Stock subject to an Option or SAR Award may be granted
only if such right is explicitly  set forth in an  arrangement  that is separate
from the  underlying  Award and that complies with the  requirements  of Section
409A of the Code and the Treasury  Regulations  and other  guidance  promulgated
thereunder.

     4.7 Payments.  Awards may be settled through cash payments, the delivery of
shares of Stock, the granting of replacement  Awards, or any combination thereof
as the Committee shall  determine.  Any Award  settlement may be subject to such
conditions, restrictions and contingencies as the Committee shall determine.

     4.8 Transferability.  Except as otherwise provided by the Committee, Awards
under the Plan are not  transferable  except as designated by the Participant by
will or by the laws of descent and distribution.

     4.9 Form and Time of Elections.  Unless otherwise  specified  herein,  each
election  required or  permitted to be made by any  Participant  or other person
entitled  to  benefits  under  the  Plan,  and any  permitted  modification,  or
revocation thereof,  shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.

     4.10  Agreement  With Company.  An Award under the Plan shall be subject to
such terms and  conditions,  not  inconsistent  with the Plan,  as the Committee
shall, in its sole discretion,  prescribe. The terms and conditions of any Award
to any  Participant  shall be reflected  in such form of written  document as is
determined by the  Committee.  A copy of such document  shall be provided to the


                                       41

<PAGE>

Participant,  and the Committee may, but need not,  require that the Participant
sign a copy of such  document.  Such  document  is referred to in the Plan as an
"Award Agreement" regardless of whether any Participant signature is required.

     4.11 Action by Company or Subsidiary.  Any action  required or permitted to
be taken by the Company or any Subsidiary shall be by resolution of its Board of
Directors,  or by  action  of one or more  members  of the  Board  (including  a
committee of the Board) who are duly authorized to act for the Board, or (except
to the extent  prohibited  by applicable  law or  applicable  rules of any stock
exchange) by a duly authorized officer of such company.

     4.12 Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and the
plural shall include the singular.

     4.13 Limitation of Implied Rights.

     (a)  Neither  a  Participant  nor any  other  person  shall,  by  reason of
participation in the Plan, acquire any right in or title to any assets, funds or
property  of  the  Company  or any  Subsidiary  whatsoever,  including,  without
limitation,  any specific funds,  assets, or other property which the Company or
any  Subsidiary,  in its sole  discretion,  may set aside in  anticipation  of a
liability under the Plan. A Participant  shall have only a contractual  right to
the Stock or amounts, if any, payable under the Plan, unsecured by any assets of
the  Company  or  any  Subsidiary,  and  nothing  contained  in the  Plan  shall
constitute a guarantee that the assets of the Company or any Subsidiary shall be
sufficient to pay any benefits to any person.

     (b) The Plan does not constitute a contract of employment, and selection as
a Participant will not give any participating  employee the right to be retained
in  the  employ  of the  Company  or any  Subsidiary,  nor  shall  it  give  any
non-employee any rights to retain any relationship  with the Company,  nor shall
any  Participant  have any right or claim to any benefit under the Plan,  unless
such right or claim has been granted and specifically accrued under the terms of
the Plan.  Except as  otherwise  provided  in the Plan,  no Award under the Plan
shall confer upon the holder  thereof any rights as a shareholder of the Company
prior to the date on which the individual fulfills all conditions for receipt of
such rights.

     4.14  Evidence.  Evidence  required  of  anyone  under  the  Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers  pertinent and reliable,  and shall be signed, made or presented by
the proper party or parties.


                                    SECTION 5

                                    COMMITTEE

     5.1  Administration.  The authority to control and manage the operation and
administration  of the Plan shall be vested in a committee (the  "Committee") in
accordance  with this Section 5. The  Committee  shall be selected by the Board,
and  shall  consist  solely  of  two  or  more  members  of the  Board  who  are
non-employee  Directors  within the meaning of Rule 16b-3  under the  Securities
Exchange Act of 1934, as amended,  are outside  Directors  within the meaning of
Code Section 162(m) and found to be "independent" by the Board of Directors,  in
accordance with applicable NASDAQ standards  (currently  defined in Rule 4200 of
the NASD  Manual).  If the  Committee  does not exist,  or for any other  reason
determined by the Board, the Board may take any action under the Plan that would
otherwise be the responsibility of the Committee, bearing in mind any applicable
NASDAQ Shareholder  approval rule. Unless otherwise determined by the Board, the
Company's   Compensation  Committee  shall  be  designated  as  the  "Committee"
hereunder.

     5.2 Powers of Committee.  The Committee's  administration of the Plan shall
be subject to the following:

     (a) Subject to the  provisions  of the Plan,  the  Committee  will have the
authority  and  discretion  to select  from among the  Eligible  Grantees  those
persons who shall receive Awards, to determine the time or times of receipt,  to
determine  the types of Awards and the  number of shares or other  consideration
covered by the Awards, to establish the terms, conditions, performance criteria,
restrictions, and other provisions of such Awards to determine whether an Award,
will be jointly, singly, or in combination with other Awards, or as replacements
or  alternatives  to other Awards,  and subject to the  restrictions  imposed by
Section  6, to cancel or  suspend  Awards,  to correct  any  defect,  supply any
omission,  or reconcile any inconsistency,  and to waive or otherwise modify any
vesting or other restrictions contained in the Plan or any Awards. The Committee
may also, without obtaining shareholder approval, amend any outstanding Award to
provide  the holder  thereof  with  additional  rights or  benefits  of the type
otherwise  permitted by the Plan,  including without  limitation,  extending the
term thereof; provided,  however, that in no event may the term of any Option or
SAR exceed ten years;  further provided,  that the Committee shall not amend any
Award if or to the  extent  that such  amendment  would  cause  such Award to be
subject to taxation under Section 409A of the Code.



                                       42

<PAGE>

     (b) To the  extent  that the  Committee  determines  that the  restrictions
imposed by the Plan  preclude the  achievement  of the material  purposes of the
Awards in jurisdictions  outside the United States,  the Committee will have the
authority  and  discretion  to  modify  those   restrictions  as  the  Committee
determines to be necessary or appropriate to conform to applicable  requirements
or practices of jurisdictions outside the United States.

     (c) The Committee  will have the authority and  discretion to interpret the
Plan, to establish, amend, and rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of any Award Agreement made pursuant
to the  Plan,  and to make all other  determinations  that may be  necessary  or
advisable for the administration of the Plan.

     (d) Any  interpretation  of the Plan by the Committee and any decision made
by it under the Plan is final and binding on all persons.

     (e) In  controlling  and managing the operation and  administration  of the
Plan,  the  Committee  shall  take  action  in a  manner  that  conforms  to the
certificate of  incorporation  and by-laws of the Company,  and applicable state
corporate law.

     5.3 Delegation by Committee.  Except to the extent prohibited by applicable
law or the applicable rules of a stock exchange,  the Committee may allocate all
or any  portion  of its  responsibilities  and  powers to any one or more of its
members  and may  delegate  all or any part of its  responsibilities  and powers
hereunder,  including without  limitation,  the power to designate  Participants
hereunder and determine the amount, timing and terms of Awards hereunder, to any
person or persons selected by it, including  without  limitation,  any executive
officer of the Company.  Any such allocation or delegation may be revoked by the
Committee at any time.

     5.4 Information to be Furnished to Committee.  The Company and Subsidiaries
shall furnish the Committee with such data and  information as it determines may
be  required  for it to  discharge  its  duties.  The records of the Company and
Subsidiaries  as to an employee's or  Participant's  employment,  termination of
employment, leave of absence,  reemployment and compensation shall be conclusive
unless the Committee  determines such records to be incorrect.  Participants and
other  persons  entitled to benefits  under the Plan must furnish the  Committee
such evidence, data or information as the Committee considers desirable to carry
out the terms of the Plan.


                                    SECTION 6

                            AMENDMENT AND TERMINATION

     (a) The Plan may be  terminated or amended by the Board of Directors at any
time,  except that the following  actions may not be taken  without  shareholder
approval:

     (i) any  increase in the number of shares that may be  delivered  under the
Plan (except by certain adjustments provided for under the Plan);

     (ii) any change in the class of persons  eligible to receive  Awards  under
the Plan;

     (iii) any change in the  requirements  of Section 2.2 hereof  regarding the
Exercise Price;

     (iv) any other  amendment  to the Plan that would  require  approval of the
Company's shareholders under applicable law, regulation or rule.

Notwithstanding any of the foregoing,  adjustments  pursuant to paragraph 4.2(d)
shall not be subject to the foregoing limitations of this Section 6.

     (b) Awards may not be granted under the Plan after the date of  termination
of the  Plan,  but  Awards  granted  prior to that  date  shall  continue  to be
exercisable or vest according to their terms.

     (c) The Committee may not,  without first obtaining  shareholder  approval,
"reprice"  outstanding  Options  or  SARs  as  such  term  is used by the SEC or
otherwise lower their exercise or base prices, or make any material amendment to
the Plan in violation of NASDAQ requirements.




                                       43

<PAGE>

                                    SECTION 7

                                CHANGE IN CONTROL

     Subject to the provisions of paragraph  4.2(d)  (relating to the adjustment
of shares),  and except as otherwise provided in the Plan or the Award Agreement
reflecting the applicable  Award,  upon the occurrence of a Change in Control as
defined in Section 8:

     (a) All  outstanding  Options  (regardless  of whether in tandem with SARs)
shall become fully exercisable.

     (b) All  outstanding  SARs  (regardless  of whether in tandem with Options)
shall become fully exercisable.

     (c)  All  Stock  Units,  Restricted  Stock,  Restricted  Stock  Units,  and
Performance Shares shall become fully vested.


                                    SECTION 8

                                  DEFINED TERMS

     In  addition  to the other  definitions  contained  herein,  the  following
definitions shall apply:

     (a) Affiliated  Company.  The term  "Affiliated  Company" means any company
controlled by, controlling or under common control with the Company.

     (b) Award.  The term "Award" shall mean any award or benefit  granted under
the Plan, including,  without limitation, the grant of Options, SARs, Stock Unit
Awards,  Restricted  Stock Awards,  Restricted Stock Unit Awards and Performance
Share Awards.

     (c)  Board.  The term  "Board"  shall  mean the Board of  Directors  of the
Company.

     (d) Change in Control.  The term "Change in Control"  means a change in the
beneficial  ownership  of  the  Company's  voting  stock  or  a  change  in  the
composition of the Board which occurs as follows:

     (i) Any "person,"  including a "syndication"  or "group" as those terms are
used in Section  13(d)(3) of the Securities  Exchange Act of 1934, is or becomes
the  beneficial  owner,  directly or  indirectly,  of  securities of the Company
representing  40% or more of the  combined  voting power of the  Company's  then
outstanding  "Voting   Securities,"  which  is  any  security  which  ordinarily
possesses  the  power to vote in the  election  of the Board of  Directors  of a
corporation without the happening of any precondition or contingency;

     (ii) The Company is merged or  consolidated  with another  corporation  and
immediately after giving effect to the merger or consolidation  less than 80% of
the outstanding  Voting Securities of the surviving or resulting entity are then
beneficially  owned in the aggregate by (x) the  shareholders  of the Company in
their capacities as such immediately prior to such merger or  consolidation,  or
(y) if a record date has been set to determine the  shareholders  of the Company
entitled  to vote on such  merger  or  consolidation,  the  shareholders  of the
Company as of such record date;

     (iii) If at any time the  following  do not  constitute  a majority  of the
Board of Directors of the Company (or any successor entity referred to in clause
(ii) above):  Persons who,  prior to their election as a Director of the Company
(or successor entity if applicable) were nominated, recommended or endorsed by a
formal resolution of the Board of Directors of the Company or the Nominating and
Corporate Governance Committee thereof; or

     (iv) The  Company  transfers  substantially  all of its  assets to  another
corporation which is a less than 80% owned subsidiary of the Company.

Notwithstanding  the  foregoing  provisions  of this Section 8(d), an event that
would otherwise affect an Other Stock Award that is subject to the provisions of
Section 409A of the Code shall only constitute a Change in Control if such event
constitutes a change in the  ownership or effective  control of the Company or a
change in the  ownership of a  substantial  portion of the assets of the Company
within the meaning of Section 409A(a)(2)(A)(v) of the Code.



                                       44

<PAGE>

     (e) Code.  The term "Code"  means the  Internal  Revenue  Code of 1986,  as
amended. A reference to any provision of the Code shall include reference to any
successor provision of the Code.

     (f) Eligible  Grantee.  With respect to ISOs, the term  "Eligible  Grantee"
shall mean any employee of the Company or a  Subsidiary.  With respect to Awards
other than ISOs, the term "Eligible Grantee" shall mean any employee, officer of
director  of  the  Company  or  a  Subsidiary,   and  consultants,   independent
contractors  and advisors to the Company or any  Subsidiary,  provided that such
consultants,  contractors and advisors  provide bona fide services none of which
are in  connection  with the offer or sale of  securities  in a  capital-raising
transaction.  An Award may be granted to an employee, in connection with hiring,
retention or otherwise,  prior to the date the employee first performs  services
for the Company or the  Subsidiaries,  provided that such Award shall not become
vested prior to the date the employee first performs such services.

     (g) Fair Market Value.  For purposes of determining the "Fair Market Value"
of a share of Stock as of any date, shall be the value of a share of the Company
Common Stock determined as follows:

     (i) if such Common Stock is then quoted on the Nasdaq National Market,  its
closing  price on the Nasdaq  National  Market on the date of  determination  as
reported in The Wall Street Journal;

     (ii) if such  Common  Stock is  publicly  traded  and is then  listed  on a
national securities exchange,  its closing price on the date of determination on
the principal national  securities  exchange on which the Common Stock is listed
or admitted to trading as reported in The Wall Street Journal;

     (iii) if such  Common  Stock is  publicly  traded  but is not quoted on the
Nasdaq  National  Market  nor  listed  or  admitted  to  trading  on a  national
securities exchange, the average of the closing bid and asked prices on the date
of determination as reported by The Wall Street Journal (or, if not so reported,
as  otherwise  reported  by any  newspaper  or other  source  as the  Board  may
determine); or

     (iv) if none of the foregoing is applicable, by the Committee in good faith
provided that such determination  comports with Section 409A of the Code and the
Treasury Regulations and other guidance promulgated thereunder.

     (h) Individual Agreement. "Individual Agreement" means a written employment
or  similar  agreement  between  a  Participant  and the  Company  or one of its
Subsidiaries or a written Award grant agreement under the Plan.

     (i)  Subsidiaries.  With respect to ISOs, the term  "Subsidiary"  means any
present or future  subsidiary  corporation  of the Company within the meaning of
Section  424(f)  of the Code,  and with  respect  to  non-ISO  Awards,  the term
"Subsidiary"  means any present or future  business  venture  designated  by the
Committee in which the Company has a significant  interest, as determined in the
discretion of the Committee, provided that such venture would be considered, for
purposes  of Section  409A of the Code and the  Treasury  Regulations  and other
guidance  promulgated  thereunder,  a member of the "service recipient" group to
which the Company belongs.

     (j)  Stock.  The term  "Stock"  shall  mean  shares of common  stock of the
Company.

                                    SECTION 9

                                  GOVERNING LAW


     This Plan shall be governed by, and construed in accordance  with, the laws
of the  State of  Georgia,  except to the  extent  that the  Minnesota  Business
Corporation Act shall be applicable.




                                       45

<PAGE>


                                   APPENDIX B

                                 INTERLAND, INC.
                  AUDIT COMMITTEE MISSION STATEMENT AND CHARTER

                           AS AMENDED AND RESTATED IN
                                  FEBRUARY 2006

                                MISSION STATEMENT
                              ---------------------

     The Audit  Committee  serves as an independent and objective party integral
to the Board in its oversight responsibilities. Areas of responsibility include:

     a) Monitoring the Company's  accounting and financial  reporting  processes
and internal control systems;

     b) Reviewing and appraising the audit efforts of the Company's  independent
accountants  and,  if and when  implemented,  the  Company's  internal  auditing
department;

     c) Reviewing  compliance with laws and regulations  under which the Company
is required to operate;

     d)  Providing  an  open  avenue  of  communication  among  the  independent
accountants,  financial and senior management, any internal auditing department,
and the Board of Directors;

     e)  Pre-approve  permissible  non-audit  services to be  performed  for the
Company by its independent public accountants; and

     f)  Be  responsible  for  the  appointment,   compensation,  retention  and
oversight of the work of the independent accountants,  which audit the Company's
financial  statements or perform other audit,  review or attest services for the
Company.




                                       46

<PAGE>


                                     CHARTER

     Committee  Composition.  The Audit Committee shall consist of three or more
directors who meet the  independence  and experience  requirements of the NASDAQ
and the SEC. The members of the Audit Committee shall be appointed by the Board.

     In selecting  members of the Audit Committee,  the Board of Directors shall
appoint  at least  one  member  (a) who has (1) an  understanding  of  generally
accepted  accounting  principles  and financial  statements,  (2) the ability to
assess  the  general  application  of such  principles  in  connection  with the
accounting  for estimates,  accruals and reserves,  (3) experience in preparing,
auditing,  analyzing or evaluating  financial statements generally comparable to
those of the Company or experience actively  supervising someone engaged in such
activities,  (4) an understanding of internal controls over financial reporting,
and (5) an understanding of Audit Committee  function;  and (b) who has acquired
such  attributes  through  education or experience of the type described in Item
401 of Regulation S-K as adopted by the Securities and Exchange Commission.

     Special Consultants. The Audit Committee shall have the authority to retain
and  appropriate  funds  to  compensate  special  legal,   accounting  or  other
consultants to advise the Committee. The Audit Committee may request any officer
or employee  of the  Company or the  Company's  outside  counsel or  independent
accountants to attend a meeting of the Committee or to meet with any members of,
or consultants to, the Committee.

     Reports. The Audit Committee shall make regular reports to the Board.

     Responsibilities. The Audit Committee shall:

     1. Review and reassess  the adequacy of this Charter at least  annually and
submit any  proposed  changes  to this  Charter  to the Board of  Directors  for
approval.

     2.  Be  responsible  for  the  appointment,   compensation,  retention  and
oversight of the work of the independent  accountants engaged for the purpose of
preparing or issuing an audit report or performing other audit, review or attest
services for the Company. The independent  accounting firm shall report directly
to the Audit  Committee,  although  it is  ultimately  accountable  to the Audit
Committee, the Board, and the Shareholders.

     3. Approve  fees to be paid to the  independent  accountants  for audit and
other services.

     4. Annually evaluate the performance of the independent accountants and, if
so determined, replace the independent accountants.

     5. Following such time as the Company maintains an internal audit function,
review  the  appointment  and  replacement  of  the  senior  internal   auditing
executive,  and the significant  reports to management  prepared by the internal
auditing department and management's responses.

     6. Meet at least  annually  with the  Chief  Financial  Officer,  the chief
accounting  officer,  any senior internal auditing executive and the independent
accountants in separate executive sessions.

     7. Adopt the Audit Committee  Report to Shareholders  required by the rules
of the Securities and Exchange Commission to be included in the Company's annual
proxy statement.

     8.  Approve  any  non-audit  services  to  be  provided  by  the  Company's
independent accountants which audit the Company's financial statements.

                 Responsibilities with Regard to External Audits

     The Audit Committee shall:

     1.  Review  the  annual  audited  financial   statements  with  management,
including  major  issues  regarding   accounting  and  auditing  principles  and
practices as well as the adequacy of internal controls that could  significantly
affect the Company's financial statements and assets.



                                       47

<PAGE>

     2. Review annually with the independent accountants,  significant financial
reporting  issues and judgments made in connection  with the  preparation of the
Company's financial statements.

     3. Review the Company's financial results prior to the release of quarterly
earnings.

     4. Discuss with management and independent accountants, prior to the filing
of  reports  on Forms  10-Q or 10-K,  any  significant  trends or  developments,
including the Company's  major  financial  risk exposures and the steps taken to
monitor and control such exposures;  and major changes to the Company's auditing
and  accounting  principles  and  practices  as  suggested  by  the  independent
accountants, internal auditors, or management.

     5. Receive from the  independent  accountants  a formal  written  statement
delineating all the  relationships  between the independent  accountants and the
Company,  consistent  with  Independence  Standards  Board  Standard  1 and  any
successor standard.

     6. Engage  actively in a dialogue  with the  independent  accountants  with
respect  to  any  disclosed  relationships  or  services  that  may  impact  the
objectivity  and  independence  of the  independent  accountants;  and take,  or
recommend that Board take, appropriate action to oversee the independence of the
independent accountants.

     7. Obtain from the  independent  accountants  assurance that Section 10A of
the Private Securities Litigation Reform Act of 1995 has not been implicated.

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

     9. Review with the independent accountants any problems or difficulties the
independent  accountants  may  have  encountered  and any  management  letter(s)
provided  by the  independent  accountants  and the  Company's  response to such
letter(s). Such review should include:

     (a) Any difficulties encountered in the course of the audit work, including
any restrictions on the scope of activities or access to required information.

     (b) Any changes required in the planned scope of the audit.

     (c)  Following  such  time  as the  Company  maintains  an  internal  audit
function, the internal audit department responsibilities, budget and staffing.

                           Compliance Responsibilities

     The Audit Committee shall:

     1. Obtain reports from management,  the Company's senior internal  auditing
executive  (if  any),  and  the  independent   accountants  that  the  Company's
subsidiaries  are in  conformity  with  applicable  legal  requirements  and any
applicable code of conduct.

     2. Advise the Board with respect to the Company's  policies and  procedures
regarding   compliance  with  applicable  laws  and  regulations  and  with  any
applicable code of conduct.

     3. Review with the Company's  General Counsel legal matters that may have a
material impact on the financial  statements,  the Company's compliance policies
and any material  reports or inquiries  received from regulators or governmental
agencies.

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

     While the Audit Committee has the  responsibilities and powers set forth in
this  Charter,  it is not the duty of the  Audit  Committee  to plan or  conduct
audits or to determine that the Company's financial  statements are complete and
accurate and are in accordance with generally accepted accounting principles and


                                       48

<PAGE>

governmental  regulations.  This is the  responsibility  of  management  and the
independent accountants.  Except as specifically expressed herein, it is not the
duty of the Audit Committee to conduct  investigations  or to assure  compliance
with laws and regulations and any applicable code of conduct.

     The Company shall  provide  appropriate  funds,  as determined by the Audit
Committee,  for the  payment  of  compensation  to the  independent  accountants
engaged for the purpose of preparing  or issuing an audit  report or  performing
other  audit,   review  or  attest   services  for  the  issuer;   and  ordinary
administrative expenses of the Audit Committee that are necessary or appropriate
in carrying out its duties.





                                       49

<PAGE>



          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
                                 INTERLAND, INC.
         303 PEACHTREE CENTER AVENUE, SUITE 500, ATLANTA, GEORGIA 30303
                       2006 ANNUAL MEETING OF SHAREHOLDERS
                                  MARCH 3, 2006

     The undersigned shareholder(s) of Interland, Inc., a Minnesota corporation,
hereby acknowledges receipt of the Notice of 2006 Annual Meeting of Shareholders
and the Proxy  Statement,  each dated March 3, 2006, and hereby appoints Jeffrey
M. Stibel,  Gonzalo Troncoso and Jonathan B. Wilson,  and each of them,  proxies
and  attorneys-in-fact,  with full power of  substitution,  on behalf and in the
name of the undersigned, to represent the undersigned at the 2006 Annual Meeting
of Shareholders of Interland,  Inc., to be held on March 31, 2006, at 10:00 a.m.
Eastern Time, at the Marriott  Marquis,  265 Peachtree  Center Avenue,  Atlanta,
Georgia 30303, and at any adjournment(s) or postponement(s) thereof (the "Annual
Meeting"),  and to vote, as designated  on the  proposals  below,  all shares of
Interland, Inc. common stock which the undersigned would be entitled to vote, if
then and there personally present, on the proposals set forth below:

1.   ELECTION OF DIRECTORS:

         John B. Balousek                   Alex Kazerani
         John Patrick Crecine               Robert Lee
         Efrem Gerszberg                    Robert T. Slezak
         Seymour Holtzman                   Jeffrey M. Stibel


     [_]  FOR ALL           [_] WITHHOLD ALL      [_]  FOR ALL EXCEPT

To withhold  authority  to vote,  mark "FOR ALL EXCEPT" and write the  nominee's
name or names on the line below:

--------------------------------------------------------------------------------

2.   APPROVAL OF AMENDMENT TO  INTERLAND,  INC'S  ARTICLES OR  INCORPORATION  TO
     INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

     [_]  FOR                  [_] AGAINST                       [_]  ABSTAIN

3.   APPROVAL OF INTERLAND, INC. 2006 EQUITY INCENTIVE PLAN

     [_]  FOR                  [_] AGAINST                       [_]  ABSTAIN

and in their  discretion,  upon such other matter or matters  which may properly
come before the Annual Meeting.

     The shares represented by this Proxy, when properly executed, will be voted
in the manner directed herein by the undersigned shareholder(s). If no direction
is made,  this  Proxy  will be voted  FOR  items 1, 2 and 3 above.  If any other
matters properly come before the Annual Meeting, the persons named in this Proxy
will  vote in their  discretion.  In the  event  that any  nominee  is unable or
declines to serve as a director at the time of the Annual  Meeting,  the Proxies
will be voted for any nominee whom shall be designated by the then present board
of  directors  to fill the  vacancy or for the balance of those  nominees  named
without a substitute.

                                          Dated March ___,  2006

                                          --------------------------------------

                                                        Signature

                                          --------------------------------------
                                                        Signature


(This Proxy should be voted, signed, and dated by the shareholder(s)  exactly as
his or her name appears hereon,  and returned promptly in the enclosed envelope.
Persons signing in a fiduciary  capacity should so indicate.  If shares are held
by joint  tenants or as  community  property,  all  persons  having an  interest
therein should sign.)